Atmos Energy Corporation November 19, 2014 New York
Management Participants Kim Cocklin - President & CEO Bret Eckert - Senior VP & CFO John McDill - VP, Pipeline Safety Dick Erskine - President, Atmos Pipeline-Texas Conrad Gruber - VP, Strategic Planning Susan Giles - VP,…
Corporate Overview Kim Cocklin President and CEO 3
Atmos Energy Footprint Attractive Service Areas Offer Operating Scale and Risk Diversification 4 As of November 5, 2014
Business Overview Regulated Distribution Serves over 3.1 million customers across 8 states Performance is driven by safety and reliability spending, rate base growth and balanced regulatory outcomes Regulated Pipeline Favorably…
Investment Highlights A Pure-Play, High-Growth Natural Gas Delivery Investment Proposition Attractive total return proposition of 9 - 11% Attractive pure-play 6 - 8% forecasted EPS growth through Fiscal 2018; current dividend yield of…
Attractive, Pure-Play Return Constructive Regulatory Mechanisms Support Efficient Conversion of Rate Base Growth Opportunities into Financial Results 900 million - 1.1 billion in annual Constructive rate mechanisms 6% - 8%…
Leading Natural Gas Delivery Platform Eight-state distribution territory Business mix Intrastate pipeline system Regulated distribution 61% Regulated distribution 68% Regulated Nonregulated pipeline 9% Regulated 30%…
Sustainable and Growing Dividend 31 Consecutive Years of Dividend Increases 1.56E 1.60 Dividend increased 1.40 5.4% for fiscal 2015 1.20 The indicated annual dividend rate for 1.00 fiscal 2015 is 1.56 0.80 Dividend has…
3 - Year Total Shareholder Return 145.0 125.0 119.1 120.0 112.2 95.0 Percent 70.0 63.8 54.3 Peer Average*: 56.4% 45.5 45.0 34.9 38.6 29.6 32.0 21.6 20.0 7.9 (5.0) l as nt r u ra G o ces ede sta G as ry s rg…
2015 Opportunities & Challenges Opportunities Ample and affordable opportunities to invest in our regulated assets for safety and reliability Operating in jurisdictions with well-balanced regulation and a shared emphasis on safety…
Financial Overview Bret Eckert Senior Vice President and CFO 12
Fiscal 2014 Achievements Year-over-year earnings per share growth of 14.6(1) percent; 12th consecutive year of increased earnings per share Fiscal 2014 total shareholder return of 15.5% Strong fiscal 2014 results allowed for a 5.4%…
Consolidated Financial Results Fiscal 2014 Fiscal 2014 Net Income versus Fiscal 2013 Net Income Average Fiscal 2014 Net Income Regulated Non Diluted (millions, except EPS) Distribution Pipeline Regulated TOTAL Shares EPS * Net Income…
Segment Financial Results Fiscal 2014 Regulated Distribution Key Drivers Year Ended 9/30 Gross profit increased primarily from rate increases, increased ( millions) 2014 2013 Change revenue-related taxes and Gross Profit 1,176.5…
Segment Financial Results Fiscal 2014 Regulated Pipeline Key Drivers Year Ended 9/30 Gross profit increased primarily ( millions) 2014 2013 Change from increased revenue from the GRIP filings effective May 2014 Gross Profit 318.5…
Segment Financial Results Fiscal 2014 Nonregulated Year Ended 9/30 ( millions) 2014 2013 Change Key Drivers Gas Delivery & Related Realized margins increased Services 39.5 39.8 (0.3) primarily due to the Storage/Transportation…
Key Regulatory Developments - Fiscal 2014 Implemented Annual Increases in Operating Income from Rate Activity 134 Million Key Rates Implemented 140.0 Fiscal 2014 APT - 2013 GRIP - 45.6M 120.0 Mid-Tex 2012 RRM - 12.5M 100.0…
Consolidated Financial Results Fiscal 2014 Long-Term Debt Maturity and Liquidity Profile Debt Maturity as of Liquidity Profile as of September 30, 2014 September 30, 2014 millions millions 1,760 1,500 1,800 42.3 75.0…
Strong Financial Foundation Improved Weighted Average Cost of Long-Term Debt Average maturities about 20 years after 500 million issuance in October 2014 2,500 8.0 2,000 Net Long Term Debt 7.0 Interest Rate % 6.9 6.9…
Fiscal 2015E Guidance 22
Fiscal 2015E Guidance Net Income (excluding Mark-to-Market) 2014 2014 Realized Adjusted Net Weather for ( millions, except EPS) Income2 Impact Weather 2015E* Regulated Operations 258 5 253 285 300 Nonregulated Operations 26 12…
