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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant {X}
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{ } Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
K N ENERGY, INC.
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(Name of Registrant as Specified in Its Charter)
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[K N Energy logo] [Kinder Morgan logo]
IMPORTANT NEW INFORMATION
September 15, 1999
To the Stockholders of
K N Energy, Inc. and Kinder Morgan, Inc.:
At our September 28, 1999 special meetings of stockholders you will
have the opportunity to vote on the K N Energy - Kinder Morgan transaction. In
connection with your vote, we have enclosed a copy of a recent joint press
release outlining the strategies that K N Energy plans to implement for the
combined company following completion of the merger. The joint press release
contains important new information. WE ENCOURAGE YOU TO READ THE PRESS RELEASE
CAREFULLY.
Stockholders of Kinder Morgan are being asked, at Kinder Morgan's
special meeting of stockholders, to approve the merger. Stockholders of K N
Energy are being asked, at K N Energy's special meeting of stockholders, to
approve a proposal to issue K N Energy common stock pursuant to the terms of the
merger agreement and a proposal to amend K N Energy's articles of incorporation
to change the corporate name of K N Energy to "Kinder Morgan, Inc."
For your convenience, we have enclosed an additional proxy card for
you to vote at your stockholder meeting. IF YOU HAVE ALREADY VOTED AND DO NOT
WISH TO CHANGE YOUR VOTE, YOU MAY DISREGARD THE ENCLOSED PROXY CARD. Otherwise,
whether or not you plan to attend your meeting, please take the time to vote on
the proposal(s) submitted to stockholders at your meeting by completing and
mailing the enclosed proxy card. K N Energy stockholders may also vote their
shares by telephone or Internet by following the instructions on the proxy card.
Thank you.
[Signature] [Signature]
Stewart A. Bliss Richard D. Kinder
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
K N Energy, Inc. Kinder Morgan, Inc.
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[K N Energy logo] [Kinder Morgan logo]
Larry Pierce @ 303-914-4751 Irene Twardowski @ 713-844-9500
www.kne.com www.kindermorgan.com
KINDER MORGAN,INC. - KN ENERGY
UNVEIL PLAN FOR COMBINED COMPANY
HOUSTON and LAKEWOOD, COLO., Sept. 15, 1999 - Kinder Morgan, Inc. and
KN Energy, Inc. (NYSE - KNE), which previously announced plans to merge,
unveiled a strategic gameplan Wednesday for the combined company. By merging
operations, the company expects to realize $65 million to $70 million in annual
cost savings beginning next year. The key strategies outlined by management are
designed to increase earnings beyond analysts' current consensus estimate of
$0.92 of earnings per share for KN for the year 2000.
Both companies have scheduled special shareholder meetings Sept. 28 to
vote on the proposed transaction. KN shareholders also will vote on amending
KN's articles of incorporation to change the name of the company to Kinder
Morgan, Inc. upon completion of the merger, which is expected in early October.
Rich Kinder, chairman and chief executive officer of Kinder Morgan,
Inc., and Stewart Bliss, interim chairman and chief executive officer of KN,
noted the merger combines the general partner of the largest independent refined
products pipeline company in the U.S. with one of the largest natural gas
pipeline operators in the country.
"The planned merger will create a premier midstream energy company,"
Kinder said. "Our combined asset base, with operations in every region of the
U.S. except the northeast, will provide a diverse platform for growth."
According to Bliss, the merger will reduce KN's debt to total
capitalization ratio from 72 percent to 65 percent and will provide a strong
senior management team with a proven track record. Kinder will be named chairman
and chief executive officer of the combined entity.
(more)
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Kinder Morgan-KN Strategy Page 2
Kinder outlined the following "back to basics" strategy to improve the
company's financial performance:
o Focus on and enhance utilization of core assets. The company's core
businesses will include interstate natural gas pipelines and
associated assets, interstate refined products pipelines, retail
natural gas distribution, natural gas marketing and trading and power
development.
o Sell non-core assets to deleverage the balance sheet. Assets
previously identified for potential divestiture include KN's
international assets, MidCon Texas Pipeline, Wattenberg Gathering and
Processing, enoable and Orcom, KN Field Services and Compressor Pump &
Engine and certain West Texas transmission assets. The company
announced today it will actively market other gathering and processing
assets, including the Bushton plant and Hugoton gathering system in
Kansas. In total, the sale of non-strategic assets is expected to
reduce debt and long-term leases by $750 million to $1 billion.
o Sell select core assets for fair value to Kinder Morgan Energy
Partners (NYSE:ENP), a publicly traded master limited partnership.
