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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Kinder Morgan Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net operating profit after taxes (NOPAT)¹	4,396)	3,834)	3,502)	2,949)	2,335)
Cost of capital²	8.55%	8.17%	7.51%	8.02%	7.43%
Invested capital³	67,164)	69,659)	69,077)	69,639)	72,098)

Economic profit⁴	(1,345)	(1,860)	(1,686)	(2,638)	(3,022)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 4,396 – 8.55% × 67,164 = -1,345

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Kinder Morgan Inc. economic profit decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Kinder Morgan Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net income attributable to Kinder Morgan, Inc.	2,190)	1,609)	183)	708)	253)
Deferred income tax expense (benefit)¹	717)	405)	2,073)	1,087)	692)
Increase (decrease) in allowance for doubtful accounts²	6)	(32)	(4)	(52)	81)
Increase (decrease) in equity equivalents³	723)	373)	2,069)	1,035)	773)
Interest, net	1,801)	1,917)	1,832)	1,806)	2,051)
Interest expense, operating lease liability⁴	14)	35)	29)	30)	32)
Adjusted interest, net	1,815)	1,952)	1,861)	1,836)	2,083)
Tax benefit of interest, net⁵	(381)	(410)	(651)	(642)	(729)
Adjusted interest, net, after taxes⁶	1,434)	1,542)	1,210)	1,193)	1,354)
Net income (loss) attributable to noncontrolling interest	49)	310)	40)	13)	(45)
Net operating profit after taxes (NOPAT)	4,396)	3,834)	3,502)	2,949)	2,335)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in equity equivalents to net income attributable to Kinder Morgan, Inc..

⁴ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 329 × 4.31% = 14

⁵ 2019 Calculation
Tax benefit of interest, net = Adjusted interest, net × Statutory income tax rate
= 1,815 × 21.00% = 381

⁶ Addition of after taxes interest expense to net income attributable to Kinder Morgan, Inc..

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Kinder Morgan Inc. NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Kinder Morgan Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Income tax provision	926)	587)	1,938)	917)	564)
Less: Deferred income tax expense (benefit)	717)	405)	2,073)	1,087)	692)
Add: Tax savings from interest, net	381)	410)	651)	642)	729)
Cash operating taxes	590)	592)	516)	472)	601)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Kinder Morgan Inc. cash operating taxes increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Kinder Morgan Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Current portion of debt	2,477)	3,388)	2,828)	2,696)	821)
Long-term debt, excluding current portion	31,915)	33,936)	35,015)	37,354)	42,406)
Operating lease liability¹	329)	683)	573)	600)	642)
Total reported debt & leases	34,721)	38,007)	38,416)	40,650)	43,869)
Total Kinder Morgan, Inc.’s stockholders’ equity	33,742)	33,678)	33,636)	34,431)	35,119)
Net deferred tax (assets) liabilities²	(857)	(1,566)	(2,044)	(4,352)	(5,323)
Allowance for doubtful accounts³	9)	3)	35)	39)	91)
Equity equivalents⁴	(848)	(1,563)	(2,009)	(4,313)	(5,232)
Accumulated other comprehensive (income) loss, net of tax⁵	333)	330)	541)	661)	461)
Redeemable noncontrolling interest	803)	666)	—)	—)	—)
Noncontrolling interests	344)	853)	1,488)	371)	284)
Adjusted total Kinder Morgan, Inc.’s stockholders’ equity	34,374)	33,964)	33,656)	31,150)	30,632)
Construction work in process⁶	(1,006)	(2,312)	(2,995)	(2,161)	(2,395)
Marketable securities at fair value⁷	(925)	—)	—)	—)	(8)
Invested capital	67,164)	69,659)	69,077)	69,639)	72,098)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of equity equivalents to total Kinder Morgan, Inc.’s stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction work in process.

