Atmos Energy Corporation · NYSE:ATO
Atmos Energy — Q4 2022 Earnings Presentation
39 slides from Atmos Energy's earnings presentation, Nov 10, 2022
Slide 1: Analyst Call to Review Fiscal 2022 Financial Results & Fiscal 2023-2027 Outlook
Analyst Call to Review Fiscal 2022 Financial Results & Fiscal 2023 – 2027 Outlook November 10, 2022 10:00 a.m. Eastern
Slide 2: Fiscal 2022 Review
aI MOS energy. Fiscal 2022 Review
Slide 3: Fiscal 2022 Highlights
Fiscal 2022 Financial Performance Fiscal 2022 Highlights • Financial Performance • YTD Diluted EPS of $5.60; 20th consecutive year of EPS growth • $2.4 billion in capital spending; 88% allocated to safety and reliability spending • 8.8% increase in fiscal 2022 annual dividend to $2.72 per diluted sh
Slide 4: Consolidated Financial Highlights
Fiscal 2022 Financial Performance Consolidated Financial Highlights Three Months Ended Twelve Months Ended September 30 September 30 Segment Net Income 2022 2021 2022 2021 ($millions, except EPS) Distribution $ 16 $ 7 $ 522 $ 446 Pipeline & Storage 56 42 252 220 Net Income $ 72 $ 49 $ 774 $ 666 Dilu
Slide 5: Segment Operating Income Highlights (Twelve Months)
Fiscal 2022 Financial Performance Segment Operating Income Highlights Twelve Months Ended 2022 2021 Change September 30 ($millions) Distribution $ 604.6 $ 618.5 $ (13.9) Pipeline & Storage 316.4 286.5 29.9 Operating Income $ 921.0 $ 905.0 $ 16.0 Distribution Key Drivers Pipeline & Storage Key Driver
Slide 6: Segment Operating Income Highlights (Three Months)
Fiscal 2022 Financial Performance Segment Operating Income Highlights Three Months Ended 2022 2021 Change September 30 ($millions) Distribution $ 36.7 $ 37.6 $ (0.9) Pipeline & Storage 68.7 53.4 15.3 Operating Income $ 105.4 $ 91.0 $ 14.4 Distribution Key Drivers Pipeline & Storage Key Drivers • $27
Slide 7: Capital Spending Highlights
Fiscal 2022 Financial Performance Capital Spending Highlights $millions Fiscal 2022 YTD CapEx Repair and replace transmission and $ 1,103 distribution pipelines 269 Pipeline integrity management projects 1% Install & replace measurement & regulating 256 equipment 11% 239 Service line replacement 88%
Slide 8: FY 2022 System Modernization
FY 2022 System Modernization $2.4 Billion Capital spent in 2022; 88% Focused On Safety and Reliability Distribution & Transmission Miles Replaced1,2 • Replaced ~900 miles of distribution and 1200 transmission pipe 900 • ~1.1% of total system 600 • Replaced ~24,500 steel service lines • ~3.5% reducti
Slide 9: Financing Highlights
Fiscal 2022 Financial Performance Financing Highlights • $800 million of long-term debt financing issued • $600 million 2.85% 30-year senior notes issued in October 2021 • $200 million 2.625% senior notes issued in January 2022 due September 2029 • Equity needs satisfied through our ATM program • $1
Slide 10: Strong Financial Foundation Supports Capital Spending Program
Fiscal 2022 Financial Performance Strong Financial Foundation Supports Capital Spending Program Capitalization and Liquidity Profile Total Capitalization1 Liquidity Profile as of 100% 1% September 30, 2022 $3,500 $52 $3,000 $777 75% 45% 48% $2,500 $3.1 billion $100 Available $2,000 $900 Liquidity 50
Slide 11: Manageable Debt Maturity Schedule
Fiscal 2022 Financial Performance Manageable Debt Maturity Schedule Supports Capital Spending Program Weighted Average Maturity ~18.9 Years1,2 3 $2,200 2.10% $1,100 4.168% $950 3.73% $750 4.125% $600 $600 $500 $500 1.5% $500 4.30% 3.00% 2.63% $400 4.15% $300 5.50% 5.45% $200 $150 5.95% 6.75% $10 6.6
Slide 12: Strong Investment Grade Ratings Support Affordable Customer Bills
Fiscal 2022 Financial Performance Strong Investment Grade Ratings Support Affordable Customer Bills Strong Investment Declining Weighted Average Cost of Debt1 Grade Credit Ratings $7,000 5.0 Standard & 4.7 Moody’s Poor’s 4.5 4.2 Senior Unsecured A1 A- $6,000 4.0 3.8 3.8 4.0 Commercial Paper P-1 A-2
Slide 13: Fiscal 2023-2027 Financial Outlook
Fiscal 2023-2027 Financial Outlook Page 13
Slide 14: 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 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 ~ $15 billion in capital investment Constructive rate mechanisms 6% - 8% Consolidated EPS through 2027; >85% allocated to that reduce re
