Atmos Energy Corporation · NYSE:ATO
Atmos Energy — Investor Presentation (March 2022)
64 slides from Atmos Energy's investor presentation, March 2022
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. March 2022
Slide 2: 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 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 2026 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 ~ $13 - $14 billion in capital Constructive rate mechanisms 6% - 8% Consolidated EPS investment through 2026; >80% that reduce regulator
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 2022E Jurisdiction Infrastructure Forward- Meters (000s) % of Filing Case (
Slide 6: Constructive Regulation Focused on Safety and Reliability
Constructive Regulation Focused on Safety and Reliability Efficient Recovery Mechanisms Support Ongoing Modernization Constructive Regulation Supports Constructive Regulation Provides • Pipe replacement via risk models and • Reduced Regulatory Lag • Annual mechanisms / Infrastructure mechanisms indu
Slide 7: Leading Natural Gas Delivery Platform: Diversified LDC 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 over 2.0 million customers • ~72,000 miles of distribution and transmission mains • Connected to 37 differe
Slide 8: Leading Natural Gas Delivery Platform
Leading Natural Gas Delivery Platform 98% of Rate Base in states that offer policy support for investment in natural gas infrastructure AK HI Passed (Atmos Passed Pending Legislation Jurisdictions) As of February 8, 2022 Page 8
Slide 9: Modernizing Our Distribution System
Modernizing Our Distribution System ~$10 Billion Capital Plan Through 2026; > 85% Focused On Safety and Reliability 1 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 • 15%
Slide 10: Leading Natural Gas Delivery Platform: APT
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 2026 Transmission Miles Replaced1 • 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 al
Slide 12: 2016-2026 Significant APT Capital Projects
Modernizing our Transmission System 2016-2026 Significant APT Capital Projects FY16 – FY20 FY21 – FY26 As of February 8, 2022 Page 12
Slide 13: APT - Bethel Storage Projects
Modernizing our Transmission System APT - Bethel Storage Projects • Development of a third cavern at Bethel provides storage capacity to meet projected growth. • Third cavern is designed to add 5-6 Bcf of working gas capacity. In service late 2022. • Timing covers required outages of existing two ca
Slide 14: Sustainability Integrated Into Strategy
Sustainability Integrated Into Strategy Page 14
Slide 15: 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 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 • Deploy advanced leak emissions by 50% by 2035 and enclosed combustion bleed de
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- • 15 LEED certified facilities • Currently selling ~ 5 Bcf of • Customer efficiency tariffs hybrid or CNG vehicles (4 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 RNG Projects by State/Division 6.0 Annual Bcf 4.8 4.4 3.4 CO VA 2.9 3.2 TN 2015 2016 2017 2018 2
Slide 21: Zero Net Energy Homes
Sustainability Integrated Into Strategy Zero Net Energy Homes Demonstrate The Role Natural Gas Plays to Affordably Achieve The Nation’s Environmental Objectives Zero Net Energy (ZNE) Projects Evans, CO Dedication 9/30/21 CO VA KS KY Taylor, TX TN About the Home $50 Estimated gas Fall per and electri
Slide 22: Residential use of natural gas remains affordable
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 $60 $58 2022E – 2026E $53 Assumptions $50 • Normal weather and consumption $40 • $13 - $14
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 $98 $116 CO KS KY TN LA Natural Gas1 $58 Electric4 Mobile Phone5 $117 $104 1. FY2021 Atmos Energy enterprise-wide average monthly residential bill 2. Bureau of Labor
Slide 24: Financial Performance and Outlook
Financial Performance and Outlook Page 24
Slide 25: Q1 Fiscal 2022 Financial Performance: Highlights
Q1 Fiscal 2022 Financial Performance Fiscal 2022 Highlights • Financial Performance • YTD Diluted EPS of $1.86 • $684 million in capital spending; 88% allocated to safety and reliability spending • 8.8% increase in fiscal 2022 annual dividend to $2.72 per diluted share • 38th consecutive year of ris
