atmos enerrgy _analyst-conf100108
TRANSCRIPT
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Atmos Energy CorporationAnalyst Conference
October 1, 2008
2
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 historical fact included in this presentation are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this presentation or in any of our other documents or oral presentations, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “objective,” “plan,”“projection,” “seek,” “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this presentation, including the risks relating to regulatory trends and decisions, our ability to continue to access the capital markets, and the other factors discussed in our filings with the Securities and Exchange Commission. These factors include the risks and uncertainties discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2007 and in our Quarterly Report on Form 10-Q for the three and nine months ended June 30, 2008. Although we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Management Participants
Robert W. Best - Chairman & CEO
Kim Cocklin - President and COO
J. Patrick Reddy - Senior VP & CFO
Mark H. Johnson - Senior VP, Nonregulated Operations
Susan Giles - VP, Investor Relations
4
OverviewThe Nation’s Largest Pure Gas Distribution CompanyRegulated gas distribution operates in 12 states (gold)Nonregulated operates primarily in the Midwest & Southeast (gray)
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1.16
0 .4 2
1.3 8
0 .3 4
0 .9 8
0 .8 4
1.2 3
0 .6 9
1.53 -1.59
0 .4 2 -0 .4 6
1.53 -1.59
0 .52 -0 .56
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
2004 2005 2006 2007 2008E 2009E
NonregulatedOperations5.2% growth
RegulatedOperations6.1% growth
Diluted Earnings Per Share Contribution Shows Steady Growth
Overview
$1.82$1.72
$1.92$1.95-$2.05
$1.58
CAGR 5.9% $2.05-$2.15
6
Atmos Energy Holdings, Inc.(Nonregulated Operations)
Atmos Energy Holdings, Inc.(Nonregulated Operations)
Atmos Energy Marketing• Marketing• Asset Optimization
Atmos Energy Marketing• Marketing• Asset Optimization
Atmos Pipeline, Storageand Other
• Non-Texas Assets (Storage & Pipeline)• Midstream• Other
Atmos Pipeline, Storageand Other
• Non-Texas Assets (Storage & Pipeline)• Midstream• Other
Kentucky/Mid-StatesKentucky/Mid-States
Atmos Energy Corporation(Regulated Operations)
Gas Distribution DivisionsTransmission & Storage
Atmos Energy Corporation(Regulated Operations)
Gas Distribution DivisionsTransmission & Storage
West TexasWest Texas
Colorado-KansasColorado-Kansas
LouisianaLouisiana
Mid-Tex Mid-Tex
MississippiMississippi
Atmos Pipeline -TexasAtmos Pipeline -Texas
Regulated Operations
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Margin Drivers in the Regulated Business Operating in 12 states (gold)
Grow rate base by investing capital and adding customers
• Estimated rate base of $3.5 billion at 9/30/08
Executing our rate strategy
• $50-$60 million annual approved rate increases
Regulated Operations
8
Successfully Executing on the Rate Strategy
Regulated Operations
GRIP/
Partial means applicable within certain jurisdictions within the category.Excludes Colorado, Iowa and Illinois for a total of 137,657 customers.Includes Missouri, Kansas and Georgia for a total of 258,102 customers.Includes Missouri for a total of 59,672 customers.Includes Amarillo for a total of 69,772 customers.Includes Kansas and Virginia for a total of 151,545 customers.Includes Mid-Tex Division customers residing in cities covered by settlement agreements. Includes Mid-Tex Division for a total of 1,500,000 customers.
Number of Customers
Percentage of Total
Purchased Gas Cost Adjustments WNA
Accelerated Capital Recovery
Decoupling/ Rate Stabilization
Gas Cost Bad Debt Recovery
Texas 1,800,000 57% Partial
Louisiana 350,000 11%
Mississippi 270,000 8%Remaining Jurisdictions 770,000 24% PartialPartialPartial 2 3
4,7
51
1
2
3
4
5
6
6Partial
7
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15.8
2.8
10.5
5.7
4.51.8
3.3
34.3
1.4
11.6
25.6
2.9
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
2003 2004 2005 2006 2007 2008-2012E
Annual Rate Filings GRIP General Rate Case Aggregate
($ M
illio
ns)
Approved Annual Rate Increases in the Regulated Operations
$6.3
$50 - $60
$39.0
Regulated Operations
$40.1
$18.6$16.2
10
$0
$50
$100
$150
$200
$250
$300
$350
2007 2008E 2009E
Cap
ital E
xpen
ditu
res
$0
$50
$100
$150
$200
$250
$300
Dep
reci
atio
n Ex
pens
e
Non-Growth Growth Depreciation
Managing Capital ExpendituresAccelerated Rate Mechanisms Provide Timely Returns($ millions)
$132-135
$346-$350
Regulated Operations
$212-215
$328-$335
$90-$94$101.2
$285.5
$197-$200$195.8
Includes both Natural Gas Distribution and Regulated Transmission and Storage segments
$104-$106 million of non-growth capital to be spent in areas with annual updates-Texas, Louisiana & Mississippi
$12-$14 million to be spent in remaining states where rate cases are filed-regulatory lag
$104-$106 recovered in annual
filings
$12-$14 exposed to
regulatory lag
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9.3
7.4 7.5
8.78.3
4.0
6.0
8.0
10.0
12.0
2005 2006 2007 2008E 2009E
Regulated Operations ROE Potential in Regulated Distribution and Pipeline Operations
ALLOWED ROE – 10.0%
POTENTIAL ROE – 9.0%Regulatory lag, inflation, etc.
