No one has emerged from the Enron wreckage looking smarter than Richard Kinder. Ousted in 1996, following a bitter power struggle with his former college friend Ken Lay, he quietly snapped up the "dirty", infrastructural assets that Enron ditched in its headlong rush to reinvent itself. Kinder's story reads like the story line "of a morality play", says The New York Times. While Ken Lay died in disgrace, a convicted fraudster, the once-discredited Kinder masterminded a giant pipeline empire. In Texas, they call him the "anti-Enron".
"Kenny Boy" must be looking down in dismay, says The Houston Press. Kinder has stepped into his shoes as the king of Houston's Energy Alley. Lots of oil and gas men have built empires in a hurry, but "Kinder has outdone them all". This week's $21bn deal to acquire El Paso Corp only tightens his grip on the US energy industry. His outfit, Kinder Morgan, now controls "a pipeline long enough to circle the Earth more than three times", notes Bloomberg Businessweek. With the American natural gas industry booming (see below), Kinder is on a roll.
The complicated personal and professional relationships entwining Kinder, Lay, and their mutual friend Bill Morgan, began at the University of Missouri in the 1960s. Members of the same fraternity, they dated and married three friends from the same sorority. Professionally, Kinder seemed the weakest of the three. While Lay and Morgan steamed into oil and gas, he dabbled in law and then disastrously real estate. When he filed for bankruptcy in 1980, Bill Morgan came to his aid with a job at the pipeline company, Florida Gas. Four years later, the three college buddies were reunited when Lay in the midst of the whirlwind acquisition spree that gave birth to Enron bought up the company.
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A tough, no-nonsense man with a penny-pinching streak, Kinder was a formidable executive. By the early 1990s, he wasn't just president but heir apparent, says Fortune. Lay agreed to hand over the CEO job; but, in 1996, he reneged on the promise. Gossip had it they'd fallen out when Kinder began an affair with his personal assistant, Nancy McNeil, whom he later married. But it was more likely due to a clash of strategy. "Plodding" Kinder, with his to-do lists and penchant for flying coach class, distrusted Lay's "shiny new world" of leveraged energy trading. "Let's make sure we're not smoking our own dope," was his favourite saying. It sealed his departure.
While the subsequent reign of Jeffrey Skilling propelled Enron to ever more fanciful heights, Kinder teamed up with Morgan again, and began buying up Lay's cast-off orphaned assets on the cheap.
How did he react to his rival's downfall? Shrewdly: Kinder refuses to discuss it safe in the knowledge that plenty of people believe that, had he stayed on, "the implosion would never have happened".
Kinder's high-stakes play on American infrastructure
Irwin Stelzer once observed that Ken Lay was the only person he'd ever met who was "always in spin mode". By contrast, Richard Kinder tells it as it is, notes the energy blog MasterResource. Although his relentless attention to the bottom line "followed him out of the door" when he quit Enron, it is alive and well at Kinder Morgan. "Forget seeing the company's name on a stadium Kinder won't even pay for a box inside of one," says the Houston Chronicle.
That doesn't mean investors easily trust him, says Chuck Saletta on Fool.com. Would a company run by Ken Lay's college buddy, which got its start buying assets off Enron's books and is renowned for its "incredibly complicated" corporate structure, pass your initial sniff test? Yet those who have stuck with Kinder have done well, as has the man himself. Forbes puts his current fortune at $6.4bn. A bet on Kinder Morgan is essentially a bet on America's increasing reliance on natural shale gas, says Yahoo! Finance. The process of extracting the gas may be controversial, but its effect on the US energy market has been profound. Over the past five years, shale gas has risen from 1% of the total gas market to 20%, helping to slash prices to a third of their level in 2008. Yet the country's pipeline infrastructure has struggled to keep up hence the significance of Kinder's deal to buy El Paso, which instantly creates America's largest pipeline operator.
Rich Kinder would be the first to acknowledge that the stakes are high, says Bloomberg Businessweek. As fellow billionaire Warren Buffett once said, "you can undo ten years of hard work with one stupendously dumb deal". Yet Kinder's big investment in infrastructure looks "wise", argues analyst William Herbert of Simmons & Co. He might have been a footnote in the Enron story, but he "continues to make history by shaping and redefining the North American energy landscape".
