Edgar Filing: KINDER MORGAN, INC.

kmi10q3_09.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

F O R M 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission file number: 1-06446

KINDER MORGAN, INC.

(Exact name of registrant as specified in its charter)

Kansas		48-0290000
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Dallas Street, Suite 1000, Houston, Texas 77002

(Address of principal executive offices)(zip code)

Registrant’s telephone number, including area code: 713-369-9000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ ] No [X]

Number of outstanding shares of Common stock, $0.01 par value, as of October 30, 2009 was 100 shares.

Kinder Morgan, Inc. Form 10-Q

KINDER MORGAN, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page Number
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Operations - Three and Nine Months Ended September 30, 2009 and 2008	3
	Consolidated Balance Sheets - September 30, 2009 and December 31, 2008	4
	Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2009 and 2008	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
	General and Basis of Presentation	50
	Critical Accounting Policies and Estimates	50
	Results of Operations	51
	Financial Condition	68
	Recent Accounting Pronouncements	72
	Information Regarding Forward-Looking Statements	73

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74

Item 4.	Controls and Procedures	75



	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	75

Item 1A.	Risk Factors	75

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75

Item 3.	Defaults Upon Senior Securities	75

Item 4.	Submission of Matters to a Vote of Security Holders	75

Item 5.	Other Information	75

Item 6.	Exhibits	76

	Signature	77

Kinder Morgan, Inc. Form 10-Q

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

KINDER MORGAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Millions)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Revenues
Natural gas sales	$	686.2		$	2,183.3		$	2,291.8		$	6,369.8
Services		690.2			700.9			2,003.7			2,187.5
Product sales and other		335.9			412.4			939.0			1,194.8
Total Revenues		1,712.3			3,296.6			5,234.5			9,752.1

Operating Costs, Expenses and Other
Gas purchases and other costs of sales		665.2			2,179.2			2,240.3			6,433.9
Operations and maintenance		286.0			360.8			815.4			977.4
Depreciation, depletion and amortization		255.5			217.2			777.1			651.0
General and administrative		92.2			85.9			269.2			264.0
Taxes, other than income taxes		36.4			48.0			98.8			151.6
Other expense (income)		(14.2	)		7.2			(14.1	)		4.5
Goodwill impairment		-			-			-			4,033.3
Total Operating Costs, Expenses and Other		1,321.1			2,898.3			4,186.7			12,515.7

Operating Income (Loss)		391.2			398.3			1,047.8			(2,763.6	)

Other Income (Expense)
Earnings from equity investments		65.0			42.9			159.9			141.9
Interest, net		(139.6	)		(141.5	)		(419.8	)		(493.8	)
Interest income (expense) – deferrable interest debentures		(0.5	)		(0.5	)		(1.6	)		5.6
Other, net		13.0			4.4			43.9			18.1
Total Other Income (Expense)		(62.1	)		(94.7	)		(217.6	)		(328.2	)

Income (Loss) from Continuing Operations Before Income Taxes		329.1			303.6			830.2			(3,091.8	)

Income Taxes		(99.6	)		(87.9	)		(247.2	)		(194.4	)

Income (Loss) from Continuing Operations		229.5			215.7			583.0			(3,286.2	)

Income (Loss) from Discontinued Operations, net of tax		(0.1	)		(0.2	)		0.4			(0.6	)

Net Income (Loss)		229.4			215.5			583.4			(3,286.8	)

Net Income attributable to Noncontrolling Interests		(106.6	)		(106.8	)		(215.5	)		(359.4	)

Net Income (Loss) attributable to Kinder Morgan, Inc.	$	122.8		$	108.7		$	367.9		$	(3,646.2	)

The accompanying notes are an integral part of these consolidated financial statements.

Kinder Morgan, Inc. Form 10-Q

KINDER MORGAN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Millions, except Shares)

(Unaudited)

	September 30, 2009			December 31, 2008
ASSETS
Current Assets
Cash and cash equivalents	$	226.1		$	118.6
Restricted deposits		50.0			-
Accounts, notes and interest receivable, net		717.9			992.5
Inventories		56.6			44.2
Gas imbalances		15.7			14.1
Gas in underground storage		51.9			-
Fair value of derivative contracts		24.4			115.2
Other current assets		56.0			32.6
Total Current Assets		1,198.6			1,317.2

Property, plant and equipment, net		16,582.5			16,109.8
Investments		3,405.8			1,827.4
Notes receivable		189.9			178.1
Goodwill		4,737.4			4,698.7
Other intangibles, net		241.4			251.5
Fair value of derivative contracts		433.3			828.0
Deferred charges and other assets		217.0			234.2
Total Assets	$	27,005.9		$	25,444.9

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of debt	$	206.7		$	302.5
Cash book overdrafts		34.7			45.2
Accounts payable		438.7			849.8
Accrued interest		120.6			241.9
Accrued taxes		89.0			152.1
Deferred revenues		65.1			41.2
Gas imbalances		8.2			12.4
Fair value of derivative contracts		198.3			129.5
Accrued other current liabilities		165.0			240.1
Total Current Liabilities		1,326.3			2,014.7

Long-Term Liabilities and Deferred Credits
Long-term debt
Outstanding		12,994.5			11,020.1
Deferrable interest debentures		35.7			35.7
Preferred interest in general partner of Kinder Morgan Energy Partners		100.0			100.0
Value of interest rate swaps		612.0			971.0
Total Long-term debt		13,742.2			12,126.8
Deferred income taxes		2,081.9			2,081.3
Asset retirement obligations		84.1			74.0
Fair value of derivative contracts		298.0			92.2
Other long-term liabilities and deferred credits		531.8			579.0
Total Long-Term Liabilities and Deferred Credits		16,738.0			14,953.3

Total Liabilities		18,064.3			16,968.0

Commitments and Contingencies (Notes 4 and 11)
Stockholders’ Equity
Common stock – authorized and outstanding – 100 shares, par value $0.01 per share		-			-
Additional paid-in capital		7,835.0			7,810.0
Retained deficit		(3,284.4	)		(3,352.3	)
Accumulated other comprehensive loss		(131.2	)		(53.4	)
Total Kinder Morgan, Inc. Stockholder’s Equity		4,419.4			4,404.3
Noncontrolling interests		4,522.2			4,072.6
Total Stockholders’ Equity		8,941.6			8,476.9
Total Liabilities and Stockholders’ Equity	$	27,005.9		$	25,444.9

The accompanying notes are an integral part of these consolidated financial statements.

Kinder Morgan, Inc. Form 10-Q

KINDER MORGAN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Millions)

(Unaudited)

	Nine Months Ended September 30,
	2009			2008
Cash Flows From Operating Activities
Net Income (loss)	$	583.4		$	(3,286.8	)
Adjustments to reconcile net income to net cash provided by operating activities
Loss from goodwill impairment		-			4,033.3
Loss on early extinguishment of debt		-			23.6
Depreciation, depletion and amortization		777.1			651.0
Amortization of excess cost of equity investments		4.3			4.3
Deferred income taxes		51.3			46.4
Income from the allowance for equity funds used during construction		(22.6	)		-
(Income) loss from the sale or casualty of property, plant and equipment and other net assets		(14.1	)		4.4
Earnings from equity investments		(164.2	)		(146.2	)
Mark-to-market interest rate swap gain		-			(19.8	)
Distributions from equity investments		184.5			185.0
Proceeds from (payment for) termination of interest rate swap agreements		146.0			(2.5	)
Pension contributions in excess of expense		(11.1	)		-
Changes in components of working capital
Accounts receivable		215.5			(55.5	)
Other current assets		(73.4	)		1.0
Inventories		(11.8	)		(7.3	)
Accounts payable		(342.5	)		(89.3	)
Accrued interest		(121.3	)		(145.3	)
Accrued liabilities		(143.1	)		(81.0	)
Accrued taxes		(77.8	)		(502.3	)
Rate reparations, refunds and other litigation reserve adjustments		(15.5	)		(10.7	)
Other, net		(46.0	)		(18.5	)
Cash flows provided by continuing operations		918.7			583.8
Net cash flows provided by (used in) discontinued operations		0.1			(0.7	)
Net Cash Provided by Operating Activities		918.8			583.1

Cash Flows From Investing Activities
Proceeds from sale of 80% interest in NGPL PipeCo LLC, net of $1.1 cash sold		-			2,899.3
Proceeds from NGPL PipeCo LLC restricted cash		-			3,106.4
Acquisitions of assets		(27.5	)		(16.4	)
Repayments from customers		109.6			-
Capital expenditures		(1,076.4	)		(1,922.8	)
Sale or casualty of property, plant and equipment, and other net assets net of removal costs		9.8			113.3
(Investments in) net proceeds from margin deposits		(13.2	)		40.3
Investments in restricted deposits		(39.9	)		-
Contributions to investments		(1,619.6	)		(342.1	)
Distributions from equity investments		15.9			92.5
Natural gas stored underground and natural gas liquids line-fill		-			(2.5	)
Net Cash Provided by (Used in) Investing Activities		(2,641.3	)		3,968.0

Cash Flows From Financing Activities
Issuance of debt		6,617.7			7,980.4
Payment of debt		(4,735.0	)		(12,581.7	)
Repayments from related party		2.5			2.7
Discount on early extinguishment of debt		-			69.2
Debt issue costs		(14.8	)		(14.3	)
(Decrease) Increase in cash book overdrafts		(10.4	)		43.5
Cash dividends		(300.0	)		-
Contributions from noncontrolling interests		815.5			385.0
Distributions to noncontrolling interests		(550.2	)		(463.3	)
Other, net		(0.3	)		8.9
Net Cash Provided by (Used in) Financing Activities		1,825.0			(4,569.6	)

Effect of exchange rate changes on cash and cash equivalents		5.0			(3.5	)

Increase (Decrease) in Cash and Cash Equivalents		107.5			(22.0	)
Cash and Cash Equivalents, beginning of period		118.6			148.6
Cash and Cash Equivalents, end of period	$	226.1		$	126.6

Noncash Investing and Financing Activities
Assets acquired by the assumption or incurrence of liabilities	$	3.7		$	3.4
Interest expense recognized from the early extinguishment of debt		-			87.5
Subordinated notes acquired by exchange of preferred equity interest		-			111.4
Assets acquired by contributions from noncontrolling interests	$	5.0		$	-
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest (net of capitalized interest)	$	555.9		$	623.0
Cash paid during the period for income taxes	$	317.2		$	622.9

The accompanying notes are an integral part of these consolidated financial statements.

