Phoenix, Ariz. January 7-8, 2016 Evercore ISI Utility CEO Conference
Company Overview Key Statistics 72% market share Third largest publicly traded natural gas distribution company 2.1 million customers 87% market share 42,500 miles of distribution and transmission pipeline 14% market share…
Competitive Strengths Page 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…
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%…
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
Proximity to Natural Gas Supply Location Supports Sustainability Kansas Topeka City Mississippian Wichita Close proximity to significant Lime natural gas reserves Granite Wash Tulsa Delivered natural gas costs are Cana- Oklahoma…
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…
Regulatory Overview Page 10
Regulatory Mechanisms Overview Oklahoma Natural Gas Performance-based rate structure (PBR) with a targeted ROE between 9-10 percent that provides for annual rate reviews between rate cases* Kansas Gas Service Gas System Reliability…
Regulatory Filing Timeline Oklahoma & Kansas Filed general rate case application in July 2015, General rate case application filing in June 2021, with new rates effective early 2016* with new rates effective early 2022, if…
Regulatory Filing Timeline Texas El Paso Service Area Rate case expected in 2016 Central Texas Service Area (includes Austin) Annual GRIP filings Rate case required by 2016 Remainder of Texas Annual cost of service adjustment…
Regulatory Update Recent Activity Oklahoma November 2015: Joint stipulation and settlement agreement with all parties reached on Nov. 13, 2015, and recommended by the Administrative Law Judge, for an increase in base rates of 29.995…
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 Nov. 13, 2015 Joint stipulation and settlement agreement with all parties…
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…
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% Page 17
Financial Overview Page 18
2015 Guidance Updated October 2015 Net income: narrowed range to Operating Income 113-118 million 235 Operating income midpoint: 225 220* 235 million 216 Capital expenditures: 300 million 200 Estimated 2015 average rate base:…
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…
Capital Expenditures Capital Spending Exceeds Depreciation 294 300 280 287 Majority of capital expenditures for safety, 243 reliability and efficiency 208 219 195 180 (in millions) System integrity and replacements 182 70%…
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…
Investment Grade Commitment to Investment-Grade Ratings Strong liquidity position will support capital Capital Structure expenditure and working capital needs As of September 30, 2015 Stable operating cash flows 700 million…
Creating Value for Stakeholders Page 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…
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 42 private CNG stations Increased CNG volumes…
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…
Appendix Page 28
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 29
Diverse Employment Mix State Employment by Sector* Kansas Oklahoma Texas Construction Mining Mining Mining Construction 4% Other Services 3% Financial 4% 1% 5% 5% Activities Financial 5% Construction Other Activities Trade, 6%…
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…
Regulatory Information By State as of September 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 639…
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…
Safety and Environment Operating Safely and Environmentally Responsibly Ongoing effort to replace aging assets Replaced approximately 475 miles of distribution and transmission facilities in 2014 Currently ranked in the top quartile…
Customer and Asset Mix Key Statistics as of Dec. 31, 2014 Kansas Gas Service Oklahoma Natural Gas Texas Gas Service 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…
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…
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 13 homes One transit bus is equivalent to 24 homes Incremental margins…
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…
Cash Flow From Operations Before Changes In Working Capital* Updated Previous (Millions of dollars) 2015 2015 Change Guidance Guidance Net Income 116 113 3 Depreciation and amortization 133 135 (2) Deferred taxes 23 (8) 31 Other…
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