atmos enerrgy _nonutility101705

Atmos Energy Corporation
Nonutility Operations

JD Woodward
Senior Vice President
October 17, 2005
1

Nonutility Leadership Participants

JD Woodward Senior VP, Nonutility Operations,
Richard A. Erskine President, Mid-Tex Division and
President, Atmos Pipeline-Texas
Mark Johnson VP, Nonutility Operations and
President, Atmos Energy Marketing
Rick Alford SVP, Finance & Administration,
Atmos Energy Holdings

2

Forward Looking Statements
The matters discussed or incorporated by reference in this presentation may
contain “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933 or 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 the Company’s other documents or oral presentations, the words “anticipate,”
“believes,” “estimate,” “expect,” “forecast,” “goal,” “intends,” “objective,” “plans”
“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 successful integration of the
Company’s acquisition of the operations of TXU Gas, the Company’s ability to
continue to access the capital markets and the other factors discussed in the
Company’s SEC filings. These factors include the risks and uncertainties
discussed in the Company’s Form 10-K for the fiscal year ended September 30,
2004 and the Company’s Form 10-Q for the three and nine month periods ended
June 30, 2005. Although the Company believes 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. The
Company undertakes no obligation to update or revise forward-looking
statements, whether as a result of new information, future events or otherwise.

3

Corporate Structure

(Natural Gas Utility Divisions) Atmos Energy Holdings, Inc.
(Nonutility Businesses)
Colorado-Kansas
Colorado-Kansas
Atmos Energy Marketing
Kentucky
Kentucky • • Storage (Trading)
Storage (Trading)
• • Transportation (Marketing)
Transportation (Marketing)
Louisiana
Louisiana
Atmos Pipeline & Storage
Mid-States
Mid-States • • Atmos Pipeline-Texas
Atmos Pipeline-Texas
• Non-Texas Assets

Mid-Tex **
Mid-Tex
Other Nonutility
Other Nonutility
Mississippi
Mississippi • • Atmos Energy Services
Atmos Energy Services
• • Atmos Power Systems
Atmos Power Systems
West Texas
West Texas * Effective 10/1/04, includes LDC and pipeline operations of
former TXU Gas. Pipeline operations functionally reported
under the nonutility businesses in Fiscal 2005.
4

Overview of Nonutility Operations
Office Locations and Staffing

New Orleans
16

196 Employees
6 Main Locations
Jackson
Owensboro
6
7

Houston
72

AEH Staff Energy Pipeline & Energy Power
Franklin Dallas
Office Locations Levels Marketing Storage Services Systems
23 72

Houston, TX 72 X X X X
New Orleans, LA 16 X X X -
Franklin, TN 23 X - X X
Owensboro, KY 7 X - - -
Dallas, TX (APT) 69 X - X
Dallas, TX (AEM) 3 X
- - -
Jackson, MS 6 X
196

5

Overview of Nonutility Operations
Business Segments

Gas Marketing
Marketing
Utilizes storage and transportation assets that are leased or managed to:
(1) provide bundled city-gate services (including base-load sales, peaking sales, risk
management and demand based storage services), to municipal, industrial, power
generator, LDC and affiliate utility customers and (2) capture time and location price
differentials (arbitrage) through various trading strategies.

Pipeline & Storage
Owns or leases storage and pipeline assets in Texas, Kentucky and Louisiana that are
utilized to provide storage and transportation services to municipal, industrial, power
generator and affiliate utility customers
Includes recently acquired pipeline and storage assets from TXU Gas (6,162 miles of
intrastate pipelines and 5 storage facilities). Effective 10/1/04, these pipeline operations
are functionally reporting under the nonutility businesses.

Other Nonutility
Provides gas supply services to Atmos utility divisions and peaking power construction
services

6


Colorado-Kansas
Colorado-Kansas
Kentucky
Storage (Trading)
Louisiana
Louisiana
Mid-States

Mid-Tex **
Mid-Tex
Other Nonutility
Other Nonutility
Mississippi
Atmos Power Systems
West Texas
former TXU Gas. Pipeline operations functionally reported
7

Commercial Business Flow

Aggregate and Purchase Transportation and Storage Logistics Sales to Markets

• AEM is a transportation and storage logistics company that generates margins
through commercial transactions with its various customer classes. These
transactions cover the the movement of gas from wellhead to burner-tip.

• AEM aggregates gas supply, transports it across pipelines, stores gas and
withdraws it for delivery to various strategic geographical markets, based upon
the terms of its customer agreements. Customers include municipals,
industrials, power generators, LDCs and utility affiliates.

