Guarantee of Securities of Subsidiaries (Notes)

6 Months Ended

Jun. 30, 2016

Guarantee of Securities of Subsidiaries [Abstract]

Guarantee of Securities of Subsidiaries

KMI, along with its direct and indirect subsidiaries KMP and Copano, are issuers of certain public debt securities. After the completion of the Merger Transactions, KMI, KMP, Copano and substantially all of KMI’s wholly owned domestic subsidiaries, entered into a cross guarantee agreement whereby each party to the agreement unconditionally guarantees, jointly and severally, the payment of specified indebtedness of each other party to the agreement. Accordingly, with the exception of certain subsidiaries identified as Subsidiary Non-Guarantors, the parent issuer, subsidiary issuers and other subsidiaries are all guarantors of each series of public debt. As a result of the cross guarantee agreement, a holder of any of the guaranteed public debt securities issued by KMI, KMP or Copano are in the same position with respect to the net assets, income and cash flows of KMI and the Subsidiary Issuers and Guarantors. The only amounts that are not available to the holders of each of the guaranteed public debt securities to satisfy the repayment of such securities are the net assets, income and cash flows of the Subsidiary Non-Guarantors.

In lieu of providing separate financial statements for each subsidiary issuer and guarantor, we have included the accompanying condensed consolidating financial statements based on Rule 3-10 of the SEC’s Regulation S-X. We have presented each of the parent and subsidiary issuers in separate columns in this single set of condensed consolidating financial statements.

Excluding fair value adjustments, as of June 30, 2016, Parent Issuer and Guarantor, Subsidiary Issuer and Guarantor-KMP, Subsidiary Issuer and Guarantor-Copano, and Subsidiary Guarantors had $15,032 million, $19,485 million, $332 million, and $5,783 million, respectively, of Guaranteed Notes outstanding. Included in the Subsidiary Guarantors debt balance as presented in the accompanying June 30, 2016 condensed consolidating balance sheets is approximately $173 million of capitalized lease debt that is not subject to the cross guarantee agreement.

The accounts within the Parent Issuer and Guarantor, Subsidiary Issuer and Guarantor-KMP, Subsidiary Issuer and Guarantor-Copano, Subsidiary Guarantors and Subsidiary Non-Guarantors are presented using the equity method of accounting for investments in subsidiaries, including subsidiaries that are guarantors and non-guarantors, for purposes of these condensed consolidating financial statements only. These intercompany investments and related activity eliminate in consolidation and are presented separately in the accompanying balance sheets and statements of income and cash flows.

A significant amount of each Issuers’ income and cash flow is generated by its respective subsidiaries. As a result, the funds necessary to meet its debt service and/or guarantee obligations are provided in large part by distributions or advances it receives from its respective subsidiaries. We utilize a centralized cash pooling program among our majority-owned and consolidated subsidiaries, including the Subsidiary Issuers and Guarantors and Subsidiary Non-Guarantors. The following Condensed Consolidating Statements of Cash Flows present the intercompany loan and distribution activity, as well as cash collection and payments made on behalf of our subsidiaries, as cash activities.

Effective December 31, 2015, Kinder Morgan (Delaware), Inc. and Kinder Morgan Services LLC merged into KMI. As a result of such merger, both entities are no longer Subsidiary Guarantors, and for all periods presented, financial statement balances and activities for Kinder Morgan (Delaware), Inc. and Kinder Morgan Services LLC are reflected within the Parent Issuer and Guarantor column.

Condensed Consolidating Statements of Income and Comprehensive Income for the Three Months Ended June 30, 2016 (In Millions) (Unaudited)

	Parent Issuer and Guarantor			Subsidiary Issuer and Guarantor - KMP			Subsidiary Issuer and Guarantor - Copano			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated KMI
Total Revenues	$	8		$	—		$	—		$	2,777		$	371		$	(12	)	$	3,144

Operating Costs, Expenses and Other
Costs of sales	—			—			—			693			60			(1		)	752
Depreciation, depletion and amortization	4			—			—			462			86			—			552
Other operating expenses	30			2			—			681			198			(11		)	900
Total Operating Costs, Expenses and Other	34			2			—			1,836			344			(12		)	2,204

