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    2007_NY-printable 2007_NY-printable Document Transcript

    • Atmos Energy Corporation Analyst Conference December 2007 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. 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. Further, we will only update earnings guidance through our quarterly and annual earnings releases. All estimated financial metrics for fiscal year 2008 and beyond that appear in this presentation are current as of the date noted on each relevant slide. 2
    • Management Participants Robert W. Best - Chairman, President & CEO J. Patrick Reddy - Senior VP & CFO Kim Cocklin - Senior VP, Regulated Operations Mark H. Johnson - Senior VP, Nonregulated Operations Susan Giles- VP, Investor Relations 3 Atmos Energy Today Robert W. Best Chairman, President & CEO 4
    • Overview Company Profile The nation’s largest pure-gas distribution company Solid financial foundation Track record of creating shareholder value • Consistent earnings growth • 24 consecutive years of increasing dividends Focused strategy over time • Grow through prudent acquisitions • Maximize core regulated, natural gas distribution earnings capability • Complement core distribution business through select nonregulated operations 5 Overview Scope of Operations Regulated gas distribution operates in 12 states (gold) Nonregulated operates in 22 states (gray) 6
    • Overview Atmos Energy Corporation Atmos Energy Corporation (Regulated Operations) (Regulated Operations) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. Gas Distribution Divisions Gas Distribution Divisions Transmission & Storage (Nonregulated Operations) Transmission & Storage (Nonregulated Operations) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Marketing Marketing • • Asset Optimization Asset Optimization Louisiana Louisiana Atmos Pipeline, Storage Atmos Pipeline, Storage Mid-Tex Mid-Tex & Other & Other • • Non-Texas Assets (Storage & Pipeline) Mississippi Non-Texas Assets (Storage & Pipeline) Mississippi • • Midstream Midstream • • Other Other West Texas West Texas Atmos Pipeline -Texas Atmos Pipeline -Texas 7 Overview Successful Acquisition History Acquisition Company Customers Purchase Date Acquired Acquired Price $ (000s) 1986 Trans Louisiana Gas 69,000 44,100 1987 Western Kentucky Gas 147,000 85,100 1993 Greeley Gas Company 98,000 111,717 1997 United Cities Gas Co 307,000 469,485 2000 ANG Missouri Assets 48,000 32,000 2001 55% interest in Woodward - 26,657 2001 Louisiana Gas Service 279,000 363,399 2002 Mississippi Valley Gas 261,500 220,200 2004 ComFurT Gas Inc. 1,800 2,000 2004 TXU Gas Company 1,500,000 1,916,696 8
    • Overview Diluted Earnings Per Share Contribution Shows Steady Growth % R 6.1 $1.95-$2.05 CAG $1.92 $2.10 $1.82 $1.72 $1.58 $1.80 0.59-0.61 Nonregulated 0.69 0.34 $1.50 Operations 0.84 0.42 $1.20 Regulated Operations $0.90 1.36-1.44 1.38 1.23 $0.60 1.16 0.98 $0.30 $0.00 2004 2005 2006 2007 2008E 9 Overview Regulated Operating Income Moving Towards Historic Levels Estimated to be 80% in Fiscal 2008 1% 4% 5% 4% 100% 12% Nonregulated Pipeline, 16% 19% 27% Storage & Other 80% 19% 20% Nonregulated Natural Gas 20% 16% 60% Marketing Regulated Transmission 68% 40% 60% & Storage 53% 56% Regulated Gas 20% Distribution 0% 2005 2006 2007 2008E 10
    • Overview Successfully Executing on the Rate Strategy GRIP/ Purchased Accelerated Decoupling/ Gas Cost Number of Percentage Gas Cost Capital Rate Bad Debt Customers of Total Adjustments WNA Recovery Stabilization Recovery 4 1,800,000 Texas 57% Partial Louisiana 350,000 11% Mississippi 270,000 8% Remaining 1 2 3 5 Jurisdictions 770,000 24% Partial Partial Partial Partial means applicable within certain jurisdictions within the category. 1 Excludes Colorado, Iowa and Illinois for a total of 137,657 customers. 2 Includes Missouri, Kansas and Georgia for a total of 258,102 customers. 3 Includes Missouri for a total of 59,672 customers. 4 Includes Amarillo for a total of 69,772 customers. 5 Includes Kansas and Virginia for a total of 151,545 customers. 11 Overview Annual Dividend for the Years 1984 – 2008E $1.30E $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 '8 '8 '8 '8 '8 '8 '9 '9 '9 '9 '9 '9 '9 '9 '9 '9 '0 '0 '0 '0 '0 '0 '0 '0 '0 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 Note: Amounts are adjusted for mergers and acquisitions. For fiscal 2008, $1.30 is the indicated annual dividend. 12
    • Overview Dividend Payout Ratio Has Improved Payout Dividend / Share 85% $1.50 81% 80% $1.40 78% 77% 1.30 1.28 75% $1.30 1.26 72% 69% 1.24 70% $1.20 1.22 1.20 1.18 63-67% 66% 65% $1.10 60% $1.00 2002 2003 2004 2005 2006 2007 2008E Current Dividend Yield Approximately 5% Average LDC Payout Ratio = 65% 13 Overview Improved Debt Capitalization Ratio Achieved Stated Goal of 50-55% 65 (TXU Gas) 60.9% 59.3% 60 55 53.6% 53.7% 50 45 43.3% 40 Fiscal 2003 Fiscal 2004 Fiscal 2005* Fiscal 2006 Fiscal 2007 * TXU Gas acquisition effective 10/1/04 14
