1. 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
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
3. 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
4. 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
5. 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
6. 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
8. 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
9. 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
10. 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
11. 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
12. 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
13. 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
14. 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
15. 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
16. 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
17. 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
18. 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
19. 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
20. 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
21. 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
22. 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
23. 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
24. 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
25. 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
26. 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
27. 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
28. 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
29. 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
31. 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%
$200
2005 2006 2007 2008E
62
32. Financial Review
Managing Pension, Post-Retirement & Other Benefits Expense
($ 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
33. 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