Atmos Energy Corporation · NYSE:ATO
Atmos Energy — Investor Presentation (August 2023)
69 slides from Atmos Energy's investor presentation, August 2023
Slide 1: Our vision is for Atmos Energy to be the Safest provider of natural gas
Our vision is for Atmos Energy to be the Safest provider of natural gas services. We will be recognized for Exceptional Customer Service, for being a Great Employer and for achieving Superior Financial Results. August 2023
Slide 2: Leading Natural Gas Delivery Platform
Leading Natural Gas Delivery Platform Eight-state distribution territory Business Mix Intrastate pipeline system ~33% Pipeline & Storage ~67% Distribution 2023 Estimated Net Income Favorably positioned pipeline spans Diversified LDC platform in 8 states Texas shale gas supply basins • Largest pure-p
Slide 3: Sustainable Performance Supported By Focused Business Model
Sustainable Performance Supported By Focused Business Model • Safety-driven, organic growth strategy supports 6% - 8% earnings per share and dividend per Attractive pure-play share growth through Fiscal 2027 total return supported • 100% of earnings from fully regulated, leading natural gas delivery
Slide 4: Safety Driven, Organic Growth Strategy
Safety Driven, Organic Growth Strategy Constructive Regulatory Mechanisms Support Efficient Conversion of Safety and Reliability Investments into Financial Results ~ $15 billion in capital investment Constructive rate mechanisms 6% - 8% Consolidated EPS through 2027; >85% allocated to that reduce re
Slide 5: Constructive Regulation Focused on Safety and Reliability
Constructive Regulation Focused on Safety and Reliability ~90% of Annual Capital Spend Begins to Earn Within Six Months Regulatory Mechanisms Recovery Method Service Territory Detail CapEx Deferral/ Rate Base 1 Annual General 2023E Jurisdiction Infrastructure Forward- Meters (000s) % of Filing Case
Slide 6: Constructive Regulation Focused on Safety and Reliability
Constructive Regulation Focused on Safety and Reliability Ongoing Modernization Supported By Efficient Recovery Mechanisms Constructive Regulation Supports Constructive Regulation Provides • Pipe replacement via risk models and • Reduced Regulatory Lag • Annual mechanisms / Infrastructure mechanisms
Slide 7: Leading Natural Gas Delivery Platform
Leading Natural Gas Delivery Platform Diversified LDC Platform in Eight States • Largest pure-play natural gas LDC with over 3 million customers • Largest Natural Gas Distributor in Texas with ~ 2.1 million customers • ~73,000 miles of distribution and transmission mains • Connected to 38 different
Slide 8: Leading Natural Gas Delivery Platform
Leading Natural Gas Delivery Platform 97% of Rate Base in states that offer policy support for investment in natural gas infrastructure Passed (Atmos Passed Proposed Legislation Jurisdictions) As of August 7, 2023 Page 8
Slide 9: Modernizing Our Distribution System
Modernizing Our Distribution System ~$11 Billion Capital Plan Through 2027; > 85% Focused On Safety and Reliability 1,2 Distribution Miles Replaced • Replace 4,000 – 5,000 miles of 1000 distribution system pipe • 6% - 8% of total system 500 • Replace 120,000-170,000 steel service lines 0 • 15% - 20%
Slide 10: Leading Natural Gas Delivery Platform
Leading Natural Gas Delivery Platform APT is Favorably Positioned Intrastate Pipeline Spans Texas Shale Gas Supply Basins • Regulated by the Railroad Commission of Texas • Established to provide gas supply service to Mid-Tex and other LDCs • 100% of margin derived from tariff-based rates • ~5,700 mi
Slide 11: Modernizing our Transmission System
Modernizing our Transmission System ~$4 Billion Capital Plan for APT Through 2027 Transmission Miles Replaced1,2 • Pipeline Integrity Management 175 • Upgrading lines with pigging facilities 150 • Replacing valves, fittings, and pipe to 125 allow In-Line Inspection tools to 100 travel through pipeli
