Atmos Energy Corporation · NYSE:ATO
Atmos Energy — Q4 2021 Earnings Presentation
37 slides from Atmos Energy's earnings presentation, Nov 12, 2021
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. November 2021
Slide 2: Fiscal 2021 Review
Fiscal 2021 Review As of November 10, 2021 Page 2
Slide 3: FY 2021 Financial Performance: Fiscal 2021 Highlights
FY 2021 Financial Performance Fiscal 2021 Highlights • Financial Performance • YTD Diluted EPS of $5.12; 19th consecutive year of EPS growth • $2.0 billion in capital spending; 88% allocated to safety and reliability spending • 8.7% increase in fiscal 2021 annual dividend to $2.50 per diluted share
Slide 4: Consolidated Financial Highlights
FY 2021 Financial Performance Consolidated Financial Highlights Three Months Ended Twelve Months Ended September 30 September 30 Segment Net Income 2021 2020 2021 2020 ($millions, except EPS) Distribution $ 7 $ 20 $ 446 $ 395 Pipeline & Storage 42 45 220 206 Net Income $ 49 $ 65 $ 666 $ 601 Nonrecur
Slide 5: Segment Operating Income Highlights (Twelve Months)
FY 2021 Financial Performance Segment Operating Income Highlights Twelve Months Ended September 30 2021 2020 Change ($millions) Distribution $ 618.5 $ 528.2 $ 90.3 Pipeline & Storage 286.5 295.9 (9.4) Operating Income $ 905.0 $ 824.1 $ 80.9 Distribution Key Drivers Pipeline & Storage Key Drivers • $
Slide 6: Segment Operating Income Highlights (Three Months)
FY 2021 Financial Performance Segment Operating Income Highlights Three Months Ended September 30 2021 2020 Change ($millions) Distribution $ 37.6 $ 31.9 $ 5.7 Pipeline & Storage 53.4 68.9 (15.5) Operating Income $ 91.0 $ 100.8 $ (9.8) Distribution Key Drivers Pipeline & Storage Key Drivers • $22.9M
Slide 7: Capital Spending Highlights
FY 2021 Financial Performance Capital Spending Highlights $millions Fiscal 2021 YTD CapEx Repair and replace transmission and distribution $ 1,051 pipelines 240 Service line replacement 1% 187 Pipeline integrity management projects 11% Install & replace measurement & regulating 145 equipment 88% 66
Slide 8: FY 2021 System Modernization
FY 2021 System Modernization $2.0 Billion Capital spent in 2021; 88% Focused On Safety and Reliability Distribution & Transmission Miles Replaced1,2 • Replaced ~1,100 miles of distribution 1200 and transmission pipe 900 • ~1.4% of total system 600 • On track to eliminate all cast iron in CY2021 300
Slide 9: Financing Highlights
FY 2021 Financial Performance Financing Highlights • $2.8 billion of long-term debt financing issued • $2.2 billion 2-year senior notes issued in March 2021 to finance Winter Storm Uri costs • $1.1 billion 0.625% • $1.1 billion LIBOR + 0.38% • $600 million 1.50% 10-year senior notes issued in Octobe
Slide 10: Manageable Debt Maturity Schedule Supports Capital Spending Program
Financial Outlook Manageable Debt Maturity Schedule Supports Capital Spending Program Weighted Average Maturity ~19.2 Years1 $2,200 2 0.56% $950 3.73% $750 4.125% $600 $600 $600 $500 1.5% $500 4.30% 2.85% 3.00% $400 4.15% $300 5.50% $200 2.625% $200 $150 2.29% 5.95% 6.75% $10 6.67% 2022 2023 2024 20
Slide 11: Strong Investment Grade Ratings Support Affordable Customer Bills
Financial Outlook Strong Investment Grade Ratings Support Affordable Customer Bills Strong Investment Declining Weighted Average Cost of Debt1 Grade Credit Ratings $6,000 6.0 Standard & Moody’s 5.2 Poor’s $5,000 4.7 5.0 Senior A1 A- 4.2 Unsecured 4.0 $4,000 3.9 4.0 Commercial P-1 A-2 Paper Net Long
Slide 12: Strong Financial Foundation Supports Capital Spending Program
Financial Outlook Strong Financial Foundation Supports Capital Spending Program Capitalization and Liquidity Profile Total Capitalization1 Liquidity Profile as of September 30, 2021 100% $3,000 $302 $2,500 $117 40% $100 75% 48% $2,000 $900 $2.9 billion Available $1,500 50% Liquidity as of 9/30/21 $1
