Atmos Energy Corporation · NYSE:ATO
Atmos Energy — Investor Presentation (December 2023)
60 slides from Atmos Energy's investor presentation, December 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. December 2023
Slide 2: Leading Natural Gas Delivery Platform
Leading Natural Gas Delivery Platform Eight-state distribution territory Business Mix Intrastate pipeline system ~34% Pipeline & Storage ~66% Distribution 2024 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 2028 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 ~ $17 billion in capital investment Constructive rate mechanisms 6% - 8% Consolidated EPS through 2028; >82% 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 Base1 Annual General 2024E 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 97% of Rate Base in states that offer policy support for investment in natural gas infrastructure Passed (Atmos Passed Proposed Legislation Jurisdictions) As of December 1, 2023 Page 7
Slide 8: Diversified LDC Platform in Eight States
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 9: Modernizing Our Distribution System
Modernizing Our Distribution System ~$12.5 Billion Capital Plan Through 2028; > 82% Focused On Safety and Reliability Distribution Miles Replaced1,2 • Replace 4,000 – 5,000 miles of 1000 distribution system pipe 750 • 6% - 8% of total system 500 • Replace 120,000-170,000 steel service lines 250 • 15
Slide 10: APT is Favorably Positioned Intrastate Pipeline
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 ~$4.5 Billion Capital Plan for APT Through 2028 Transmission Miles Replacement Rate1,2 • Pipeline Integrity Management 200 • Upgrading lines with pigging facilities • Replacing valves, fittings, and pipe to 150 allow In-Line Inspection tools to 100 travel through
Slide 12: 2017-2030 Significant APT Capital Projects
Modernizing our Transmission System 2017-2030 Significant APT Capital Projects FY17 – FY24 FY24 – FY30 As of December 1, 2023
Slide 13: Sustainability Integrated Into Strategy
Sustainability Integrated Into Strategy Page 13
Slide 14: Formal Board of Director Oversight Over Sustainability
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 15: 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 16: 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 17: 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 18: 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 19: 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 8.8 7.5 7.8 6.5 6.0 Annual Bcf 4.8 4.4 CO VA TN 2018 2019 2020 2021 2022 2023 2024E MS LA • Added ~0.
Slide 20: 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 ZNE Homes can produce as much or more KY energy
Slide 21: Residential use of natural gas remains competitive
Sustainability Integrated Into Strategy Residential use of natural gas remains competitive Average Monthly Customer Bill Key Assumptions $120 • Normal weather and consumption $98 • ~$17 billion of CAPEX $100 spending through 2028 • Commodity pricing $80 • FY 24-28: $3.00 to $4.00 $71 • Delivery cost
Slide 22: Natural Gas Price Advantage Over Electricity
Sustainability Integrated Into Strategy Natural Gas Price Advantage Over Electricity Electricity1 vs Natural Gas2 - kWh Equivalent 15 14.20 14.44 14.19 13.74 13.45 12.42 12.26 11.54 10 6.20 6.12 5.89 5.10 4.96 5 4.37 4.51 3.86 0 Colorado Kansas Kentucky Louisiana Mississippi Tennessee Texas Virginia
Slide 23: 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 $111 $118 CO KS KY TN LA Natural Gas1 $71 Electric4 Mobile Phone5 $127 $134 1. FY2023 Atmos Energy enterprise-wide average monthly residential bill 2. Statista (https
Slide 24: Financial Performance and Outlook
Financial Performance and Outlook Page 24
Slide 25: Fiscal 2023 Highlights
Fiscal 2023 Financial Performance Fiscal 2023 Highlights • Financial Performance • YTD Diluted EPS of $6.10; 21st consecutive year of EPS growth • $2.8 billion in capital spending; 85% allocated to safety and reliability spending • 8.8% increase in fiscal 2023 annual dividend to $2.96 per diluted sh
Slide 26: Consolidated Financial Highlights