Kinder Morgan, Inc. Form 10-Q

KINDER MORGAN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. General

Organization

We are a large energy transportation and storage company, operating or owning an interest in approximately 37,000 miles of pipelines and approximately 170 terminals. We have both regulated and nonregulated operations. We also own all the common equity of the general partner of, and a significant limited partner interest in, Kinder Morgan Energy Partners, L.P., a publicly traded pipeline limited partnership. We are a wholly owned subsidiary of Kinder Morgan Holdco LLC, a private company (formerly Knight Holdco LLC). Our executive offices are located at 500 Dallas Street, Suite 1000, Houston, Texas 77002 and our telephone number is (713) 369-9000. Unless the context requires otherwise, references to “we,” “us,” “our,” or the “Company” are intended to mean Kinder Morgan, Inc. and its consolidated subsidiaries. Unless the context requires otherwise, references to “Kinder Morgan Energy Partners” and “KMP” are intended to mean Kinder Morgan Energy Partners, L.P. and its consolidated subsidiaries.

Kinder Morgan Management, LLC, referred to in this report as “Kinder Morgan Management” or “KMR,” is a publicly traded Delaware limited liability company. Kinder Morgan G.P., Inc., the general partner of Kinder Morgan Energy Partners and a wholly owned subsidiary of ours, owns all of Kinder Morgan Management’s voting shares. Kinder Morgan Management, pursuant to a delegation of control agreement, has been delegated, to the fullest extent permitted under Delaware law, all of Kinder Morgan G.P., Inc.’s power and authority to manage and control the business and affairs of Kinder Morgan Energy Partners, subject to Kinder Morgan G.P., Inc.’s right to approve certain transactions.

As further disclosed in Note 1 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008 (“2008 Form 10-K”), on May 30, 2007, Kinder Morgan, Inc. merged with a wholly owned subsidiary of Kinder Morgan Holdco LLC, with Kinder Morgan, Inc. continuing as the surviving legal entity and subsequently renamed Knight Inc. On July 15, 2009, the Company’s name was changed back to Kinder Morgan, Inc. This transaction is referred to in this report as “the Going Private transaction.” Effective with the closing of the Going Private transaction, all of our assets and liabilities were recorded at their estimated fair market values based on an allocation of the aggregate purchase price paid in the Going Private transaction.

Basis of Presentation

We have prepared our accompanying unaudited interim consolidated financial statements under the rules and regulations of the Securities and Exchange Commission (“SEC”). Under such SEC rules and regulations, we have condensed or omitted certain information and notes normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). We believe, however, that our disclosures are adequate to make the information presented not misleading. Our consolidated financial statements reflect normal adjustments, and also recurring adjustments that are, in the opinion of management, necessary for a fair presentation of our financial results for the interim periods and certain amounts from prior periods have been reclassified to conform to the current presentation. Interim results are not necessarily indicative of results for a full year; accordingly, you should read these interim consolidated financial statements in conjunction with our consolidated financial statements and related notes included in our 2008 Form 10-K.

Our accounting records are maintained in United States dollars and all references to dollars are United States dollars, except where stated otherwise. Canadian dollars are designated as C$. Our consolidated financial statements include the accounts of Kinder Morgan, Inc. and our majority-owned subsidiaries, as well as those of Kinder Morgan Energy Partners, Kinder Morgan Management and Triton Power Company LLC. Investments in jointly owned operations in which we hold a 50% or less interest (other than Kinder Morgan Energy Partners, Kinder Morgan Management and Triton Power Company LLC, because we have the ability to exercise significant control over their operating and financial policies) are accounted for under the equity method. All significant intercompany transactions and balances have been eliminated.

Kinder Morgan, Inc. Form 10-Q

Partners and/or its subsidiaries and vice versa, except as discussed in the following paragraph. Responsibility for payments of obligations reflected in our or Kinder Morgan Energy Partners’ financial statements is a legal determination based on the entity that incurs the liability.

In conjunction with Kinder Morgan Energy Partners’ acquisition of certain natural gas pipelines from us, we agreed to indemnify Kinder Morgan Energy Partners with respect to approximately $733.5 million of its debt. We would be obligated to perform under this indemnity only if Kinder Morgan Energy Partners’ assets were unable to satisfy its obligations.

The Financial Accounting Standards Board’s Accounting Standards Codification

In this report, we refer to the Financial Accounting Standards Board as the FASB and the FASB’s issued Statements of Financial Accounting Standards as SFAS.

In June 2009, the FASB voted to approve its Accounting Standards Codification as the single source of GAAP recognized by the FASB to be applied by nongovernmental entities. All other accounting literature not included in the Codification is considered nonauthoritative. In this report, we refer to the FASB Accounting Standards Codification as the Codification. It became effective for us on September 30, 2009, and although the adoption of the Codification did not have any direct effect on our consolidated financial statements, it does affect the way we reference GAAP in our financial statements and in our accounting policies.

The FASB now communicates new accounting standards via a new document called an Accounting Standards Update (“ASU”). Each ASU is a transient document—not considered authoritative in its own right—and serves only to update the Codification by detailing the specific amendments to the Codification and explaining the historical basis for conclusions of a new standard. The FASB will organize the content of each ASU using the same topics and section headings as those used in the Codification. For more information on Codification updates and other recent accounting pronouncements, see Note 13.

Noncontrolling Interests

On January 1, 2009, we adopted certain provisions concerning the accounting and reporting for noncontrolling interests included within the “Consolidation” Topic of the Codification. A noncontrolling interest, sometimes referred to as a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent.

Specifically, these provisions establish accounting and reporting standards that require (i) the ownership interests in subsidiaries held by parties other than the parent to be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the parent’s equity and (ii) the equity amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations. Accordingly, our consolidated net income and comprehensive income are now determined without deducting amounts attributable to our noncontrolling interests.

The adopted provisions apply prospectively, with the exception of the presentation and disclosure requirements, which must be applied retrospectively for all periods presented. In addition, on September 18, 2009, we filed a Current Report on Form 8-K to update certain sections of our 2008 Form 10-K solely to reflect the retrospective presentation and disclosure requirements for noncontrolling interests. The Form 8-K included Item 6 “Selected Financial Data,” Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8 “Financial Statements and Supplementary Data.” For those sections updated, we also changed our name from Knight Inc. to Kinder Morgan, Inc. to reflect our July 15, 2009 name change. No other items from our 2008 Form 10-K were adjusted or otherwise revised. The Form 8-K did not reflect any subsequent information or events other than the adoption of presentation and disclosure requirements for noncontrolling interests and our name change. Accordingly, whenever we refer in this report to disclosure contained in our 2008 Form 10-K, such references also apply to the relevant Form 10-K items included in the Form 8-K.

Kinder Morgan, Inc. Form 10-Q

Pensions and Other Postretirement Benefits

The Codification’s “Defined Benefit Plans—General” Subtopic provides the accounting and disclosure requirements for the pension and other postretirement benefit plans sponsored by our subsidiaries. Effective December 31, 2009, certain provisions of this Subtopic will require additional disclosure of pension and postretirement benefit plan assets regarding (i) investment asset classes, (ii) fair value measurement of assets, (iii) investment strategies, (iv) asset risk and (v) rate-of-return assumptions. Currently, we do not expect these provisions to have a material impact on our consolidated financial statements.

Subsequent Events

Effective June 30, 2009, the Codification’s “Subsequent Events” Topic requires us to disclose the date through which we evaluate subsequent events and the basis for that date. For this report, we have evaluated subsequent events, which are events or transactions that occurred after September 30, 2009 through November 13, 2009, the date we issued the accompanying Consolidated Financial Statements.

2. Acquisitions, Joint Ventures and Divestitures

Acquisitions

General

The provisions of the Codification’s Topic 805, “Business Combinations,” are to be effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, we adopted the provisions of Topic 805 on January 1, 2009. Topic 805 requires that (i) the acquisition method of accounting be used for all business combinations and (ii) an acquirer be identified for each business combination. It applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree), including combinations achieved without the transfer of consideration. The adoption of Topic 805 did not have a material impact on our consolidated financial statements.

Significant provisions of Topic 805 concern principles and requirements for how an acquirer (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Topic also amends the provisions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination. It requires that acquired contingencies in a business combination be recognized at fair value on the acquisition date if fair value can be reasonably estimated during the allocation period. Otherwise, companies would typically account for the acquired contingencies in accordance with the provisions of the “Contingencies” Topic of the Codification.