Operating (loss) income	(26		)	(2		)	—			941			27			—			940

Other Income (Expense)
Earnings (losses) from consolidated subsidiaries	752			734			(3		)	41			17			(1,541		)	—
Earnings from equity investments	—			—			—			106			—			—			106
Interest, net	(176		)	34			(12		)	(304		)	(13		)	—			(471		)
Amortization of excess cost of equity investments and other, net	1			—			—			6			6			—			13

Income (Loss) Before Income Taxes	551			766			(15		)	790			37			(1,541		)	588

Income Tax Expense	(179		)	(1		)	—			(16		)	(17		)	—			(213		)

Net Income (Loss)	372			765			(15		)	774			20			(1,541		)	375
Net Income Attributable to Noncontrolling Interests	—			—			—			—			—			(3		)	(3		)

Net Income (Loss) Attributable to Controlling Interests	372			765			(15		)	774			20			(1,544		)	372

Preferred Stock Dividends	(39		)	—			—			—			—			—			(39		)
Net Income (Loss) Available to Common Stockholders	$	333		$	765		$	(15	)	$	774		$	20		$	(1,544	)	$	333

Net Income (loss)	$	372		$	765		$	(15	)	$	774		$	20		$	(1,541	)	$	375
Total other comprehensive (loss) income	(140		)	(213		)	—			(223		)	8			428			(140		)
Comprehensive income (loss)	232			552			(15		)	551			28			(1,113		)	235
Comprehensive income attributable to noncontrolling interests	—			—			—			—			—			(3		)	(3		)
Comprehensive income (loss) attributable to controlling interests	$	232		$	552		$	(15	)	$	551		$	28		$	(1,116	)	$	232

Condensed Consolidating Statements of Income and Comprehensive Income for the Three Months Ended June 30, 2015 (In Millions) (Unaudited)

	Parent Issuer and Guarantor			Subsidiary Issuer and Guarantor - KMP			Subsidiary Issuer and Guarantor - Copano			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated KMI
Total Revenues	$	10		$	—		$	—		$	3,050		$	414		$	(11	)	$	3,463

Operating Costs, Expenses and Other
Costs of sales	—			—			—			989			95			1			1,085
Depreciation, depletion and amortization	5			—			—			473			92			—			570
Other operating expenses	38			—			—			767			123			(12		)	916
Total Operating Costs, Expenses and Other	43			—			—			2,229			310			(11		)	2,571

Operating (loss) income	(33		)	—			—			821			104			—			892

Other Income (Expense)
Earnings (losses) from consolidated subsidiaries	683			666			(5		)	127			15			(1,486		)	—
Earnings from equity investments	—			—			—			114			—			—			114
Interest, net	(149		)	34			(12		)	(345		)	—			—			(472		)
Amortization of excess cost of equity investments and other, net	—			—			—			(5		)	2			—			(3		)

Income (Loss) Before Income Taxes	501			700			(17		)	712			121			(1,486		)	531

Income Tax Expense	(168		)	(2		)	—			(11		)	(8		)	—			(189		)

Net Income (Loss)	333			698			(17		)	701			113			(1,486		)	342
Net Income Attributable to Noncontrolling Interests	—			—			—			—			—			(9		)	(9		)
Net Income (Loss) Attributable to Controlling Interests	$	333		$	698		$	(17	)	$	701		$	113		$	(1,495	)	$	333

Net Income (loss)	$	333		$	698		$	(17	)	$	701		$	113		$	(1,486	)	$	342
Total other comprehensive (loss) income	(98		)	(139		)	—			(148		)	23			264			(98		)
Comprehensive income (loss)	235			559			(17		)	553			136			(1,222		)	244
Comprehensive income attributable to noncontrolling interests	—			—			—			—			—			(9		)	(9		)
Comprehensive income (loss) attributable to controlling interests	$	235		$	559		$	(17	)	$	553		$	136		$	(1,231	)	$	235

Condensed Consolidating Statements of Income and Comprehensive Income for the Six Months Ended June 30, 2016 (In Millions) (Unaudited)

