Kinder Morgan Inc - Class P (KMI) — Q4 2024 Earnings Call Transcript

Hey, thank you, Michelle. And before we begin, as we always do, I'd like to remind you that KMI's earnings release today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosure on forward-looking statements and the use of non-GAAP financial measures set forth at the end of our earnings release, as well as review our latest filings with the SEC for important material assumptions, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. I usually kick off these earnings calls with an overview of developments, present and future, in the midstream energy space, with a special emphasis on the various growth drivers for natural gas demand. These drivers are creating enormous opportunities for expansion of the Natural Gas Pipeline and storage system across America, especially in the Gulf Coast and Southeast regions. At the beginning of this new calendar year, I thought it might be appropriate to be a little more specific about Kinder Morgan's response to those opportunities. In the last few months, we have announced the FID of four new major projects: the expansion of our GCX system out of the Permian Basin, our SS4 expansion on our Southern Natural Gas system, our Mississippi Crossing line which will serve SS4 and other increased demand in the Southeast, and our Trident line, which we announced today, which will serve growing demand in the Southeast Texas region including the new Golden Pass LNG facility. Altogether, these new projects will entail capital expenditures net to us in excess of $5 billion and will have the capacity to transport over 5 Bcf a day of natural gas. All of these projects, I would point out, are supported by long-term contracts with creditworthy customers almost entirely on the demand side. And while for obvious reasons, we're not disclosing specific IRR targets for these projects, I know you realize our Board would not have approved without returns that are significantly above our cost of capital. In addition to these projects, we are seeing other sizable opportunities to grow our business as exemplified by our recently-announced Outrigger transaction, which will expand our position in the Bakken. In fact, this is the most exciting time to be in the midstream natural gas market that I've seen in my long decades in this business. We believe that our investments, as they come online, will drive growth in EBITDA and EPS for years to come. With that, I'll turn it over to Kim.

Okay. Thanks, Rich. 2024 was a very good year in terms of our financial performance. We grew EBITDA and EPS, and we improved our leverage metrics. We set the Company up for future success securing commercial contracts to underpin $6.3 billion in new expansion projects that will add growth for the future. Today, we announced we're proceeding with the $1.7 billion Trident project, as Rich just said, and we also announced today that we successfully secured contracts to upsize our previously announced MSX project by 300 million cubic feet a day to 1.8 Bcf a day. For the quarter, we added $3.5 billion in expansion projects to the backlog, which is primarily comprised of Trident and MSX. For the year, we have added $6.3 billion in projects to the backlog and placed $1.2 billion of projects in service, growing the backlog from $3 billion at the end of last year to $8.1 billion today. These projects will pay benefits for many years to come. As a result of the projects added to the backlog, we now expect to spend approximately $2.5 billion per year in expansion CapEx for the next several years, up from our prior estimate of approximately $2 billion per year. During the quarter, we also agreed to purchase a natural gas gathering and processing system in the Bakken, which is complementary to our existing Bakken assets for $640 million. The system is backed by long-term contracts from creditworthy counterparties. On a GAAP basis, the purchase price translates into an 8 times multiple, but based on the cash we receive in 2025, the multiple is approximately 6 times. In addition, in the future, we expect the acquisition to reduce CapEx that we would have otherwise had to spend to expand for our customers. As we look to the future, we continue to see additional growth opportunities in natural gas between LNG, exports to Mexico, power, and industrial growth. Our internal number for growth in the overall natural gas business is roughly 28 Bcf a day of growth between now and 2030. Our assets are well-positioned to serve this growth. We currently serve approximately 45% of the export LNG demand, 50% of the exports to Mexico, and 45% of the power demand in the combined region of the desert Southwest, Texas, and the Southeast. 2024 was a successful year that brought numerous opportunities and nice growth, and we're looking forward to further growth and capitalizing on additional opportunities in 2025. And with that, I'll turn it over to Tom to give you more details on the business performance.