Fiscal 2023 Financial Performance Consolidated Financial Highlights Three Months Ended Twelve Months Ended September 30 September 30 Segment Net Income 2023 2022 2023 2022 ($millions, except EPS) Distribution $ 38 $ 16 $ 580 $ 522 Pipeline & Storage 81 56 306 252 Net Income $ 119 $ 72 $ 886 $ 774 Di
Slide 27: Segment Operating Income Highlights
Fiscal 2023 Financial Performance Segment Operating Income Highlights Twelve Months Ended September 30 2023 2022 Change ($millions) Distribution $ 692.6 $ 604.6 $ 88.0 Pipeline & Storage 374.5 316.4 58.1 Operating Income $ 1,067.1 $ 921.0 $ 146.1 Distribution Key Drivers Pipeline & Storage Key Drive
Slide 28: Segment Operating Income Highlights
Fiscal 2023 Financial Performance Segment Operating Income Highlights Three Months Ended September 30 2023 2022 Change ($millions) Distribution $ 53.9 $ 36.7 $ 17.2 Pipeline & Storage 100.2 68.7 31.5 Operating Income $ 154.1 $ 105.4 $ 48.7 Distribution Key Drivers Pipeline & Storage Key Drivers • $2
Slide 29: Capital Spending Highlights
Fiscal 2023 Financial Performance Capital Spending Highlights $millions Fiscal 2023 YTD Capital Spending Repair and replace transmission and distribution $ 1,258 pipelines 325 Fortifications 2% 270 Service line replacement 13% Install & replace measurement & regulating 85% 249 equipment 226 Pipeline
Slide 30: Regulatory Highlights
FY 2023 Financial Performance Regulatory Highlights Approved Annualized Key Rate Activity Operating Income Increases1 Through December 1, 2023 $350 • $135.0MM Completed • $ 98.6MM – Mid-Tex Cities RRM $300 • $ 11.5MM – Mississippi SRF • $ 11.0MM – Mississippi SIR $250 • $ 8.6MM – West Texas Cities R
Slide 31: Financing Highlights
Fiscal 2023 Financial Performance Financing Highlights • $800 million of long-term debt financing issued • $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 • $496.5 millio
Slide 32: Financial Outlook
Financial Outlook FY 2024 Five Year Plan Key Themes • Plan drives 6.0% - 8.0% annual EPS growth through FY 2028 • FY 2024 Guidance of $6.45 - $6.65; Midpoint of range implies 7.4% Earnings and growth Dividends Per • FY 2028 guidance of $8.35 - $8.75 Share • $3.22 Indicated Dividend for FY 2024; 8.8%
Slide 33: Fiscal 2024E Guidance
Financial Outlook Fiscal 2024E Guidance ($millions, except EPS) FY 2023 FY 2024E1 Distribution $ 580 $ 645 - 665 Pipeline & Storage 306 340 - 350 Total Net Income $ 886 $ 985 - 1,015 Average Diluted Shares 145.2 152 - 154 Diluted EPS2 $ 6.10 $ 6.45 - 6.65 Capital Spending $ 2,806 $ ~2,900 1. Changes
Slide 34: Fiscal 2024E Guidance - Selected Expenses
Financial Outlook Fiscal 2024E Guidance Selected Expenses FY 2023 FY 2024E1 ($millions) O&M $ 765 $ 780 - 800 D&A $ 604 $ 685 - 695 Interest $ 137 $ 190 - 196 Income Tax $ 114 $ 165 -180 Effective Tax Rate 11.4% 14% - 16%2 1. Changes in events or other circumstances that the Company cannot currently
Slide 35: Capital Spending Focused on System Modernization and Growth
Financial Outlook Capital Spending Focused on System Modernization and Growth Consolidated 2024E Capital Expenditures of ~$2.9 billion $4,500 $4,000 $3,500 $3,000 $ millions $2,500 $2,000 $1,500 $1,000 $500 $0 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024E FY2025E FY2026E FY2
Slide 36: Capital Spending Drives Rate Base Growth
Financial Outlook Capital Spending Drives Rate Base Growth Enhancing System Safety and Reliability1 $35,000 $28.0B- $30,000 $30.0B $25,000 $20,000 $ millions $16.6B $15,000 $14.1B $10,000 $5,000 $0 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024E FY2025E FY2026E FY2027E FY2028E
Slide 37: Strong Financial Foundation Supports Capital Spending Program
Fiscal 2023 Financial Performance Strong Financial Foundation Supports Capital Spending Program Capitalization and Liquidity Profile Total Capitalization 100% 1% 1% Liquidity Profile as of September 30, 2023 $3,500 37% 45% $3,000 75% $15 $467 $2,500 $100 $2.7 billion 50% $2,000 $900 Available Liquid
Slide 38: Manageable Debt Maturity Schedule Supports Capital Spending Program
Fiscal 2023 Financial Performance Manageable Debt Maturity Schedule Supports Capital Spending Program Weighted Average Maturity ~18.41 Years1 $1,100 4.168% $950 3.73% $750 4.125% $600 $600 1.50% 4.30% $500 $500 $500 $500 3.00% 2.625% 4.15% 6.20% $400 $400 5.90% 5.50% $300 5.45% $200 $150 5.95% 6.75%