Slide 12: Modernizing our Transmission System
Modernizing our Transmission System 2017-2027 Significant APT Capital Projects 2017-2027 APT STORA W (LOOP) GE Integrity, WELLS LAPAN Fortification & WORSHAM- STORA GE WELLS WD PH. STEED Growth Projects STORAGE DELIVERY NEW YORK 1 STORAGE WELLS D17(LOO P) PH.1 MILLSAP LAKE DALLAS LINE S2 PH. 1 WA(LO
Slide 13: Modernizing our Transmission System
Modernizing our Transmission System APT - Bethel Storage Projects • Development of a third cavern at Bethel provides storage capacity to meet growth. • Third cavern placed into service in late 2022; adds 7 Bcf of new working gas capacity. As of May 3, 2023 Page 13
Slide 14: Sustainability Integrated Into Strategy
Sustainability Integrated Into Strategy Page 14
Slide 15: Sustainability Integrated Into Strategy
Sustainability Integrated Into Strategy Formal Board of Director Oversight Over Sustainability Board of Directors Corporate Responsibility, Sustainability, & Safety Committee Strong Corporate Governance ✓ Diverse Board & Senior Leadership ✓ Accountable to Shareholders Providing Value to Customers Sa
Slide 16: Environmental Strategy Overview
Sustainability Integrated Into Strategy Environmental Strategy Overview • Atmos Energy's comprehensive environmental strategy is focused on reducing our Scope 1, 2, and 3 emissions and environmental impact from our operations in five key focus areas: Operations, Fleet, Facilities, Gas Supply, and Cu
Slide 17: Environment Strategy - Operations
Sustainability Integrated Into Strategy Environment Strategy - Operations Pipeline Systems Venting Pneumatic Devices Storage & Compression • Goal to reduce methane • Incorporate recompression • Utilize bleed-free or low • Gas Cloud Imaging emissions by 50% by 2035 and enclosed combustion bleed devic
Slide 18: Environment Strategy - Fleet, Facilities, Gas Supply, and Customers
Sustainability Integrated Into Strategy Environment Strategy - Fleet, Facilities, Gas Supply, and Customers Fleet Facilities Gas Supply Customers • Transitioning fleet to gas- • 17 LEED certified facilities • Currently selling ~ 5 Bcf of • Customer efficiency tariffs hybrid or CNG vehicles (6 Gold,
Slide 19: Supporting research and development initiatives to further reduce emissions
Sustainability Integrated Into Strategy Supporting research and development initiatives to further reduce emissions The ONE Future Coalition is a group of more than 50 natural gas companies working together to voluntarily reduce methane emissions across the Natural Gas value chain to 1% (or less) by
Slide 20: Supporting RNG Projects Through Transportation Contracts
Sustainability Integrated Into Strategy Supporting RNG Projects Through Transportation Contracts Helps Customers Achieve Their Environmental Objectives Atmos Energy transports ~8 Bcf of RNG annually 8.0 7.5 6.5 6.0 Annual Bcf 4.8 4.4 3.4 CO VA TN 2017 2018 2019 2020 2021 2022 2023E MS LA • Added ~1.
Slide 21: Natural Gas Combined With Renewable Energy Affordably Reduce Carbon Footprint
Sustainability Integrated Into Strategy Natural Gas Combined With Renewable Energy Affordably Reduce Customers’ Carbon Footprint Zero Net Energy (ZNE) Homes Atmos Energy is Partnering With Local Habitat For Humanity Chapters to Build ZNE Homes CO VA KS produce as much or more ZNE Homes can KY energy
Slide 22: Residential use of natural gas remains competitive
Sustainability Integrated Into Strategy Residential use of natural gas remains competitive Average Monthly Customer Bill Key Assumptions $100 • Normal weather and $91 consumption $90 • ~$15 billion of CAPEX $80 spending through 2027 $72 $68 • Commodity pricing $70 • FY23: $4.00 to $5.00 $60 • FY24 -