Capital Expenditures Drive Rate Base Growth Consolidated 2015E Capital Expenditures of 900 million - 1.0 billion ( millions) 1,100 900M - 1.1B Safety & Reliability 750 - 900 1,000 900M - 1.0B million 900 845.0 835.3 Pipeline…
Capital Spending Drives Rate Base Growth Strong Regulated Rate Base Growth Focused on enhancing system safety and reliability 7.2 - 7.4 Billion 8,000 7,000 6,000 ( billions) 5,000 4.1 Billion 4,000 3,000 2,000 1,000…
Constructive Rate Outcomes Drive Operating Income Growth Implemented Annual Increases to Operating Income 1 Distribution and Pipeline Operations 150.0 Customers and investors 122.3 134.0 benefit from fair and 125.0 105 - 125…
Investments Drive Rate Base Growth that Drives Earnings Growth Earnings Per Share Expected to Grow Between 6% 8% Annually Consolidated Results Factors Included in Projections 3.50 - 3.75 Capital expenditures of 900 4.00 million - 1.1…
Safety Strategy John McDill Vice President, Pipeline Safety 29
Safety Vision Our vision is to be the safest provider of gas distribution, pipeline and related services. We choose safety as a value, not a policy. We are dedicated to incident-free choices because we care about our customers,…
National Landscape Focus on pipeline safety and infrastructure renewal Strengthening federal and state legislative and regulatory activities Increasing focus on methane emissions Reauthorization of Pipeline Safety in 2015…
How is Atmos Energy Responding Atmos Energy is executing on a strategy to invest in our existing infrastructure for added safety. Supportive commissions and regulators have allowed Atmos Energy to meet the demands of accelerated…
Charles K Vaughan Training Center Technical & Safety Training Flow Lab and Gas City 33
Pipeline Integrity Management Miles of Transmission Pipe Capable of In-Line Inspection 59% 60% 58% Smart Pig 55% 50% 49% 50% 47% 40% Pipeline inspection gauge contains electronic and magnetic sensors to check the condition…
Pipeline Integrity Management Constant Pipe Assessment Identifies Risk Potential Assessment Miles Baseline Miles Assessed Miles Reassessed 3,683 2,254 Assessment Types Hydrostatic Testing 5% 14% Direct Assessment In-Line…
Composition of Distribution & Transmission Pipe All Pipe is Reviewed to Prioritize Potential Replacement DISTRIBUTION PIPE 67,000 Total Miles Plastic ABS Plastic PVC Cast Iron Steel-Bare (Un) 10% Steel-Bare (Pr) Steel…
Portion of System Installed Pre - 1970 Current Investment Allows for Reduction of Pre-1970 Pipe 58% 60% 55% 1970 - Federal pipeline regulations implemented 50% Atmos Energy pre-1970 pipe: 45% % of Total Pipe Distribution…
Projected Replacement by Type Fiscal 2014 Pipeline Replacement Plastic ABS Plastic DuPont Distribution Transmission Plastic PE 374 96 Plastic PVC miles miles Non-APT Cast Iron APT Steel - Bare Steel - Coated 23,000 Service…
Projected Replacement of Distribution & Transmission Pipe Estimated Miles Replaced by Fiscal Year - An Ongoing Commitment 450-500 miles annually 70-90 miles annually 500 110 100 100 96 450 90 400 374 352 80 350 70 300…
Staying Focused Explore innovative technologies to enhance safety Invest in employees and infrastructure Rigorous, multiple-year planning for continuous improvement Page40 40
Atmos Pipeline-Texas Dynamic Market Area Regulated by the Railroad Commission of Texas Primary purpose is to provide regulated transportation and storage services to system customers, primarily Mid-Tex Division APT serves a…
Atmos Pipeline-Texas Regulated Pipeline Spans Texas Shale Gas Supply Basins Approximately 5,600 mile intrastate pipeline with connections at all 3 Texas Hubs- Waha, Katy, and Carthage Five storage facilities with 46 Bcf of…
Atmos Pipeline-Texas Strategically Positioned Connects to major market hubs Katy Carthage Waha Diverse connectivity to hubs, pipelines, markets and supply Effectively compete for supply and transportation opportunities…