⁷ Subtraction of marketable securities at fair value.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Kinder Morgan Inc. invested capital increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Kinder Morgan Inc., cost of capital calculations

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	49,401)	49,401)	÷	87,746)	=	0.56	0.56	×	11.95%	=	6.73%
Mandatory Convertible Preferred Stock	—)	—)	÷	87,746)	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	38,016)	38,016)	÷	87,746)	=	0.43	0.43	×	5.27% × (1 – 21.00%)	=	1.80%
Operating lease liability⁴	329)	329)	÷	87,746)	=	0.00	0.00	×	4.31% × (1 – 21.00%)	=	0.01%
Total:	87,746)					1.00					8.55%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	40,791)	40,791)	÷	80,484)	=	0.51	0.51	×	11.95%	=	6.06%
Mandatory Convertible Preferred Stock	1,541)	1,541)	÷	80,484)	=	0.02	0.02	×	9.75%	=	0.19%
Debt³	37,469)	37,469)	÷	80,484)	=	0.47	0.47	×	5.15% × (1 – 21.00%)	=	1.89%
Operating lease liability⁴	683)	683)	÷	80,484)	=	0.01	0.01	×	5.15% × (1 – 21.00%)	=	0.03%
Total:	80,484)					1.00					8.17%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	38,033)	38,033)	÷	80,197)	=	0.47	0.47	×	11.95%	=	5.67%
Mandatory Convertible Preferred Stock	1,541)	1,541)	÷	80,197)	=	0.02	0.02	×	9.75%	=	0.19%
Debt³	40,050)	40,050)	÷	80,197)	=	0.50	0.50	×	5.02% × (1 – 35.00%)	=	1.63%
Operating lease liability⁴	573)	573)	÷	80,197)	=	0.01	0.01	×	5.02% × (1 – 35.00%)	=	0.02%
Total:	80,197)					1.00					7.51%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	50,185)	50,185)	÷	93,341)	=	0.54	0.54	×	11.95%	=	6.43%
Mandatory Convertible Preferred Stock	1,541)	1,541)	÷	93,341)	=	0.02	0.02	×	9.75%	=	0.16%
Debt³	41,015)	41,015)	÷	93,341)	=	0.44	0.44	×	4.95% × (1 – 35.00%)	=	1.41%
Operating lease liability⁴	600)	600)	÷	93,341)	=	0.01	0.01	×	4.95% × (1 – 35.00%)	=	0.02%
Total:	93,341)					1.00					8.02%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	34,857)	34,857)	÷	74,521)	=	0.47	0.47	×	11.95%	=	5.59%
Mandatory Convertible Preferred Stock	1,541)	1,541)	÷	74,521)	=	0.02	0.02	×	9.75%	=	0.20%
Debt³	37,481)	37,481)	÷	74,521)	=	0.50	0.50	×	4.92% × (1 – 35.00%)	=	1.61%
Operating lease liability⁴	642)	642)	÷	74,521)	=	0.01	0.01	×	4.92% × (1 – 35.00%)	=	0.03%
Total:	74,521)					1.00					7.43%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Kinder Morgan Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(1,345)	(1,860)	(1,686)	(2,638)	(3,022)
Invested capital²	67,164)	69,659)	69,077)	69,639)	72,098)
Performance Ratio
Economic spread ratio³	-2.00%	-2.67%	-2.44%	-3.79%	-4.19%
Benchmarks
Economic Spread Ratio, Competitors⁴
Chevron Corp.	-12.60%	—	—	—	—
ConocoPhillips	-0.34%	—	—	—	—
Exxon Mobil Corp.	-5.72%	—	—	—	—
Marathon Petroleum Corp.	-3.03%	—	—	—	—
Occidental Petroleum Corp.	-10.58%	—	—	—	—
Valero Energy Corp.	-3.08%	—	—	—	—

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,345 ÷ 67,164 = -2.00%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Kinder Morgan Inc. economic spread ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Kinder Morgan Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(1,345)	(1,860)	(1,686)	(2,638)	(3,022)
Revenues	13,209)	14,144)	13,705)	13,058)	14,403)
Performance Ratio
Economic profit margin²	-10.18%	-13.15%	-12.30%	-20.20%	-20.98%
Benchmarks
Economic Profit Margin, Competitors³
Chevron Corp.	-17.63%	—	—	—	—
ConocoPhillips	-0.59%	—	—	—	—
Exxon Mobil Corp.	-6.80%	—	—	—	—
Marathon Petroleum Corp.	-2.00%	—	—	—	—
Occidental Petroleum Corp.	-43.67%	—	—	—	—
Valero Energy Corp.	-1.16%	—	—	—	—

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × -1,345 ÷ 13,209 = -10.18%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Kinder Morgan Inc. economic profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Kinder Morgan Inc. (NYSE:KMI)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin