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atmos enerrgy _analyst-conf100108
1. Atmos Energy Corporation
Analyst Conference
October 1, 2008
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.
2
2. 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
3
Overview
The Nation’s Largest Pure Gas Distribution Company
Regulated gas distribution operates in 12 states (gold)
Nonregulated operates primarily in the Midwest & Southeast (gray)
4
3. Overview
Diluted Earnings Per Share Contribution Shows Steady Growth
$2.50
$2.05-$2.15
5.9%
CAGR $1.95-$2.05
$1.92
$2.00 $1.82
0 .52 -
$1.72 0 .4 2 -
Nonregulated
$1.58 0 .56
0 .4 6
Operations
0 .6 9
0 .3 4
$1.50
5.2% growth
0 .8 4
0 .4 2
1.53 - Regulated
1.53 -
$1.00 1.59
1.59 Operations
1.3 8 6.1% growth
1.2 3
1.16
$0.50 0 .9 8
$0.00
2004 2005 2006 2007 2008E 2009E
5
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
6
4. Regulated Operations
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
7
Regulated Operations
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
4,7
6
1,800,000 Partial
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.
Excludes Colorado, Iowa and Illinois for a total of 137,657 customers.
1
Includes Missouri, Kansas and Georgia for a total of 258,102 customers.
2
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.
6 Includes Mid-Tex Division customers residing in cities covered by settlement agreements.
7 Includes Mid-Tex Division for a total of 1,500,000 customers. 8
5. 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
$0.0
2003 2004 2005 2006 2007 2008-2012E
Annual Rate Filings GRIP General Rate Case Aggregate 9
Regulated Operations
Managing Capital Expenditures
Accelerated Rate Mechanisms Provide Timely Returns
($ millions)
$346-$350 $328-$335
$350 $300
$12-$14
exposed to
Includes both Natural
regulatory lag $104-$106
$300 recovered
$285.5 Gas Distribution and
$250
in annual
filings
Regulated Transmission
D epreciation E xpense
C ap ital E xpenditures
$197-$200 $212-215
$250 and Storage segments
$195.8
$200
$104-$106 million of non-
$200
growth capital to be
$150
spent in areas with
$150 $132-135
annual updates-Texas,
$100 Louisiana & Mississippi
$101.2
$90-$94
$100
$12-$14 million to be
$50 spent in remaining states
$50
where rate cases are
filed-regulatory lag
$0 $0
2007 2008E 2009E
Non-Growth Growth Depreciation
10
6. Regulated Operations
ROE Potential in Regulated Distribution and Pipeline Operations
Regulatory Return
on Equity %
12.0
ALLOWED ROE – 10.0%
10.0 Regulatory lag, inflation, etc.
$17 million Net Income Gap $18 million
POTENTIAL ROE – 9.0%
9.3 $ 5 million Net Income Gap $12 million
8.7
8.0
8.3 Net Income Gap between actual
return and allowed return is
projected to be approximately:
7.5
7.4 $22 million for fiscal 2008
6.0 $30 million for fiscal 2009
4.0
2005 2006 2007 2008E 2009E
Earned Regulatory ROE %
Note: Calculations are based on regulatory accounting treatment and are not consistent with GAAP accounting