Slide 23: Natural Gas Price Advantage Over Electricity
Sustainability Integrated Into Strategy TMOS . . energy. Natural Gas Price Advantage Over Electricity Electricity’ vs Natural Gas2 - kWh Equivalent 14.39 14.55 14.07 13.86 13.78 12.49 12.30 11.92 6.35 5.97 6.19 th i : Colorado Kansas Kentucky Louisiana Mississippi Tennessee Texas Virginia mElectric
Slide 24: Consolidated Residential Bill
Consolidated Residential Bill Anticipated To Remain Competitive Water2 Cable & Internet3 $111 $95 CO KS KY TN LA Natural Gas1 $72 Electric4 Mobile Phone5 $154 $144 1. FY2023 Atmos Energy enterprise-wide average monthly residential bill 2. Statista (https://www.statista.com/) December 2022 3. Doxo; 2
Slide 25: Financial Performance and Outlook
Financial Performance and Outlook Page 25
Slide 26: Q3 Fiscal 2023 Financial Performance
Q3 Fiscal 2023 Financial Performance Fiscal 2023 Highlights • Financial Performance • YTD Diluted EPS of $5.33 • $2.1 billion in capital spending; 86% allocated to safety and reliability spending • Reaffirmed fiscal 2023 EPS guidance range of $6.00 to $6.10 • 8.8% increase in fiscal 2023 annual divi
Slide 27: Consolidated Financial Highlights
Q3 Fiscal 2023 Financial Performance Consolidated Financial Highlights Three Months Ended Nine Months Ended June 30 June 30 Segment Net Income 2023 2022 2023 2022 ($millions, except EPS) Distribution $ 60 $ 58 $ 542 $ 506 Pipeline & Storage 78 71 225 197 Net Income $ 138 $ 129 $ 767 $ 703 Diluted EP
Slide 28: Segment Operating Income Highlights
Q3 Fiscal 2023 Financial Performance Segment Operating Income Highlights Three Months Ended June 30 2023 2022 Change ($millions) Distribution $ 71.7 $ 66.1 $ 5.6 Pipeline & Storage 97.6 88.5 9.1 Operating Income $ 169.3 $ 154.6 $ 14.7 Distribution Key Drivers Pipeline & Storage Key Drivers • $29.1MM
Slide 29: Segment Operating Income Highlights
Q3 Fiscal 2023 Financial Performance Segment Operating Income Highlights Nine Months Ended June 30 2023 2022 Change ($millions) Distribution $ 638.8 $ 567.9 $ 70.9 Pipeline & Storage 274.3 247.7 26.6 Operating Income $ 913.1 $ 815.6 $ 97.5 Distribution Key Drivers Pipeline & Storage Key Drivers • $1
Slide 30: Capital Spending Highlights
Q3 Fiscal 2023 Financial Performance Capital Spending Highlights $millions Fiscal 2023 YTD CapEx Repair and replace transmission and $ 935 distribution pipelines 207 Fortifications 1% 203 Pipeline integrity management projects 13% 197 Service line replacement 86% Install & replace measurement & regu
Slide 31: Regulatory Highlights
FY 2023 Financial Performance Regulatory Highlights Approved Annualized Key Rate Activity Operating Income Increases Through August 24, 2023 • $263.1MM Completed $450 • $ 84.9MM – APT GRIP • $ 81.4MM – Mid-Tex Cities RRM $400 $264.8 • $ 18.8MM – Mid-Tex GRIPs • $ 17.3MM – Mid-Tex DARR $350 • $ 14.5M
Slide 32: Financing Highlights
Fiscal 2023 Financial Performance Financing Highlights • $800 million of long-term debt financing issued YTD • $500 million 5.75% 30-year senior notes issued in October 20221 • $300 million 5.45% 10-year senior notes issued in October 2022 • Equity needs satisfied through our ATM program • $485.7 mi
Slide 33: Financial Outlook
Financial Outlook FY 2023 Five Year Plan Key Themes • Plan drives 6.0% - 8.0% annual EPS growth through FY 2027 • FY 2023 Guidance of $6.00 - $6.10; Midpoint of range implies 8.0% Earnings and growth Dividends Per • FY 2027 guidance of $7.65 - $8.05 Share • $2.96 Indicated Dividend for FY 2023; 8.8%
Slide 34: Fiscal 2023E Guidance
Financial Outlook Fiscal 2023E Guidance ($millions, except EPS) FY 2022 FY 2023E1 Distribution $ 522 $ 570 - 590 Pipeline & Storage 252 285 - 295 Total Net Income $ 774 $ 855 - 885 Average Diluted Shares 138.1 144 - 146 Diluted EPS2 $ 5.60 $ 6.00 - 6.10 Capital Spending $ 2,444 $ ~2,800 1. Changes i
