Tallgrass Investor Presentation October 2018
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, statements regarding the expected benefits of the simplification transactions, that TGE does not expect to pay cash federal taxes for at least 10 years, the feasibility, cost, execution and in-service timing of capital and other growth 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 Iron Horse pipeline, the Grasslands and Guernsey Terminals, additional gathering pipeline and compression in the PRB, additional pipeline and water disposal facilities in the Bakken, DJ and PRB, and the Seahorse Pipeline and Plaquemines Liquids Terminal, the components of the Tallgrass Energy EBITDA by Asset in 2020, the 2020 contracted EBITDA at Rockies Express Pipeline LLC, and the expected production growth across the Bakken, DJ, and PRB basins in the next 5 years. 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 TGE 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 Adjusted 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. We also use CAD and DCF, which we generally define as EBITDA, less cash interest costs, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and certain cash reserves permitted by our governing documents. EBITDA and CAD are both calculated and presented at the 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 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 have also presented Merger Adjusted Segment Adjusted EBITDA for each of our reporting segments. We define Merger Adjusted Segment Adjusted EBITDA as EBITDA for such segment as adjusted for the impact of the TEP Merger Transaction, assuming it had closed on the first day of the period presented. We believe that the presentation of this measure on a merger adjusted basis provides useful information to investors in assessing our financial condition and results of operations for each of our reporting segments because the accounting treatment of our ownership interests in TEP prior to the TEP Merger Transaction and the impact of non-controlling interests for the period was significantly impacted by the TEP Merger Transaction during the period but is not representative of the comparable measures during our historical periods. For a reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures, please see EBITDA Reconciliations in the appendix. Tallgrass Energy is unable to project future net cash provided by operating activities or net income to provide the related reconciliation of projected EBITDA 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. Tallgrass Energy provides ranges or approximations for future estimates of EBITDA to allow for the variability in the timing of cash receipts and disbursements, customer utilization of our assets, and the impact on the related reconciling items, many of which interplay with each other. Therefore, the reconciliation of future EBITDA to projected net cash provided by operating activities and net income is not available without unreasonable effort. NYSE: TGE │ www.tallgrassenergy.com 3
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