11
Regulated Operations
Regulated Transmission and Storage
Strategically Positioned Atmos Pipeline –Texas
Favorably positioned; spans
Texas gas supply basins and
growing consumer market
Pipeline Operations
• Connects to major market hubs-
Waha, Katy and Carthage
• 6,300 miles of intrastate pipeline
• Estimated transportation volume of
780 Bcf in fiscal 2008 and 792 Bcf
in fiscal 2009
• Current average volume of
approximately 2.15 Bcf/d
• Demonstrated peak day deliveries
of 3.5 Bcf/d
Five Storage Facilities
West Texas Division • One salt cavern, four reservoirs
• 39 Bcf working gas capacity
Mid-Tex Division
• 1.2 Bcf/d maximum withdrawal
Atmos Pipeline-Texas
• 270 MMcf/d maximum injection
Atmos Energy Headquarters
12
7. Regulated Operations
Regulated Transmission and Storage
Atmos Pipeline – Texas Growth Drivers
788-800
775-785
Growth Drivers
699
750
Transportation Volumes
581
555
Increased through-system volumes
600-
587-
605
590
primarily from producers in Barnett
500 505
(Bcf)
Shale
411
374
250
Margin expansion through ancillary
188- 188-
services such as parking and
194
181 170 195 195
lending, balancing, blending, and
0
2005 2006 2007 2008E 2009E
compression
Mid-Tex Division Third Party
Gas price volatility increasing basis
differentials between Texas hubs
198-205
188-194
200
Margin Composition
163
Accelerated capital recovery
141 99-
($millions)
138 93-
through GRIP mechanism
150 103
97
78
64
60
Required pipeline rate case filing
100
99-
95-
anticipated September 2010
102
97
85
77
50 78
Pursue capacity and compression
growth opportunities via projects
0
2005 2006 2007 2008E 2009E
Tariff Based Market Based
13
Regulated Operations
Regulated Transmission and Storage
Austin Corridor Project – L8A Loop
M
Approximately 25 miles of 24-
K5
LIMESTONE L8A(3
(3
inch pipe extending from
”)
GROESBECK
McLENNAN ND) D) Groesbeck to Riesel Junction
L8A(2N
L8A(2
L8
2”)
(12
lines
L8A(1
”)
L8AM
L8
op
TH)
A Lo
(8”
(4”)
L88 Loop
LA
rox. Completed pipeline should
CORYELL
)
”)
App
OU
Approx.25.2 s
(20
mile
ETC
25.2 supply an incremental 100
L(S
Miles
FALLS
V(
0”)
30
L32(10”)
MMcf/d to current design
)(3
”)
ROBER
ND
demand of 232 MMcf/d
TSO N
P(2
)
RTH
BELL NORTH
(20”)
L8
ZULCH
P(NO
Provides increased service to
(6
”)
)
MILAM
8”
existing LDCs and power plants
B(
L8
and will compete for new power
WILLIAMSON BRAZOS plant business in the Austin area
L19(6”)
)(20”)
”)
D)(30
L19-3
Estimated capital cost of
UTH
A(4”)
between $50-$55 million
P(2N
P(SO
LEE
Estimated completion in 3rd
TRAVIS
KINDER MORGAN
quarter of fiscal 2009
ENTERPRISE
14
8. 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
15
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 spread Driven by gathering,
day contracts
volatility creating arbitrage processing, and storage
Driven by customer demand potential, physical storage services.
for gas volumes, services capabilities, costs & available
and competition. storage & transport capacity.