Regulatory Return on Equity %
Note: Calculations are based on regulatory accounting treatment and are not consistent with GAAP accounting
Earned Regulatory ROE %
$17 million Net Income Gap $18 million
$ 5 million Net Income Gap $12 million
Net Income Gap between actual return and allowed return is projected to be approximately:
$22 million for fiscal 2008 $30 million for fiscal 2009
12
Favorably positioned; spans Texas gas supply basins and growing consumer market
Pipeline Operations• Connects to major market hubs-
Waha, Katy and Carthage• 6,300 miles of intrastate pipeline• Estimated transportation volume of
780 Bcf in fiscal 2008 and 792 Bcf in fiscal 2009
• Current average volume of approximately 2.15 Bcf/d
• Demonstrated peak day deliveries of 3.5 Bcf/d
Five Storage Facilities• One salt cavern, four reservoirs• 39 Bcf working gas capacity• 1.2 Bcf/d maximum withdrawal• 270 MMcf/d maximum injection
West Texas Division
Mid-Tex Division
Atmos Pipeline-TexasAtmos Energy Headquarters
Strategically Positioned Atmos Pipeline –Texas
Regulated Operations Regulated Transmission and Storage
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Growth Drivers Growth Drivers Increased through-system volumes primarily from producers in Barnett Shale
Margin expansion through ancillary services such as parking and lending, balancing, blending, and compression
Gas price volatility increasing basis differentials between Texas hubs
Accelerated capital recovery through GRIP mechanism
Required pipeline rate case filing anticipated September 2010
Pursue capacity and compression growth opportunities via projects
Atmos Pipeline – Texas Growth DriversTr
ansp
orta
tion
Volu
mes
(Bcf
)
78
60
77
64
85
78
95-97
93-97
99-102
99-103
0
50
100
150
200
2005 2006 2007 2008E 2009E
Mar
gin
Com
posi
tion
($m
illio
ns)
181
374
170
411
194
505
188-195
587-590
188-195
600-605
0
250
500
750
2005 2006 2007 2008E 2009E
555 581
699775-785
138 141163
188-194
788-800
198-205
Regulated Operations Regulated Transmission and Storage
Mid-Tex Division Third Party
Tariff Based Market Based
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L8A LoopApprox.25.2
MilesCORYELL
WILLIAMSON
BELL
TRAVIS
LEE
MILAM
BRAZOS
McLENNAN
FALLS
LIMESTONE
K5(3”)
L8 L8A(2ND)
L8A(3GROESBECK
V(30”)
L8A(2ND)
L8A(12”)
M
L32(10”)
P(2N
D)(3
0”)
P(N
OR
TH)
(20”
)L(
SOU
TH)
(20”
)
NORTHZULCH
(12”)
L8(8”)
P(SO
UTH
)(20”
)P(
2ND
)(30”
)
L19(6”)
L8(6”)
L19-3A(4”)
L8B(
8”)
ROBERTSON
L8AM
(4”)
KINDER MORGANENTERPRISE
ETC
Austin Corridor Project – L8A Loop
Regulated Operations Regulated Transmission and Storage
Approximately 25 miles of 24-inch pipe extending from Groesbeck to Riesel Junction lines
Completed pipeline should supply an incremental 100 MMcf/d to current design demand of 232 MMcf/d
Provides increased service to existing LDCs and power plants and will compete for new power plant business in the Austin area
Estimated capital cost of between $50-$55 million
Estimated completion in 3rd
quarter of fiscal 2009
L8A Loop
Approx.