	Parent Issuer and Guarantor			Subsidiary Issuer and Guarantor - KMP			Subsidiary Issuer and Guarantor - Copano			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated KMI
Total Revenues	$	17		$	—		$	—		$	5,602		$	741		$	(21	)	$	6,339

Operating Costs, Expenses and Other
Costs of sales	—			—			—			1,345			136			2			1,483
Depreciation, depletion and amortization	9			—			—			918			176			—			1,103
Other operating expenses	49			4			—			1,494			473			(23		)	1,997
Total Operating Costs, Expenses and Other	58			4			—			3,757			785			(21		)	4,583

Operating (loss) income	(41		)	(4		)	—			1,845			(44		)	—			1,756

Other Income (Expense)
Earnings from consolidated subsidiaries	1,410			1,331			4			54			31			(2,830		)	—
Earnings from equity investments	—			—			—			200			—			—			200
Interest, net	(346		)	97			(24		)	(613		)	(26		)	—			(912		)
Amortization of excess cost of equity investments and other, net	1			—			—			1			10			—			12

Income (Loss) Before Income Taxes	1,024			1,424			(20		)	1,487			(29		)	(2,830		)	1,056

Income Tax Expense	(337		)	(3		)	—			(10		)	(17		)	—			(367		)

Net Income (Loss)	687			1,421			(20		)	1,477			(46		)	(2,830		)	689
Net Income Attributable to Noncontrolling Interests	—			—			—			—			—			(2		)	(2		)

Net Income (Loss) Attributable to Controlling Interests	687			1,421			(20		)	1,477			(46		)	(2,832		)	687

Preferred Stock Dividends	(78		)	—			—			—			—			—			(78		)
Net Income (Loss) Available to Common Stockholders	$	609		$	1,421		$	(20	)	$	1,477		$	(46	)	$	(2,832	)	$	609

Net Income (loss)	$	687		$	1,421		$	(20	)	$	1,477		$	(46	)	$	(2,830	)	$	689
Total other comprehensive (loss) income	(93		)	(161		)	—			(229		)	132			258			(93		)
Comprehensive income (loss)	594			1,260			(20		)	1,248			86			(2,572		)	596
Comprehensive income attributable to noncontrolling interests	—			—			—			—			—			(2		)	(2		)
Comprehensive income (loss) attributable to controlling interests	$	594		$	1,260		$	(20	)	$	1,248		$	86		$	(2,574	)	$	594

Condensed Consolidating Statements of Income and Comprehensive Income for the Six Months Ended June 30, 2015 (In Millions) (Unaudited)

	Parent Issuer and Guarantor			Subsidiary Issuer and Guarantor - KMP			Subsidiary Issuer and Guarantor - Copano			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated KMI
Total Revenues	$	19		$	—		$	—		$	6,276		$	789		$	(24	)	$	7,060

Operating Costs, Expenses and Other
Costs of sales	—			—			—			1,990			184			1			2,175
Depreciation, depletion and amortization	10			—			—			915			183			—			1,108
Other operating expenses	50			38			1			1,452			291			(25		)	1,807
Total Operating Costs, Expenses and Other	60			38			1			4,357			658			(24		)	5,090

Operating (loss) income	(41		)	(38		)	(1		)	1,919			131			—			1,970

Other Income (Expense)
Earnings (loss) from consolidated subsidiaries	1,482			1,549			(28		)	141			31			(3,175		)	—
Earnings from equity investments	—			—			—			190			—			—			190
Interest, net	(304		)	7			(24		)	(649		)	(14		)	—			(984		)
Amortization of excess cost of equity investments and other, net	—			—			—			(8		)	6			—			(2		)

Income (Loss) Before Income Taxes	1,137			1,518			(53		)	1,593			154			(3,175		)	1,174

Income Tax Expense	(375		)	(4		)	—			(25		)	(9		)	—			(413		)

Net Income (Loss)	762			1,514			(53		)	1,568			145			(3,175		)	761
Net Loss Attributable to Noncontrolling Interests	—			—			—			—			—			1			1

Net Income (Loss) Attributable to Controlling Interests	762			1,514			(53		)	1,568			145			(3,174		)	762

