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Kathy Panagopouloskathy.panagopoulos@morningstar.com
Morningstar Names Rich Kinder of Kinder Morgan as Its 2005 CEO of the Year

CHICAGO, Jan. 5, 2006 – Morningstar, Inc., a leading provider of independent investment research, today named four-time nominee Rich Kinder of Kinder Morgan (KMI) as its 2005 CEO of the Year. Kinder is also the chairman and CEO of Kinder Morgan Energy Partners (KMP) and Kinder Morgan Management (KMR). Morningstar’s annual award recognizes a chief executive who exhibits exemplary corporate stewardship, demonstrates independent thinking, creates lasting value for shareholders, and has put his or her stamp on an industry.

“We’ve followed Kinder Morgan for years, and have always been a fan of Rich Kinder’s management style,” said Patrick Dorsey, director of stock analysis for Morningstar. “He’s made key long-term, contrarian decisions to solidify the company’s future and created a tremendous amount of value for shareholders since taking over in 1997. With compensation that rewards long-term value creation and is tied to company performance, Kinder has demonstrated exemplary stewardship.”

Kinder served as Enron’s president from 1990 to 1996. Recognizing that greater long-term value would be created by operating hard assets rather than trading energy, Kinder left Enron in 1996, and with his partner Bill Morgan, purchased a controlling stake in one of Enron’s pipeline businesses, Enron Liquids Pipeline, LP, renaming it Kinder Morgan Energy Partners. Headquartered in Houston, Kinder Morgan is one of the country’s largest owners and operators of energy pipelines, managing more than 40,000 miles of natural gas and products pipelines, and more than 150 terminals. Kinder has stayed resolutely focused on generating income by investing in hard assets—often those that were sold off by firms that jumped on the energy-trading bandwagon.

Morningstar considers Kinder Morgan to be a wide-moat stock – a company with a strong competitive advantage over its peers – because of its strong, consistent cash flows and barriers that limit competition.

Kinder Morgan also stands out for its corporate governance, receiving an A, Morningstar’s highest Stewardship Grade. The firm sets a high standard for financial disclosure, publishing a detailed annual budget complete with yearly goals. The company uses the budget as a benchmark to keep shareholders informed of its progress and to assess employee performance. There’s no chance that the firm will suddenly lower expectations or move the goals if it has a bad year.

In addition, Kinder’s compensation is directly linked to the company’s performance – a key indication of the firm’s commitment to stewardship. He receives $1 in annual salary, and the rest of his pay comes from distributions and dividends paid from his ownership stakes. Kinder is the largest shareholder of KMI, owning more than 18 percent of the company. This large stake ties his wealth to the company’s performance and to that of the firm’s other owners. Also, Kinder has never sold a single share of stock and has bought shares on the open market over the years. During the fourth quarter of 2005 alone, he bought about $1 million worth of shares in KMI and KMR. Finally, Kinder sets a cost-conscious example for the firm. Executive salaries are capped at $200,000 annually, with the bulk of executive compensation tied to performance-related bonuses and restricted stock.

  • Under Kinder’s leadership, the company has grown significantly:
    KMI has increased its dividend five-fold since new dividend tax laws were passed in early 2003. With its ample free cash flow, the company has been paying down debt and buying back shares.
  • Since 1998, units of KMP have tripled, and partnership distributions have more than doubled.
  • KMP unitholders have enjoyed a 32 percent annualized total return since 1997, when Kinder took over the company.
  • For the past 12 consecutive quarters, KMP has increased its quarterly cash distribution per common unit, currently at an annualized $3.16. Since Kinder took over in 1997, there have been 25 increases in 34 quarters.
  • In 2005, Kinder Morgan bought Canadian pipeline operator Terasen and announced plans to build a $3 billion pipeline that will transport natural gas from Wyoming to Ohio, further demonstrating a long-term strategy that few firms can match.

“We have always admired the steady performance of Kinder Morgan's core business,” Dorsey added. “The acquisition of Terasen enables Kinder Morgan to participate in pipeline projects related to the Canadian oil sands, while the Rockies Express project provides much needed pipeline capacity to a region of expanding natural-gas production. Kinder’s ability to use capital wisely, think strategically, and treat shareholders with respect placed him at the top for our CEO of the Year award.”

In addition to Kinder, short-list contenders for Morningstar’s 2005 CEO of the Year award included: William Cooper, CEO of TCF Financial (TCB); Hunter Harrison, CEO of Canadian National (CNI); Robert Silberman, CEO of Strayer Education (STRA); and John Mackey, CEO of Whole Foods Market (WFMI). This is the second time Morningstar has considered Mackey for its CEO of the Year award.

The Morningstar CEO of the Year award, introduced in January 2000, recognizes leaders who maximize shareholder value and demonstrate independent thinking. Winners are chosen by Morningstar stock analysts, based on the company’s independent research.

For the complete report, go to:

For the complete list of past winners, go to:

About Morningstar, Inc.
Morningstar, Inc. (Nasdaq: MORN) is a leading provider of independent investment research in the United States and in major international markets. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar tracks more than 100,000 investment offerings, including stocks, mutual funds, and similar vehicles. The company has operations in 16 countries.

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