25.2 miles
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Atmos Energy Holdings, Inc.(Nonregulated Operations)
Atmos Energy Holdings, Inc.(Nonregulated Operations)
Atmos Energy Marketing• Marketing• Asset Optimization
Atmos Energy Marketing• Marketing• Asset Optimization
Atmos Pipeline, Storage and Other
• Non-Texas Assets (Storage & Pipeline)• Midstream• Other
Atmos Pipeline, Storage and Other
• Non-Texas Assets (Storage & Pipeline)• Midstream• Other
Nonregulated Operations
Kentucky/Mid-StatesKentucky/Mid-States
Atmos Energy Corporation(Regulated Operations)
Gas Distribution DivisionsTransmission & Storage
Atmos Energy Corporation(Regulated Operations)
Gas Distribution DivisionsTransmission & Storage
West TexasWest Texas
Colorado-KansasColorado-Kansas
LouisianaLouisiana
Mid-TexMid-Tex
MississippiMississippi
Atmos Pipeline -TexasAtmos Pipeline -Texas
Organization Structure
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Core Business Core Business Growth Business
Business Delivered Gas Asset Optimization Mid-Stream Development
ServicesAggregate & Purchase Gas Supply, Transport, Storage/Load Balancing, Risk Management and other bundled services
Extract (optimize) the value of owned, leased or managed storage and transportation assets as markets provide opportunities via price volatility
Gather, process and store producer volumes for downstream delivery to markets.
Strategy Find cost effective sources of gas and deliver to customers reliably and at a competitive price.
Provide creative solutionsand services to meetcustomers gas requirements
Capture additional value of storage and transportationassets thru arbitrage andsegmenting strategies, within risk limits.
Expand leased storage and transportation capacity thru new customer relationships
Develop or acquire gathering, processing or storage assets that will provide steady, predictable income and support marketing opportunities.
Reduce gas costs throughvalue-added services providedto producers.
MarginsMore predictable margins from primarily 90 day to 365 day contracts
Driven by customer demand for gas volumes, services and competition.
Variable margins, with upside.Driven by gas price spread volatility creating arbitrage potential, physical storage capabilities, costs & available storage & transport capacity.
Stable, fee-based income.Driven by gathering, processing, and storage services.
Nonregulated OperationsBusiness Mix
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Increased availability and demand for pipeline and storage assets
Uncertainty around the future role of large financial institutions in the marketing business
Tighter credit may result in consolidation or exit of competitors
Sustained higher natural gas prices supporting new drilling and production
Increased storage and transportation lease costs
Dampened time spread volatility
Market Overview
Neutral
Leases or manages storage and pipeline assets
Creates opportunity to increase availability of talent, offset in part by the loss of market liquidity
Business Reason
Positive
New sources of gas supply; offset by collections risk and working capital impact
Nonregulated OperationsImpact
Positive/Neutral
Neutral Potential to increase market share; offset by higher credit costs
Requires greater asset optimization marginsNegative
NegativeAEH has assets, experience and proven strategy to capture arbitrage value as prices vary
18
Atmos Energy Marketing Customers (gray states)
Nonregulated Operations
Key Growth DriversKey Growth Drivers
Retain existing customers(1,100 current customers)
Saturate existing markets-target Atmos Energy’s distribution footprint
Expand into targeted growth markets – where lease, own or manage storage & transportation assets
Expand asset management business
Unit margin expansion from premium value-added services provided to customers
Access to storage and transportation capacity
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Delivered Gas
(Bundled gas deliveries &peaking sales)
Delivered Gas
(Bundled gas deliveries &peaking sales)
Asset Optimization
(Storage & transportationmanagement)
Asset Optimization
(Storage & transportationmanagement)
Total AEMMarginsTotal AEMMargins
Impacted by customer volume demand Sales prices are:
• Cost plus profit margin• Cost plus demand charges
Margins: More predictable
Impacted by gas price spread values in the market (arbitrage opportunity)Physical storage capabilitiesAvailable storage and transport capacity
7.8 Bcf proprietary contracted capacity27 Bcf customer-owned / AEM- managedstorage
Margins: More variable
Total margins reflect:Stability from delivered gas margins Upside from optimizing our storage and transportation assets to capture arbitrage value
Margins: Stable with potential upside
2009E
$70 - $75 Million
$15 - $20 Million
$85 - $95 Million
=
Atmos Energy Marketing – Margin Composition
Nonregulated Operations
20
Gross Sales VolumesBCF
273
337424 450-470 480-500
0
100
200
300
400
500
600
2005 2006 2007 2008E 2009E
.25.31
.15 .14-.15 .14 -.15
0.00
0.10
0.20
0.30
0.40
2005 2006 2007 2008E 2009E
Delivered Gas Unit Margins(cents per Mcf)
Delivered Gas Volumes Projected to Continue Growth Trend
Nonregulated Operations
~ 15%
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Atmos Energy Marketing Realized Margins Projected Compound Annual Growth Rate
Nonregulated Operations
51.3
(1.9)
60.0
28.0
87.2
26.2
15.0-20.0.