Megafleet Towing Co., Inc. Assets

Effective April 23, 2009, Kinder Morgan Energy Partners acquired certain terminals assets from Megafleet Towing Co., Inc. for an aggregate consideration of approximately $21.7 million. The consideration included $18.0 million in cash and an obligation to pay additional cash consideration on April 23, 2014 (five years from the acquisition date) contingent upon the purchased assets providing Kinder Morgan Energy Partners an agreed-upon amount of earnings, as defined by the purchase and sale agreement, during the five year period. The contingent consideration had a fair value of $3.7 million as of the acquisition date and there has been no change in the fair value during the post-acquisition period ended September 30, 2009.

The acquired assets primarily consist of nine marine vessels that provide towing and harbor boat services along the Gulf coast, the Intracoastal Waterway, and the Houston Ship Channel. The acquisition complements and expands Kinder Morgan Energy Partners’ existing Gulf Coast and Texas petroleum coke terminal operations, and all of the acquired assets are included in the Terminals–KMP reportable segment. Kinder Morgan Energy Partners allocated $7.1 million of the combined purchase price to “Property, plant and equipment, net,” $4.0 million to

Kinder Morgan, Inc. Form 10-Q

“Other intangibles net,” and the remaining $10.6 million to “Goodwill.” Kinder Morgan Energy Partners believes the primary item that generated the goodwill is the value of the synergies created between the acquired assets and its pre-existing terminal assets (resulting from the increase in services now offered by its Texas petroleum coke operations), and we expect that approximately $5.0 million of goodwill will be deductible for tax purposes.

Joint Ventures

Rockies Express Pipeline

Rockies Express Pipeline LLC (“Rockies Express”) is the sole owner of the Rockies Express natural gas pipeline system. The final portion of Rockies Express-East, consisting of approximately 195 miles of 42-inch diameter pipe extending to Clarington, Ohio, went into service on November 12, 2009, which is considered the Rockies Express project completion. West2East Pipeline LLC (“West2East”) owns all of the member interests in Rockies Express, and West2East is owned 51% by Kinder Morgan Energy Partners, 25% by Sempra Pipelines & Storage (“Sempra”) and 24% by ConocoPhillips. By the end of 2009, the member interests and voting rights in West2East will change: Kinder Morgan Energy Partners will own 50% and ConocoPhillips will own 25%. In addition, at that time West2East will merge with Rockies Express. Rockies Express will be the surviving company that will be owned 50% by Kinder Morgan Energy Partners and 25% by both Sempra and ConocoPhillips.

During the three and nine months ended September 30, 2009, Kinder Morgan Energy Partners made capital contributions of $642.1 million and $1,075.6 million, respectively, to West2East to partially fund construction costs for the Rockies Express pipeline system and to fund the repayment of senior notes by Rockies Express which matured in August 2009. For more information on this additional contribution, see Note 4 “Debt—Contingent Debt—Rockies Express Pipeline LLC Debt.”

Midcontinent Express Pipeline

Kinder Morgan Energy Partners owns a 50% equity interest in Midcontinent Express Pipeline LLC (“Midcontinent Express”) the sole owner of the Midcontinent Express natural gas pipeline system. Energy Transfer Partners, L.P. owns the remaining 50% equity ownership interest. During the three and nine months ended September 30, 2009, Kinder Morgan Energy Partners made capital contributions of $131.5 million and $464.5 million, respectively, to Midcontinent Express to partially fund construction costs for the Midcontinent Express pipeline system. Construction of the pipeline was completed and the pipeline was placed in service on August 1, 2009. In January 2008, in conjunction with the signing of additional binding transportation commitments, Midcontinent Express entered into an option agreement with a subsidiary of MarkWest Energy Partners, L.P. (“Mark West”) providing it a one-time right to purchase a 10% ownership interest in Midcontinent Express. In September 2009, MarkWest declined to exercise this option.

Fayetteville Express Pipeline

Kinder Morgan Energy Partners owns a 50% equity interest in Fayetteville Express Pipeline LLC (“Fayetteville Express”), the sole owner of the Fayetteville Express natural gas pipeline system. During the three and nine months ended September 30, 2009, Kinder Morgan Energy Partners made capital contributions of $39.0 million and $70.2 million, respectively, to Fayetteville Express to partially fund certain pre-construction pipeline costs for the Fayetteville Express pipeline system.

We included all of the cash contributions to the three joint ventures described above as increases to “Investments” in the accompanying interim Consolidated Balance Sheet as of September 30, 2009, and as “Contributions to investments” in the accompanying interim Consolidated Statement of Cash Flows for the nine months ended September 30, 2009. We use the equity method of accounting for each of the three investments, and as of September 30, 2009, the carrying value of the investments in West2East, Midcontinent Express, and Fayetteville Express were $1,559.5 million, $468.4 million, and $80.2 million, respectively.

In addition, on January 1, 2009, we also adopted certain provisions included within the “Investments—Equity Method and Joint Ventures” Topic of the Codification. These provisions clarify certain accounting and impairment considerations involving equity method investments. The adoption of these provisions did not have any impact on our consolidated financial statements. For more information on these joint ventures, see Note 12.

Kinder Morgan, Inc. Form 10-Q

Pro Forma Information

Pro forma consolidated statement of operations information that gives effect to all of the acquisitions that have been made and all of the joint ventures that have been entered into since January 1, 2008 as if they had occurred as of January 1, 2008 is not presented because it would not be materially different from the information presented in the accompanying interim Consolidated Statements of Operations.

Acquisitions Subsequent to September 30, 2009

Crosstex Energy, L.P. Natural Gas Treating Business

On August 31, 2009, Kinder Morgan Energy Partners announced that it had entered into a partnership interest purchase and sales agreement to acquire the natural gas treating business from Crosstex Energy, L.P. and Crosstex Energy, Inc. for an aggregate consideration of approximately $266 million, subject to certain working capital and other closing adjustment provisions. The acquired assets primarily consist of approximately 290 natural gas amine-treating and dew-point control plants and related equipment and are used to remove impurities and liquids from natural gas in order to meet pipeline quality specifications. The assets are predominantly located in Texas and Louisiana, with additional facilities located in Mississippi, Oklahoma, Arkansas and Kansas.

The acquisition makes Kinder Morgan Energy Partners the largest provider of contract-provided treating plants in the United States (“U.S.”) and complements and expands the existing natural gas treating operations currently being offered by Kinder Morgan Energy Partners’ Texas intrastate natural gas pipeline group. All of the acquired assets will be included in the Natural Gas Pipelines–KMP reportable segment. On October 1, 2009, the transaction closed. The acquired entity is now named Kinder Morgan Treating, L.P.

GMX Resources Inc. Natural Gas Gathering Business

On October 16, 2009, Kinder Morgan Energy Partners announced that it had entered into a definitive purchase agreement to acquire a 40% ownership interest in the natural gas gathering and compression business of GMX Resources Inc. (“GMXR”) for an aggregate consideration of approximately $36 million. The transaction closed effective November 1, 2009.

The gas gathering business provides service to GMXR’s exploration and production activities in its Cotton Valley Sands and Haynesville/Bossier Shale horizontal well developments located in east Texas. GMXR’s wholly owned subsidiary, Endeavor Pipeline Inc., will continue to act as operator of the system. The acquisition will complement Kinder Morgan Energy Partners’ existing natural gas transportation business located in the state of Texas and all of the acquired investment will be included in the Natural Gas Pipelines–KMP business segment.

Divestitures

Cypress Pipeline

On July 14, 2009 Kinder Morgan Energy Partners received notice from Westlake Petrochemicals LLC that it was exercising an option it held to purchase 50% of the Cypress Pipeline. As of September 30, 2009, the net assets of Kinder Morgan Energy Partners’ Cypress Pipeline totaled approximately $21.2 million. The sale of 50% of the Cypress Pipeline will not have a material impact on our results of operations or cash flows.

NGPL PipeCo LLC

On February 15, 2008, we sold an 80% ownership interest in NGPL PipeCo LLC (formerly MidCon Corp.), which owns Natural Gas Pipeline of America and certain affiliates, collectively referred to as “NGPL PipeCo LLC,” to Myria Acquisition Inc. (“Myria”) for approximately $2.9 billion. We also received $3.0 billion of cash previously held in escrow related to a notes offering by NGPL PipeCo LLC in December 2007, the net proceeds of which were distributed to us principally as repayment of intercompany indebtedness and partially as a dividend, immediately prior to the closing of the sale to Myria. Pursuant to the purchase agreement, Myria acquired all 800 Class B shares and we retained all 200 Class A shares of NGPL PipeCo LLC. We continue to operate NGPL PipeCo LLC’s assets pursuant to a 15-year operating agreement; see Note 9 for more information regarding this operating agreement. The total proceeds from this sale of $5.9 billion were used to pay off the entire outstanding balances of our

Kinder Morgan, Inc. Form 10-Q

senior secured credit facility’s Tranche A and Tranche B term loans, to repurchase $1.67 billion of our outstanding debt securities and to reduce balances outstanding under our $1.0 billion revolving credit facility.

3. Intangibles

Goodwill

We evaluate goodwill for impairment on May 31 of each year. For this purpose, we have six reporting units as follows: (i) Products Pipelines–KMP (excluding associated terminals), (ii) Products Pipelines Terminals–KMP (evaluated separately from Products Pipelines for goodwill purposes), (iii) Natural Gas Pipelines–KMP, (iv) CO2; (v) Terminals–KMP and (vi) Kinder Morgan Canada–KMP.

