Kinder Morgan: Riding the Power Demand Wave into a $10B Backlog
Q2 EBITDA +12%, EPS +32%, guidance raised, and a shadow backlog that just keeps growing.
KMI · Earnings Call · 2026-07-22
A Record Quarter, and a Raised Bar
Kinder Morgan's second quarter of 2026 was, in CEO Kim Dang's words, "another fantastic quarter," with “adjusted EBITDA increased 12% compared to the second quarter of '25, while adjusted earnings per share increased 32%.” — Kimberly Dang, Chief Executive Officer · 2026-07-22 The company raised its full-year guidance, now expecting adjusted EBITDA at least 5% above budget and EPS at least 12% above budget. CFO David Michels announced a 2% dividend increase, noting “we're declaring a quarterly dividend of $0.2975 per share, which is $1.19 annualized and an increase of 2% over 2025.” — David Michels, Chief Financial Officer · 2026-07-22 The beat was broad-based, with every business segment contributing, led by natural gas volumes, CO2 production, and capacity sales. Operating income climbed 26% year-over-year to $1.4 billion, reflecting higher margins across the network.
The Backlog Engine
The real story lies in the shadow backlog — the roughly $10 billion of unsanctioned opportunities management has been cultivating. That number has not shrunk even as the company sanctioned ~$2 billion of projects over the past year. Dang reiterated on the call:
I think we are bullish on the opportunities of adding. I'd also point out that the $10 billion hasn't decreased despite the fact that we added $2 billion and are looking to add at least $1 billion in the back half of the year. And so our opportunity set has continued to grow.
The sanctioned backlog stands at ~$9.6 billion after placing $650 million into service, but the board contingently approved roughly $400 million more, waiting only on contract execution. In addition, significant projects are expected to FID before year-end — including the Permian Link project, which targets the growing power corridor along the NGPL footprint. Management highlighted that power demand is the primary driver of incremental expansion projects, not just LNG. As Dang put it, “a lot of that's really around power is the primary driver of those incremental expansion projects.” — Kimberly Dang, Chief Executive Officer · 2026-07-22
Power Demand: The New Load
The scale of power-driven gas demand is staggering. Georgia Power alone filed a report showing over 75 gigawatts of potential power demand by the mid-2030s. Across the Southeast, the company's SNG, Mississippi Crossing, and FGT assets are well positioned. This is a structural shift, not a cyclical one. The power demand theme has been building for quarters — back in January, Dang noted that “about 60% of our backlog is associated with power projects.” — Kimberly Dang, Chief Executive Officer · 2026-01-21 The data center angle is intertwined, as utilities and hyperscalers seek reliable power. KMI's management has been careful to stick to its midstream knitting, focusing on take-or-pay contracts with creditworthy counterparties rather than investing behind the meter. The company is also addressing supply chain bottlenecks, with Sital Mody noting that compression timelines are tightening and the team is "staying ahead of the impending delay in supply chain." This careful planning supports the confidence in the backlog conversion.
Balance Sheet Firepower
The funding question is central. Net debt to adjusted EBITDA sits at 3.6x, below the midpoint of the 4.0x target. Dang emphasized the flexibility: “So we absolutely have the ability to finance incremental CapEx, stay within our – at the middle potentially – of our balance sheet target range.” — Kimberly Dang, Chief Executive Officer · 2026-07-22 With internally generated cash flow covering the ~$3 billion annual growth capex, there's room to accelerate. Free cash flow generation remains robust, providing a buffer for both organic projects and opportunistic M&A. Prior to this quarter, management had already signaled intent to FID significant projects in 2026 — as Dang said in October 2025, “we'll bring significant projects to FID in 2026 based on that $10 billion backlog.” — Kimberly Dang, Chief Executive Officer · 2025-10-22 That promise is now being tested.
Market Disconnect?
Despite the strong fundamentals, KMI's stock has slipped 5.2% over the past 90 days, with a drawdown of 9.7% from its May peak. The broader tape shows data center-related names under selling pressure — the 30-day decliners list includes dozens of data center and power-related tickers. Yet KMI's own business is accelerating. The market may be mispricing the durability of the natural gas demand story, or simply digesting the pace of growth. For a company that has grown enterprise value at 22% CAGR for 29 years, the current setup — a robust backlog, a balanced sheet, and record earnings — suggests the long-term thesis remains intact. As Rich Kinder reminded investors, "this unexcited company has, over the last 29 years of its existence, grown its enterprise value at a compound annual rate of approximately 22%." The market might be missing the forest for the trees.