57.1
28.8
(10.0)
10.0
30.0
50.0
70.0
90.0
110.0
130.0
2004 2005 2006 2007 2008E 2009E
Asset Optimization
Delivered Gas
113.4
88.0
75.0-85.0
85.9 85.0-95.0
49.4
65.0-70.0
10.0-15.015.0-20.0
70.0-75.0
($ m
illio
ns)
~ 13%
22
51.3
(1.9)
(2.8)
60.0
28.0
(26.0)
87.2
26.2
17.2
65.0-70.0
10.0-15.0
18.415.0-20.0
.
70.0-75.0
(30.0)
(10.0)
10.0
30.0
50.0
70.0
90.0
110.0
130.0
150.0
2004 2005 2006 2007 2008E 2009E
Delivered Gas Asset Optimization Unrealized Margins
($ m
illio
ns)
Nonregulated Operations
62.0
130.6
104.3
75.0-85.0
Mark-to-market accounting can cause large swings in unrealized margins. An example of the accounting can be found in the appendix to this presentation
Fiscal 2008E and Fiscal 2009E marketing margins exclude any mark-to-market impact
Atmos Energy Marketing Margins – Mark-to-Market Accounting Impact
85.0-95.0
46.6
57.1
28.8
65.0-70.0
15.0-20.010.0-15.0
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StorageDevelopment of Fort Necessity storage project in Franklin Parish, Louisiana2 reservoir storage locations in Kentucky and a 25% interest in a salt storage in Louisiana. (Total usable capacity of 3.9 BCF)
Pipeline21-mile pipeline (24-inch with 270,000 per day capacity) with receipt interconnects to Gulf South, Bridgeline, Acadian and Columbia Gulf interstate pipelines - ability to deliver to Atmos distribution affiliates, a few industrial customers, an Entergy power plant, and Entergy’s LDC in New Orleans
GatheringCompleted Park City Gathering System in Kentucky – 23 mile, low-pressure gathering system in Edmonson County, KentuckyClosing on October 1, 2008, of the Shrewsbury Gathering System acquisition
Growth DriversStrategic locationPreferred provider to LDC’s Expand asset management businessAccess to storage and transportation assetsGas price volatility
Atmos Pipeline & Storage & Other – Owned Asset Mix
Nonregulated Operations
23
24
Initial project includes development of three 5 Bcf caverns with six-turn injection and withdrawal capabilities
Storage facility spans 500 acres adjacent to large interstate pipelines
Pending FERC approval, first cavern projected to be operational in 2011; the other two caverns operational by 2012 and 2014
Depending on market demand, four additional storage caverns could potentially be developed
Successful non-binding open season completed in July 2008
Currently considering an ownership/development arrangement
Ft. Necessity Gas Storage Project in Louisiana
Nonregulated Operations
Salt Storage ProjectFranklin Parish, LA
(80 acres per square)
Legend of Nearby Pipelines
Regency ANR
LIG CGT
TGT TGP
TLGFort Necessity
Salt Dome
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23 mile low-pressure gas gathering system northeast of Bowling Green, KY with delivery into TGT’s Slaughter/Bowling Green lateral
Initially, 47 of 60 wells connected via polyethylene pipe with expected capacity of over 10,000 Mcf/d
Current production of about 2,200 Mcf/day
Gas contains about 16% nitrogen and is treated by a facility; treating capacity limited to 5,000 Mcf/day
Total cost of about $12 million; $3 million of capital spent in fiscal 2007 and about $9 million in fiscal 2008
Operations began in May 2008
Projected to generate about $1.3 million of net income per year over 10 years, with additional $2.5 million of capex to extend the backbone system
Full payback expected in 9 years
Park City Gathering System in Kentucky
Nonregulated Operations
26
$6.2 Million Asset Purchase -80 mile low-pressure gas gathering system
-26 miles of 10-inch lines-treatment & compression-Midwestern PL Interconnect-Intent to sell
-Proved reserves-Producing wells -Mineral interests
Current production of about 700Mcf/day
50 additional wells can be connected for Kentucky Natural Gas with expected capacity of 750 Mcf/d
Remaining gathering business projected to generate about $0.2 million of net income per year over 10 years to yield an IRR of 27%