Slide 35: Fiscal 2023E Guidance: Selected Expenses
Financial Outlook Fiscal 2023E Guidance Selected Expenses FY 2022 FY 2023E1 ($millions) O&M $ 710 $ 760 - 780 D&A $ 536 $ 600 - 610 Interest $ 103 $ 123 - 129 Income Tax $ 78 $ 105 - 120 Effective Tax Rate 9.1% 11% - 13%2 1. Changes in events or other circumstances that the Company cannot currently
Slide 36: Capital Spending Focused on System Modernization and Growth
Financial Outlook Capital Spending Focused on System Modernization and Growth Consolidated 2023E Capital Expenditures of ~$2.7 billion $4,000 $3,500 $3,000 $2,500 $ millions $2,000 $1,500 $1,000 $500 $0 FY2023E FY2024E FY2025E FY2026E FY2027E FY2020 FY2021 FY2022 FY2014 FY2015 FY2016 FY2017 FY2018 F
Slide 37: Capital Spending Drives Rate Base Growth
Financial Outlook Capital Spending Drives Rate Base Growth Enhancing System Safety and Reliability1 $30,000 $24.0B- $26.0B $25,000 $20,000 $15.0B- $17.0B $ millions $15,000 $14.1B $10,000 $4.8B $5,000 $0 FY2023E FY2024E FY2025E FY2026E FY2027E FY2014 FY2016 FY2019 FY2021 FY2015 FY2017 FY2018 FY2020
Slide 38: Strong Financial Foundation Supports Capital Spending Program
Q3 Fiscal 2023 Financial Performance Strong Financial Foundation Supports Capital Spending Program Capitalization and Liquidity Profile Liquidity Profile as of Total Capitalization1 June 30, 2023 100% ($millions) 1% $3,500 $56 38% $3,000 75% 45% $589 $2,500 $100 $2,000 $900 $3.1 billion 50% Availabl
Slide 39: Manageable Debt Maturity Schedule
Q3 Fiscal 2023 Financial Performance Manageable Debt Maturity Schedule Supports Capital Spending Program Weighted Average Maturity ~18.3 Years $1,100 4.168% $950 3.73% $750 4.125% $600 $600 1.5% 4.30% $500 $500 $500 3.00% 2.625% 4.15% $400 5.50% $300 5.45% $200 $150 5.95% 6.75% $10 6.67% 2025 2029 2
Slide 40: Strong Investment Grade Ratings Support Affordable Customer Bills
Q3 Fiscal 2023 Financial Performance Strong Investment Grade Ratings Support Affordable Customer Bills Strong Investment Weighted Average Cost of Debt 1 Grade Credit Ratings $7,000 5.0 Standard & 4.7 Moody’s Poor’s 4.5 4.2 $6,000 4.0 Senior Unsecured A1 A- 4.0 3.8 4.0 Commercial Paper P-1 A-2 $5,000
Slide 41: Sustained Dividend Increases
Financial Outlook Sustainable Financial Performance Supports Sustained Dividend Increases 39 Consecutive Years* of Dividend Increases $3.00 $2.96E $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 • Indicated dividend increase of 8.8% for Fiscal 2023 *Fiscal year Note: Amounts are adjusted for mergers and acquisi
Slide 42: Regulatory Developments Appendix
Regulatory Developments Appendix Page 42
Slide 43: Regulatory Mechanisms To Support Recovery
Regulatory Mechanisms To Support Recovery Annual Revenue and Lag Revenue Stability and Lag Mechanisms Mechanisms Pension and Annual Rate Bad Debt in Jurisdiction Infrastructure Retirement Cost WNA Stabilization GCA Trackers Colorado x x Kansas x x x x Kentucky x x x Tennessee x x x x x Virginia x x
Slide 44: Key Regulatory Filings – Fiscal 2023E
Key Regulatory Filings – Fiscal 2023E Rate Filing Planned Timing Q1 Q2 Q3 Q4 October – December January – March April – June July – September Mid-Tex and WTX Cities – Implemented RRM Atmos Pipeline – Texas (APT) – Implemented Mississippi – Filed (SRF) in June 2023; new filing of $88.3MM; $88.7MM net
Slide 45: Regulatory Summary
Regulatory Summary Effective Date of Authorized Requested Authorized Requested Authorized Requested Authorized Requested Requested Date of Last Rate Operating Operating Rate Base Debt/ Meters Jurisdiction (1) Rate Base Rate of Rate of Return on Return on Debt/Equity Last Rate Filing Incom e Incom e
Slide 46: Regulatory Summary (continued)