Slide 13: Fiscal 2022-2026 Financial Outlook
Fiscal 2022-2026 Financial Outlook As of November 10, 2021 Page 13
Slide 14: Leading Natural Gas Delivery Platform
Leading Natural Gas Delivery Platform Eight-state distribution territory Business Mix Intrastate pipeline system ~32% Pipeline & Storage ~68% Distribution 2022 Estimated Net Income Favorably positioned pipeline spans Diversified LDC platform in 8 states Texas shale gas supply basins • Largest pure-p
Slide 15: Safety Driven, Organic Growth Strategy
Safety Driven, Organic Growth Strategy Constructive Regulatory Mechanisms Support Efficient Conversion of Safety and Reliability Investments into Financial Results ~ $13 - $14 billion in capital Constructive rate mechanisms 6% - 8% Consolidated EPS investment through 2026; >80% that reduce regulator
Slide 16: Modernizing Our Distribution System
Modernizing Our Distribution System ~$10 Billion Capital Plan Through 2026; > 85% Focused On Safety and Reliability 1,2 Distribution Miles Replaced 1000 • Replace 4,000 – 5,000 miles of distribution system pipe 750 • 6% - 8% of total system 500 • Replace 100,000-150,000 steel service 250 lines 0 • 1
Slide 17: Modernizing our Transmission System
Modernizing our Transmission System ~$4 Billion Capital Plan Through 2026 Transmission Miles Replaced1,2 • Pipeline Integrity Management 175 • Two phase Line X replacement 150 project near Abilene 125 • Upgrading lines with pigging facilities 100 • Replacing valves, fittings, and pipe to 75 allow In
Slide 18: 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 Base1 Annual General 2022E Jurisdiction Infrastructure Forward- Meters (000s) % of Filing Case (
Slide 19: FY 2022 Five Year Plan Key Themes
Financial Outlook FY 2022 Five Year Plan Key Themes • Plan drives 6.0% - 8.0% annual EPS growth through FY 2026 • FY 2022 Guidance of $5.40 - $5.60; Midpoint of range implies 7.4% Earnings and growth Dividends Per • FY 2026 guidance of $7.00 - $7.40 Share • $2.72 Indicated Dividend for FY 2022; 8.8%
Slide 20: Fiscal 2022E Guidance
Financial Outlook Fiscal 2022E Guidance ($millions, except EPS) FY 2021 FY 2022E1 Distribution $ 446 $ 500 - 520 Pipeline & Storage 220 240 - 250 Total Net Income $ 666 $ 740 - 770 Average Diluted Shares 129.8 136.0 - 138.5 Diluted EPS2 $ 5.12 $ 5.40 - $ 5.60 Capital Spending $ 1,970 $ 2,400 - $ 2,5
Slide 21: Fiscal 2022E Guidance: Selected Expenses
Financial Outlook Fiscal 2022E Guidance Selected Expenses FY 2021 FY 2022E1 ($millions) O&M $ 679 $ 690 - 710 D&A $ 478 $ 530 - 540 Interest $ 84 $ 100 - 105 Income Tax $ 154 $ 73 - 83 Effective Tax Rate 18.8% 9% - 11%2 1. Changes in events or other circumstances that the Company cannot currently an
Slide 22: Capital Spending Focused on System Modernization and Growth
Financial Outlook Capital Spending Focused on System Modernization and Growth Consolidated 2022E Capital Expenditures of $2.4 billion - $2.5 billion $3,500 $3,000 $2,500 $2,000 $ millions $1,500 $1,000 $500 $0 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022E FY2023E FY2024E FY2
Slide 23: Capital Spending Drives Rate Base Growth
Financial Outlook Capital Spending Drives Rate Base Growth Enhancing System Safety and Reliability1 $25,000 $21.0B- $23.0B $20,000 $15,000 $ millions $12.1B $10,000 $5,000 $4.3B $0 FY2022E FY2023E FY2024E FY2025E FY2026E FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 Distribution Pip
Slide 24: Sustainable Financial Performance Supports Sustained Dividend Increases
Financial Outlook Sustainable Financial Performance Supports Sustained Dividend Increases 38 Consecutive Years of Dividend Increases $2.80 $2.72E $2.30 $1.80 $1.30 $0.80 $0.30 -$0.20 • Indicated dividend increase of 8.8% for Fiscal 2022 Note: Amounts are adjusted for mergers and acquisitions. As of