Shrewsbury Gathering System in Kentucky
Nonregulated Operations
AEH 6”
Shrewsbury 10”
Park City
AEH 8” Orbit
White Plains Storage
AEH Central Treating Facility
Proposed
12”
32,000 acres
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11.5
1.6
5.3
11.8
3.4
5.9
16.0
10.7
3.8
10.0-12.0
4.0 - 5.0
4.0 - 6.0
11.0-13.0
4.0-5.0
14.0-16.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2005 2006 2007 2008E 2009E
OtherAsset OptimizationStorage & Transport
($ m
illio
ns)
Nonregulated Operations
18.421.1
30.5
Atmos Pipeline and Storage Realized MarginProjected Fiscal 2009E Compound Annual Growth Rate
18.0- 23.0
29.0- 34.0
Asset Optimization
~ 29.5%
Projected CAGR
Storage & Transportation
~ 1%
Other ~ 29.7%
~ 15%
28
11.5
1.6
5.3
(4.7)
11.8
3.4
5.9
3.4
16.0
10.7
3.82.1
10.0-12.0
4.0 - 5.0
4.0 - 6.0
11.0-13.0
4.0 - 5.0
14.0-16.0
(10.0)
(5.0)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2005 2006 2007 2008E 2009E
Unrealized MarginsOtherAsset OptimizationStorage & Transport
($ m
illio
ns)
Nonregulated Operations
13.7
24.5
32.6
Atmos Pipeline and Storage and Other MarginMark-to-Market Accounting Impact
18.0- 23.0
29.0- 34.0 Mark-to-market accounting can cause large swings in unrealized margins. An example of the accounting can be found in the appendix to this presentationFiscal 2008E and Fiscal 2009E pipeline and storage margins exclude any mark-to-market impact
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Atmos Energy expects earnings to be in the range of $2.05 - $2.15 per diluted share for the 2009 fiscal yearAssumptions include:
Contribution from natural gas marketing segment reflects less volatility in gas price spreads
o Total expected gross margin contribution from the marketing segment in the range of $85 million to $95 million, excluding any material mark-to-market impact at September 30, 2009
Continued successful execution of rate strategy and collection effortsBad debt expense of no more than $12 millionAverage gas cost ranging from $9 - $11 per mcfShort-term interest rate of 3.75%No material acquisitionsNormal weather
Note: Changes in these events or other circumstances that the company cannot currently anticipate could materially impact earnings, and could result in earnings for fiscal 2009 significantly above or below this outlook.
Consolidated Earnings Guidance – Fiscal 2009E
Financial Review
30
$ 2.05 – $2.15$ 1.95 – 2.05$ 1.92$ 1.82$ 1.72Earnings Per Share
91.490.187.781.479.0Avg. Diluted Shares
187 – 197176 – 185168148136Total
17 – 1911 – 1215104Pipeline, Storage & Other
30 – 3327 – 30465823Natural Gas Marketing
44 – 4643 – 44342728Regulated Trans. & Storage
$ 96 – 99$ 95 – 99$ 73$ 53$ 81Natural Gas Distribution
2009E2008E200720062005
Financial ReviewProjected Net Income by Segment($ millions, except EPS)
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136
82
133
178
416
148
89
147
186
433
168
94
145
199
463
110 - 115
136-138
200-210
480-490
187-197
121-127
142-144
215-220
480- 490
0
200
400
600
800
1,000
1,200
2005 2006 2007 2008E 2009E
Selected Income Statement Components($ millions)
D & A $215 - $220Interest $142 - $144Income Tax $121 - $127Net Income $187 - $197
O & M $480 - $490
2009E Consolidated($ millions)
Financial Review
176 - 185
Shares Out 91.4 million
32
99.1
228.3
80-83
285- 288
70-72
280-285
$0
$100
$200
$300
$400
2007 2008E 2009E
RegulatedGas Distribution
RegulatedTransmission & Storage
$365-$371
Capital Expenditures
$327.4
2.1
57.2
10-11
61-62
62-63
48-50
$0
$20
$40
$60
$80
$100
$120
2007 2008E 2009E
$71-73
4.6 1.1 15-16
4-548-52
2-3
$0
$15
$30
$45
$60
$75
2007 2008E 2009E
Nonregulated
$59.3
$5.7
Financial Review
Consolidated fiscal 2009 CAPEX projection is $510-$525 million
($ millions)
$19-21
Growth Capital
Non- Growth Capital
2008E as of August 5, 2008
$350-$357
$110-$113
$50-$55