There were no impairment charges resulting from the May 31, 2009 impairment testing, and there have been no events indicating an impairment subsequent to that date. The fair value of each reporting unit was determined from the present value of the expected future cash flows from the applicable reporting unit (inclusive of a terminal value calculated using market multiples between six and ten times cash flows) discounted at a rate of 9.0%. The fair value of each reporting unit was determined on a stand-alone basis from the perspective of a market participant and represented the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.

Changes in the carrying amount of our goodwill for the nine months ended September 30, 2009 are summarized as follows (in millions):

	Products Pipelines–KMP		Natural Gas Pipelines–KMP		CO2–KMP		Terminals–KMP		Kinder Morgan Canada–KMP		Total
Balance as of December 31, 2008	$	850.0	$	1,349.2	$	1,521.7	$	774.2	$	203.6	$	4,698.7
Acquisitions and purchase price adjustments.		-		-		-		10.6		-		10.6
Currency translation adjustments		-		-		-		-		28.1		28.1
Balance as of September 30, 2009	$	850.0	$	1,349.2	$	1,521.7	$	784.8	$	231.7	$	4,737.4

In addition, we identify any premium or excess cost we pay over our proportionate share of the underlying fair value of net assets acquired and accounted for as investments under the equity method of accounting. This premium or excess cost is referred to as equity method goodwill and is also not subject to amortization but rather to impairment testing. No event or change in circumstances that may have a significant adverse effect on the fair value of our equity investments has occurred during the first nine months of 2009, and as of both September 30, 2009 and December 31, 2008, we reported $138.2 million in equity method goodwill within the caption “Investments” in the accompanying interim Consolidated Balance Sheets.

Kinder Morgan, Inc. Form 10-Q

Other Intangibles

Excluding goodwill, our other intangible assets include customer relationships, contracts and agreements, lease value, technology-based assets and other long-term assets. These intangible assets have definite lives, are being amortized on a straight-line basis over their estimated useful lives, and are reported separately as “Other intangibles, net” in the accompanying interim Consolidated Balance Sheets. Following is information related to our intangible assets subject to amortization (in millions):

	September 30, 2009			December 31, 2008
Customer relationships, contracts and agreements
Gross carrying amount	$	272.5		$	270.9
Accumulated amortization		(44.0	)		(30.3	)
Net carrying amount		228.5			240.6

Technology-based assets, lease value and other
Gross carrying amount		14.1			11.7
Accumulated amortization		(1.2	)		(0.8	)
Net carrying amount		12.9			10.9

Total other intangibles, net	$	241.4		$	251.5

For the three and nine months ended September 30, 2009, the amortization expense on our intangibles totaled $4.6 million and $14.1 million, respectively, and for the same prior year periods, the amortization expense on our intangibles totaled $4.8 million and $14.5 million, respectively. As of September 30, 2009, the weighted average amortization period for our intangible assets was approximately 15.9 years. Our estimated amortization expense for these assets for each of the next five fiscal years (2010 – 2014) is approximately $17.3 million, $17.1 million, $16.9 million, $16.8 million and $16.7 million, respectively.

In addition, on January 1, 2009, we adopted certain provisions included within the “General Intangibles Other than Goodwill” Subtopic of the Codification. These provisions introduce factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The adoption of these provisions did not have any impact on our consolidated financial statements.

4. Debt

Notwithstanding the consolidation of Kinder Morgan Energy Partners and its subsidiaries into our financial statements, we are not liable for, and our assets are not available to satisfy, the obligations of Kinder Morgan Energy Partners and/or its subsidiaries and vice versa, except as discussed following. Responsibility for payments of obligations reflected in our or Kinder Morgan Energy Partners’ financial statements is a legal determination based on the entity that incurs the liability. In conjunction with Kinder Morgan Energy Partners’ acquisition of certain natural gas pipelines from us, we agreed to indemnify Kinder Morgan Energy Partners with respect to approximately $733.5 million of its debt. We would be obligated to perform under this indemnity only if Kinder Morgan Energy Partners’ assets were unable to satisfy its obligations.

We classify our debt based on the contractual maturity dates of the underlying debt instruments or as of the earliest put date available to the holders of the applicable debt. As of September 30, 2009, our outstanding short-term debt was $206.7 million, and our outstanding long-term debt (excluding the value of interest rate swap agreements, the preferred interest in the G.P. of Kinder Morgan Energy Partners, and the deferrable interest debentures issued to subsidiary trusts) was $12,994.5 million.

As of September 30, 2009, our outstanding short-term debt balance consisted of (i) $50.0 million in outstanding borrowings under our senior secured credit facility, (ii) a $1.1 million current portion of our 6.50% series Debentures, Due 2013, (iii) $110 million in outstanding borrowings under Kinder Morgan Energy Partners’ bank credit facility (discussed below), (iv) $23.7 million in principal amount of tax-exempt bonds that mature on April 1,

Kinder Morgan, Inc. Form 10-Q

2024, but are due on demand pursuant to certain standby purchase agreement provisions contained in the bond indenture (Kinder Morgan Energy Partners’ subsidiary Kinder Morgan Operating L.P. “B” is the obligor on the bonds), (v) a $9.8 million portion of a 5.40% long-term note payable (Kinder Morgan Energy Partners’ subsidiaries Kinder Morgan Operating L.P. “A” and Kinder Morgan Canada Company are the obligors on the note), (vi) a $6.8 million portion of 5.23% senior notes (Kinder Morgan Energy Partners’ subsidiary Kinder Morgan Texas Pipeline, L.P. is the obligor on the notes) and (vii) $5.3 million in principal amount of adjustable rate industrial development revenue bonds that mature on January 1, 2010 (the bonds were issued by the Illinois Development Finance Authority and Kinder Morgan Energy Partners’ subsidiary Arrow Terminals L.P. is the obligor on the bonds).

Credit Facilities

	September 30, 2009
	Short-term Notes Payable		Commercial Paper Outstanding		Weighted- Average Interest Rate
	(In millions)
Kinder Morgan, Inc. – Secured debt(a)	$	50.0	$	-		1.38	%
Kinder Morgan Energy Partners – Unsecured debt(b)	$	110.0	$	-		0.85	%

____________

(a)	The average short-term debt outstanding (and related weighted-average interest rate) was $39.1 million (1.85%) and $73.6 million (2.13%) during the three and nine months ended September 30, 2009.

(b)	The average short-term debt outstanding (and related weighted-average interest rate) was $522.0 million (1.25%) and $427.8 million (1.62%) during the three and nine months ended September 30, 2009.

Kinder Morgan, Inc.’s $1.0 billion six-year senior secured credit facility matures on May 30, 2013 and includes a sublimit of $300 million for the issuance of letters of credit and a sublimit of $50 million for swingline loans. Kinder Morgan, Inc. does not have a commercial paper program. Kinder Morgan, Inc. had $8.8 million outstanding under its credit facility at December 31, 2008.

Kinder Morgan Energy Partners’ $1.85 billion unsecured bank credit facility is with a syndicate of financial institutions, and Wachovia Bank, National Association is the administrative agent. The credit facility permits Kinder Morgan Energy Partners to obtain bids for fixed rate loans from members of the lending syndicate and the facility can be amended to allow for borrowings of up to $2.0 billion. Interest on Kinder Morgan Energy Partners’ credit facility accrues at its option at a floating rate equal to either (i) the administrative agent’s base rate (but not less than the Federal Funds Rate, plus 0.5%), or (ii) LIBOR, plus a margin, which varies depending upon the credit rating of its long-term senior unsecured debt.

The outstanding balance under Kinder Morgan Energy Partners credit facility was $110 million as of September 30, 2009. As of December 31, 2008, there were no borrowings under the credit facility. Kinder Morgan Energy Partners’ credit facility matures August 18, 2010 and currently it plans to negotiate a renewal of the credit facility before its maturity date. Borrowings under Kinder Morgan Energy Partners’ credit facility can be used for partnership purposes and as a backup for its commercial paper program.

During the first quarter of 2009, following Lehman Brothers Holdings Inc.’s filing for bankruptcy protection in September 2008, Kinder Morgan Energy Partners amended the credit facility to remove Lehman Brothers Commercial Bank as a lender, thus reducing the borrowing capacity under the facility by $63.3 million. The commitments of the other banks remain unchanged, and the facility is not defaulted.

Additionally, as of September 30, 2009, the amount available for borrowing under Kinder Morgan Energy Partners’ credit facility was reduced by an aggregate amount of $264.2 million, consisting of (i) a $100 million letter of credit that supports certain proceedings with the California Public Utilities Commission involving refined products tariff charges on the intrastate common carrier operations of Kinder Morgan Energy Partners’ Pacific operations’ pipelines in the state of California, (ii) a combined $90.8 million in three letters of credit that support tax-exempt bonds, (iii) a combined $35.0 million in two letters of credit that support Kinder Morgan Energy Partners’ hedging of commodity price risks associated with the sale of natural gas, natural gas liquids and crude oil, (iv) a $21.4 million letter of credit that supports Kinder Morgan Energy Partners’ indemnification obligations on the Series D note borrowings of Cortez Capital Corporation and (v) a combined $17.0 million in other letters of credit

Kinder Morgan, Inc. Form 10-Q

supporting other obligations of Kinder Morgan Energy Partners and its subsidiaries.