Regulatory Summary (continued) Effective Date of Authorized Requested Authorized Requested Authorized Requested Authorized Requested Requested Date of Last Rate Operating Operating Rate Base Debt/ Meters Jurisdiction (1) Rate Base Rate of Rate of Return on Return on Debt/Equity Last Rate Filing Inco
Slide 47: Atmos Pipeline - Texas
Atmos Pipeline - Texas • Atmos Pipeline: Filed 2023 Statement of Intent (SOI) on May 19, 2023 • Requested an increase in annual operating income of $107.4 million • Requested ROE: 13.5%; ROR: 9.73% • Requested capital structure: 40% debt / 60% equity • Requested rate base: $4.3 billion • Test year e
Slide 48: Colorado - Kansas Division
Colorado - Kansas Division • Kansas: Implemented 2022 General Rate Case on May 9, 2023 • Authorized an increase in annual operating income of $2.0 million • Authorized rate base: $295.1 million • Test year ended March 31, 2022 • Kansas: Implemented System Integrity Program (SIP) on April 1, 2023 • A
Slide 49: Colorado - Kansas Division
Colorado - Kansas Division • Colorado: Implemented 2022 General Rate Case on May 14, 2023 • Authorized an increase in annual operating income of $0.9 million • Authorized ROE: 9.3% to 9.6%; ROR: 7.00% • Authorized capital structure: 42% to 45% debt / 55% to 58% equity • Authorized rate base: $229.6
Slide 50: Kentucky/Mid-States Division
Kentucky/Mid-States Division • Kentucky: Implemented Annual PRP on October 2, 2022 • Authorized an annual operating income increase of $1.6 million • Authorized ROE: 9.45%; ROR: 6.94% • Authorized capital structure: 45% debt / 55% equity • Authorized rate base: $14.4 million • Virginia: Implemented
Slide 51: Kentucky/Mid-States Division
Kentucky/Mid-States Division • Virginia: Filed SAVE Infrastructure Program on June 1, 2023 • Requested an annual operating income increase of $0.7 million • Requested ROE: 9.20%; ROR: 7.43% • Requested capital structure: 42% debt / 58% equity • Requested rate base: $16.4 million • Virginia: Filed Ge
Slide 52: Louisiana Division
Louisiana Division • Louisiana: Implemented Annual Rate Stabilization Clause (RSC) on July 1, 2023 • Authorized an increase in annual operating income of $14.5 million • Authorized ROR: 7.30% • Authorized rate base: $1.1 billion • Test year ending December 31, 2022 As of August 3, 2023 Page 52
Slide 53: Mid-Tex Division
Mid-Tex Division • Mid-Tex Environs: Implemented 2022 GRIP on June 1, 2023 • Authorized an increase in annual operating income of $6.0 million • Authorized ROE: 9.80%; ROR: 7.97% • Authorized capital structure: 40% debt / 60% equity • Authorized rate base: $5.9 billion • Test year ending December 31
Slide 54: Mid-Tex Division
Mid-Tex Division • Mid-Tex Cities: Filed Rate Review Mechanism (RRM) on March 31, 2023 • Requested an increase in annual operating income of $113.8 million • Requested ROE: 9.80%; ROR: 7.44% • Requested capital structure: 41% debt / 59% equity • Requested rate base: $6.1 billion • Test year ending D
Slide 55: Mid-Tex Division
Mid-Tex Division • Mid-Tex Cities: Implemented Rate Review Mechanism (RRM) on October 1, 2022 • Authorized an increase in annual operating income of $81.4 million • Authorized ROE: 9.80%; ROR: 7.28% • Authorized capital structure: 42% debt / 58% equity • Authorized rate base: $5.2 billion • Test yea
Slide 56: Mississippi Division
Mississippi Division • Mississippi: Filed Annual System Integrity Rider (SIR) on March 1, 2023 • Requested an increase in annual operating income of $11.0 million • Requested ROR: 7.82% • Requested rate base: $472.7 million • Forward-looking components - PP&E, accumulated depreciation, accumulated d
Slide 57: Mississippi Division
Mississippi Division • Mississippi: Implemented Annual System Integrity Rider (SIR) on November 1, 2022 • Authorized an increase in annual operating income of $8.6 million • Authorized ROR: 7.53% • Authorized rate base: $390.3 million • Forward-looking components - PP&E, accumulated depreciation, ac
