Citi Midstream / Energy Infrastructure Conference August 14-15, 2019 Cautionary Statements
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Citi Midstream / Energy Infrastructure Conference August 14-15, 2019 Cautionary Statements This presentation contains forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or the ability to generate revenues, income or cash flow or to make distributions or pay dividends are forward- looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations of Tallgrass Energy, LP or Rockies Express Pipeline LLC and their respective affiliates may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond Tallgrass Energy, LP’s and Rockies Express Pipeline LLC’s ability to control or predict and are necessarily based upon various assumptions involving judgements with respect to the future. Forward-looking statements contained in this presentation specifically include, without limitation, TGE 2019 Guidance, statements regarding the expected strategy and benefits resulting from the investment in Tallgrass Energy, LP by affiliates of Blackstone Infrastructure Partners and its co-investors, the feasibility, cost, execution and in-service timing of capital and other growth and joint venture projects at Rockies Express Pipeline LLC and Tallgrass Energy, LP, and their respective affiliates, including, without limitation, the Cheyenne Connector pipeline, the Cheyenne Hub enhancements, the expansion of capacity on the Pony Express System, the Seahorse Pipeline Project, the Plaquemines Liquids Terminal Project, and the identified growth opportunities of Gathering and Processing and BNN Water Solutions, the recontracting of contracts at Rockies Express Pipeline LLC, and the 2020 projected EBITDA at Rockies Express Pipeline LLC, including its currently contracted 2020 EBITDA, its 2020 DCF and its 2020 Leverage. These statements also include, among others, Tallgrass Energy, LP’s and Rockies Express Pipeline LLC’s respective ability to complete and integrate acquisitions, implement their respective business plans and complete internal growth projects; changes in general economic conditions; competitive conditions; actions taken by third-party operators, processors and transporters; demand for natural gas transportation, storage and processing services and crude oil transportation services; price and availability of debt and equity financing; availability and price of natural gas and crude oil compared to alternative fuels; energy efficiency and technology trends; operating hazards and other risks incidental to the business; natural disasters, weather-related delays and casualty losses; interest rates; labor relations; customer defaults; changes in tax status; effects of existing and future laws and governmental regulations; effects of future litigation; and other uncertainties. There is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on our results of operations or financial condition. Because of these uncertainties, you are cautioned not to put undue reliance on any forward-looking statement. This presentation does not constitute an offer to sell any securities of Tallgrass Energy, LP or its respective affiliates or a solicitation of an offer to buy any securities of Tallgrass Energy, LP or its respective affiliates. NYSE: TGE │ www.tallgrassenergy.com 2 Non-GAAP Measures Adjusted EBITDA (“EBITDA”), Cash Available for Dividends (“CAD”), and Distributable Cash Flow (“DCF”) are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements and financial statements of our subsidiaries and unconsolidated investments, such as industry analysts, investors, lenders and rating agencies, may use to assess: • Our operating performance as compared to other publicly traded midstream infrastructure companies, without regard to historical cost basis or, in the case of EBITDA, financing methods; • The ability of our assets to generate sufficient cash flow to make dividends to our shareholders; • Our ability to incur and service debt and fund capital expenditures; and • The viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities. We believe that the presentation of EBITDA, CAD, and DCF provides useful information to investors in assessing our financial condition and results of operations. EBITDA, CAD, and DCF should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP, nor should EBITDA, CAD, and DCF be considered alternatives to available cash or other definitions in our partnership agreement. EBITDA, CAD, and DCF have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because EBITDA, CAD, and DCF may be defined differently by other companies in our industry, our definition of EBITDA, CAD, and DCF may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. We generally define EBITDA as net income excluding the impact of interest, income taxes, depreciation and amortization, non-cash income or loss related to derivative instruments, non-cash long-term compensation expense, impairment losses, gains or losses on asset or business disposals or acquisitions, gains or losses on the repurchase, redemption or early retirement of debt, and earnings from unconsolidated investments, but including the impact of distributions from unconsolidated investments and deficiency payments received from or utilized by our customers. In addition, EBITDA at Rockies Express excludes the impact of other non-cash gains or losses and includes the impact of the change in contract asset, which represents the difference between the revenue recognized and the actual cash collected from the customer. We also use CAD and DCF, which we generally define as EBITDA, less cash interest costs, maintenance capital expenditures, current income tax, and certain cash reserves permitted by our governing documents. EBITDA and CAD are both calculated and presented at the Tallgrass Equity, LLC (“Tallgrass Equity”) level, before consideration of noncontrolling interest associated with the Exchange Right Holders or calculating distributions from Tallgrass Equity to us, on one hand, and to the Exchange Right Holders, on the other. We believe calculating these measures at Tallgrass Equity provides investors the most complete and comparable picture of our overall financial and operational results and provides a consistent metric for period over period comparisons that is not impacted by any future exercises by the Exchange Right Holders of the right to exchange TGE Class B Shares and Tallgrass Equity Units for an equal number of TGE Class A Shares (the "Exchange Right"), which does not have a dilutive effect on TGE's net income per share. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see EBITDA Reconciliations in the appendix. We are unable to project net cash provided by operating activities or net income attributable to TGE to provide the related reconciliation of projected EBITDA and CAD to the most comparable financial measures calculated in accordance with GAAP, because the impact of changes in operating assets and liabilities and the volume and timing of deficiency payments received and utilized from our customers are out of our control and cannot be reasonably predicted. We provide a range for the forecasts of EBITDA and CAD to allow for the variability in the timing of cash receipts and disbursements, customer utilization of our assets, and maintenance capital spending and the impact on the related reconciling items, many of which interplay with each other. The timing of maintenance capital expenditures is volatile as it depends on weather, regulatory approvals, contractor availability, system performance and various other items. Therefore, the reconciliation of projected EBITDA to projected net cash provided by operating activities and net income attributable to TGE and the reconciliation of projected CAD to projected net cash provided by operating activities is not available without unreasonable effort. NYSE: TGE │ www.tallgrassenergy.com 3 Tallgrass Energy Overview Unique platform with large scale, diversified asset base with long-term contracted cash flows (1) • 3 FERC-regulated natural gas transportation & storage systems totaling >6,800 miles of pipe EBITDA Natural Gas 56% • Rockies Express Pipeline (“REX”): ~4.4 Bcf/d long haul capacity Transportation • Tallgrass Interstate Gas Transmission (“TIGT”) and Trailblazer Pipeline Company (“Trailblazer”): ~2.0 Bcf/d of transportation and ~16 Bcf of storage design capacity $1,035 $872 • Pony Express: 834-mile FERC-regulated crude oil pipeline system with ~400 kbbls/d of $965 Crude Oil capacity 35% Transportation • Powder River Gateway (“PRG”): 2 FERC-regulated crude oil pipelines with ~190 kbbls/d of capacity