Thanks, Kim. Starting with the Natural Gas business unit, transport volumes were essentially unchanged in the quarter versus the fourth quarter of 2023. Natural gas gathering volumes were down 7% in the quarter compared to the fourth quarter of '23, driven by lower Haynesville and Bakken volumes, partially offset by higher Eagle Ford volumes. Sequentially, gathering volumes were flat quarter-over-quarter. For the year, our gathering volumes averaged 8% below our 2024 plan, and 6% over 2023. We have budgeted for a 5% increase in gathering volumes in 2025 versus 2024 actuals. We view the slight pullback in gathering volumes due to lower prices as temporary, given that higher production volumes will be necessary to meet the demand growth from LNG expected in the second half of 2025. Looking forward, we continue to see significant incremental project opportunities across our Natural Gas Pipelines network to expand our transportation and storage capabilities in support of the growing natural gas market. On our Products Pipelines segment, refined products volumes were up 2%, and crude and condensate volumes were down 5% in the quarter compared to the fourth quarter of 2023. For the full year, refined products volumes were down 3% below our plan, but 1% over 2023. We have budgeted for a 1% increase in refined product volumes in '25 versus '24 actuals. In December 2024, BP North America exercised its unilateral right to extend their contract for five years at existing rates for all of the petroleum condensate processing capacity at our facility on the Houston Ship Channel. The extension is a recognition of the strategic value of Kinder Morgan's 100,000 barrels per day processing capability at our facility and the locational value of Kinder Morgan's footprint in the area. In our Terminals business segment, our liquids lease capacity remains high at 95%. Though refining cracks and blending margins have softened, they remain constructive and supportive of strong rates and utilization at our key hubs at the Houston Ship Channel and New York Harbor. Our Jones Act tanker fleet is fully leased today, 97% leased through 2025, 94% leased through 2026, assuming likely options are exercised. We have opportunistically chartered a significant percentage of the fleet at higher market rates and extended the average length of firm contract commitments to four years. The CO2 segment experienced 3% lower oil production volumes, 4% lower NGL volumes, and 3% lower CO2 volumes in the quarter versus the fourth quarter of 2023. For the full year, oil volumes were down 6% versus 2023, but within 1% of our budget. With that, I'll turn it over to David Michels.

Thank you, Tom. For the quarter, we are declaring a dividend of $0.2875 per share, which annualizes to $1.15 per share and represents a 2% increase from 2023. In the fourth quarter, we reported net income attributable to KMI of $667 million, reflecting a 12% increase compared to the same period last year. We achieved earnings per share of $0.30, an 11% rise from last year. On an adjusted net income basis, excluding certain items, we generated $708 million and an adjusted earnings per share of $0.32, which are increases of 12% and 14% year-over-year, respectively. This growth was primarily driven by contributions from our Natural Gas Products and Terminals businesses, particularly from our acquired South Texas midstream assets, which we added at the end of 2023, along with increased contributions from our Texas Intrastate Natural Gas system and new natural gas projects that were commissioned during the quarter. For the full year, our earnings per share stood at $1.17, a 10% increase over the previous year, while adjusted earnings per share rose by 7%. As we’ve communicated over the last two quarters, we finished 2024 slightly below our budget mainly due to commodity prices being lower than expected and reduced production from our RNG plants. However, we still saw solid growth compared to 2023. Looking at our balance sheet, we closed the year with $31.7 billion in net debt and a net debt to adjusted EBITDA ratio of 4.0, which is well within our leverage target range of 3.5 to 4.5 times. Our net debt decreased by $112 million from the start of 2024. For 2025, as we mentioned in December, we anticipate another year of strong growth, with projected net income growth of 8%, EBITDA growth of 4%, and adjusted earnings per share growth of 10%. We also expect to further strengthen our balance sheet, finishing the year at 3.8 times. As indicated in our press release, we'll release our budget materials on February 5th, which will give more detail on the summary budget shared in December. Our budget does not include the recently announced Outrigger acquisition, expected to close in the first quarter, which we anticipate will be immediately accretive. We expect our year-end leverage to remain at 3.8 times, even after factoring in that transaction. Now, I’ll pass it back to Kim.