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Bank Facility Features:In December 2006, Atmos Energy entered into a new $600 million, 5-year committed revolving credit facility through December 2011
Serves as a backup liquidity facility for our $600 million commercial paper programCommitment amount from Lehman Brothers Bank approximately $33 million
In November 2007, Atmos Energy entered into a new $300 million, 364-day committed revolving credit facility
Supplements amounts available under existing $18 million committed credit facilityCommitment amount from Lehman Brothers Bank approximately $17 million
In March 2008, Atmos Energy Marketing amended and extended its $580 million uncommitted demand working capital credit facility to March 31, 2009
Used primarily for Letters of Credit and working capital needsParticipating banks include BNP Paribas, Fortis Capital, Brown Brothers Harriman, Natixis, Royal Bank of Scotland, Societe Generale, RZBFinance, and Bank of Tokyo-Mitsubishi UFJ
Financial ReviewAmple Liquidity with Existing Credit Lines
34
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
'84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08
$1.30E
51.5%53.7%
60.9%59.3%
43.3%
53.6%
40
45
50
55
60
65
2003 2004 2005 2006 2007 Jun-08
Dividend Payout Ratio
Debt Capitalization Ratio
Solid Dividend and Credit Positions
Dividend / SharePayout Annual Dividend
Amounts are adjusted for mergers and acquisitions. Fiscal 2008 is the indicated annual dividend.
Moody’sSenior Unsecured Debt: Baa3Commercial Paper: P-3Outlook: Stable
Standard & Poor’sSenior Unsecured Debt: BBBCommercial Paper: A-2Outlook: Positive
FitchSenior Unsecured Debt: BBB+Commercial Paper: F-2Outlook: Stable
Investment Grade Credit
Current Dividend Yield About 4.8%Average LDC Payout Ratio = 65%
Financial Review
78% 77%
72%
63-67%67%
81%
69%
1.26 1.28
1.241.221.201.18
1.30
60%
65%
70%
75%
80%
85%
2002 2003 2004 2005 2006 2007 2008E$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
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Financial Review
14.1x
15.2x
13.2x
11.0
12.0
13.0
14.0
15.0
16.0
S&P 500 Peer GroupAvg.
Compelling Valuation and Total Return Proposition
4.9
3.9
4.7
4.8 11.9
2.0
3.0
6.0
9.0
12.0
15.0
Peer GroupAvg.
S&P 500
5 year growth rate dividend yield
Forward P/E Estimates 5 Year Expected Total Return
Companies in the peer group include AGL Resources, Laclede, New Jersey Resources, Nisource, Northwest Natural Gas, Oneok, Piedmont Natural Gas, Southwest Gas and WGL Holdings.
Source: Bloomberg @ 9/25/08Peer group averages exclude Atmos
8.8% 9.5%
13.9%
Atmos EnergyAtmos
Energy
36
SlideAppendix
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10.0%Authorized Return on Equity (ROE)9.6%
Effective 7/1/08Capital Structure 52% Debt; 48% EquityEffective 11/08 (est.)
Pending city council approval$20.0 Million RRM
Effective 11/08 (est.)(approx. $16 million)
Effective 11/08 (est.)(approx. $2 million)
$10.3 Million GRIP Filing RecoveryIncluded in RRM filing
Effective 7/1/08Gas Cost Recovery of Bad DebtEffective 11/08 (est.)
$1 Million Conservation Program
$19.6 Million Rate Increase
$10 Million Rate Increase
Systemwide Increase in Revenues
100%
Effective 11//08 (est.)
__
Effective 4/1/08(approx. $8.0 million)
Settlement(438 of 439 Cities)
~80%
Effective 10/1/08
__
Effective 7/8/08(approx. $3.9 million)
RRC Order(City of Dallas & Environs)
~20%
Regulated OperationsMid-Tex Division 2008 Rate Outcome Summary
38
713
588
0
200
400
600
800
Atmos Energy Peer Group Avg.
Regulated Distribution Efficiency Metrics
$119
$202
$0
$50
$100
$150
$200
$250
Atmos Energy Peer Group Avg.
Distribution O&M Expense per CustomerCustomers Served Per Distribution Employee
Note: Results are based on fiscal 2007 performance for Atmos and most recent information available for the peer group. Companies in the peer group include AGL Resources, Laclede, New Jersey Resources, Nisource, Northwest Natural Gas, Oneok, Piedmont Natural Gas, Southwest Gas and WGL Holdings.