Commercial Paper Program

On October 13, 2008, Standard & Poor’s Rating Services lowered Kinder Morgan Energy Partners’ short-term credit rating to A-3 from A-2. Additionally, on May 6, 2009, Moody’s Investor Services, Inc. downgraded Kinder Morgan Energy Partners’ commercial paper rating to Prime-3 from Prime-2 and assigned a negative outlook to its long-term credit rating. As a result of these revisions and current commercial paper market conditions, Kinder Morgan Energy Partners is currently unable to access commercial paper borrowings, and as of both September 30, 2009 and December 31, 2008, it had no commercial paper borrowings. However, Kinder Morgan Energy Partners expects that its financing and liquidity needs will continue to be met through borrowings made under its bank credit facility described above.

Senior Notes

On February 1, 2009, Kinder Morgan Energy Partners paid $250 million to retire the principal amount of its 6.30% senior notes that matured on that date. Kinder Morgan Energy Partners borrowed the necessary funds under its bank credit facility.

On May 14, 2009, Kinder Morgan Energy Partners completed a public offering of senior notes. It issued a total of $1 billion in principal amount of senior notes in two separate series, consisting of $300 million of 5.625% notes due February 15, 2015, and $700 million of 6.85% notes due February 15, 2020. Kinder Morgan Energy Partners received proceeds from the issuance of the notes, after underwriting discounts and commissions, of $993.3 million, and it used the proceeds to reduce the borrowings under its bank credit facility.

On September 16, 2009, Kinder Morgan Energy Partners completed an additional public offering of senior notes. It issued a total of $1 billion in principal amount of senior notes in two separate series, consisting of $400 million of 5.80% notes due March 1, 2021, and $600 million of 6.50% notes due September 1, 2039. Kinder Morgan Energy Partners received proceeds from the issuance of the notes, after underwriting discounts and commissions, of $987.4 million, and it used the proceeds to reduce the borrowings under its bank credit facility.

Kinder Morgan Operating L.P. “A” and Kinder Morgan Canada

Effective January 1, 2007, Kinder Morgan Energy Partners acquired the remaining approximately 50.2% interest in the Cochin pipeline system that it did not already own. As part of the purchase price consideration, two of its subsidiaries issued a long-term note payable to the seller having a fair value of $42.3 million. It valued the debt equal to the present value of amounts to be paid, determined using an annual interest rate of 5.40%. Kinder Morgan Energy Partners’ subsidiaries Kinder Morgan Operating L.P. “A” and Kinder Morgan Canada Company are the obligors on the note, and the principal amount of the note, along with interest, is due in five annual installments of $10.0 million beginning March 31, 2008. The final payment is due March 31, 2012. As of December 31, 2008, the net present value (representing the outstanding balance) of the note was $36.6 million. Kinder Morgan Energy Partners paid the second installment on March 31, 2009, and as of September 30, 2009, the net present value of the note was $27.8 million.

Interest Rate Swaps

Information on interest rate swaps is contained in Note 6, “Risk Management – Interest Rate Risk Management.”

Contingent Debt

The following contingent debt disclosures pertain to certain types of guarantees or indemnifications Kinder Morgan Energy Partners has made and cover certain types of guarantees included within debt agreements, even if the likelihood of requiring its performance under such guarantee is remote. The following is a description of Kinder Morgan Energy Partners’ contingent debt agreements as of September 30, 2009.

Kinder Morgan, Inc. Form 10-Q

Cortez Pipeline Company Debt

Pursuant to a certain Throughput and Deficiency Agreement, the partners of Cortez Pipeline Company (Kinder Morgan CO2 Company, L.P. – 50% partner; a subsidiary of Exxon Mobil Corporation – 37% partner; and Cortez Vickers Pipeline Company – 13% partner) are required, on a several, proportional percentage ownership basis, to contribute capital to Cortez Pipeline Company in the event of a cash deficiency. Furthermore, due to Kinder Morgan Energy Partners’ indirect ownership of Cortez Pipeline Company through Kinder Morgan CO2 Company, L.P., it severally guarantees 50% of the debt of Cortez Capital Corporation, a wholly-owned subsidiary of Cortez Pipeline Company.

As of September 30, 2009, the debt facilities of Cortez Capital Corporation consisted of (i) $42.9 million of Series D notes due May 15, 2013, (ii) a $125 million short-term commercial paper program and (iii) a $125 million committed revolving credit facility due December 22, 2009 (to support the above-mentioned $125 million commercial paper program). Cortez is currently in the process of refinancing the $125 million credit facility and it expects to close on a refinancing in the fourth quarter of 2009. As of September 30, 2009, in addition to the $42.9 million of outstanding Series D notes, Cortez Capital Corporation had outstanding borrowings of $109.5 million under its credit facility. Accordingly, as of September 30, 2009, our contingent share of Cortez’s debt was $76.2 million (50% of total guaranteed borrowings).

With respect to Cortez Capital Corporation’s Series D notes, the average interest rate on the notes is 7.14%, and the outstanding $42.9 million principal amount of the notes is due in four equal annual installments of approximately $10.7 million beginning May 2010. Shell Oil Company (“Shell”) shares Kinder Morgan Energy Partners’ several guaranty obligations jointly and severally; however, Kinder Morgan Energy Partners is obligated to indemnify Shell for liabilities it incurs in connection with such guaranty. As of September 30, 2009, JP Morgan Chase has issued a letter of credit on Kinder Morgan Energy Partners’ behalf in the amount of $21.4 million to secure its indemnification obligations to Shell for 50% of the $42.9 million in principal amount of Series D notes outstanding as of that date.

Nassau County, Florida Ocean Highway and Port Authority Debt

Kinder Morgan Energy Partners has posted a letter of credit as security for borrowings under Adjustable Demand Revenue Bonds issued by the Nassau County, Florida Ocean Highway and Port Authority. The bonds were issued for the purpose of constructing certain port improvements located in Fernandino Beach, Nassau County, Florida. Kinder Morgan Energy Partners’ subsidiary, Nassau Terminals LLC, is the operator of the marine port facilities. The bond indenture is for 30 years and allows the bonds to remain outstanding until December 1, 2020. Principal payments on the bonds are made on the first of December each year and corresponding reductions are made to the letter of credit. As of September 30, 2009, this letter of credit had a face amount of $21.2 million.

Rockies Express Pipeline LLC Debt

Pursuant to certain guaranty agreements, all three member owners of West2East (which owns all of the member interests in Rockies Express) have agreed to guarantee, severally in the same proportion as their percentage ownership of the member interests in West2East, borrowings under Rockies Express’ $2.0 billion five-year, unsecured revolving credit facility (due April 28, 2011) and Rockies Express’ $2.0 billion commercial paper program. The three member owners and their respective ownership interests consist of the following: Kinder Morgan Energy Partners’ subsidiary Kinder Morgan W2E Pipeline LLC – 51%, a subsidiary of Sempra Energy – 25%, and a subsidiary of ConocoPhillips – 24%.

Borrowings under the Rockies Express commercial paper program and/or its credit facility were primarily used to finance the construction of the Rockies Express interstate natural gas pipeline and to pay related expenses. The credit facility, which can be amended to allow for borrowings of up to $2.5 billion, supports borrowings under the commercial paper program, and borrowings under the commercial paper program reduce the borrowings allowed under the credit facility. Lehman Brothers Commercial Bank was a lending bank with a $41.0 million commitment under Rockies Express’ $2.0 billion credit facility, and during the first quarter of 2009, Rockies Express amended its facility to remove Lehman Brothers Commercial Bank as a lender, thus reducing the borrowing capacity under the facility by $41.0 million. However, the commitments of the other banks remain unchanged, and the facility is not defaulted.

Kinder Morgan, Inc. Form 10-Q

In October 2008, Standard & Poor’s Rating Services lowered Rockies Express’ short-term credit rating to A-3 from A-2. As a result of this revision and current commercial paper market conditions, Rockies Express is unable to access commercial paper borrowings; however, it expects that its financing and liquidity needs will continue to be met through both borrowings made under its long-term bank credit facility and contributions by its equity investors. As of September 30, 2009, Rockies Express had outstanding borrowings of $1,871.5 million under its credit facility. Accordingly, as of September 30, 2009, Kinder Morgan Energy Partners’ contingent share of Rockies Express’ debt was $954.5 million (51% of total guaranteed borrowings).

Additionally, on August 20, 2009, Rockies Express paid $600 million to retire the principal amount of its floating rate senior notes that matured on that date. It obtained the necessary funds to repay these senior notes from contributions received from its equity investors, including $306.0 million received from Kinder Morgan Energy Partners (51% of total principal repayments).

Midcontinent Express Pipeline LLC Debt

Pursuant to certain guaranty agreements, each of the two member owners of Midcontinent Express have agreed to guarantee, severally in the same proportion as their percentage ownership of the member interests in Midcontinent Express, borrowings under its $1.4 billion three year, unsecured revolving credit facility, entered into on February 29, 2008 and due February 28, 2011. The facility is with a syndicate of financial institutions with The Royal Bank of Scotland plc as the administrative agent. Borrowings under the credit facility are used to finance the construction of the Midcontinent Express pipeline system and to pay related expenses. Midcontinent Express is an equity method investee of Kinder Morgan Energy Partners, and the two member owners and their respective ownership interests consist of the following: Kinder Morgan Energy Partners’ subsidiary Kinder Morgan Operating L.P. “A” – 50%, and Energy Transfer Partners, L.P. – 50%.