Slide 26: Consolidated Financial Highlights
Q1 Fiscal 2022 Financial Performance Consolidated Financial Highlights Three Months Ended December 31 Segment Net Income 2021 2020 ($millions, except EPS) Distribution $ 179 $ 154 Pipeline & Storage 70 64 Net Income $ 249 $ 218 Diluted EPS1 $ 1.86 $ 1.71 Capital Expenditures $ 684.2 $ 456.8 1. Since
Slide 27: Segment Operating Income Highlights
Q1 Fiscal 2022 Financial Performance Segment Operating Income Highlights Three Months Ended 2021 2020 Change December 31 ($millions) Distribution $ 190.5 $ 209.5 $ (19.0) Pipeline & Storage 85.4 89.3 (3.9) Operating Income $ 275.9 $ 298.8 $ (22.9) Distribution Key Drivers Pipeline & Storage Key Driv
Slide 28: Capital Spending Highlights
Q1 Fiscal 2022 Financial Performance Capital Spending Highlights $millions Fiscal 2021 YTD CapEx Repair and replace transmission and distribution $ 302 pipelines 108 Pipeline integrity management projects 1% Install & replace measurement & regulating 74 equipment 11% 63 Service line replacement 88%
Slide 29: 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 • Replaced ~1,100 miles of distribution 1200 and transmission pipe 900 • ~1.4% of total system 600 • Eliminated all cast iron in CY2021 300 • Replaced ~3
Slide 30: Regulatory Highlights
FY 2022 Financial Performance Regulatory Highlights Approved Annualized Key Rate Activity Operating Income Increases1,2 Through March 1, 2022 • $28.9MM Completed $200 • $ 21.7MM – Mid-Tex RRM • $ 8.4MM – Mississippi SIR • $ 2.6MM – Colorado SSIR $150 • $ 1.8MM – Kansas GSRS • $ 0.3MM – Virginia SAVE
Slide 31: Financing Highlights
Q1 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 •
Slide 32: 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 • $2.72 Indicated Dividend for FY 2022; 8.8%
Slide 33: Fiscal 2022E Guidance
Financial Outlook Fiscal 2022E Guidance ($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 34: 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 $ 62 - 72 Effective Tax Rate 18.8% 7% - 9%2 1. Changes in events or other circumstances that the Company cannot currently ant
Slide 35: 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 FY2022E FY2023E FY2024E FY2025E FY2026E FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 F
Slide 36: 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 37: Strong Financial Foundation Supports Capital Spending Program
Q1 Fiscal 2022 Financial Performance Strong Financial Foundation Supports Capital Spending Program Capitalization and Liquidity Profile Total Capitalization1 Liquidity Profile as of 100% December 31, 2021 $3,000 $295 48% $264 75% 49% $2,500 $100 $2,000 $3.1 billion $900 Available 50% Liquidity as $1
Slide 38: Manageable Debt Maturity Schedule
Q1 Fiscal 2022 Financial Performance Manageable Debt Maturity Schedule Supports Capital Spending Program Weighted Average Maturity ~19.2 Years1 2 $2,200 0.60% $950 3.73% $750 4.125% $600 $600 $600 $500 $500 1.5% $500 4.30% 2.85% 3.00% 2.625% $400 4.15% 5.50% $200 $150 5.95% 6.75% $10 6.67% 2023 2024
Slide 39: Strong Investment Grade Ratings Support Affordable Customer Bills
Q1 Fiscal 2022 Financial Performance 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 3.8 4.0 Commercial P-1
Slide 40: 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 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 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 43: 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 – Colorado and Kansas – Implemented Mid-Tex and WTX Cities – Anticipate Mississippi – Anticipate Stable Rate Implemented RRM filing of
Slide 44: 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 45: 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 46: Atmos Pipeline - Texas
Atmos Pipeline - Texas • Atmos Pipeline: Filed 2021 GRIP on February 11, 2022 • Requested an annual operating income increase of $78.8 million • Requested ROE: 11.5%; ROR: 8.87% • Requested capital structure: 47% debt / 53% equity • Requested rate base: $3.4 billion • Test year ended December 31, 20
Slide 47: Colorado - Kansas Division