    • Overview Investment Grade Credit Ratings Moody’s Rating Senior Unsecured Debt: Baa3 Commercial Paper: P-3 Outlook: stable Standard & Poor’s Senior Unsecured Debt: BBB Commercial Paper: A-2 Outlook: positive Fitch Senior Unsecured Debt: BBB+ Commercial Paper: F-2 Outlook: stable 15 Overview In Summary: Achievements and Priorities Fiscal 2007 Achievements (1) Increased earnings per share by 5.5% (2) Paid cash dividends for the 23rd consecutive year (3) Regained debt capitalization target of 50-55% (4) Received $40 million of rate increases in regulated operations (5) Commenced Park City low-pressure gas gathering project in Kentucky Fiscal 2008 Priorities (1) Deliver earnings objective of $1.95 - $2.05 per diluted share (2) Preserve our progress in strengthening the balance sheet (3) Seek improved rate design mechanisms to cure earnings deficiencies in regulated operations (4) Identify, review, and develop internal projects in nonregulated businesses that provide above-average financial returns 16
    • Regulated Operations Kim Cocklin Senior VP, Regulated Operations 17 Regulated Operations Atmos Energy Corporation Atmos Energy Corporation (Regulated Operations) (Regulated Operations) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. Gas Distribution Divisions Gas Distribution Divisions Transmission & Storage (Nonregulated Operations) Transmission & Storage (Nonregulated Operations) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Marketing Marketing • • Asset Optimization Asset Optimization Louisiana Louisiana Atmos Pipeline, Storage Atmos Pipeline, Storage Mid-Tex Mid-Tex and Other and Other • • Non-Texas Assets (Storage & Pipeline) Non-Texas Assets (Storage & Pipeline) Mississippi Mississippi • • Midstream Midstream • • Other Other West Texas West Texas Atmos Pipeline -Texas Atmos Pipeline -Texas 18
    • Regulated Natural Gas Distribution Profit Drivers in the Distribution Business Regulated Gas Distribution Operates in 12 States (gold) Customer and meter growth Growing rate base • Estimated rate base at 9/30/07 was $3.4 billion Managing costs Executing our rate strategy 19 Regulated Natural Gas Distribution Mid-Tex Division Largest Atmos division; serves about 550 communities Largest natural gas distributor in Texas Over 28,300 miles of distribution pipe Weather normalization in place from November - April Accelerated capital recovery through annual GRIP filings $52 million rate case pending Authorized Effective Date Rate Base Authorized Debt/Equity of Last Rate Jurisdiction Meters ($ thousands) ROE Ratio Action Mid-Tex 1,518,119 1,043,857 10.00% 52/48 04/01/07 Meter count as of 9/30/07. Remaining rate statistics are as of the last rate case indicated. 20
    • Regulated Natural Gas Distribution West Texas Division Serves about 80 communities Over 14,600 miles of distribution pipe Weather normalization in place from October - May Accelerated capital recovery through annual GRIP filings Recovery of gas cost portion of bad debt expense in Amarillo Authorized Effective Date Rate Base Authorized Debt/Equity of Last Rate Jurisdiction Meters ($ thousands) ROE Ratio Action Amarillo 69,772 36,844 12.00% 50/50 09/01/03 Lubbock 73,672 43,300 11.25% 50/50 03/01/04 West Texas 165,919 87,500 10.50% 50/50 05/01/04 Meter count as of 9/30/07. Remaining rate statistics are as of the last rate case indicated in each jurisdiction. 21 Regulated Natural Gas Distribution Louisiana Division Serves about 300 communities Over 8,200 miles of distribution pipe Weather normalization in place from December - March Rates updated annually through stable rate filings Authorized Effective Date Rate Base Authorized Debt/Equity of Last Rate Jurisdiction Meters ($ thousands) ROE Ratio Action Trans LA 79,985 96,848 10.00 – 10.80% 52/48 04/01/07 LGS 277,497 207,587 10.40% 52/48 07/01/07 Meter count as of 9/30/07. Remaining rate statistics are as of the last rate case indicated in each jurisdiction. 22
    • Regulated Natural Gas Distribution Mississippi Division Serves about 110 communities Over 6,400 miles of distribution pipe Weather normalization in place from November - April Rates updated annually through stable rate filings Authorized Effective Date Rate Base Authorized Debt/Equity of Last Rate Jurisdiction Meters ($ thousands) ROE Ratio Action Mississippi 270,980 196,801 9.80% 47/53 01/01/05 Meter count as of 9/30/07. Remaining rate statistics are as of the last rate case indicated. 23 Regulated Natural Gas Distribution Colorado-Kansas Division Serves about 170 communities Over 6,600 miles of distribution pipe Weather normalization in Kansas from October - May $5 million rate case pending in Kansas Authorized Effective Date Rate Base Authorized Debt/Equity of Last Rate Jurisdiction Meters ($ thousands) ROE Ratio Action Colorado 109,860 84,711 11.25% 52/48 07/01/05 Kansas 127,824 * * 03/01/04 * * Not included in state commission’s final decision. Meter count as of 9/30/07. Remaining rate statistics are as of the last rate case indicated in each jurisdiction. 24
    • Regulated Natural Gas Distribution Kentucky/Mid-States Division Serves over 420 communities in 7 states Over 12,000 miles of distribution pipe Weather normalization in 4 states • Georgia from October - May • Kentucky from November - April • Tennessee from November - April • Virginia from January - December Decoupling rate mechanism in Missouri Accelerated capital recovery in Missouri and Georgia Recovery of gas cost portion of bad debt expense in Virginia Authorized Effective Date Rate Base Authorized Debt/Equity of Last Rate Jurisdiction Meters ($ thousands) ROE Ratio Action Georgia 70,606 62,380 10.13% 55/45 12/20/05 Illinois 23,342 24,564 11.56% 67/33 11/01/00 Iowa 4,455 5,000 11.00% 57/43 03/01/01 Kentucky 177,988 * * * 08/01/07 Missouri 59,672 * * * 03/04/07 Tennessee 133,715 186,506 10.48% 56/44 11/04/07 Virginia 23,721 30,672 9.50-10.50% 52/48 08/01/04 * Not included in state commission’s final decision. Meter count as of 9/30/07. Remaining rate statistics are as of the last rate case indicated in each jurisdiction. 