Operating Efficiencies Benefit Customers & Shareholders
Distribution Bad Debt Expense as % ofResidential & Commercial Revenue
Perc
ent
Non-Weather Sensitive MarginWeather-Sensitive Margin
Non-Weather-Sensitive Margin 2008-2009E Heating Season
97%
3% (approx. $32 million) 0.83
0.29
0.58 0.58 0.61
0.350.30
0.0
0.5
1.0
2003 2004 2005 2006 2007 2008E 2009E
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Nonregulated OperationsAtmos Energy Marketing
We commercially manage our storage assets by capturing arbitrage value through optimization strategies that create embedded (forward) value in the portfolio. We report the transactions for external financial reporting purposes in accordance with generally accepted accounting principles (“GAAP”).
GAAP Reported Value is the period to period net change in fair value of the portfolio reported in the income statement that results from the process of marking to market the physical storage volumes and corresponding financial instruments in an interim period.
Economic Value is the period to period forward margin of our storage portfolio that results from the process of calculating our weighted average cost of inventory (WACOG), and our weighted average sales price of our forward financials (WASP), then multiplying the difference times inventory volumes. This margin will be realized in cash when the hedged transaction is executed or when financials are settled and then reset to stay hedged against physical volumes.
• Economic Value represents the “forward” economic margin of the transactions, while GAAP reported results reflect that portion of our “forward” margin that has been recorded in the income statement.
• Volatility in earnings includes the impact of the accounting treatment of our storage portfolio in accordance with GAAP and is reflective of relatively high price volatility of the prompt month, and the relatively low volatility of the offsetting forward months.
Economic Value vs. GAAP Reported Results
40
Reported GAAPValue
- Physical and FinancialPositions
$34.3 MM
Reported GAAPValue
- Physical and FinancialPositions
$34.3 MM
Economic Value*(Commercial Value)
- Physical and FinancialPositions
$48.2 MM
Market Spread
*Potential Gross Profit$13.9 MM
* There is no assurance thatthe economic value or the potential gross profit will be fully realized in the future.
At June 30, 2008
Economic Value vs. GAAP Reported Results
Nonregulated OperationsAtmos Energy Marketing
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Physical Period Volume Total Total TotalEnding (Bcf) WASP WACOG EV ($ in millions) ($ per mcf) ($ in millions) ($ per mcf) ($ in millions)
3/31/2007 19.6 8.2196 7.6701 0.5495 10.8 (1.2347) (24.2) 1.7842 35.06/30/2007 21.5 9.5409 7.6238 1.9171 41.2 (0.3343) (7.2) 2.2514 48.4
2007 Variance 1.9 1.3213$ (0.0463)$ 1.3676$ 30.4$ 0.9004 17.0$ 0.4672$ 13.4$
3/31/2008 20.7 8.6763 8.1555 0.5208 10.8 (0.0296) (0.6) 0.5504 11.46/30/2008 17.5 11.0565 8.3037 2.7528 48.2 1.9616 34.3 0.7912 13.9
2008 Variance (3.2) 2.3802$ 0.1482$ 2.2320$ 37.4$ 1.9912 34.9$ 0.2408$ 2.5$
($ per mcf)Economic Value (EV) Market SpreadGAAP Reported Value - MTM
WASP: Weighted average sales price for gas held in storageWACOG: Weighted average cost of AEM’s gas in storageEV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis
Nonregulated OperationsAtmos Energy MarketingEconomic Value vs. GAAP Reported ResultsThree Months Ended
At June 30, 2008
42
Physical Period Volume Total Total TotalEnding (Bcf) WASP WACOG EV ($ in millions) ($ per mcf) ($ in millions) ($ per mcf) ($ in millions)
9/30/2006 14.5 11.9716 7.8329 4.1387 60.0 (1.1076) (16.0) 5.2463 76.06/30/2007 21.5 9.5409 7.6238 1.9171 41.2 (0.3343) (7.2) 2.2514 48.4