Colorado - Kansas Division • Kansas: Filed System Integrity Program (SIP) on January 14, 2022 • Requested an increase in annual operating income of $0.6 million • Requested ROE: 9.10%; ROR: 7.03% • Requested capital structure: 44% debt / 56% equity • Requested rate base: $5.9 million • Kansas: Imple
Slide 48: Kentucky/Mid-States Division
Kentucky/Mid-States Division • Tennessee: Filed Annual Review Mechanism (ARM) on February 1, 2022 • Requested an annual operating income increase of $3.7 million • Requested ROE: 9.80%; ROR: 7.53% • Requested capital structure: 39% debt / 61% equity • Requested rate base: $453.9 million • Kentucky:
Slide 49: Kentucky/Mid-States Division
Kentucky/Mid-States Division • Virginia: Implemented SAVE Infrastructure Program on October 1, 2021 • Authorized an annual operating income increase of $0.3 million • Authorized ROE: 9.20%; ROR: 7.43% • Authorized capital structure: 42% debt / 58% equity • Authorized rate base: $7.5 million Page 49
Slide 50: Mid-Tex Division
Mid-Tex Division • Mid-Tex ATM Cities: Filed 2021 GRIP on February 25, 2022 • Requested an increase in annual operating income of $12.8 million • Requested ROE: 9.80%; ROR: 7.97% • Requested capital structure: 40% debt / 60% equity • Requested rate base: $5.1 billion • Test year ending December 31,
Slide 51: Mid-Tex Division
Mid-Tex Division • Mid-Tex City of Dallas: Filed Dallas Annual Rate Review DARR on January 14, 2022 • Requested an increase in annual operating income of $13.6 million • Requested ROE: 9.80%; ROR: 7.41% • Requested capital structure: 41% debt / 59% equity • Requested rate base: $5.1 billion • Test y
Slide 52: Mississippi Division
Mississippi Division • Mississippi: Filed Annual System Integrity Rider (SIR) on March 1, 2022 • Requested an increase in annual operating income of $10.2 million • Requested ROR: 7.81% • Requested rate base: $391.8 million • Forward-looking components - PP&E, accumulated depreciation, accumulated d
Slide 53: Mississippi Division
Mississippi Division • Mississippi: Implemented Annual System Integrity Rider (SIR) on November 1, 2021 • Authorized an increase in annual operating income of $10.5 million; $8.4 million net of excess deferred income tax amortization • Authorized ROR: 7.81% • Authorized rate base: $323.7 million • F
Slide 54: West Texas Division
West Texas Division • West Texas Environs: Filed 2021 GRIP on February 25, 2022 • Requested an increase in annual operating income of $1.2 million • Requested ROE: 9.80%; ROR: 7.97% • Requested capital structure: 40% debt / 60% equity • Requested rate base: $855.2 million • Test year ending December
Slide 55: West Texas Division
West Texas Division • West Texas Triangle: Filed 2021 GRIP on February 25, 2022 • Requested an increase in annual operating income of $1.5 million • Requested ROE: 9.80%; ROR: 7.71% • Requested capital structure: 40% debt / 60% equity • Requested rate base: $50.1 million • Test year ending December
Slide 56: Jurisdictional Summaries
Jurisdictional Summaries Page 56
Slide 57: 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 58: 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 59: Louisiana Division - Overview
Louisiana Division - Overview Key Regulatory Features: Regulator ROE Equity • Public Service Commission – 5 elected LPSC 9.8% 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 60: Mississippi Division - Overview
Mississippi Division - Overview Key Regulatory Features: Regulator ROR Equity • Public Service Commission – 3 elected PSC 7.81% 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 61: Kentucky/Mid-States Division - Overview
Kentucky/Mid-States Division - Overview Key Regulatory Features: Jurisdiction Regulator ROE Equity • KY: 3 appointed commissioners, 4-year staggered 9.65% Kentucky PSC Actual terms • Traditional ratemaking, on a forward-looking Tennessee TPUC 9.8% Actual basis, for the total cost of service Virginia
Slide 62: Colorado-Kansas Division - Overview
Colorado-Kansas Division - Overview Key Regulatory Features: Jurisdiction Regulator ROE Equity • CO: 3 appointed commissioners, 4-year staggered Kansas KCC 9.10% 56% terms Colorado CPUC 9.45% Actual • Forward-looking system infrastructure rider (SSIR) • KS: 3 appointed commissioners, 4-year staggere
Slide 63: 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 64: 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