Net Income (loss)	$	762		$	1,514		$	(53	)	$	1,568		$	145		$	(3,175	)	$	761
Total other comprehensive loss	(274		)	(377		)	—			(344		)	(141		)	862			(274		)
Comprehensive income (loss)	488			1,137			(53		)	1,224			4			(2,313		)	487
Comprehensive loss attributable to noncontrolling interests	—			—			—			—			—			1			1
Comprehensive income (loss) attributable to controlling interests	$	488		$	1,137		$	(53	)	$	1,224		$	4		$	(2,312	)	$	488

Condensed Consolidating Balance Sheets as of December 31, 2015 (In Millions)

	Parent Issuer and Guarantor		Subsidiary Issuer and Guarantor - KMP		Subsidiary Issuer and Guarantor - Copano		Subsidiary Guarantors		Subsidiary Non-Guarantors		Consolidating Adjustments			Consolidated KMI
ASSETS
Cash and cash equivalents	$	123	$	—	$	—	$	12	$	142	$	(48	)	$	229
Other current assets - affiliates	2,233		1,600		—		9,451		695		(13,979		)	—
All other current assets	126		119		—		2,163		195		(8		)	2,595
Property, plant and equipment, net	252		—		—		32,195		8,100		—			40,547
Investments	16		2		—		5,906		116		—			6,040
Investments in subsidiaries	27,401		28,038		2,341		4,361		3,320		(65,461		)	—
Goodwill	15,089		22		287		5,221		3,171		—			23,790
Notes receivable from affiliates	850		21,319		—		2,070		380		(24,619		)	—
Deferred income taxes	7,501		—		—		—		—		(2,178		)	5,323
Other non-current assets	215		307		1		4,943		114		—			5,580
Total assets	$	53,806	$	51,407	$	2,629	$	66,322	$	16,233	$	(106,293	)	$	84,104

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current portion of debt	$	67	$	500	$	—	$	132	$	122	$	—		$	821
Other current liabilities - affiliates	1,328		8,682		39		3,216		714		(13,979		)	—
All other current liabilities	321		458		7		1,987		527		(56		)	3,244
Long-term debt	13,845		20,053		378		7,447		683		—			42,406
Notes payable to affiliates	2,404		448		622		19,840		1,305		(24,619		)	—
Deferred income taxes	—		—		2		594		1,582		(2,178		)	—
Other long-term liabilities and deferred credits	722		193		—		907		408		—			2,230
Total liabilities	18,687		30,334		1,048		34,123		5,341		(40,832		)	48,701

Stockholders’ equity
Total KMI equity	35,119		21,073		1,581		32,199		10,892		(65,745		)	35,119
Noncontrolling interests	—		—		—		—		—		284			284
Total stockholders’ Equity	35,119		21,073		1,581		32,199		10,892		(65,461		)	35,403
Total Liabilities and Stockholders’ Equity	$	53,806	$	51,407	$	2,629	$	66,322	$	16,233	$	(106,293	)	$	84,104

Condensed Consolidating Statements of Cash Flows for the Six Months Ended June 30, 2016 (In Millions) (Unaudited)

	Parent Issuer and Guarantor			Subsidiary Issuer and Guarantor - KMP			Subsidiary Issuer and Guarantor - Copano			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated KMI
Net cash (used in) provided by operating activities	$	(1,950	)	$	2,976		$	(143	)	$	5,616		$	221		$	(4,376	)	$	2,344

Cash flows from investing activities
Funding to affiliates	(1,670		)	(770		)	(1		)	(2,455		)	(219		)	5,115			—
Capital expenditures	(37		)	—			—			(929		)	(504		)	—			(1,470		)
Contributions to investments	(343		)	—			—			(13		)	(7		)	—			(363		)
Acquisitions of assets and investments, net of cash acquired	(2		)	—			—			(331		)	—			—			(333		)
Sale of property, plant and equipment, investments and other net assets, net of removal costs	—			—			—			220			—			—			220
Distributions from equity investments in excess of cumulative earnings	1,443			298			—			68			—			(1,728		)	81
Other, net	—			(54		)	—			37			2			—			(15		)
Net cash used in investing activities	(609		)	(526		)	(1		)	(3,403		)	(728		)	3,387			(1,880		)