Slide 39: Strong Investment Grade Ratings Support Affordable Customer Bills
Fiscal 2023 Financial Performance Strong Investment Grade Ratings Support Affordable Customer Bills Strong Investment Weighted Average Cost of Debt Grade Credit Ratings $8,000 5.0 Standard & Moody’s Poor’s 4.5 $7,000 4.2 Senior Unsecured A1 A- 4.1 4.0 4.0 3.8 4.0 Commercial Paper P-1 A-2 $6,000 3.5
Slide 40: Sustained Dividend Increases
Financial Outlook Sustainable Financial Performance Supports Sustained Dividend Increases 40 Consecutive Years* of Dividend Increases $3.50 $3.22E $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 • Indicated dividend increase of 8.8% for Fiscal 2024 *Fiscal year Note: Amounts are adjusted for mergers and a
Slide 41: Regulatory Developments Appendix
Regulatory Developments Appendix Page 41
Slide 42: 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 43: Key Regulatory Filings – Fiscal 2024E
Key Regulatory Filings – Fiscal 2024E Rate Filing Planned Timing Q1 Q2 Q3 Q4 October – December January – March April – June July – September Mid-Tex and WTX Cities – Anticipate filing Mississippi – Anticipate Stable Rate Filing Mid-Tex and WTX Cities – Implemented RRM APT – GRC implementation antic
Slide 44: 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 at Jurisdiction (1) Rate Base Rate of Rate of Return on Return on Debt/Equity Last Rate Filing Income Income
Slide 45: 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 at Jurisdiction Rate Base Rate of Rate of Return on Return on Debt/Equit Last Rate Filing Income
Slide 46: 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 47: Colorado - Kansas Division
Colorado - Kansas Division • Kansas: Implemented Gas Safety Reliability Surcharge (GSRS) on November 2, 2023 • Approved an increase in annual operating income of $1.8 million • Approved rate base: $16.5 million • Test Year October 2022 through June 2023 • Colorado: Filed System Safety and Integrity
Slide 48: Kentucky/Mid-States Division
Kentucky/Mid-States Division • Kentucky: Implemented Annual PRP on October 1, 2023 • Authorized an annual operating income increase of $2.9 million • Authorized ROE: 9.45%; ROR: 6.94% • Authorized capital structure: 45% debt / 55% equity • Authorized rate base: $40.5 million • Virginia: Implemented
Slide 49: Mid-Tex Division
Mid-Tex Division • Mid-Tex Cities: Implemented Rate Review Mechanism (RRM) on October 1, 2023 • Authorized an increase in annual operating income of $98.6 million • Authorized ROE: 9.80%; ROR: 7.35% • Authorized capital structure: 42% debt / 58% equity • Authorized rate base: $6.1 billion • Test yea
Slide 50: Mississippi Division
Mississippi Division • Mississippi: Implemented Annual System Integrity Rider (SIR) on December 1, 2023 • Authorized an increase in annual operating income of $11.0 million • Authorized ROR: 7.82% • Authorized rate base: $472.7 million • Forward-looking components - PP&E, accumulated depreciation, a
Slide 51: West Texas Division
West Texas Division • West Texas Cities: Implemented Rate Review Mechanism (RRM) on October 1, 2023 • Authorized an increase in annual operating income of $8.6 million • Authorized ROE: 9.80%; ROR: 7.35% • Authorized capital structure: 42% debt / 58% equity • Authorized rate base: $965.3 million • T
Slide 52: Jurisdictional Summaries
Jurisdictional Summaries Page 52
Slide 53: 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 54: 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 55: 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 56: Mississippi Division - Overview
Mississippi Division - Overview Key Regulatory Features: Regulator ROR Equity • Public Service Commission – 3 elected PSC 7.53% Actual commissioners with 4-year terms • Rates updated annually through Stable Rate Filing (SRF) for capital and expenses; forward-looking capital and associated costs • Sy
Slide 57: 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 58: 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 59: 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 60: 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