25 Regulated Natural Gas Distribution Stabilizing Natural Gas Distribution Margin Sensitivity Weather Normalization Adjustment (WNA) for Mid-Tex and Louisiana divisions became effective for the 2006-2007 winter heating season, which reduced margin exposure to weather from 17 percent to 5 percent With the rate design changes effective for the 2007-2008 winter heating season, weather-sensitive margin is expected to be further reduced to about 3 percent 2004–2006 2006–2007 2007–2008E Heating Season Heating Season Heating Season (Post Mid-Tex) 3% 5% 17% 95% 97% 83% Non-Weather Sensitive Margin Weather Sensitive Margin * Non-weather sensitive margin includes weather-normalized margins, monthly fixed charges and gas consumption that is not correlated to weather - gas clothes dryer, gas water heater, gas cooking, etc. 26
    • Regulated Natural Gas Distribution Gas Distribution Gross Profit per Meter $340 320-325 $320 $ per meter 299 299 $300 293 291 287 $280 271 $260 $240 2002 2003 2004 2005 2006 2007 2008E 11% 13% 6% 1% 4% Normal Normal warmer warmer warmer warmer colder 27 Regulated Natural Gas Distribution Managing Capital Expenditures at the LDC ($ millions) $254-$260 $250 $250 Depreciation Expense Capital Expenditures $51 $200 $200 $184 $150 $150 $91-$94 $100 $100 $50 $50 $0 $0 2002 2003 2004 2005 2006 2007 2008E Non-Growth Growth Depreciation 28
    • Regulated Natural Gas Distribution Leading Efficiency Metrics vs. Peers Distribution O&M Expense Customers Served per Distribution Employee per Customer $250 800 $200 713 600 $202 588 $150 400 $119 $100 200 $50 0 $0 Atmos Energy Peer Group Avg. Atmos Energy Peer Group Avg. 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. 29 Regulated Operations Approved Annual Rate Increases in the Regulated Operations $60.0 $50 - $60 $50.0 $40.1 ($ Millions) $39.0 $40.0 2.9 1.4 $30.0 25.6 $18.6 34.3 $20.0 $16.2 2.8 5.7 $10.0 $6.3 15.8 11.6 1.8 10.5 4.5 3.3 $0.0 2003 2004 2005 2006 2007 2008-2012E Annual Mechanism GRIP General Rate Case Aggregate 30
    • Regulated Operations Upside ROE Potential in Regulated Distribution and Pipeline Operations Regulatory Return on Equity % 10.0 ALLOWED ROE – 10.2% Regulatory lag, inflation, etc. 9.3 8.0 POTENTIAL ROE – 8.0 % 7.7 7.5 6.0 4.0 2.0 2005 2006 2007 ACTUAL Earned Regulatory ROE % Note: Calculations are based on regulatory accounting treatment and are not consistent with GAAP accounting 31 Regulated Transmission and Storage Atmos Pipeline -Texas 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 740 Bcf in fiscal 2008 • Current average volume of approximately 2.0 Bcf/d • Demonstrated peak day deliveries of 3.5 Bcf/d Five Storage Facilities • One salt cavern, four reservoirs West Texas Division • 39 Bcf working gas capacity • 1.2 Bcf/d maximum withdrawal Mid-Tex Division • 270 MMcf/d maximum injection Atmos Pipeline-Texas Atmos Energy Headquarters 32
    • Regulated Transmission and Storage Atmos Pipeline - Texas Business Flow Customers Margins Potential Risk Risk Management Atmos Mid-Tex Division Tariff Based Rates Weather Seamless Performance Industrial Tariff Based Rates Weather Strong Customer Service Credit Exposure Timely & Accurate Information Electric Generation Market Based Rates Weather Enforceable Contract Language ERCOT Strong Customer Service Competition Flexible Value Added Service Through System Market Based Rates Basis Differentials Timely Information Competition Marketing Excellence Available Capacity Market Knowledge Other Market Based Rates Basis Differentials Strong Customer Service Competition Volume Monitoring Available Capacity Market Knowledge Maintain/Increase Margins + Increased Throughput + Managed Risk Profile = Stable Earnings Growth 33 Regulated Transmission and Storage Atmos Pipeline - Texas Transportation Mix APT Revenue Sources APT Transport Volumes 2008E 2008E Mid-Tex Mid-Tex Elec Gen Elec Gen Other Transport Transport 7% 10% Other 14% 25% 49% 10% Industrial Industrial 4% 5% Pipeline-Thru Pipeline-Thru System System 51% 25% Firm storage and transportation services to Mid-Tex and other LDCs Interruptible transportation and ancillary services to other customer classes Capacity growth opportunities with timely recovery through GRIP • Provides reliability for Mid-Tex distribution customers Strategically positioned to serve growing producer needs in Texas 34
    • Regulated Transmission and Storage Atmos Pipeline - Texas Growth Drivers 735-745 699 750 Growth Drivers Transportation Volumes 581 555 600 Pursue capacity and 547-550 compression growth 505 450 (Bcf) 411 opportunities such as Opelika 374 300 compressor relocation 150 1188-195 194 Increased through-system 181 170 volumes primarily from 0 2005 2006 2007 2008E producers in Barnett Shale Mid Tex Division Third Party Margin expansion through 200 172-177 ancillary services such as 163 Margin Composition 175 parking and lending, balancing, 141 138 150 ($millions) blending, and compression 78-81 78 125 64 60 Gas price volatility increasing 100 basis differentials between 75 94-96 85 Texas hubs 50 78 77 25 0 2005 2006 2007 2008E Tariff Based Market Based 35 Regulated Transmission and Storage Atmos Pipeline-Texas Recent Capacity Enhancement Projects Project Volume Start Date (MMcf/d) 225 1 North Side Loop Phase 1: December 2005 Phase 2: July 2006 Howard Compression 150 August 2006 Katy Compression 50 July 2006 1 Huckabay Compression 85 July 2007 150 2 DFW Airport September 2007 2 Opelika Compression >30 July 2008 Estimate 1 2007 partial year; 2008 full year 2 2008 partial year; 2009 full year 36