Cash flows from financing activities
Issuances of debt	6,847			—			—			—			—			—			6,847
Payments of debt	(5,191		)	(500		)	—			(1,104		)	(5		)	—			(6,800		)
Funding from affiliates	1,429			882			144			2,124			536			(5,115		)	—
Debt issue costs	(6		)	—			—			—			—			—			(6		)
Cash dividends - common shares	(559		)	—			—			—			—			—			(559		)
Cash dividends - preferred shares	(76		)	—			—			—			—			—			(76		)
Contributions from parents	—			—			—			—			87			(87		)	—
Contributions from noncontrolling interests	—			—			—			—			—			87			87
Distributions to parents	—			(2,832		)	—			(3,234		)	(90		)	6,156			—
Distributions to noncontrolling interests	—			—			—			—			—			(11		)	(11		)
Net cash provided by (used in) financing activities	2,444			(2,450		)	144			(2,214		)	528			1,030			(518		)

Effect of exchange rate changes on cash and cash equivalents	—			—			—			—			5			—			5

Net (decrease) increase in cash and cash equivalents	(115		)	—			—			(1		)	26			41			(49		)
Cash and cash equivalents, beginning of period	123			—			—			12			142			(48		)	229
Cash and cash equivalents, end of period	$	8		$	—		$	—		$	11		$	168		$	(7	)	$	180

Condensed Consolidating Statements of Cash Flows for the Six Months Ended June 30, 2015 (In Millions) (Unaudited)

	Parent Issuer and Guarantor			Subsidiary Issuer and Guarantor - KMP			Subsidiary Issuer and Guarantor - Copano			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Consolidated KMI
Net cash (used in) provided by operating activities	$	(1,147	)	$	5,190		$	72		$	3,755		$	(26	)	$	(5,306	)	$	2,538

Cash flows from investing activities
Funding to affiliates	(2,118		)	(6,486		)	(1		)	(4,387		)	(351		)	13,343			—
Capital expenditures	(23		)	—			(3		)	(1,705		)	(183		)	5			(1,909		)
Contributions to investments	—			—			—			(45		)	—			—			(45		)
Investment in KMP	(159		)	—			—			—			—			159			—
Acquisitions of assets and investments, net of cash acquired	(1,709		)	—			—			(210		)	—			—			(1,919		)
Sale of property, plant and equipment, investments and other net assets, net of removal costs	—			—			5			4			—			(5		)	4
Distributions from equity investments in excess of cumulative earnings	292			—			—			80			—			(258		)	114
Other, net	—			(2		)	—			4			9			—			11
Net cash (used in) provided by investing activities	(3,717		)	(6,488		)	1			(6,259		)	(525		)	13,244			(3,744		)

Cash flows from financing activities
Issuances of debt	9,485			—			—			—			—			—			9,485
Payments of debt	(8,598		)	(300		)	—			(38		)	(5		)	—			(8,941		)
Funding from (to) affiliates	3,471			3,906			(73		)	5,546			493			(13,343		)	—
Debt issue costs	(20		)	—			—			—			—			—			(20		)
Issuances of common shares	2,562			—			—			—			—			—			2,562
Cash dividends	(2,006		)	—			—			—			—			—			(2,006		)
Repurchases of warrants	(5		)	—			—			—			—			—			(5		)
Contributions from parents	—			156			—			3			—			(159		)	—
Distributions to parents	—			(2,478		)	—			(3,010		)	(92		)	5,580			—
Distributions to noncontrolling interests	—			—			—			—			—			(16		)	(16		)
Other, net	—			(1		)	—			—			—			—			(1		)
Net cash provided by (used in) financing activities	4,889			1,283			(73		)	2,501			396			(7,938		)	1,058

Effect of exchange rate changes on cash and cash equivalents	—			—			—			—			(4		)	—			(4		)

Net increase (decrease) in cash and cash equivalents	25			(15		)	—			(3		)	(159		)	—			(152		)
Cash and cash equivalents, beginning of period	4			15			—			17			279			—			315
Cash and cash equivalents, end of period	$	29		$	—		$	—		$	14		$	120		$	—		$	163