Okay. Michelle, if you'll come on and we'll take questions. And if everyone can ask one question and one follow-up, and then if you have further questions, please get back in line.

Good afternoon, and thank you for taking my questions. When we look at the last update, at the backlog, including CO2 and GMP comparing the backlog today, the implied multiple of 6.4 times, it's pretty compelling. So, for projects like Mississippi Crossing and Trident and future natural gas infrastructure projects, can you talk about the economic moat that you have, competitive moat that you have, the financial considerations, and how you can maintain these types of multiples and returns for growth projects under development?

Sure. There has been no change in our return criteria and our approach to these projects. As you know, our required returns fluctuate depending on the risks associated with the cash flows. This means we have different returns for projects with varying levels of risk, contributing to an overall backlog multiple of less than 6 times. I believe these projects remain competitive. We were involved in the MSX project and also competed on the Trident project alongside others in the field. I think our existing infrastructure, strong reputation as an operator, and our ability to complete projects in a timely manner enhance our chances of success in securing new projects and business. The returns we are aiming for are consistent with those we have historically achieved on such projects.

Understood. And related to the Outrigger acquisition, can you expand a bit on the strategic rationale behind this and outlook for downstream synergies? And if Y-Grade eventually flows onto Double H once converted to NGL service, for example?

Yes, I want to make a few comments about that. These assets integrate well with our current system, allowing for potential capital and commercial synergies with our existing assets from this acquisition. At this stage, we are not specifying the exact nature of these synergies as they can fluctuate due to various factors, including the producer's drilling schedule. However, I believe we are positioned to realize at least some of these synergies, and hopefully, we will achieve significant benefits from this deal. Regarding downstream synergies, there are some existing contracts, and we have the potential for downstream synergies, but this will likely unfold over time, so there aren't any immediate gains in that area.

Got it. Thank you.

Good morning. A quick observation. I think on December 9th, when you announced your CapEx, you were looking for an adjusted EPS growth of 8% and today it's already 10%. And I'm hoping, as the year progresses, this number just moves up. And can you help us understand some of the macro trends or favorable factors which could help you push even higher than 10% EPS growth in 2025?

Sure. So, I think, one, that we have some sensitivity to commodity prices, and currently, commodity prices are a little bit higher than what we budgeted. Now there's crude, there's natural gas, and then we have some rent sensitivity. And so we've got upside on the first two. We've got a little bit of downside on the last one. But when you net all those together, today there's some upside on the overall commodity picture. Now, it's early in the year, and commodity prices can move. And so, I don't think you can take that to the bank at this point. The Outrigger acquisition, as David said in his comments, is not in the budget, and so that's going to be accretive and will be a positive versus our budget. There's the potential I think for some upside on the Jones Act tankers that we've got. Right now, I think interest expense, the rates that we budgeted are largely in line with where the current market is. So, I think there if the prices stay high, I mean you could see some upside on G&P volumes over time. And if we continue to deplete the inventory that's in storage as a result of winter weather, I think the winter weather, we probably did a little bit better than what we budgeted with respect to winter weather. But again, it's early in the year. There's a lot of different moving parts in our budget. And so, I'd just say at this point in time, we are not changing our guidance. We're sticking to our budget. But it is a nice start to the year.

Perfect. My quick follow-up is, it looks like we have a new administration, which is really pushing the AI goals here, $500 billion investment announced yesterday. And I'm trying to understand, in terms of this execution, are we still in very early stages of this positive macro trend where this trend could continue for like five, seven, eight, or nine years as these data centers come on and the demand for power just keeps rising and how Kinder fits into that? Thank you.