    • Regulated Transmission and Storage Atmos Pipeline -Texas Opelika Project Project relocates idle compression from existing properties and provides much needed supply support to East Texas • Adds critical capacity for Mid-Tex winter load requirement • Secures industrial customers by providing gas source options Capital expenditure estimated at about $6 million Minimum estimated ROR of 12.8% 30,000 Mmbtu/d capacity 37 Regulated Transmission and Storage Barnett Shale y alle on V Cott sier Bos s d San Permian Location of gas supply basins 38
    • Nonregulated Operations Mark Johnson Senior VP, Nonregulated Operations 39 Nonregulated Operations Organization Structure Atmos Energy Corporation Atmos Energy Corporation (Regulated Operations) (Regulated Operations) Atmos Energy Holdings, Inc. Atmos Energy Holdings, Inc. Gas Distribution Divisions Gas Distribution Divisions Transmission & Storage (Nonregulated Operations) Transmission & Storage (Nonregulated Operations) Colorado-Kansas Colorado-Kansas Atmos Energy Marketing Atmos Energy Marketing Kentucky/Mid-States Kentucky/Mid-States • • Marketing Marketing • • Asset Optimization Asset Optimization Louisiana Louisiana Atmos Pipeline, Storage Atmos Pipeline, Storage Mid-Tex and Other Mid-Tex and Other • Non-Texas Assets (Storage & Pipeline) • Non-Texas Assets (Storage & Pipeline) Mississippi • • Midstream Mississippi Midstream • • Other Other West Texas West Texas Atmos Pipeline -Texas Atmos Pipeline -Texas 40
    • Nonregulated Operations Market Overview Business Reason Impact Positive Leases or manages storage Increased availability and demand for and pipeline assets pipeline and storage assets AEH has assets, experience Positive Dampened price volatility expected and proven strategy to capture arbitrage value as prices vary LNG business is ramping up with more Additional source of low cost Positive gas expected from imports supply for customers; AEM has large takeaway capacity in Gulf. Neutral Tighter credit may result in consolidation Potential to increase market share; or exit of small regional marketers. offset by higher credit costs Improved credit quality of Neutral Large financial institutions entering potential counterparties; offset physical gas marketing and trading by increased competition and business (primarily acquisitions) lower margins New entrants and business growth Neutral Talent loss risk; offset by strong creating highly competitive market for culture and competitive talent compensation package Sustained higher natural gas prices Neutral New sources of gas supply; supporting new drilling and production offset by collections risk and working capital impact Negative Increased storage and transportation Requires greater asset lease costs optimization margins 41 Nonregulated Operations Business Mix Core Business Core Business Growth Business Asset Optimization Mid-Stream Development Delivered Gas Business Extract (optimize) the value of Aggregate & Purchase Gas Gather, process and store Services owned, leased or managed Supply, Transport, producer volumes for storage and transportation Storage/Load Balancing, downstream delivery to assets as markets provide Risk Management and other markets. opportunities via price bundled services volatility Capture additional value of Develop or acquire gathering, Strategy Find cost effective sources storage and transportation processing or storage assets of gas and deliver to assets thru arbitrage and that will provide steady, customers reliably and at a segmenting strategies, predictable income and support competitive price. within risk limits. marketing opportunities. Provide creative solutions Expand leased storage and Reduce gas costs through and services to meet transportation capacity thru value-added services provided customers gas requirements new customer relationships to producers. More predictable margins Variable margins, with upside. Stable, fee-based income. Margins from primarily 90 day to 365 Driven by gas price volatility Driven by gathering, day contracts creating arbitrage potential, processing, and storage Driven by customer demand physical storage capabilities, services. for gas volumes, services costs and available storage and competition. and transport capacity. 42
    • Nonregulated Operations Atmos Energy Marketing – Business Flow Aggregate and Purchase Transportation and Storage Logistics Sales to Markets Base Commodity Marketing Transactions - Fixed Price - Hedge forward Customers - Current Month - Baseload sales (approx 1,100) - Index Price - Bundled sales • Utilities - Flat/Plus/Minus - Peaking sales • Municipals Storage/Transport/Basis - Balancing services • Industrials - Risk Management - Asset Managed • Marketers - Other - Proprietary • Power Generators • Large Commercial 43 Nonregulated Operations Atmos Energy Marketing - Target Growth Markets About 1,100 customers Target market is Atmos Energy’s natural gas distribution footprint Focus on areas where we manage, lease or own storage and transportation assets. Regional offices allow for more direct customer access 44