Atmos Pipeline-Texas Regulatory Structure Texas Railroad Commission has Original Jurisdiction Cost of service tariffs for regulated customers Prudency of investments Priority of service GUD 10000 Most Recent Case Established…
Atmos Pipeline-Texas Investment Outlook Anticipated CAPEX spend of 250 - 350 million per year Pipeline integrity / compliance 50 - 100 million Maintenance / replacement 50 - 100 million Fortification / growth 30 - 150 million Other…
Line VP 2nd Pipeline Project Replacement/Removal and System Fortification 25 miles of 30 pipeline 60 - 65 million November 2014 completion 47 As of November 5, 2014
Line D9 Replacement Project Growth, Maintenance and Integrity 25 miles of 20 pipeline 86 - 92 million 6 year project (2013-2018) 48 As of November 5, 2014
Tri Cities Storage Enhancement Project Growth, Reliability and Maintenance 5 new horizontal wells 83 - 86 million December 2016 completion 49 As of November 5, 2014
Metroplex Fortification Project Integrity, Reliability and Growth Bethel to Tri Cities 19 miles of 3,400 MAOP, 12 pipe, in service Oct. 2015 23 - 26 million 19 miles of 24 pipe, in service Oct. 2015 29 - 33 million Tri Cities…
Waha Compression Project Additional Gas Supply & System Reliability 4,700 HP Compression Connect / transport approximately 250 MMcf/d 26 - 30 million December 2014 completion 51 As of November 5, 2014
Rate Strategy Regulatory Goals Increase Revenue Timely filings Reduce Lag Annual mechanisms / Infrastructure mechanisms Forward-looking test periods Expense deferrals Improve Margin Stability Base charges / WNA Reduce Risk of…
Alignment of Interests Utilities & Regulators Aging Infrastructure (Safety and Reliability) System Growth Increase Rates Prudently Reduce Lag Improve Margin Stability Rate Affordability Inflation 55
Capital Spending Rate Base Growth of 9% -10% Enhancing Safety and Reliability 1,200 900M 1.1B Total CAPEX = 8.5B - 9.5B 1,000 900M 1.0B 800 millions 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015E…
Constructive Rate Relief 100M-135M 140 annually 105M-125M 120 100 millions 80 60 40 20 0 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E - 2018E 57 As of November 5, 2014
2015 Regulatory Filings 18 - 20 Filings for Rate Increases of Between 105 - 125 million Filing Type Estimated Range 8 Annual Filings 43 - 48 million 7 Infrastructure Mechanisms 42 - 47 million 3 General Cases 10 - 15 million…
Constructive Rate Mechanisms Reduce Regulatory Lag 45% of Fiscal 2015E CAPEX is Unlagged % of 2015E Spend Months of Lag Capex (in millions) Unlagged Unlagged Fiscal Capital Mid-Tex and West Texas Rule 8.209, Mississippi, Louisiana…
Regulatory and Recovery Mechanisms Regulatory Mechanism Recovery Method Jurisdiction Infrastructure Forward General Rate Base Annual Filing Program Looking Case (in millions) Texas Mid-Tex 8.209 - RRM/DARR/GRIP - 1,799…
Average Residential Bill Average Customer Bill Remains Affordable* 70 60 58 57 56 50 Monthly / Customer 40 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E * Fiscal 2015E 2018E assumes…
Future Growth Continued Capital/Rate Base Growth 9% 10% Rate Base Growth Customer Growth 1% Gross Customer Growth Range Maintain and Improve Regulatory Relationships Timely Recovery of Investments 62 As of November 5, 2014
Summary Kim Cocklin 63
Summary - Atmos Energy A Pure-Play, High-Growth Natural Gas Delivery Investment Proposition Market Cap 5.4 billion Shares Outstanding 100.4 million Avg Daily Trading Volume 566 thousand 52-Week Range 43.82 - 54.20 F2015E Guidance…
Appendix 65
Key Regulatory Developments - Fiscal 2015E Rate Filing Outlook Fiscal 2015E Q1 Q2 Q3 Q4 October December January March April June July September West Texas Cities Anticipate Kansas Anticipate filing rate Louisiana Anticipate LGS…
Regulated Operations Date of Authorized Requested Effective Last Rate Operating Operating Rate Base Requested Authorized Requested Authorized Requested Authorized Requested Date of Last Filing Income Income thousands Rate Base Rate of…
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