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Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc.

One Gas, Inc. · Aug 11, 2015 · 40 slides

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Slides

  1. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 1
    New York City August 11, 2015 Goldman Sachs Power, Utilities, MLP and Pipeline Conference
  2. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 2
    Company Overview Key Statistics 72% market share Third largest publicly traded natural gas distribution company 87% market share 2.1 million customers 42,500 miles of distribution and transmission pipeline 14% market share…
  3. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 3
    Competitive Strengths Page 4
  4. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 4
    Competitive Strengths Sustainable Business 100% regulated natural gas distribution utility Focused business strategy Third largest publicly traded natural gas distributor 2.1 million customers Significant scale High percentage of…
  5. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 5
    Significant Scale High Percentage of Fixed Charges Kansas Oklahoma Texas Total Fixed Charges Sales 53% 86% 71% 71% customers Average Annual Heating 4,860 3,317 1,788 - Degree Days Normal Weather Normalization 100% 100% 62% 89%…
  6. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 6
    Significant Scale High Percentage of Residential Customers Net Sales Margin* Customer Count* 2014 2014 1% 7% 1% 16% 83% 92% Customer Type Residential Commercial/Industrial Other * Excludes transportation Page 7
  7. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 7
    Proximity to Natural Gas Supply Location Supports Sustainability Kansas Topeka City Close proximity to significant Mississippian Wichita Lime natural gas reserves Granite Wash Tulsa Delivered natural gas costs are Cana- Oklahoma…
  8. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 8
    Natural Gas vs. Electricity 3-to-1 Average Advantage Continues in ONE Gas Territories Average retail price of Natural gas price equivalent ONE Gas delivered cost of Natural gas electricity / kWh (1) of electricity / Dth (1) natural gas…
  9. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 9
    Regulatory Overview Page 10
  10. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 10
    Regulatory Mechanisms Overview Oklahoma Natural Gas Performance-based rate structure (PBR) with a targeted ROE between 10-11 percent that provides for annual rate reviews between rate cases* Kansas Gas Service Gas System Reliability…
  11. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 11
    Regulatory Filing Timeline Oklahoma & Kansas Filed general rate case application in July 2015, with Pending outcome of rate case, performance-based new rates effective early 2016, if applicable rates filing anticipated March 2018…
  12. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 12
    Regulatory Filing Timeline Texas El Paso Service Area EPARR filing annually, with new rates effective each August, if applicable GRIP filings in environs Central Texas Service Area (includes Austin) Annual GRIP filings Rate case…
  13. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 13
    Regulatory Update Recent Activity Oklahoma July 2015: Filed a request with the Oklahoma Corporation Commission (OCC) for an increase in base rates of 50.4 million; if approved, new rates effective early 2016 August 2014: OCC approved…
  14. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 14
    Regulatory Update Oklahoma Natural Gas Rate Case Status July 8, 2015 General rate case application filed OCC has 180 days to consider the proposed rate changes Request Breakdown Amount requested 50.4 million Customer impact 4.98…
  15. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 15
    Projected Rate Base By State 2015 Estimated Rate Base Projected rate base consists of: Total: 2.7 billion* + Property, plant and equipment + Working capital 25% + Other rate base items +/ 42% Accumulated deferred income taxes…
  16. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 16
    Opportunity to Narrow the Gap Return on Equity Goal: Minimize the gap between allowed and actual returns* 2015 ROE estimate: 7.4% 2014 ROE achieved: 7.6% 2013 ROE achieved: 8.0% 2012 ROE achieved: 8.3% * ROE calculations are…
  17. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 17
    Financial Overview Page 18
  18. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 18
    2015 Guidance Announced December 2014 Net income: range of 108-118 million Operating Income Earnings growth driven by new rates and customer 233 growth 225 Higher depreciation driven by capital investments 220* 216 Higher pension…
  19. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 19
    Capital Expenditures Capital Spending Exceeds Depreciation 294 300 280 287 Majority of capital expenditures for safety, 243 reliability and efficiency 180 213 219 195 (in millions) System integrity and replacements 71% 182…
  20. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 20
    2015 Cash Flow Sources and Uses Target dividend payout ratio of 55- 365 365 65% of net income Short-term debt and working capital changes Capital expenditures primarily 112 (in millions) funded by cash flow from Capital…