    • Nonregulated Operations Atmos Energy Marketing – Asset Optimization The portfolio of assets (transportation & storage) that AEM manages is leased or derived from various asset management transactions with 3rd parties. These assets are utilized to capture value and create commercial opportunities. + Transportation Assets Storage Assets Storage Assets Optimize value by trading to Optimize value by Optimize value by trading to capture time and location segmenting capacity and capture time and location price differentials price differentials supply Proprietary Asset Management Source: No customer obligation Customer obligation 100% optionality Partial optionality 45 Nonregulated Operations Atmos Energy Marketing – Leased & Managed Assets AEM manages 1.8 Bcfd of firm pipeline capacity for customers covered by 179 contracts 1 2 AEM manages approximately 52 Bcf of Louisville storage on 19 major interstate pipelines Owensboro covered by 182 customer contracts 3 71 Transport Storage (Bcf) 4 58 & 4 Franklin 59 ANR 3,000 0.28 5 Atmos-TX - 3.50 Dallas 6 NGPL - 0.16 Houston Total 3,000 3.95 New Orleans 5 Transport Storage (Bcf) CGT 57,000 - Egan - 1.50 Owned Storage Tetco 40,000 1.18 1 Primary Office Location Transport Storage (Bcf) TGP (z1) 210,000 4.74 Distributed Generation Southern Star 172,000 5.52 Total 307,000 7.42 2 Transport Storage (Bcf) Total 172,000 5.52 Dominion - 0.85 6 Transport Storage (Bcf) National Fuel 2,000 0.42 3 Transport Storage (Bcf) Gulfsouth 425,000 5.42 Columbia Gas 27,000 1.87 E. Tennessee 310,000 0.81 Gulfsouth-NO - 5.40 Tetco (m2) 20,000 0.40 Centerpoint 50,000 - Sonat 70,000 1.50 LIG 80,000 0.60 TGP (z2) 38,000 2.13 Transco 15,000 0.60 Bridgeline 30,000 0.30 Texas Gas 187,000 13.33 Trunkline 48,000 1.09 Acadian 10,000 0.45 Total 443,000 4.00 Total 274,000 19.00 Total 595,000 12.17 46
    • Nonregulated Operations Atmos Energy Marketing – Margin Composition 2008E Impacted by customer volume demand Sales prices are: Delivered Gas Delivered Gas • Cost plus profit margin 60% - 70% • Cost plus demand charges (Bundled gas deliveries & (Bundled gas deliveries & peaking sales) peaking sales) Margins: More predictable Impacted by gas price spread values in the market (arbitrage opportunity) & MTM accounting treatment Physical storage capabilities Asset Optimization 30% - 40% Asset Optimization Available storage and transport capacity (Storage & transportation • 12.9 Bcf proprietary contracted capacity (Storage & transportation management) • 39.1 Bcf customer-owned / AEM-managed management) storage Margins: More variable = Total margins reflect: Stability from delivered gas margins Total AEM Total AEM Stable with potential Upside from optimizing our storage Margins Margins upside and transportation assets to capture arbitrage value 47 Nonregulated Operations Delivered Gas Volumes Continue Growth Trend Key Growth Drivers 500 Consolidated Sales Volumes 415-450 371 400 Retain existing customers 284 300 238 223 Saturate existing markets BCF Expand into targeted growth 200 markets (Texas, Alabama, etc.) 100 Expand asset management 0 business 2004 2005 2006 2007 2008E Unit margin expansion from 0.31 premium value-added services 0.30 0.25 Consolidated Delivered Gas 0.23 provided to customers Access to storage assets (cents per Mcf) Unit Margins 0.15 0.20 0.14 Gas price volatility 0.10 0.00 2004 2005 2006 2007 2008E 48
    • Nonregulated Operations Atmos Pipeline & Storage – Owned Asset Mix Storage Atmos Pipeline & Storage (AP&S) owns 2 reservoir storage locations in Kentucky and a 25% interest in a salt storage in Louisiana. Total usable capacity of 3.9 BCF • East Diamond with 2.2 BCF of usable capacity • Barnsley 1.3 BCF of usable capacity • Napoleonville is a salt storage facility located in Louisiana. AP&S (through Trans Louisiana Gas Storage) owns a 25% interest in Napoleonville (Acadian owns the remaining 75% and manages the facility). AP&S’s interest is 0.4 BCF Pipeline AP&S owns a 21 mile pipeline (24-inch with 270,000 per day capacity) that has receipt interconnects with Gulf South, Bridgeline, Acadian and Columbia Gulf interstate pipelines This pipeline has the ability to deliver to Atmos distribution affiliates, a few industrial customers, an Entergy power plant, and Entergy’s LDC in New Orleans Growth Drivers Strategic location Preferred provider to LDC’s Expand asset management business Access to storage and transportation assets Gas price volatility 49 Nonregulated Operations Atmos Pipeline & Storage – Trans Louisiana Gas Pipeline Storage held on upstream pipelines: Bridgeline, Acadian, Gulf South Entergy Louisiana Entergy Louisiana (TLGP Sales) (TLGP Sales) S5,T13S,R20E Gulf South Pipeline S5,T13S,R20E Gulf South Pipeline S48,T13S,R21E S48,T13S,R21E Atmos Energy Louisiana Atmos Energy Louisiana S5,T13S,R23E S5,T13S,R23E Acadian Gas Pipeline Acadian Gas Pipeline S48,T13S,R21E S48,T13S,R21E AEL 18” TLGP 24” Bridgeline Gas Bridgeline Gas (Paradis) TLGP 16” (Paradis) S39,T14S,R20E S39,T14S,R20E Future Interconnect Future Interconnect Columbia Gulf Columbia Gulf S24,T13S,R23E TLGP Pipeline TLGP Pipeline B’line 14” N Metropolitan New Orleans Area 21 Miles of 24” TLGP Pipe Metropolitan New Orleans Area W E .95 Miles of 12” TLGP Pipe TLGP Transmission // TLGP Sales Points TLGP Transmission TLGP Sales Points S 50