2007 Variance 7.0 (2.4307)$ (0.2091)$ (2.2216)$ (18.8)$ 0.7733 8.8$ (2.9949)$ (27.6)$
9/30/2007 12.3 11.1547 7.8297 3.3250 40.8 0.8819 10.8 2.4431 30.06/30/2008 17.5 11.0565 8.3037 2.7528 48.2 1.9616 34.3 0.7912 13.9
2008 Variance 5.2 (0.0982)$ 0.4740$ (0.5722)$ 7.4$ 1.0797 23.5$ (1.6519)$ (16.1)$
($ per mcf)Economic Value (EV) Market SpreadGAAP Reported Value - MTM
WASP: Weighted average sales price for gas held in storageWACOG: Weighted average cost of AEM’s gas in storageEV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis
Nonregulated OperationsAtmos Energy MarketingEconomic Value vs. GAAP Reported ResultsNine Months Ended
At June 30, 2008
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Atmos Energy CorporationJurisdictional Rate Data
Jurisdiction
Effective Date of Last Rate
Action
Date of Last Rate Filing
(pending)Rate Base
(in thousands) 1
Requested Rate Base (in
thousands)
Authorized Rate of Return
Requested Rate of Return
Authorized Return on
Equity
Requested Return on
Equity
Authorized Debt/Equity
Ratio
Requested Debt/Equity
Ratio Bad debt Rider 3 WNA
Performance Base Rate Program 4
6/30/08 Meters
Atmos Pipeline-Texas 5/24/04 417,111 8.258% 10.00% 50/50 NA N/A N/A n/aAtmos Pipeline-Texas - GRIP 4/15/2008 713,351 8.258% 10.00% 50/50 NA N/A N/A n/aMid-Tex - Settled Cities 10/1/08 1,176,453 6 7.79% 9.60% 52/48 Y Y N 1,233,300 Mid-Tex - Dallas & Environs 6/24/08 1,127,924 6 7.98% 10.00% 52/48 Y Y N 308,300 Lubbock 3/1/04 6/1/2008 43,300 52,186 9.15% 7.79% 11.25% 9.60% 50/50 52/48 Y Y N 73,171 Lubbock Environs GRIP 7 9/1/2008 50,778 9.15% 11.25% 50/50 NA N/A N/A n/aWest Texas Cities 5/1/04 8/29/2008 87,500 112,043 8.77% 7.79% 10.50% 9.60% 50/50 52/48 Y Y N 156,785 W. TX Cities Environs GRIP 7 1/1/2008 96,738 8.77% 10.50% 50/50 NA N/A N/A n/aAmarillo 9/1/03 36,844 9.88% 12.00% 50/50 Y Y N 70,327 Colorado 10/1/07 81,208 8.45% 11.25% 52/48 N N N 110,322 Kansas 05/12/08 135,561 2 8.47% 2 11.00% 2 52/48 Y Y N 129,877 Georgia 9/17/2008 66,893 7.75% 10.70% 55/45 N Y Y 69,484 Illinois 11/1/00 24,564 9.18% 11.56% 67/33 N N N 23,421 Iowa 3/1/01 5,000 2 11.00% 57/43 N N N 4,428 Kentucky 8/1/07 169,406 2 8.82% 2 11.75% 2 52/48 N Y Y 177,396 Missouri 3/4/07 55,976 2 8.59% 2 12.00% 2 56/44 N N 5 N 58,581 Tennessee 11/4/07 186,506 8.03% 10.48% 56/44 N Y Y 133,965 Virginia 08/1/04 2/20/2008 32,668 36,675 8.46%-8.96% 8.08% 9.50%-10.50% 10.00% 52/48 55/45 Y Y N 23,476 TransLa 4/1/08 96,834 2 8.00% 10.00%-10.80% 52/48 N Y N 79,739 LGS 7/1/08 221,970 2 8.21% 10.40% 52/48 N Y N 280,742 Mississippi 1/1/05 9/5/2008 196,801 214,525 8.23% 8.06% 9.80% 10.46% 53/47 53/47 N Y N 272,105
1 The rate base, authorized rate of return and authorized return on equity presented in this table are those from the last base rate case for each jurisdiction.These rate bases, rates of return and returns on equity are not necessarily indicative of current or future rate bases, rates of return or returns on equity.
2 A rate base, rate of return, return on equity or debt/equity ratio was not included in the respective state commission's final decision.3 The bad debt rider allows us to recover from ratepayers the gas cost portion of uncollectible accounts.4 The performance-based rate program provides incentives to natural gas utility companies to minimize purchased gas costs by allowing the utility company
and its customers to share the purchased gas cost savings.5 The Missouri jurisdiction has a straight-fixed variable rate design, which decouples gross profit margin from customer usage patterns.6 Mid-Tex rate base for settled cities and Dallas both represented on a 'system-wide' basis.7 Lubbock & WT Cities Environs are calculated on a 'system wide' basis and will only be applied to environs areas once RRM/CCVP takes effect.