  21. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 21
    Five-year Financial Outlook Announced December 2014 Expected average annual net income growth of 5-8% between 2014 and 2019 Driven by capital investments and customer growth Rate base expected to grow an average of 5-6% per year…
  22. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 22
    Investment Grade Commitment to Investment-Grade Ratings Strong liquidity position will support capital Capital Structure expenditure and working capital needs As of June 30, 2015 Stable operating cash flows 700 million revolving…
  23. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 23
    Creating Value for Stakeholders Page 24
  24. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 24
    Creating Value for Stakeholders Strategic Focus Capital investments targeted toward safety, reliability and efficiency Approximately 70% of annual forecast Efficiency projects reduce expenses to sustainable levels Minimize gap…
  25. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 25
    Compressed Natural Gas (CNG) Current Environment Public Fueling Stations Currently operate 26 fueling stations accessible to the public Currently transporting supply to 52 retail and 40 private CNG stations Increased CNG volumes…
  26. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 26
    Summary Key Investment Considerations Focused business strategy 100% regulated natural gas distribution utility Constructive regulatory environment Multiple mechanisms and riders Significant scale 2.1 million customers High…
  27. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 27
    Appendix Page 28
  28. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 28
    Capital Expenditures By State Oklahoma Kansas Texas 136 133 126 123 100 86 90 82 85 82 74 75 76 (in millions) 62 68 68 53 57 49 52 41 42 41 45 39 21 25 16 18 20 2011 2012 2013 2014 2015G 2011 2012 2013 2014 2015G…
  29. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 29
    Regulatory Constructs By State Mechanism Oklahoma Kansas Texas* Performance-based rates*** X Capital investments; safety-related riders X** X X Weather normalization X X X Purchased Gas Adjustment/Cost of Gas riders X X X…
  30. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 30
    Regulatory Information By State as of June 30, 2015 Rate Base Authorized Authorized (in millions) Rate of Return Return on Equity Oklahoma Natural Gas 979 8.535% 10-11% Kansas Gas Service 808 N/A N/A Texas Gas Service 612 8.16%…
  31. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 31
    Authorized Rate Base Historical by State Oklahoma Kansas Texas CAGR 5.8% CAGR 1.6% CAGR 16.9% 938 896 843 793 764 770 781 744 (in millions) 542 504 416 339 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013…
  32. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 32
    Safety and Environment Operating Safely and Environmentally Responsibly Ongoing effort to replace aging assets Retired or replaced approximately 475 miles of distribution and transmission facilities in 2014 Currently ranked in the top…
  33. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 33
    Benefits of CNG Use of CNG Increases Load One vehicle is equivalent to one home One pickup truck is equivalent to two homes One refuse truck is equivalent to 12 homes One transit bus is equivalent to 25 homes Incremental margins…
  34. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 34
    Customer and Asset Mix Key Statistics as of Dec. 31, 2014 Kansas Oklahoma Texas Total Average Number of Customers 634,128 853,533 639,840 2,127,501 Number of Employees 1,000 1,100 700 3,300* Service Lines Miles 8,100 5,000 5,200 18,300…
  35. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 35
    Cost of Gas Passed Through to Customers Actual costs of the commodity, transportation and storage of natural gas are passed through to customers without markup Natural gas used in operations is recovered in Purchased Gas or Cost of…
  36. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 36
    Diverse Employment Mix State Employment by Sector* Kansas Oklahoma Texas Mining/Logging Mining/Logging Mining/Logging Construction Other Services Financial 1% Construction 4% 3% 4% 5% Activities 5% 5% Financial Construction…
  37. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 37
    Customer Growth Projected 2015 Customer Growth 0.5% to 1% Average Customer Count 2,127 2,114 2,101 2,090 (in thousands) 2011 2012 2013 2014 Page 38
  38. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 38
    Non-GAAP Information ONE Gas has disclosed in this presentation cash flow from operations before changes in working capital, which is a non-GAAP financial measure. Cash flow from operations before changes in working capital is used as a…
  39. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 39
    Cash Flow From Operations Before Changes In Working Capital* 2015 2014 (Millions of dollars) Change Guidance Actual Net Income 113 110 3 Depreciation and amortization 135 126 9 Deferred taxes (8) 50 (58) Other 13 14 (1) Cash…
  40. Goldman Sachs Power Utilities MLP Pipeline Conference – One Gas, Inc. – slide 40

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