    • Nonregulated Operations Business Development Strategy Overall Strategy: Develop or acquire assets in markets where Atmos Energy already has a strategic presence to create value multiple ways Capture return from initial Investment (fee-based income) Leverage asset position to extract additional value for Marketing and Asset Optimization businesses. Additional Value creation Initial Value captured Initial Value captured Margins generated by Marketing $ Return on asset and Asset Optimization (storage Return on asset investments (fee-based investments (fee-based arbitrage, new customers, etc) income) income) 51 Nonregulated Operations Business Development Strategy Overall Strategy: Develop or acquire assets with operational flexibility, for example Multi-turn / high deliverability salt storage Pipelines (multiple interconnects, high take-away receipt/delivery points, segmenting flexibility, etc.) The following options will be considered in effectuating the Nonregulated strategy: Greenfield development projects Partnership with other companies that have expertise and/or assets Acquire interest in third party storage and transportation assets 52
    • Nonregulated Operations Business Development Strategy Currently, over 15 potential projects under review Includes gathering, light processing, pipeline and storage projects Capital investment ranges between $3 million to $300 million per project, some are multi-year projects Fiscal 2008 budget includes approximately $33 million for development of these identified projects Currently, the Park City Gathering Project is under construction in Western Kentucky 53 Nonregulated Operations Park City Gathering Project 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 The gas contains approximately 16% nitrogen and will be treated by a facility, jointly constructed and owned by Atmos and HNNG, with participation agreements currently being finalized Approximately 72% complete on 11/1/07, with start-up expected March 2008 Estimated total cost of about $10 million. $3 million of capital spent in fiscal 2007and about $7 million expected in fiscal 2008 54
    • Nonregulated Operations Cash Flow Coverage of Working Capital Needs AEM has a $580 million uncommitted demand 180,000 working capital credit facility 130,000 ($ thousands) Used primarily for Letters of 80,000 Credit and also for working capital needs 30,000 Scheduled to be renewed (20,000) and extended prior to March 31, 2008 termination (70,000) (120,000) D e c -0 4 M a r-0 5 J u n -0 5 S e p -0 5 D e c -0 5 M a r-0 6 J u n -0 6 S e p -0 6 D e c -0 6 M a r-0 7 J u n -0 7 S e p -0 7 Working Capital Cumulative CF from Operations 55 Financial Review J. Patrick Reddy Senior VP & Chief Financial Officer 56
    • Financial Review Earnings Per Share Compared to Company Guidance Reflects Management’s Commitment to Shareholders $2.25 $1.95-$2.05 1.92 $2.00 1.82 $1.90-$2.00 $ per share 1.72 $1.75 $1.80-$1.90 1.58 1.54 $1.65-$1.75 1.45 $1.50 $1.55-$1.60 $1.52-$1.58 $1.43-$1.60 $1.25 $1.00 $0.75 $0.50 2002 2003 2004 2005 2006 2007 2008E 57 Financial Review Return on Invested Capital (ROIC*) Remains Strong 18.0% 16.4% 15.5% 16.0% 14.5% 14.4% 14.0% 13.1% 12.7% 12.0% 10.0% 2003 2004 2005 2006 2007 5 Yr Avg *ROIC - Return on invested capital is calculated using the following GAAP financial measures: Income before interest expense and income taxes plus common stock dividends paid, divided by the average of the year’s beginning and ending long-term debt plus common equity. This measure is used to more precisely evaluate operational performance and management effectiveness. 58
    • Financial Review Times Interest Earned Ratios* 3.5 3.00 3.05 3.0 2.75 2.75 2.59 2.55 2.55 2.5 2.0 1.5 2002 2003 2004 2005 2006 2007 2008E *The times interest earned ratio measures the ability to satisfy annual interest costs 59 Financial Review Weighted Average Cost of Debt Remains Low 9.0 8.0 7.4 6.9 7.0 6.4 6.1 6.1 6.0 5.9 Percent 6.0 5.6 5.0 4.0 3.0 2.0 1.0 2001 2002 2003 2004 2005 2006 2007 2008E 60
    • Financial Review Net Liquidity Position Is Solid With Existing Credit Lines* 1,340 1,346 $1,500 1,116 $1,250 487 534 $1,000 786 $ millions 551 661 $750 214 853 812 156 416 $500 565 574 149 505 $250 267 $0 2003 2004 2005 2006 2007 2008E Atm os Energy Corp. Atm os Energy Holdings * Subject to internal borrowing strategy and collateral limitations primarily at AEH 61 Financial Review Managing Consolidated Operations and Maintenance Expense Fiscal 2008 Expected to Increase at More Normalized Rate O&M increasing at an $550 4.2% CAGR average run-rate of 4.2% 465 - 475 463 since the TXU Gas $500 433 acquisition 416 $450 Approximately 60% of $ millions current O&M levels are $400 employee labor and benefits related $350 • Employee merit increases expected to $300 increase 3.5% $250 • Benefits expense increases at about 8.3% $200 2005 2006 2007 2008E 62
    • Financial Review Managing Pension, Post-Retirement & Other Benefits Expense ($ millions) $61.4 Other $56.7 $70.0 Medical & Dental $60.0 Post-Retirement 11.9 11.3 $50.0 Pension $40.0 25.8 21.0 $30.0 2008 Pension Assumptions 8.25% return on plan assets $20.0 13.6 14.3 6.30% discount rate 4.00% wage increase $10.0 9.4 10.8 $0.0 2007 2008E 63 Financial Review Natural Gas Distribution Bad Debt Expense as a % of Revenues Below Industry Average 1.0 2008E bad debt expense 0.83 is $20 million 0.61 0.60 0.58 0.58 Percent 0.5 0.29 0.0 2003 2004 2005 2006 2007 2008E 64