Yes. I think we are early in the data center trend and the power that's going to be needed there. And so I think that the encouragement that this administration has given on the data center development, their desire to see American energy do well, I think all plays into a nice long-term trend for natural gas demand. As I said in my opening comments, we think the natural gas demand is going to grow by 28 Bcf a day between now and 2030. And part of that is power demand. In those numbers though, we only have power demand up about 3 Bcf a day. And I think there are a lot of numbers that are much higher than that 3 Bcf a day in terms of power demand. I've seen numbers at 10 Bcf a day. And so I think there is the potential for upside above the 28 Bcf of growth that we are projecting.

Thank you.

Thanks. Good afternoon, everyone. Regarding President Trump's recent infrastructure announcement, one of the projects mentioned appears to be a large data center campus in Abilene, Texas, if I'm not mistaken.

I can't hear you. Well, hang on.

Can you hear me?

Yes. Now I can.

Can you guys hear me? Okay, great. So, sorry about that. So, do you hear me okay?

Yes, something in Texas.

Okay. President Trump's AI data center announcement includes a large data center in Abilene, Texas, so, which I think is pretty close to some of your pipelines. I'm wondering if there's an opportunity there for you, and do you have availability to address it?

So, Michael, this is Sital. One, it's a good announcement. Our Intrastate footprint, our NGPL footprint, it's all in and around the area. I think it's an opportunity. But once again, there's a lot of folks that are going to be chasing the opportunity. So, I think we're well-positioned to partake in some of that growth.

Okay, great. And then I also wanted to ask about the Open Season on Kinder Morgan Louisiana, like a Texas Header Project. Can you just tell us how that's progressing and the potential scope of that project? Thanks.

Absolutely. The Open Season has closed, and we have binding commitments to develop that segment. An important part of our overall strategy is the significant interconnectivity required due to the gas coming from various directions. This is a strong foundation for us to initiate that segment, with the potential to expand into the Louisiana corridor. The first phase is contracted and ready for implementation, positioning us well for future growth.

Let me expand on that. The current Header is part of the Trident project regarding the economics we derive from it. Looking ahead, we have opportunities for future expansion, but that would require the approval of a separate project at that time.

Yes, to clarify, the KMLP expansion will connect to Trident, which is separate from Trident itself. It may also serve as a potential link to the Louisiana corridor in the future.

Right, but in the future.

In the future, that's right. Michael, does that make sense?

Yes. Thank you.

Hey, good afternoon. This is Jack Wilson on for Neal. Can you maybe speak to your positioning in regards to LNG exports specifically?

Yes, we currently serve about 50% of that market, but it's actually closer to 45%. We have total contracts in place for LNG exports amounting to approximately 10.7 Bcf a day. While not all of that is operational right now, it's a position we expect to grow into over time. Currently, we're a bit under 10 Bcf/d. The future opportunity is in the range of 15 Bcf a day, which is part of the 28 Bcf a day growth we anticipate between now and 2030. We will focus on capturing these opportunities. Often, there are initial chances to connect to the Header systems or directly to those facilities. Furthermore, many LNG export facilities and customers seek to connect further upstream for competitively priced supply. Sometimes they look for additional capacity, which leads them to contract for more than just the facility's capacity to ensure they can deliver molecules. Consequently, these initial projects often pave the way for future ones. Thus, there is a significant opportunity in the LNG export sector.

Thank you very much.

Hi, good afternoon. First question, just curious, you just did an acquisition a couple of weeks ago, how you're thinking about incremental acquisitions at this point? So, on the one hand, you have greatly increased organic investment opportunities, so you probably want some excess financial capacity, but you also have a much-improved currency and it's probably pretty easy to make deals accretive at this point. So, just how are you balancing those factors and thinking about M&A?

Yes. So, we think about M&A on a very opportunistic basis. And so we can't predict that. And therefore, it's hard to budget or schedule for it. Our criteria in terms of acquisitions hasn't changed. So, it's still the same. So, we're not modifying the criteria. And then we just evaluate each one as it comes to fruition. So, right now, we are able to fully fund all of our CapEx with internally generated cash. We have no need to issue equity. If we saw some big, huge acquisition, we are not opposed to issuing equity, but it would have to make economic sense. So we would just have to view it in the context of the overall deal when that opportunity came before us.