Lehman Brothers Commercial Bank was a lending bank with a $100 million commitment to the Midcontinent Express $1.4 billion credit facility, and following Lehman Brothers Holdings Inc.’s bankruptcy filing (discussed above), Lehman Brothers Commercial Bank has not met its obligations to lend under the credit facility, effectively reducing borrowing capacity under this facility by $100 million. The commitments of the other banks remain unchanged and the facility is not defaulted. As of September 30, 2009, Midcontinent Express had outstanding borrowings of $371.6 million under its three-year credit facility. Accordingly, as of September 30, 2009, Kinder Morgan Energy Partners’ contingent share of Midcontinent Express’ debt was $185.8 million (50% of total borrowings).

Furthermore, the credit facility can be used for the issuance of letters of credit to support the construction of the Midcontinent Express pipeline system, and as of September 30, 2009, a letter of credit having a face amount of $33.3 million was issued under the credit facility. Accordingly, as of September 30, 2009, Kinder Morgan Energy Partners’ contingent responsibility with regard to this outstanding letter of credit was $16.7 million (50% of total face amount).

In November 2009, Midcontinent Express reduced the capacity on its credit facility from $1.4 billion to $255 million after completing the permanent long-term financing discussed below. On September 16, 2009, Midcontinent Express completed a private offering of senior notes. It issued an aggregate of $800 million in principal amount of fixed rate senior notesunder an indenture between itself and U.S. Bank National Association, as trustee, in a private transaction that was not subject to the registration requirements of the Securities Act of 1933, but instead was subject to the requirements of Rule 144A under the Act. Midcontinent Express received net proceeds of $793.9 million from this offering, after deducting the initial purchasers’ discount and estimated offering expenses, and the net proceeds from the sale of the notes were used to repay borrowings under its revolving credit facility.

The indenture provided for the issuance of two separate series of notes, as follows (i) $350 million in principal amount of 5.45% senior notes due September 15, 2014; and (ii) $450 million in principal amount of 6.70% senior notes due September 15, 2019. Interest on the notes will be paid semiannually on March 15 and September 15 of each year, commencing on March 15, 2010. All payments of principal and interest in respect of the notes are the sole obligation of Midcontinent Express. Noteholders will have no recourse against us, Kinder Morgan Energy Partners, Energy Transfer Partners, or against any of our or their respective officers, directors, employees, members, managers, unitholders or affiliates for any failure by Midcontinent Express to perform or comply with its obligations pursuant to the notes or the indenture.

Kinder Morgan, Inc. Form 10-Q

For additional information regarding our debt facilities and our contingent debt agreements, see Note 14 of the Notes to the Consolidated Financial Statements included in our 2008 Form 10-K.

Kinder Morgan G.P., Inc. Preferred Shares

On October 21, 2009, Kinder Morgan G.P., Inc.’s board of directors declared a quarterly cash distribution on its Series A Fixed-to-Floating Rate Term Cumulative Preferred Stock of $20.825 per share, which will be paid on November 18, 2009 to shareholders of record as of October 30, 2009. On July 15, 2009, Kinder Morgan G.P., Inc.’s board of directors declared a quarterly cash distribution on its Series A Fixed-to-Floating Rate Term Cumulative Preferred Stock of $20.825 per share that was paid on August 18, 2009 to shareholders of record as of July 31, 2009.

5. Stockholders' Equity

The following tables set forth for the respective periods (i) changes in the carrying amounts of our Stockholders’ Equity attributable to both us and our noncontrolling interests, including our comprehensive income (loss) net of tax, and (ii) associated tax amounts included in the respective components of other comprehensive income (loss) (in millions):

	Three Months Ended September 30,
	2009									2008
	Kinder Morgan, Inc.			Noncontrolling interests			Total			Kinder Morgan, Inc.			Noncontrolling interests			Total
Beginning Balance	$	4,398.0		$	4,375.7		$	8,773.7		$	3,461.4		$	2,872.0		$	6,333.4
Impact from equity transactions of Kinder Morgan Energy Partners		3.5			(5.6	)		(2.1	)		-			-			-
A-1 and B unit amortization		1.9			-			1.9			1.9			-			1.9
Distributions to noncontrolling interests		-			(191.4	)		(191.4	)		-			(162.4	)		(162.4	)
Contributions from noncontrolling interests		-			146.0			146.0			-			0.2			0.2
Cash dividends		(150.0	)		-			(150.0	)		-			-			-
Other		-			-			-			-			(0.3	)		(0.3	)
Comprehensive income
Net Income		122.8			106.6			229.4			108.7			106.8			215.5
Other comprehensive income (loss), net of tax
Change in fair value of derivatives utilized for hedging purposes		19.1			25.6			44.7			543.5			604.5			1,148.0
Reclassification of change in fair value of derivatives to net income		(7.1	)		8.2			1.1			(70.5	)		83.6			13.1
Foreign currency translation adjustments		31.1			56.9			88.0			(22.8	)		(30.4	)		(53.2	)
Adjustments to pension and other postretirement benefit plan liabilities		0.1			0.2			0.3			0.1			0.3			0.4
Total other comprehensive income		43.2			90.9			134.1			450.3			658.0			1,108.3
Total comprehensive income		166.0			197.5			363.5			559.0			764.8			1,323.8
Ending Balance	$	4,419.4		$	4,522.2		$	8,941.6		$	4,022.3		$	3,474.3		$	7,496.6


(Tax) Tax Benefit Included in Other Comprehensive Income, Net of Tax:
Change in fair value of derivatives utilized for hedging purposes	$	(8.4	)	$	(3.9	)	$	(12.3	)	$	(401.4	)	$	(67.7	)	$	(469.1	)
Reclassification of change in fair value of derivatives to net income		7.2			(0.8	)		6.4			63.2			(7.4	)		55.8
Foreign currency translation adjustments		(26.1	)		(5.6	)		(31.7	)		11.1			3.0			14.1
Adjustments to pension and other postretirement benefit plan liabilities		(0.1	)		-			(0.1	)		0.1			-			0.1
Tax included in total other comprehensive income	$	(27.4	)	$	(10.3	)	$	(37.7	)	$	(327.0	)	$	(72.1	)	$	(399.1	)

Kinder Morgan, Inc. Form 10-Q

	Nine Months Ended September 30,
	2009									2008
	Kinder Morgan, Inc.			Noncontrolling interests			Total			Kinder Morgan, Inc.			Noncontrolling interests			Total
Beginning Balance	$	4,404.3		$	4,072.6		$	8,476.9		$	7,821.5		$	3,314.0		$	11,135.5
Impact from equity transactions of Kinder Morgan Energy Partners		19.3			(30.2	)		(10.9	)		(16.0	)		(15.4	)		(31.4	)
A-1 and B unit amortization		5.7			-			5.7			5.7			-			5.7
Distributions to noncontrolling interests		-			(550.8	)		(550.8	)		-			(464.3	)		(464.3	)
Contributions from noncontrolling interests		-			820.5			820.5			-			385.0			385.0
Kinder Morgan Energy Partners’ Express pipeline system acquisition adjustment		-			3.1			3.1			-			-			-
Cash dividends		(300.0	)		-			(300.0	)		-			-			-
Other		-			(0.8	)		(0.8	)		-			4.7			4.7
Comprehensive income (loss)
Net income		367.9			215.5			583.4			(3,646.2	)		359.4			(3,286.8	)
Other comprehensive income (loss), net of tax
Change in fair value of derivatives utilized for hedging purposes		(76.3	)		(110.7	)		(187.0	)		(253.5	)		(338.5	)		(592.0	)
Reclassification of change in fair value of derivatives to net income		(42.0	)		14.2			(27.8	)		140.9			277.9			418.8
Foreign currency translation adjustments		41.3			89.9			131.2			(31.5	)		(50.3	)		(81.8	)
Adjustments to pension and other postretirement benefit plan liabilities		(0.8	)		(1.1	)		(1.9	)		1.4			1.8			3.2
Total other comprehensive loss		(77.8	)		(7.7	)		(85.5	)		(142.7	)		(109.1	)		(251.8	)
Total comprehensive income (loss)		290.1			207.8			497.9			(3,788.9	)		250.3			(3,538.6	)
Ending Balance	$	4,419.4		$	4,522.2		$	8,941.6		$	4,022.3		$	3,474.3		$	7,496.6


(Tax) Tax Benefit Included in Other Comprehensive Income (Loss), Net of Tax:
Change in fair value of derivatives utilized for hedging purposes	$	47.2		$	11.5		$	58.7		$	149.9		$	34.7		$	184.6
Reclassification of change in fair value of derivatives to net income		26.2			(1.5	)		24.7			(82.4	)		(28.5	)		(110.9	)
Foreign currency translation adjustments		(40.4	)		(9.3	)		(49.7	)		22.5			5.2			27.7
Adjustments to pension and other postretirement benefit plan liabilities		0.5			0.1			0.6			(0.8	)		(0.2	)		(1.0	)
Tax benefit included in total other comprehensive loss	$	33.5		$	0.8		$	34.3		$	89.2		$	11.2		$	100.4

During the first nine months of both 2009 and 2008, there were no material changes in our ownership interests in subsidiaries, in which we retained a controlling financial interest.

On February 17, 2009, May 18, 2009 and August 17, 2009, we paid cash dividends on our common stock of $50.0 million, $100.0 million, and $150.0 million, respectively, to our sole stockholder, which then made dividends to Kinder Morgan Holdco LLC. Our Board of Directors declared a dividend of $350.0 million on October 21, 2009 that will be paid on November 16, 2009.