Slide 16: 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 1000 • Replace 4,000 – 5,000 miles of distribution system pipe • 6% - 8% of total system 500 • Replace 120,000-170,000 steel service lines 0 • 15% - 20%
Slide 17: 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 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 2023E Jurisdiction Infrastructure Forward- Meters (000s) % of Filing Case (
Slide 19: Financial Outlook: Five Year Plan Key Themes
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 $5.90 - $6.10; Midpoint of range implies 7.1% Earnings and growth Dividends Per • FY 2027 guidance of $7.65 - $8.05 Share • $2.96 Indicated Dividend for FY 2023; 8.8%
Slide 20: Fiscal 2023E Guidance
Financial Outlook Fiscal 2023E Guidance ($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 $ 5.90 - 6.10 Capital Spending $ 2,444 $ ~2,700 1. Changes i
Slide 21: Fiscal 2023E Guidance: Selected Expenses
Financial Outlook Fiscal 2023E Guidance Selected Expenses FY 2022 FY 2023E1 ($millions) O&M $ 710 $ 740 - 760 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 a
Slide 22: 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 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 F
Slide 23: 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 $ millions $15,000 $14.1B $10,000 $4.8B $5,000 $0 FY2023E FY2024E FY2025E FY2026E FY2027E FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 Distribu
Slide 24: Sustainable Financial Performance Supports 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 25: 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 $79 $80 spending through 2027 $68 • Commodity pricing $70 • FY23: $5.50 to $6.50 $60 • FY24 -
Slide 26: Natural Gas Price Advantage Over Electricity
Sustainability Integrated Into Strategy Natural Gas Price Advantage Over Electricity Electricity1 vs Natural Gas2 - kWh Equivalent 15 13.94 13.59 12.87 12.82 12.45 12.31 11.98 11.95 10 5.77 5.11 5.35 5 3.96 4.18 3.98 3.67 3.40 0 Colorado Kansas Kentucky Louisiana Mississippi Tennessee Texas Virginia
Slide 27: Residential Natural Gas Bills Remain the Lowest Monthly Utility Bill
Sustainability Integrated Into Strategy Residential Natural Gas Bills Remain the Lowest Monthly Utility Bill Water2 Cable & Internet3 $99 $116 CO KS KY TN LA Natural Gas1 $68 Electric4 Mobile Phone5 $147 $104 1. FY2022 Atmos Energy enterprise-wide average monthly residential bill 2. Bureau of Labor
Slide 28: Regulatory Information
Regulatory Information Page 28
Slide 29: Regulatory Highlights
FY 2022 Financial Performance Regulatory Highlights Approved Annualized Key Rate Activity Operating Income Increases1,2,3 Through November 9, 2022 • $111.9MM Completed $200 • $ 81.4MM – Mid-Tex Cities RRM • $ 12.2MM – Mississippi SRF • $ 8.6MM – Mississippi SIR $150 • $ 7.3MM – West TX Cities RRM •
Slide 30: 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 31: 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 – Mid-Tex Dallas – Anticipate filing Mid-Tex and WTX Cities – Anticipate Mississippi – Anticipate Stable Rate Implemented RRM filing of
Slide 32: 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 33: 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 34: Colorado - Kansas Division
Colorado - Kansas Division • Kansas: Filed General Rate Case on September 9, 2022 • Requested an increase in annual operating income of $8.0 million • Requested ROE: 10.95%; ROR: 8.18% • Requested capital structure: 39% debt / 61% equity • Requested rate base: $302.4 million • Colorado: Filed Genera
Slide 35: Kentucky/Mid-States Division
Kentucky/Mid-States Division • Kentucky: Implemented Annual PRP on October 2, 2022 • Authorized an annual operating income increase of $1.9 million • Authorized ROE: 10.95%; ROR: 7.75% • Authorized capital structure: 45% debt / 55% equity • Authorized rate base: $16.0 million • Subject to refund • V
Slide 36: 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 year
Slide 37: 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 38: West Texas Division
West Texas Division • West Texas Cities: Implemented Rate Review Mechanism RRM on October 1, 2022 • Requested an increase in annual operating income of $7.3 million • Requested ROE: 9.80%; ROR: 7.28% • Requested capital structure: 42% debt / 58% equity • Requested rate base: $855.3 million • Test ye
Slide 39: 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