Thanks for that. Second one, just wanted to follow up on the quarter. So, Q4 EBITDA was about $100 million below the initial quarterly budget and you talked about commodities volumes and some of the RNG headwinds. Is there anything else you'd flag for the quarter in particular or are those the main factors?

The commodity headwind was a factor. Our RNG sales were lower than we anticipated. Additionally, some of the RINs we generated this quarter were deferred to next year due to a lack of market liquidity. Those were the primary contributors.

Thank you.

Hi, most of what Kinder Morgan has announced over the past year has been typical large diameter, big CapEx projects, so SNG, GCX, MSX, Trident. From here forward, do you see any shift in the type of the future projects to being mostly more like end-user projects, like laterals to power plants or data centers, which might be lower absolute CapEx but better multiples, or you're not really ready to call that shift yet?

It's difficult to determine right now. I believe we'll see opportunities on both sides. Most of the opportunities will likely be in what I refer to as the smaller projects, such as connecting to power plants. This is mainly because larger projects require coordinating many customers, making them much more complex and challenging to execute. However, we do have some large-scale opportunities that we are currently assessing, which could potentially materialize. It’s just that making predictions about these opportunities is more complicated due to competition and the need for various factors to align for success. So, it will likely remain a mix of opportunities. I anticipate that the larger projects will be less frequent, while we will encounter more smaller opportunities. It’s more challenging to achieve the big wins. We were fortunate this year to have several significant successes all at once.

Yes. That makes sense. Great. And then as a follow-up, can you kind of talk about how you're forecasting the cadence of Haynesville volumes coming back? I think rig count in that basin is falling more than most would have thought, and you've seen some producers saying that you need far higher prices than today's strip for them to come back.

Jean, this is Sital. Yes. So, I think last year, we did see a little pullback in the Haynesville as a result of kind of the price environment. In light of what we're seeing currently and the expectation of the LNG demand coming on, we are seeing activity pick back up in the Haynesville, and if any of this price is sustained as kind of we hope it is, I think you'll see a lot more activity in the Haynesville.

Okay. That's helpful. Thank you. That's all from me.

Thanks, operator. Afternoon, team. I just want to go back to the project backlog again. Now at $8.1 billion, largest we've seen in a while here. And Kim, you mentioned the $2.5 billion a year annually. And I guess if we sort of track that through 2028, gets you to about $10 billion all-in. So, just curious, is that the right way to think about maybe your visibility on the sort of unsanctioned backlog from here, at least through '28? And in that context, kind of what Jean Ann was getting at, you added over $5 billion of projects in this last year. It sounds hard to repeat, but at the same time, you also did mention being in the early stages of data center demand and potentially some new LNG FIDs coming this year. So, when do you think we do see a year like that again? I know it's hard to predict, but just thinking about how you seem to…

I hope next year will be similar. This year has been remarkable in terms of backlog additions and significant projects. We anticipate substantial growth in natural gas demand, reaching 28 Bcf a day by 2030, which is significant. This demand is primarily concentrated in the Southern United States, where we have a strong asset base in Texas, the Southeast, and the desert Southwest. We aim for around $2.5 billion a year in backlog, and while we've added some projects, there is potential for that figure to increase over time. We expect to keep adding to our backlog while also bringing projects online. However, it's difficult to specify exactly how much we can add moving forward.

Okay. Yes. Understood. That's helpful. Second question, quickly, just thinking about some weather events that have kind of occurred so far here in the first quarter. Obviously, we've got the LA fires, I know you guys have assets out in that region, but we've also had some cold weather just along the US Gulf Coast. So, just curious how much either of those events has kind of impacted operations so far in the first quarter.