    • Financial Review Nonregulated Atmos Energy Marketing Delivered Gas and Asset Optimization Margins Remain Steady 150.0 Delivered Gas Margins (previously referred 130.6 to as realized marketing margins) have 130.0 remained fairly constant at about $60 17.2 104.3 million, with the exception of Fiscal 2006 110.0 90.0-100.0 due to effect of Hurricane Katrina 26.2 62.0 18.4 ($ millions) Asset Optimization Margins ( previously 90.0 referred to realized storage margins) 30.0-35.0 28.0 28.8 trending between $25 million - $30 million 70.0 annually 50.0 Fiscal 2008 marketing segment margins 87.2 are expected to be between $90 million 60.0 57.1 60.0-65.0 30.0 and $100 million, excluding any mark-to- market impact 10.0 Mark-to-Market Impact is recognized in Unrealized Margins and an example of the (10.0) (26.0) accounting can be found in the appendix to this presentation. (30.0) 2005 2006 2007 2008E Delivered Gas Asset Optimization Unrealized Margins 65 Financial Review Consolidated Earnings Guidance – Fiscal 2008E Atmos Energy anticipates earnings to be in the range of $1.95 - $2.05 per fully diluted share for the 2008 fiscal year Assumptions include: • Contribution from natural gas marketing segment reflecting less volatility in gas prices o Total expected gross margin contribution from the marketing segment in the range of $90 million to $100 million • Continued successful execution of rate strategy and collection efforts • Normal weather • Bad debt expense of no more than $20 million • Average annual short-term interest rate @ 6.5% • Average gas cost ranging from $7.95 - $10.00 per mcf • No material acquisitions Note: Changes in these events or other circumstances that the company cannot currently anticipate could materially impact earnings, and could result in earnings for fiscal 2008 significantly above or below this outlook. 66
    • Financial Review Projected Net Income by Segment ($ millions, except EPS) 2008E 2005 2006 2007 $ 86 - 90 $ 53 $ 81 $ 73 Natural Gas Distribution 37 - 40 27 28 34 Regulated Trans & Storage 42 - 43 58 23 46 Natural Gas Marketing 11 - 12 10 4 15 Pipeline, Storage & Other 176 - 185 148 136 168 Total 90.1 81.4 79.0 87.7 Avg. Diluted Shares $1.95 - $2.05 $ 1.82 $ 1.72 $ 1.92 Earnings Per Share 67 Financial Review Projected Cash Flow ($ millions) 2007 2006 2008E 2005 $ 387 $ 311 $ 547 $ 540 - 560 Cash flows from operations (243) (287) (287) (310-325) Maintenance/Non-growth capital (99) (102) (112) (117) Dividends $ 148 $ 113 - 118 $ 45 Available Cash $ (78) 68
    • Financial Review Selected Income Statement Components ($ millions) 1,200 2008E Consolidated ($ millions) 1,000 O&M $465 - $475 465- 475 463 D&A $207 - $214 800 433 Interest $140 - $142 416 Income Tax $114 - $118 600 Net Income $176 - $185 207- 214 199 186 178 400 140-142 145 147 47 114 - 117 94 200 89 82 176 - 185 168 148 136 0 2005 2006 2007 2008E 69 Financial Review Capital Expenditures ($ millions) Regulated Regulated Nonregulated Gas Distribution * Transmission & Storage $33-37 $345-$354 $327.4 $100 $400 $67-74 $40 $350 $59.3 2-5 $75 $300 254- $30 $250 260 228.3 54-60 $50 $200 $20 57.2 $150 31-32 $5.7 $25 $100 $10 1.1 $50 99.1 91-94 13-14 4.6 2.1 $0 $0 $0 2007 2008E 2007 2008E 2007 2008E * Division Detail in Appendix Maintenance Capital Growth Capital Consolidated fiscal 2008 CAPEX projection is $445-$465 million 70
    • Financial Measures Compelling Valuation and Total Return Proposition Forward P/E Estimates 5 Year Expected Total Return 18.0 14.3% 15.0 16.5x 1.7 10.4% 12.0 16.0 8.7% 15.1x 9.0 5.0 12.6 14.0 3.8 6.0 12.6x 5.4 4.9 3.0 12.0 Peer Group S&P 500 Atmos Atmos S&P 500 Peer Group Avg. Energy Energy Avg. 5 year growth rate dividend yield Source: Bloomberg @ 11/30/07 Peer group averages exclude Atmos Companies in the peer group include AGL Resources, Laclede, New Jersey Resources, Nisource, Northwest Natural Gas, Oneok, Piedmont Natural Gas, Southwest Gas and WGL Holdings. 71 Questions 72
    • Slide Appendix 73 Regulated Natural Gas Distribution Capital Expenditures by Division ($ millions) 2007 2008E Growth Growth Division Nongrowth Nongrowth Louisiana 13 11-12 31 35-36 Kentucky/Mid-States 20 20-21 43 41-42 West Texas 7 8 22 25-26 Colorado/Kansas 7 4 15 17-18 Mississippi 7 9 14 12-13 Mid-Tex 45 39-40 103 124-125 Total Growth $ 99 $ 91-94 Total Nongrowth $ 228 $ 254-260 74
    • Regulated Natural Gas Distribution Mid-Tex Division GRIP Investment and Revenue Calendar Gross Net Investment Incremental Annual Year Change Revenue Additions 2003 $ 73,795,961 $ 32,518,365 $ 6,691,224 2004 87,742,809 28,902,652 6,731,115 2005 117,155,948 62,158,304 11,890,765 2006 111,991,675 62,375,020 12,422,428 Total $ 390,686,393 $ 185,952,341 $ 37,735,532 Gas Reliability Infrastructure Program (GRIP) filings made each calendar year as opposed to ATO September 30th fiscal year-end reporting 75 Regulated Transmission and Storage Atmos Pipeline - Texas GRIP Investment and Revenue Calendar Gross Net Investment Incremental Annual Year Change Revenue Additions 2003 $ 21,174,271 $ 11,038,027 $ 1,801,725 2004 29,087,351 10,640,163 1,918,699 2005 31,350,757 21,485,762 3,286,353 2006 99,476,670 88,937,803 13,201,664 Total $ 181,089,049 $ 132,101,755 $ 20,208,441 Gas Reliability Infrastructure Program (GRIP) filings made each calendar year as opposed to ATO September 30th fiscal year-end reporting 76