Kinder Morgan, Inc. Form 10-Q

Noncontrolling Interests

The caption “Noncontrolling interests” in the accompanying interim Consolidated Balance Sheets consists of interests in the following subsidiaries:

	September 30, 2009		December 31, 2008
	(In millions)
Kinder Morgan Energy Partners	$	2,597.6	$	2,198.2
Kinder Morgan Management		1,864.2		1,826.5
Triton Power Company LLC		49.8		39.0
Other		10.6		8.9
	$	4,522.2	$	4,072.6

Kinder Morgan Energy Partners’ Common Units

On January 16, 2009, Kinder Morgan Energy Partners entered into an equity distribution agreement with UBS Securities LLC (“UBS”). According to the provisions of this agreement, Kinder Morgan Energy Partners may offer and sell from time to time common units having an aggregate offering value of up to $300 million through UBS, as sales agent. Sales of the units will be made by means of ordinary brokers’ transactions on the New York Stock Exchange at market prices, in block transactions or as otherwise agreed between Kinder Morgan Energy Partners and UBS. Under the terms of this agreement, Kinder Morgan Energy Partners also may sell common units to UBS as principal for its own account at a price agreed upon at the time of the sale. Any sale of common units to UBS as principal would be pursuant to the terms of a separate agreement between Kinder Morgan Energy Partners and UBS.

This equity distribution agreement provides Kinder Morgan Energy Partners the right, but not the obligation, to sell common units in the future, at prices it deems appropriate. Kinder Morgan Energy Partners retains at all times complete control over the amount and the timing of each sale, and it will designate the maximum number of common units to be sold through UBS, on a daily basis or otherwise as it and UBS agree. UBS will then use its reasonable efforts to sell, as Kinder Morgan Energy Partners’ sales agent and on its behalf, all of the designated common units. Kinder Morgan Energy Partners may instruct UBS not to sell common units if the sales cannot be effected at or above the price designated by it in any such instruction. Either Kinder Morgan Energy Partners or UBS may suspend the offering of common units pursuant to the agreement by notifying the other party. During the three and nine months ended September 30, 2009, Kinder Morgan Energy Partners issued 1,962,811 and 4,519,558, respectively, of its common units pursuant to this agreement. After commissions of $1.3 million and $3.6 million, respectively, for the three and nine month periods, Kinder Morgan Energy Partners received net proceeds from the issuance of these common units of approximately $103.0 million and $227.6 million, respectively. Kinder Morgan Energy Partners used the proceeds to reduce the borrowings under its bank credit facility. For more information concerning offerings subsequent to September 30, 2009, see “Subsequent Event” below.

Kinder Morgan Energy Partners also completed two separate underwritten public offerings of its common units in the first nine months of 2009, discussed following, and in April 2009, it issued 105,752 common units—valued at $5.0 million—as the purchase price for additional ownership interests in certain oil and gas properties.

In Kinder Morgan Energy Partners’ first 2009 public offering, completed in March, it issued 5,666,000 of its common units at a price of $46.95 per unit, less underwriting commissions and expenses. Kinder Morgan Energy Partners received net proceeds of $258.0 million for the issuance of these common units. In its second offering, completed in July, Kinder Morgan Energy Partners issued 6,612,500 common units at a price of $51.50 per unit, less underwriting commissions and expenses, and received net proceeds of $329.9 million for the issuance of these common units. Kinder Morgan Energy Partners used the proceeds from each of these two public offerings to reduce the borrowings under its bank credit facility.

These issuances during the nine months ended September 30, 2009, collectively, had the associated effects of increasing our (i) noncontrolling interests associated with Kinder Morgan Energy Partners by $790.3 million (ii) accumulated deferred income taxes by $10.9 million and (iii) additional paid-in capital by $19.3 million.

Kinder Morgan, Inc. Form 10-Q

Kinder Morgan Management, LLC

On August 14, 2009, Kinder Morgan Management made a share distribution of 0.022146 shares per outstanding share (1,814,650 total shares) to shareholders of record as of July 31, 2009, based on the $1.05 per common unit distribution declared by Kinder Morgan Energy Partners. On November 13, 2009, Kinder Morgan Management will make a share distribution of 0.021292 shares per outstanding share (1,783,310 total shares) to shareholders of record as of October 30, 2009, based on the $1.05 per common unit distribution declared by Kinder Morgan Energy Partners. Kinder Morgan Management’s distributions are paid in the form of additional shares or fractions thereof calculated by dividing the Kinder Morgan Energy Partners cash distribution per common unit by the average of the market closing prices of a Kinder Morgan Management share determined for a ten-trading day period ending on the trading day immediately prior to the ex-dividend date for the shares.

Subsequent Event

On October 1, 2009, Kinder Morgan Energy Partners amended and restated its equity distribution agreement with UBS (discussed above in “Kinder Morgan Energy Partners’ Common Units”) to allow for the offer and sale from time to time of common units having an aggregate offering value of up to $600 million through UBS, as sales agent. After September 30, 2009, Kinder Morgan Energy Partners issued 124,768 of its common units pursuant to settlement of sales made before September 30, 2009 pursuant to its equity distribution agreement. After commissions of $0.1 million, Kinder Morgan Energy Partners received net proceeds of $6.7 million for the issuance of these 124,768 common units, and it used the proceeds to reduce the borrowings under its bank credit facility.

6. Risk Management

Certain of our business activities expose us to risks associated with unfavorable changes in the market price of natural gas, natural gas liquids and crude oil. We also have exposure to interest rate risk as a result of the issuance of our debt obligations. Pursuant to our management’s approved risk management policy, we use derivative contracts to hedge or reduce our exposure to certain of these risks.

Energy Commodity Price Risk Management

We are exposed to risks associated with changes in the market price of natural gas, natural gas liquids and crude oil as a result of the forecasted purchase or sale of these products. Specifically, these risks are associated with unfavorable price volatility related to (i) pre-existing or anticipated physical natural gas, natural gas liquids and crude oil sales, (ii) natural gas purchases and (iii) natural gas system use and storage. The unfavorable price changes are often caused by shifts in the supply and demand for these commodities, as well as their locations.

Our principal use of energy commodity derivative contracts is to mitigate the risk associated with unfavorable market movements in the price of energy commodities. Our energy commodity derivative contracts act as a hedging (offset) mechanism against the volatility of energy commodity prices by allowing us to transfer this price risk to counterparties who are able and willing to bear it.

For derivative contracts that are designated and qualify as cash flow hedges pursuant to generally accepted accounting principles, the portion of the gain or loss on the derivative contract that is effective in offsetting the variable cash flows associated with the hedged forecasted transaction is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “revenues” when the hedged transactions are commodity sales). The remaining gain or loss on the derivative contract in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion), is recognized in earnings during the current period. The effectiveness of hedges using an option contract may be assessed based on changes in the option’s intrinsic value with the change in the time value of the contract being excluded from the assessment of hedge effectiveness. Changes in the excluded component of the change in an option’s time value are included currently in earnings. During the current period we recognized a net loss of $5.4 million related to crude oil hedges, which resulted from hedge ineffectiveness and amounts excluded from effectiveness testing.

Kinder Morgan, Inc. Form 10-Q

During the three and nine months ended September 30, 2009, we reclassified gains of $7.1 million and $42.0 million, respectively, of “Accumulated other comprehensive loss” into earnings, and for the same comparable periods last year, we reclassified gains of $70.5 million and losses of $140.9 million, respectively, into earnings. All amounts reclassified into net income during the first nine months of both years resulted from the hedged forecasted transactions actually affecting earnings (i.e., when the forecasted sales and purchases actually occurred). No amounts were reclassified into earnings as a result of the discontinuance of cash flow hedges because it was probable that the original forecasted transactions would not occur by the end of the originally specified time period or within an additional two-month period of time thereafter. The proceeds or payments resulting from the settlement of cash flow hedges are reflected in the operating section of the accompanying interim Consolidated Statements of Cash Flows as changes to net income and working capital.

The “Accumulated other comprehensive loss” balance included in our Stockholders’ Equity was $131.2 million as of September 30, 2009, and $53.4 million as of December 31, 2008. These totals included “Accumulated other comprehensive loss” amounts associated with energy commodity price risk management activities of $35.9 million of losses as of September 30, 2009 and $82.4 million of gains as of December 31, 2008. Approximately $15.0 million of the total amount associated with energy commodity price risk management activities as of September 30, 2009 is expected to be reclassified into earnings during the next twelve months (when the associated forecasted sales and purchases are also expected to occur), and as of September 30, 2009, the maximum length of time over which we have hedged our exposure to the variability in future cash flows associated with energy commodity price risk is through December 2013.

As of September 30, 2009, Kinder Morgan Energy Partners had entered into the following outstanding commodity forward contracts to hedge its forecasted energy commodity purchases and sales:

	Notional quantity
Derivatives designated as hedging contracts
Crude oil	26.4 million barrels
Natural gas(a)	43.8 billion cubic feet
Derivatives not designated as hedging contracts
Crude oil	0.1 million barrels
Natural gas(a)	1.5 billion cubic feet

____________

(a)	Notional quantities are shown net.