Yes. In terms of California, no impact on our assets. I mean, we were down for two days on some pipes, but I think those volumes, we'll largely be able to make up. And then, on the cold weather, I mean, our operations guys have done a fantastic job. We went out and manned stations, and yes, we had something go off, but they would get it right back on. So, really, no impact in terms of being able to operate, from the fires or from the cold weather.

Great. I'll leave it there. Thanks for the time.

Hey, thanks for taking my question. Maybe first one on the Bakken acquisition. Can you maybe touch on a high level, what type of contracting that plant and the pipeline have? Is it MBCs, is it mostly contracted, or just any more color there would be great.

Yes, sure. So, this is Sital. One, I think the asset folks will kind of overall integrate the strategy. Most of the contracts are kind of MBC-backed with some firm obligations there. As we think about the footprint, one of the things that this asset does for us is it gives us processing north of the river. We've always been kind of south of the river, if you're familiar with that area. And so, I think it opens up some potential flexibility that we can leverage as we move forward.

Got you. That makes sense. And then maybe just one on Trident. I know that shortly after announcing it, Golden Pass came out talking about them being one of the anchor shippers. I know in the press release today, you kind of note LNG and industrial demand. Could you touch on maybe just the high-level makeup of the demand contracts? Is it mostly LNG or is there also some power and industrial demand you're seeing as well?

Since we last spoke, I can't disclose specific names, but we have strong demand backing the contracts, and we are collaborating with industrial clients and some large end-use customers on the possibility of expanding our pipeline capacity from the currently guided 1.5 Bcf up to 2.8 Bcf through capital-efficient expansion.

Got you. Super helpful. I appreciate the time today. Thanks.

Thank you for the opportunity. I would like to revisit Spiro's question regarding the $2.5 billion a year. Can you clarify if that figure represents a limit on your annual spending? Is there potential for that amount to increase? Also, how do you approach determining that figure? Is it related to leverage, free cash flow, or dividends? Clarifying this for us would be beneficial.

So, we estimate that $2.5 billion is what we can invest, taking into account our backlog and other potential projects over the next three to four years. This figure averages out to $2.5 billion per year, though there will be fluctuations; some years may see expenditures around $3 billion while others might be closer to $2 billion. The allocation won't be uniform each year due to variations in project timelines. However, this gives you an idea of our capital investment opportunities moving forward. We can fund this $2.5 billion each year from our internally generated cash, so we don't anticipate needing external capital for that. In certain years, we may even exceed that amount. Our financial position is solid enough to handle these fluctuations. Currently, our balance sheet has a ratio of 4 times, which we expect to improve to 3.8 times by the end of 2025. This means we can manage the variability, and as projects are launched, we expect to benefit from growth. We'll continue to monitor this number and may increase it if we take on significant new projects. Additionally, as previously mentioned, our backlog amounts to $8.1 billion, while four years of $2.5 billion totals $10 billion, indicating we have potential additional capital based on the opportunities we foresee.

I appreciate that. Thank you. Maybe just second one from me. We've talked a lot about these big kind of marquee projects you've added. Is there anything you can share on kind of knock-on effects across the rest of the Kinder system now that you're going to be moving a lot more gas? Is there some kind of operating leverage on the rest of the footprint that you could think about adding to these returns?

Sure. This is Sital again. As we consider the installation of new infrastructure along with the upcoming developments in data centers and overall power, there are opportunities for us to utilize our presence to connect to these facilities. One point that Jean Ann mentioned was about small, capital-efficient projects, which we can pursue alongside these larger expansions in key locations. Additionally, we're exploring opportunities to expand into the desert Southwest, which could present both primary and secondary growth potential.

I would also like to highlight that, similar to MSX, it will connect the three segments of the Tennessee gas pipeline. Over time, this will provide us with operational flexibility and possibly enhance our ability to serve our customers. Additionally, with Trident entering the Intrastate market, it should integrate effectively with our Texas Intrastate operations, allowing us to offer more value to our customers as we develop this further.