16
9. Nonregulated Operations
Market Overview Business Reason
Impact
Positive Leases or manages storage
Increased availability and demand
and pipeline assets
for pipeline and storage assets
Positive/ Creates opportunity to
Uncertainty around the future role
Neutral increase availability of talent,
of large financial institutions in the
offset in part by the loss of
marketing business
market liquidity
Potential to increase market
Tighter credit may result in Neutral
share; offset by higher credit
consolidation or exit of competitors
costs
New sources of gas
Sustained higher natural gas
Neutral supply; offset by collections
prices supporting new drilling and
risk and working capital
production
impact
Increased storage and Requires greater asset
Negative
transportation lease costs optimization margins
AEH has assets, experience
Negative
Dampened time spread volatility and proven strategy to
capture arbitrage value as
prices vary 17
Nonregulated Operations
Atmos Energy Marketing Customers (gray states)
Key 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
18
10. Nonregulated Operations
Atmos Energy Marketing – Margin Composition
2009E
Impacted by customer volume demand
Delivered Gas Sales prices are:
Delivered Gas
• Cost plus profit margin $70 - $75 Million
(Bundled gas deliveries & • Cost plus demand charges
(Bundled gas deliveries &
peaking sales)
peaking sales)
Margins: More predictable
Impacted by gas price spread values
in the market (arbitrage opportunity)
Physical storage capabilities
Asset Optimization $15 - $20 Million
Asset Optimization Available storage and transport
capacity
(Storage & transportation
(Storage & transportation 7.8 Bcf proprietary contracted capacity
management)
management) 27 Bcf customer-owned / AEM- managed
storage
Margins: More variable
=
Total margins reflect:
$85 - $95 Million
Stability from delivered gas margins
Total AEM
Total AEM Upside from optimizing our storage
Margins
Margins and transportation assets to capture
arbitrage value
Margins: Stable with potential upside
19
Nonregulated Operations
Delivered Gas Volumes Projected to Continue Growth Trend
Gross Sales Volumes Delivered Gas Unit Margins
BCF (cents per Mcf)
~ 15%
600 0.40
480-500
450-470 .31
500 424
0.30 .25
337
400
273
300 0.20 .14-.15 .14 -.15
.15
200
0.10
100
0 0.00
2005 2006 2007 2008E 2009E 2005 2006 2007 2008E 2009E
20
11. Nonregulated Operations
Atmos Energy Marketing Realized Margins
Projected Compound Annual Growth Rate
130.0
~ 13%
113.4
110.0
26.2
88.0 85.0-95.0
85.9
90.0
75.0-85.0
15.0-20.0
($ millions)
15.0-20.0
.
28.0 10.0-15.0
70.0 28.8
87.2
49.4 70.0-75.0
Asset Optimization
50.0 65.0-70.0
57.1
60.0 Delivered Gas
51.3
30.0
10.0
(1.9)
(10.0)
2004 2005 2006 2007 2008E 2009E
21
Nonregulated Operations
Atmos Energy Marketing Margins – Mark-to-Market Accounting Impact
150.0
Mark-to-market
130.6
130.0 accounting can
17.2 cause large swings
104.3
110.0 in unrealized
85.0-95.0
62.0 26.2 margins. An example
18.4
90.0 75.0-85.0
of the accounting
15.0-20.0
15.0-20.0
($ millions)
10.0-15.0
10.0-15.0
28.0 can be found in the
.
70.0
28.8 appendix to this
46.6
presentation
50.0
87.2 70.0-75.0
65.0-
57.1 Fiscal 2008E and
65.0-70.0
60.0
30.0 70.0
51.3
Fiscal 2009E
marketing margins
10.0
(1.9)
exclude any mark-to-
(10.0) (2.8) market impact
(26.0)
(30.0)
2004 2005 2006 2007 2008E 2009E
Delivered Gas Asset Optimization Unrealized Margins
22
12. Nonregulated Operations
Atmos Pipeline & Storage & Other – Owned Asset Mix
Storage
Development of Fort Necessity storage project in Franklin Parish, Louisiana
2 reservoir storage locations in Kentucky and a 25% interest in a salt storage in