Slide 25: Sustainability Integrated Into Strategy
Sustainability Integrated Into Strategy Residential use of natural gas remains affordable Average Monthly Customer Bill1 Affordability • FY 21 bill ~3.0x less $80 $75 expensive than average electric bill2 $70 • Our bill represents ~1% of $58 household income in our $60 $53 jurisdictions3 $50 $40 202
Slide 26: Appendix
Appendix As of November 10, 2021 Page 26
Slide 27: Regulatory Highlights
FY 2022 Financial Performance Regulatory Highlights Approved Annualized Key Rate Activity Operating Income Increases1,2 Through November 10, 2021 • $3.1MM Completed $200 • $ 8.4MM – Mississippi SIR • $ 0.3MM – Virginia SAVE • $ (5.6)MM – Mississippi SRF $150 • $21.9MM Completed; not implemented • $
Slide 28: Regulatory Mechanisms To Support Recovery
Regulatory Mechanisms To Support Recovery Annual Revenue and Lag Revenue Stability and Lag Other Mechanisms Mechanisms Pension and Recovery of Annual Rate Bad Debt Jurisdiction Infrastructure Retirement Cost WNA Certain Stabilization in GCA Trackers COVID-19 Costs Colorado x x Kansas x x x x x Kentu
Slide 29: Key Regulatory Filings – Fiscal 2022E
Key Regulatory Filings – Fiscal 2022E Rate Filing Planned Timing Q1 Q2 Q3 Q4 October – December January – March April – June July – September Mid-Tex and WTX Cities – Completed Mid-Tex Dallas – Anticipate filing Mid-Tex and WTX Cities – Anticipate Mississippi – Anticipate Stable Rate RRM filing of $
Slide 30: Regulatory Summary
Regulatory Summary Authorized Requested Authorized Effective Date of Last Requested Authorized Requested Authorized Requested Requested Operating Operating Rate Base Debt/ Meters Jurisdiction Date of Last Rate Filing (1) Rate Base Rate of Rate of Return on Return on Debt/Equity Income Income $millio
Slide 31: Regulatory Summary (continued)
Regulatory Summary (continued) Authorized Requested Authorized Effective Date of Last Requested Authorized Requested Authorized Requested Requested Operating Operating Rate Base Debt/ Meters Jurisdiction Date of Last Rate Filing (1) Rate Base Rate of Rate of Return on Return on Debt/Equity Income In
Slide 32: Colorado - Kansas Division
Colorado - Kansas Division • Kansas: Filed Gas Safety Reliability Surcharge filing (GSRS) on November 1, 2021 • Requested an increase in annual operating income of $1.8 million • Requested ROE: 9.10%; ROR: 7.03% • Requested capital structure: 44% debt / 56% equity • Requested rate base: $35.9 millio
Slide 33: Kentucky/Mid-States Division
Kentucky/Mid-States Division • Kentucky: Filed Annual Pipe Replacement Program (PRP) on July 30, 2021 • Requested an annual operating income increase of $3.5 million • Requested ROE: 10.35%; ROR: 7.66% • Requested capital structure: 43% debt / 57% equity • Requested rate base: $67.9 million • Filing
Slide 34: Mid-Tex Division
Mid-Tex Division • Mid-Tex Cities: Approved 2020 Annual Rate Review Mechanism (RRM) effective December 1, 2021 • Approved an increase in annual operating income of $55.5 million; $21.7 million net of excess deferred income tax amortization • Approved ROE of 9.80%; ROR of 7.36% • Approved capital str
Slide 35: Mississippi Division
Mississippi Division • Mississippi: Implemented Annual Stable Rate Filing (SRF) on November 1, 2021 • Authorized a decrease in annual operating income of ($1.3) million; ($5.6) million net of excess deferred income tax amortization • Authorized ROR: 7.81% • Authorized rate base: $473.9 million • For
Slide 36: West Texas Division
West Texas Division • West Texas Cities: Approved 2020 Annual Rate Review Mechanism (RRM) effective December 1, 2021 • Approved annual operating income increase of $3.5 million; $0.2 million net of excess deferred income tax amortization • Requested ROE: 9.80%; ROR: 7.36% • Requested capital structu
Slide 37: 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