I think the message here that all of the team is trying to deliver is, we have an unparalleled system that bridges the part of the country that needs the most new natural gas delivery system. We have that, and all of what we're saying, I think lends itself to lots of expansion opportunities coming off of this great footprint that we have. And that's really our whole strategy over the next several years, is to move forward with the system we have, expand it, extend it, and drive home real nice earnings growth and growth in EBITDA.

That's great. Thank you, Rich. Thank you, team. Appreciate the time.

Good afternoon, everyone. I want to begin by saying that based on the share price performance, Pete is making a strong case for not holding Analyst Days in the future. Peter, I would like to ask about the MSX project timeline being around four years, which is nearly two years longer than a similar-sized Intrastate project. Is this related to permitting, right-of-way, or conservative estimates? Is there any caution incorporated into that? Additionally, in light of the changes in Washington with the new administration, are there any permitting priorities or discussions that you believe could help speed up the process, considering this might be your first significant greenfield Interstate project in a while?

Yes, the difference in timelines for Interstate and Intrastate pipes can be compared to horseshoes and hand grenades. Typically, Interstate pipes take about four years, with two years for permitting and two years for construction, while Intrastate pipes, which do not require a FERC certificate, usually take around two years. This difference is evident when comparing projects like Trident and MSX or South System 4. We established these schedules when we approved these projects late last year, aligned with our expectations under the previous administration. If FERC accelerates their timeline, particularly for the permit, we could potentially have the project in service sooner. However, it’s essential that we obtain a solid FERC permit that can withstand legal challenges, so we don't want any shortcuts in their processes. Ideally, they can issue a robust, defendable FERC permit more quickly under the current administration.

Thanks, Kim. And I know there'll be some more details on '25 guidance in the not-too-distant future, but could I ask maybe just one on your nat gas sensitivity that you've got to the $0.10 change in gas prices? It's a bit higher this year than last, kind of want to know what's behind that.

Yes, sure.

I know it's not a big piece of things, but…

We've experienced this sensitivity before, so it's not a new issue. It's been challenging to measure because some of our gathering producers have contracts where the prices and tariffs fluctuate with gas prices. This year, we find ourselves in the middle of the expected range, and we've been working to quantify this for our investors. We were able to achieve that this year, so there's no change from previous years.

Thanks, Kim.

Hi, good afternoon.

Good afternoon, Jeremy.

I just wanted to circle back, I guess, new administration, new lookout there. Just wondering, Kinder has looked at expansions in the Northeast before, but state-level permitting issues has impacted the calculus of moving forward with those types of projects. Just wondering if you're tracking anything on the federal side that maybe would change, I guess, the permitting process or laws otherwise that would kind of, I guess, change your outlook. I mean, clearly, the need for more gas logistics in the Northeast is there, but just do you see anything on the permitting side that might make you kind of look at things differently?

Yes. The real issue in the Northeast isn't the federal permits. We can obtain both federal and state permits without any anticipated changes. Another challenge is the commercial structure in the region. The operator's structure does not enable independent power producers to pass through fixed demand charges, which complicates their ability to secure firm capacity contracts. These are the two main obstacles we face, and there has been no change.

Got it. Understood. And might be dating myself a little bit here, but if I go back, I think, to around the 2009 timeframe with Rockies Express, I think it was described as the Pig and the Boa Constrictor at that point. And there was a big move in the industry as far as unconventional production, supply push out of basins and everyone was running on the same steel and construction at the same time, and led to some cost inflation issues. At that point in time, we see inflationary environment in the background now. Just wondering how you think about, I guess, those risks going forward and with ENCs you see out there that you think can best protect you? Just wondering, I'm sure you guys are very thoughtful in all this, but wanted to see your latest thoughts.

Yes. We are already engaged in procurement for all three major pipelines. While I won't go into details about each one, we have already reached agreements to procure steel and compression for some of them. For the others, we expect to finalize agreements in the near future. We are actively working to mitigate these risks.

Got it. Okay. Thank you.

Okay. Thank you all very much. Have a pleasant evening.