Slide 58: West Texas Division
West Texas Division • West Texas Environs: Implemented 2022 GRIP on June 1, 2023 • Authorized an increase in annual operating income of $1.3 million • Authorized ROE: 9.80%; ROR: 7.97% • Authorized capital structure: 40% debt / 60% equity • Authorized rate base: $958.2 million • Test year ending Dec
Slide 59: West Texas Division
West Texas Division • West Texas Cities: Filed Rate Review Mechanism (RRM) on March 31, 2023 • Requested an increase in annual operating income of $10.1 million • Requested ROE: 9.80%; ROR: 7.44% • Requested capital structure: 41% debt / 59% equity • Requested rate base: $965.9 million • Test year e
Slide 60: West Texas Division
West Texas Division • West Texas Cities: Implemented Rate Review Mechanism (RRM) on October 1, 2022 • Authorized an increase in annual operating income of $7.3 million • Authorized ROE: 9.80%; ROR: 7.28% • Authorized capital structure: 42% debt / 58% equity • Authorized rate base: $855.3 million • T
Slide 61: Jurisdictional Summaries
Jurisdictional Summaries Page 61
Slide 62: Mid-Tex Division - Overview
Mid-Tex Division - Overview Key Regulatory Features: Mechanism Regulator Cities % Cust. % ROE Equity • Each municipality has original jurisdiction Annual Rate Review • Railroad Commission of Texas (RRC) has appellate ACSC Cities 72% 72% 9.8% 58% Cap jurisdiction and original jurisdiction over enviro
Slide 63: West Texas Division - Overview
West Texas Division - Overview Key Regulatory Features: Mechanism Regulator Cities % Cust. % ROE Equity • Each municipality has original jurisdiction RRM Cities Cities 85% 45% 9.8% 58% Cap • Railroad Commission of Texas (RRC) has appellate GRIP jurisdiction and original jurisdiction over environs AL
Slide 64: Louisiana Division - Overview
Louisiana Division - Overview Key Regulatory Features: Regulator ROR Equity • Public Service Commission – 5 elected LPSC 7.3% Actual commissioners, serve staggered 6-year terms • Rates updated annually through the Rate Stabilization Clause (RSC), which contains a safety and reliability mechanism (SI
Slide 65: Mississippi Division - Overview
Mississippi Division - Overview Key Regulatory Features: Regulator ROR Equity • Public Service Commission – 3 elected PSC 7.53% Unspecified commissioners with 4-year terms • Rates updated annually through Stable Rate Filing (SRF) for capital and expenses; forward-looking capital and associated costs
Slide 66: Kentucky/Mid-States Division - Overview
Kentucky/Mid-States Division - Overview Key Regulatory Features: Jurisdiction Regulator ROE Equity • KY: 3 appointed commissioners, 4-year staggered Kentucky PSC 9.23% Actual terms • Traditional ratemaking, on a forward-looking Tennessee TPUC 9.8% Actual basis, for the total cost of service Virginia
Slide 67: Colorado-Kansas Division - Overview
Colorado-Kansas Division - Overview Key Regulatory Features: Jurisdiction Regulator ROE Equity • CO: 3 appointed commissioners, 4-year staggered Kansas KCC Unspecified Unspecified terms Colorado CPUC 9.3% – 9.6% 55% – 58% • Forward-looking system infrastructure rider (SSIR) • KS: 3 appointed commiss
Slide 68: Atmos Pipeline – Texas - Overview
Atmos Pipeline – Texas - Overview Key Regulatory Features: • Railroad Commission of Texas (RRC): 3 elected commissioners, with six-year staggered terms • Rates updated annually through GRIP (Gas Reliability Infrastructure Program) • Approved change in net utility plant investment incurred in the pri
Slide 69: Forward Looking Statements
Forward Looking Statements The matters discussed or incorporated by reference in this presentation may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of