Louisiana. (Total usable capacity of 3.9 BCF)
Pipeline
21-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
Gathering
Completed Park City Gathering System in Kentucky – 23 mile, low-pressure gathering
system in Edmonson County, Kentucky
Closing on October 1, 2008, of the Shrewsbury Gathering System acquisition
Growth Drivers
Strategic location
Preferred provider to LDC’s
Expand asset management business
Access to storage and transportation assets
Gas price volatility
23
Nonregulated Operations
Ft. Necessity Gas Storage Project in Louisiana
Initial project includes
development of three 5 Bcf
Salt Storage Project
caverns with six-turn injection
Franklin Parish, LA
and withdrawal capabilities
(80 acres per square)
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
Legend of Nearby Pipelines
Successful non-binding open
Regency ANR
season completed in July 2008
LIG CGT
TGT TGP
Currently considering an Fort Necessity
TLG Salt Dome
ownership/development
arrangement
24
13. Nonregulated Operations
Park City Gathering System in Kentucky
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
25
Nonregulated Operations
Shrewsbury Gathering System in Kentucky
$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
AEH
-Mineral interests
6”
Current production of about 700
Mcf/day
50 additional wells can be AEH
Central
connected for Kentucky Natural Shrewsbury
Treating
Gas with expected capacity of 10”
Facility
osed
Prop
750 Mcf/d
12”
AEH
Orbit
Remaining gathering business 8” White
projected to generate about $0.2 Plains
Park
Storage
million of net income per year City
over 10 years to yield an IRR of
27%
32,000 acres
26
14. Nonregulated Operations
Atmos Pipeline and Storage Realized Margin
Projected Fiscal 2009E Compound Annual Growth Rate
40.0
~ 15%
29.0- 34.0
35.0 Projected CAGR
30.5 Other ~ 29.7%
30.0 Asset
3.8
($ millions)
Optimization
14.0-16.0 ~ 29.5%
25.0
21.1
18.0- 23.0
18.4 Storage &
10.7
20.0 Transportation
5.9
~ 1%
4.0 - 6.0
5.3
15.0 4.0-5.0
3.4 4.0 - 5.0
1.6
10.0
16.0 Other
11.0-13.0
11.5 11.8 Asset Optimization
10.0-12.0
5.0
Storage & Transport
0.0
2005 2006 2007 2008E 2009E
27
Nonregulated Operations
Atmos Pipeline and Storage and Other Margin
Mark-to-Market Accounting Impact
40.0 Mark-to-market accounting
29.0- 34.0
can cause large swings in
32.6
35.0 unrealized margins. An
example of the accounting
2.1
30.0 can be found in the appendix
24.5 3.8 14.0-16.0
to this presentation
($ millions)
18.0- 23.0
25.0
Fiscal 2008E and Fiscal
13.7 3.4
10.7
2009E pipeline and storage
4.0 - 6.0
20.0
5.9 margins exclude any mark-
to-market impact
5.3 4.0 - 5.0
15.0 4.0 - 5.0
3.4
1.6
10.0 16.0
11.0-13.0
10.0-12.0
11.5 11.8
5.0 Unrealized Margins
Other
0.0 Asset Optimization
(4.7)
Storage & Transport
(5.0)
(10.0)
2005 2006 2007 2008E 2009E
28
15. Financial Review
Consolidated Earnings Guidance – Fiscal 2009E
Atmos Energy expects earnings to be in the range of
$2.05 - $2.15 per diluted share for the 2009 fiscal year
Assumptions 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 efforts
Bad debt expense of no more than $12 million
Average gas cost ranging from $9 - $11 per mcf
Short-term interest rate of 3.75%
No material acquisitions
Normal weather
Note: Changes in these events or other circumstances that the company cannot currently anticipate could
materially impact earnings, and could result in earnings for fiscal 2009 significantly above or below this outlook.
29
Financial Review
Projected Net Income by Segment
($ millions, except EPS)
2005 2006 2007 2008E 2009E
Natural Gas
Distribution $ 81 $ 53 $ 73 $ 95 – 99 $ 96 – 99
Regulated Trans.