Kinder said these assets must qualify for the partnership and be
accretive to distributions per unit. By selling assets to KMEP, the
company will still continue to participate in their future growth
through its general partner interest.
o Dramatically reduce corporate overhead costs by $65 million to $70
million annually starting in 2000. Approximately one-third of the
savings are expected to come from payroll reductions. Kinder explained
that with divestiture of certain non-core assets, less corporate
overhead support will be required. Nearly all of the cost cuts will
occur at the corporate level as opposed to field operations. Regulated
operations and services will not be adversely affected by the cost
reductions.
o Align employee and shareholder incentives. Kinder and William Morgan,
who will become the two largest shareholders of the merged company
upon closing, will be the top two executives of the combined company
and have each agreed to a salary of $1 per year. In addition, all
full-time employees will be eligible for a stock option plan.
o Recommend to the new board of the combined company reducing the
dividend from $0.80 to $0.20 annually. This measure would save nearly
$70 million in cash annually that could be used to reduce debt and
fuel growth initiatives. Kinder said he is committed to increasing the
dividend as the company's financial performance improves.
o Aggressively seek accretive acquisitions and expansions in core
businesses. For example, Kinder said the company will pursue power
development and retail natural gas distribution opportunities, as well
as strategic growth projects along its interstate pipeline systems.
(more)
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Kinder Morgan-KN Strategy Page 3
Bliss said he expects third quarter operating results near breakeven
with minor merger-related charges producing a net loss. In the fourth quarter,
significant non-recurring charges are expected, including losses associated with
assets definitively identified for sale or discontinuance, as well as
merger-related charges. Combined, this could result in an after-tax charge in
the range of $200 million to $250 million.
Kinder Morgan, Inc. is the sole stockholder of the general partner of
Kinder Morgan Energy Partners, L. P. Kinder Morgan Energy Partners, L. P., which
has an enterprise value of approximately $3.0 billion, is the nation's largest
pipeline master limited partnership. It owns and operates one of the large
product pipeline systems in the United States, serving customers in 16 states
with more than 5,000 miles of pipeline and over 20 associated terminals. Kinder
Morgan Energy Partners, L. P. also operates 24 bulk terminal facilities which
transload over 40 million tons of coal, petroleum coke and other products
annually. In addition, Kinder Morgan owns 51 percent of Plantation Pipe Line
Company and a 20 percent interest in Shell CO2 Company, Ltd.
KN Energy, Inc., based in Lakewood, Colo., is the nation's
sixth-largest integrated natural gas company with more than $8 billion in total
assets and is one of the largest pipeline operators with more than 25,000 miles
of pipe. It has operations in 16 states, including natural gas gathering,
processing, marketing, storage, transportation, energy commodity sales - natural
gas and natural gas liquids; electric generation design, construction and
operation; and innovative services designed for consumers, utilities and
commercial entities.
# # #
This news release contains forward-looking statements within the scope
of the Securities Act of 1933 and the Securities Exchange Act of 1934. Although
the company believes that these statements are based upon reasonable
assumptions, it can give no assurance that its goals will be achieved.
Differences between assumed facts and actual results can be material depending
on the circumstances and investors should be aware of important factors that
could have a material impact on future results. Such factors include, among
others, the pace of deregulation of retail natural gas and electricity; federal,
state and international regulatory developments; the timing and extent of
changes in commodity prices for oil, natural gas, natural gas liquids,
electricity, certain agricultural products and interest rates; the extent of
success in acquiring natural gas facilities; the timing and success of efforts
to develop power, pipeline and other projects; political developments in foreign
countries; weather-related factors; and conditions of the capital markets and
equity markets during the periods noted in the release. All of these factors are
difficult to predict and many are beyond the company's control.