    • Nonregulated Operations Business Risks and Risk Management Business Risks and Risk Management Commercial Opportunities Potential Risks Risk Management Gas Marketing - Bundled delivered gas sales - Contract disputes - Enforceable contract language - Lost customers - Strong customer service - Credit exposure - Credit risk management - Peaking sales and balancing - Position accuracy - Timely & accurate position monitoring - Volume variances - Physical storage to meet swings - Price risk - Hedging & contract language Asset Optimization - Storage and transportation management - Position accuracy - Timely & accurate position monitoring - Volume variances - Physical storage to meet swings (asset management, storage and transport - Price risk - Hedging & contract language arbitrage, park and loan, pipeline segmentation) - Basis risk - Hedging & contract language - Capital cost recovery - Valuation analysis and execution - Operational - Adherence to process, controls & contracts Midstream Business Development Develop or acquire assets in areas where - Contract disputes - Enforceable contract language Atmos has a strategic presence to: - Capital cost recovery - Valuation analysis and execution - Capture return from initial investment - Operational - Adherence to process, controls & contracts - Leverage asset position to extract additional - Credit exposure - Credit risk management value for Marketing and asset optimization. 77 Nonregulated Operations Atmos Energy Marketing - Types of Storage Asset Management (39.1 BCF) Proprietary (12.9 BCF) Gulf South 6.2 Billable Plans Gulf South 6.2 Full Requirements Billable Plans Full Requirements Bammel 3.0 Bammel 3.0 Egan 1.5 Egan 1.5 Atmos P/L-T 0.5 Atmos P/L-T 0.5 Other 1.7 Other 1.7 12.9 12.9 Parking Gas Loaning Gas Parking Gas Loaning Gas (deposited with pipeline) (borrowed from pipeline) (deposited with pipeline) • No customer obligation (borrowed from pipeline) • 100% optionality • Customer obligation • Partial optionality 78
    • Nonregulated Operations Atmos Energy Holdings Storage Contracts by Type Proprietary AEM contracts directly for this storage, which is not encumbered with any other contractual obligations to a third party. Storage MDWQ MDIQ MSQ # of Billable Plan Type (dth/d) (dth/d) (dth) Contracts AEM invoices customer for flowing supply as requested by the customer. AEM has rights to the remaining storage optionality calculated as “Storage Contract Proprietary 331,167 90,646 12,924,654 16 Rights – (Customer Requirements – Flowing Gas Plan)” Billable Plan 635,482 339,152 26,469,304 88 Customer (We Own) Customer- AEM maintains financial responsibility for gas injected into storage and is obligated to provide the Customers’ We Own 114,423 74,238 4,596,385 56 full requirements. Customer- They Own 265,829 127,515 7,696,040 14 Customer (They Own) AEM has no optimization rights for this storage type; Consigned 27,022 14,224 1,049,082 8 customer is invoiced for storage injections as they occur. TOTAL 1,291,008 645,775 51,960,535 182 Consigned Similar to Customer Storage (they own) with the exception that AEM finances storage injections at a predetermined interest rate and holds the storage cost on the customers behalf, which are invoiced to customer when storage is withdrawn and consumed 79 Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results We commercially manage our storage assets by capturing arbitrage value through optimization strategies that create embedded (forward) value in the portfolio. We financially report the transactions for external 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. 80
    • Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results Reported GAAP Economic Value* Reported GAAP Value (Commercial Value) Value - -Physical and Financial Physical and Financial - Physical and Financial Positions Positions Positions $40.8 MM $10.8 MM $10.8 MM Market Spread Embedded margin difference *Realizing Economic Value $30.0 MM is dependent on ability to execute – deliver physical gas & close financial hedges Supporting data appears on the following slide At September 30, 2007 81 Nonregulated Operations Atmos Energy Marketing Economic Value vs. GAAP Reported Results Fiscal Year Physical Economic Value (EV) GAAP Reported Value - MTM Market Spread ($ per mmcf) Period Volume Total Total Total WASP WACOG EV Ending (Bcf) ($ in millions) ($ per mmcf) ($ in millions) ($ per mmcf) ($ in millions) 6.9 6.3466 4.4435 1.9031 (2.1502) 4.0533 9/30/2005 13.1 (14.8) 27.9 14.5 11.9716 7.8329 4.1387 (1.1076) 5.2463 9/30/2006 60.0 (16.0) 76.0 7.6 $ 5.6250 $ 3.3894 $ 2.2356 1.0426 (1.2) $ 1.1930 2006 Variance $ 46.9 $ $ 48.1 14.5 11.9716 7.8329 4.1387 (1.1076) 5.2463 9/30/2006 60.0 (16.0) 76.0 12.3 11.1547 7.8297 3.3250 0.8819 2.4431 9/30/2007 40.8 10.8 30.0 (2.2) $ (0.8169) $ (0.0032) $ (0.8137) $ 1.9895 $ (2.8032) $ 2007 Variance (19.2) $ 26.8 (46.0) WASP: Weighted average sales price for gas held in storage WACOG: Weighted average cost of AEM’s gas in storage EV: “Economic Value” which equals gas sales price (WASP) minus cost of gas (WACOG) on a per unit basis 82
    • Nonregulated Operations Illustration of MTM Effect on Storage Prompt Month January Economic Gas Daily Hedge 2008 P&L Value Month Inject Withdraw Gas Cost/Mcf Index Hedge Volume Price Futures Spread $MM $MM June 1 Bcf 0 $7.00 N/A Sell 1 Bcf $11.00 $11.00 $4.00 $0 $4.0 Futures July 0 0 $7.00 $6.00 N/A 1 Bcf - $10.50 $4.50 ($0.5) $4.0 Sept. 0 0 $7.00 $6.00 N/A 1 Bcf - $11.50 $5.50 ($1.0) $4.0 Jan. 0 1 Bcf $7.00 $10.00 Buy 1 Bcf - $10.00 $0.00 $5.5 $4.0 Futures Total $4.0 $4.0 83