For derivative contracts that are not designated as a hedge for accounting purposes, all realized and unrealized gains and losses are recognized in the statement of income during the current period. These types of transactions include basis spreads, basis-only positions and gas daily swap positions. Kinder Morgan Energy Partners primarily enters into these positions to economically hedge an exposure through a relationship that does not qualify for hedge accounting. This will result in non-cash gains or losses being reported in Kinder Morgan Energy Partners’ operating results.

Effective at the beginning of the second quarter of 2008, Kinder Morgan Energy Partners determined that the derivative contracts of its Casper and Douglas natural gas processing operations that previously had been designated as cash flow hedges for accounting purposes no longer met the hedge effectiveness assessment as required by accounting principles. Consequently, it discontinued hedge accounting treatment for these relationships (primarily crude oil hedges of heavy natural gas liquids sales) effective March 31, 2008. Since the forecasted sales of natural gas liquids volumes (the hedged item) were still expected to occur, all of the accumulated losses through March 31, 2008 on the related derivative contracts remained in accumulated other comprehensive income, and are not reclassified into earnings until the physical transactions occur. Any changes in the value of these derivative contracts subsequent to March 31, 2008 will no longer be deferred in other comprehensive income, but rather will impact current period income. The last of these derivative contracts will expire in December, 2009.

Kinder Morgan, Inc. Form 10-Q

Subsequent Event

In October 2009, Kinder Morgan Energy Partners entered into forward contracts to hedge an additional 0.9 million barrels of crude oil.

Interest Rate Risk Management

In order to maintain a cost effective capital structure, it is our policy to borrow funds using a mix of fixed rate debt and variable rate debt. We use interest rate swap agreements to manage the interest rate risk associated with the fair value of our fixed rate borrowings and to effectively convert a portion of the underlying cash flows related to our long-term fixed rate debt securities into variable rate cash flows in order to achieve our desired mix of fixed and variable rate debt.

Since the fair value of fixed rate debt varies inversely with changes in the market rate of interest, we enter into swap agreements to receive a fixed and pay a variable rate of interest in order to convert the interest expense associated with certain of our senior notes from fixed rates to variable rates, resulting in future cash flows that vary with the market rate of interest. These swaps, therefore, hedge against changes in the fair value of our fixed rate debt that result from market interest rate changes. For derivative contracts that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.

As of December 31, 2008, we were not party to any interest rate swap agreements, and our subsidiary, Kinder Morgan Energy Partners, was a party to interest rate swap agreements with a total notional principal amount of $2.8 billion. During the first nine months of 2009, we entered into two fixed-to-variable interest swap agreements having a combined notional principal amount of $725.0 million related to our 5.70% senior notes due January 5, 2016. During the first nine months of 2009, Kinder Morgan Energy Partners both terminated an existing fixed-to-variable interest rate swap agreement having a notional principal amount of $300 million and a maturity date of March 15, 2031, and entered into sixteen separate fixed-to-variable swap agreements having a combined notional principal amount of $2.95 billion. Kinder Morgan Energy Partners received proceeds of $144.4 million from the early termination of the $300 million swap agreement. In addition, an existing fixed-to-variable rate swap agreement having a notional principal amount of $250 million matured on February 1, 2009. This swap agreement corresponded with the maturity of Kinder Morgan Energy Partners’ $250 million in principal amount of 6.30% senior notes that also matured on that date (discussed in Note 4).

Therefore, as of September 30, 2009, we and our subsidiary, Kinder Morgan Energy Partners, had a combined notional principal amounts of $725.0 million and $5.2 billion, respectively, of fixed-to-variable interest rate swap agreements effectively converting the interest expense associated with certain series of Kinder Morgan Energy Partners senior notes from fixed rates to variable rates based on an interest rate of LIBOR plus a spread. All of our and Kinder Morgan Energy Partners’ swap agreements have termination dates that correspond to the maturity dates of the related series of senior notes and, as of September 30, 2009, the maximum length of time over which we or Kinder Morgan Energy Partners has hedged a portion of our exposure to the variability in the value of this debt due to interest rate risk is through January 15, 2038.

Fair Value of Derivative Contracts

The fair values of our current and non-current asset and liability derivative contracts are each reported separately as “Fair value of derivative contracts” in the accompanying interim Consolidated Balance Sheets. The following table summarizes the fair values of our derivative contracts included in the accompanying interim Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008 (in millions):

Kinder Morgan, Inc. Form 10-Q

Fair Value of Derivative Contracts

	Asset derivatives						Liability derivatives
	September 30, 2009			December 31, 2008			September 30, 2009			December 31, 2008
	Balance sheet location	Fair value		Balance sheet location	Fair value		Balance sheet location	Fair value		Balance sheet location	Fair value

Derivatives designated as hedging contracts
Energy commodity derivative contracts	Current	$	21.8	Current	$	113.5	Current	$	(196.8)	Current	$	(129.4)
	Non-current		67.1	Non-current		48.9	Non-current		(189.5)	Current		(92.2)
Subtotal			88.9			162.4			(386.3)			(221.6)

Interest rate swap agreements	Non-current		366.2	Non-current		747.1	Non-current		(103.4)	Non-current		-
Cross currency swap agreements	Non-current		-	Non-current		32.0	Non-current		(5.1)	Non-current		-
Total			455.1			941.5			(494.8)			(221.6)

Derivatives not designated as hedging contracts
Energy commodity derivative contracts	Current		2.6	Current		1.8	Current		(1.5)	Current		(0.1)

Total derivatives		$	457.7		$	943.3		$	(496.3)		$	(221.7)

The offsetting entry to adjust the carrying value of the debt securities whose fair value was being hedged is included within “Value of interest rate swaps” on the accompanying interim Consolidated Balance Sheets, which also includes any unamortized portion of proceeds received from the early termination of interest rate swap agreements. As of September 30, 2009 and December 31, 2008, this unamortized premium totaled $342.9 million and $216.8 million, respectively.

Effect of Derivative Contracts on the Statement of Operations

The following four tables summarize the impact of our derivative contracts on the accompanying interim Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008 (in millions):

Derivatives in fair value hedging relationships	Location of gain/(loss) recognized in income on derivative	Amount of gain/(loss) recognized in income on derivative(a)				Hedged items in fair value hedging relationships	Location of gain/(loss) recognized in income on related hedged item	Amount of gain/(loss) recognized in income on related hedged items(a)
		Three Months Ended September 30,						Three Months Ended September 30,
		2009		2008				2009		2008
Interest rate swap agreements	Interest, net – income/(expense)	$	127.4	$	70.3	Fixed rate debt	Interest, net – income/(expense)	$	(127.4)	$	(70.3)
Total		$	127.4	$	70.3	Total		$	(127.4)	$	(70.3)

		Nine Months Ended September 30,						Nine Months Ended September 30,
		2009		2008				2009		2008
Interest rate swap agreements	Interest, net – income/(expense)	$	(339.9)	$	61.2	Fixed rate debt	Interest, net – income/(expense)	$	339.9	$	(61.2)
Total		$	(339.9)	$	61.2	Total		$	339.9	$	(61.2)

____________

(a)

Amounts reflect the change in the fair value of interest rate swap agreements and the change in the fair value of the associated fixed rate debt which exactly offset each other as a result of no hedge ineffectiveness. Amounts do not reflect the impact on interest expense from the interest rate swap agreements under which we pay variable rate interest and receive fixed rate interest.

Kinder Morgan, Inc. Form 10-Q

Derivatives in cash flow hedging relationships	Amount of gain/(loss) recognized in OCI on derivative (effective portion)				Location of gain/(loss) reclassified from Accumulated OCI into income (effective portion)	Amount of gain/(loss) reclassified from Accumulated OCI into income (effective portion)				Location of gain/(loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain/(loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
	Three Months Ended September 30,					Three Months Ended September 30,					Three Months Ended September 30,
	2009		2008			2009		2008			2009		2008
Energy commodity derivative contracts	$	19.1	$	543.5	Revenues-natural gas sales	$	4.1	$	1.0	Revenues	$	(5.4)	$	-
					Revenues-product sales and other		4.1		71.6
					Gas purchases and other costs of sales		(1.1)		(2.1)	Gas purchases and other costs of sales		-		0.1
Total	$	19.1	$	543.5	Total	$	7.1	$	70.5	Total	$	(5.4)	$	0.1

	Nine Months Ended September 30,					Nine Months Ended September 30,					Nine Months Ended September 30,
	2009		2008			2009		2008			2009		2008
Energy commodity derivative contracts	$	(76.3)	$	(253.5)	Revenues-natural gas sales	$	8.5	$	(4.1)	Revenues	$	(5.4)	$	-
					Revenues-product sales and other		33.8		(125.5)
					Gas purchases and other costs of sales		(0.3)		(11.3)	Gas purchases and other costs of sales		-		(8.4)
Total	$	(76.3)	$	(253.5)	Total	$	42.0	$	(140.9)	Total	$	(5.4)	$	(8.4)

Derivatives in

net investment hedging

relationships

Amount of gain/(loss)

recognized in OCI

on derivative

(effective portion)

Location of

gain/(loss)

reclassified from

Accumulated OCI

into income

(effective portion)

Amount of gain/(loss)

reclassified from

Accumulated OCI

into income

(effective portion)

Location of

gain/(loss)

recognized in income

on derivative

(ineffective portion

and amount

excluded from

effectiveness

testing)

Amount of gain/(loss)

recognized in income

on derivative

(ineffective portion and amount excluded from

effectiveness testing)

Three Months Ended

September 30,

Three Months Ended

September 30,

Three Months Ended

September 30,