& Storage 28 27 34 43 – 44 44 – 46
Natural Gas
Marketing 23 58 46 27 – 30 30 – 33
Pipeline, Storage
& Other 4 10 15 11 – 12 17 – 19
Total 136 148 168 176 – 185 187 – 197
Avg. Diluted Shares 79.0 81.4 87.7 90.1 91.4
Earnings Per Share $ 1.72 $ 1.82 $ 1.92 $ 1.95 – 2.05 $ 2.05 – $2.15
30
17. Financial Review
Ample Liquidity with Existing Credit Lines
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
program
Commitment 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 facility
Commitment 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 needs
Participating banks include BNP Paribas, Fortis Capital, Brown Brothers
Harriman, Natixis, Royal Bank of Scotland, Societe Generale, RZB
Finance, and Bank of Tokyo-Mitsubishi UFJ
33
Financial Review
Solid Dividend and Credit Positions
Annual Dividend
Dividend Payout Ratio Dividend / Share
Payout $1.30E
$1.40
85% $1.50
$1.20
81%
80% $1.40
78% $1.00
77%
1.30
$0.80
1.28
75% $1.30
1.26
72%
$0.60
69%
1.24
70% $1.20
1.22
1.20 67%
1.18 $0.40
63-67%
65% $1.10
$0.20
60% $1.00 $0.00
2002 2003 2004 2005 2006 2007 2008E
'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
Current Dividend Yield About 4.8% Amounts are adjusted for mergers and acquisitions.
Average LDC Payout Ratio = 65% Fiscal 2008 is the indicated annual dividend.
Debt Capitalization Ratio Investment Grade Credit
65 Moody’s
Senior Unsecured Debt: Baa3
60.9%
59.3%
Commercial Paper: P-3
60
Outlook: Stable
55
53.7%
53.6% Standard & Poor’s
51.5%
Senior Unsecured Debt: BBB
50
Commercial Paper: A-2
Outlook: Positive
45
43.3% Fitch
Senior Unsecured Debt: BBB+
40
Commercial Paper: F-2
2003 2004 2005 2006 2007 Jun-08 Outlook: Stable
34
18. Financial Review
Compelling Valuation and Total Return Proposition
Forward P/E Estimates 5 Year Expected Total Return
16.0 13.9%
15.2x
15.0
15.0
2.0
14.1x
12.0 9.5%
8.8%
14.0 13.2x
9.0
13.0 11.9
4.8
3.9
6.0
12.0
4.9 4.7
3.0
11.0 Peer Group S&P 500
Atmos
S&P 500 Peer Group Atmos Avg. Energy
Energy
Avg.
5 year growth rate dividend yield
Source: Bloomberg @ 9/25/08
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.
35
Slide
Appendix
36
19. Regulated Operations
Mid-Tex Division 2008 Rate Outcome Summary
Systemwide
Settlement RRC Order
Increase in Revenues
(438 of 439 Cities) (City of Dallas & Environs)
100%
~80% ~20%
Effective 4/1/08
$10 Million Rate Increase __
(approx. $8.0 million)
Effective 7/8/08
__ $19.6 Million Rate Increase
(approx. $3.9 million)
Effective 11/08 (est.) Pending city council
$20.0 Million RRM
approval
(approx. $16 million)
Effective 11/08 (est.)
Included in RRM filing $10.3 Million GRIP Filing Recovery
(approx. $2 million)
Effective 11/08 (est.) Gas Cost Recovery of Bad Debt Effective 7/1/08
Effective 11/08 (est.) Capital Structure 52% Debt; 48% Equity Effective 7/1/08
Effective 11//08 (est.) $1 Million Conservation Program Effective 10/1/08
9.6% Authorized Return on Equity (ROE) 10.0%
37
Regulated Distribution Efficiency Metrics
Operating Efficiencies Benefit Customers & Shareholders
Distribution O&M Expense per Customer
Customers Served Per Distribution Employee
$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.
Non-Weather-Sensitive Margin Distribution Bad Debt Expense as % of
Residential & Commercial Revenue
2008-2009E Heating Season
1.0
0.83
3% (approx. $32 million)
0.61
0.58
0.58
97%
Percent
0.5
0.35
0.29 0.30
Non-Weather Sensitive Margin
Weather-Sensitive Margin 0.0
38
2003 2004 2005 2006 2007 2008E 2009E
20. 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
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.
39
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
$48.2 MM
$34.3 MM
$34.3 MM
Market Spread
*Potential Gross Profit
$13.9 MM
* There is no assurance that
the economic value or the
potential gross profit will be
fully realized in the future.
40
At June 30, 2008