• AEM manages its commercial transactions and related business processes
through a disciplined and conservative risk management philosophy.

8

Business Model
The portfolio of assets that AEM manages is either acquired, leased or results from various asset management transactions
with 3rd parties. Also, transportation and storage assets are contracted for (proprietary). These assets are utilized to capture
value and create commercial opportunities.

Storage Assets Transportation Assets
• Support Customer Marketing
• Optimize Value
(trading to capture (optimize value of capacity)
time and location price differentials)

Proprietary Proprietary
Asset Management Asset Management
• No customer obligation • No customer obligation
• Customer obligation • Customer obligation
• 100% optionality • 100% optionality
• Partial optionality • Partial optionality

Customer Sales Customer Sales
• Full Requirements • Base-load
• Billable Plan • Peaking
• Other • Balancing
9

Atmos Energy Marketing-Storage

Atmos Energy Marketing –
Storage

10

Atmos Energy Marketing - Storage
Types of Storage

Asset Management
Proprietary

Billable Plans
Full Requirements Billable Plans
Full Requirements (18.2 BCF)
BCF (12.4 BCF) (18.2 BCF)
BCF (12.4 BCF)
• •Egan
Egan 1.5
1.5
• •Atmos P/L-T 1.0
Atmos P/L-T 1.0
• •Gulf South
Gulf South 6.0
6.0
8.5
8.5

Parking Gas Loaning Gas
Parking Gas Loaning Gas
• No customer obligation (deposited with pipeline) (borrowed from pipeline)
(deposited with pipeline) (borrowed from pipeline)
• 100% optionality

• Customer obligation
• Partial optionality
11

Proprietary Storage
Example

Proprietary

Cash Market = $8.00 / dth
Forward Nymex = $8.60 / dth
Storage
Storage AEM buys physical at $8.00 and injects in storage
AEM sells forward NYMEX futures at $8.60

Spread captured $ 0.60 / dth
Less: Storage fees (0.20) / dth
Unit Margin $ 0.40 / dth
Proprietary storage - is physical storage that is
leased by AEM.
Associated Risk - the economic value of this storage is subject to market price changes (both
physical and financial) and is realized by withdrawing or injecting gas according to the hedge strategy
designed for the facility.
Risk Management - Gas injected and held as inventory will be hedged with forward NYMEX sales
in the month the gas is to be withdrawn. Forward spreads may be locked-in ahead of time in line with injection
and withdrawal capabilities of each storage facility. If the relationships between and among NYMEX
forward prices change, hedges may be moved (rolled back or forward) to move withdrawals to the higher
priced months and injections to the lower priced months.
Margin Impact - The economic value is derived from the difference between the weighted average
sales price (WASP) of gas, the weighted average cost of gas (WACOG), adjusted for the gain or loss
on financial hedges, less any injection or withdrawal charges, fuel and any interest costs on holding
inventory.
12

Full Requirements Storage
Example
Full Requirements


Storage
Storage AEM buys physical at $8.00 and injects in storage

Less: Storage fees (0.20) / dth

Full Requirements Storage - Storage that is managed on behalf of customers that require all of
their gas usage requirements to be delivered to their city-gate by their provider (AEM).
Associated Risk - The economic value of this storage is subject to market price changes, based on
the monthly index. There is also the risk of customer usage being more or less than expected during
the winter heating season, which may create price risk.
Risk Management - Same as proprietary storage with the following additional steps taken:
(1) set up conservative withdrawal profile based on customer usage patterns over the contract
period and (2) monitor customer usage and storage activity (especially swing on storage customers)
such that NYMEX contracts or physical gas is bought back or sold (whichever is the best value) to
ensure hedges and inventory balance as close as possible.
Margin Impact - Same as proprietary with the potential changes in economic value that could occur
due to swings in customer usage. These swings may erode or increase some of the time spread and
daily optionality profits.
13

Billable Plan Storage
Example
Billable Plan Storage


Storage AEM sells physical at $8.20 and defers injection into storage
Storage AEM buys forward NYMEX futures at $8.00

Less: Storage fees 0.00 / dth

Billable Plan Storage - Storage that is managed on behalf of customers (primarily the Atmos
Affiliates and ETN Municipal customers) under a ratable / billing plan arrangement. Prices from
injection months are set at monthly indices and billed, and then later withdrawn and delivered per
the plan.
Associated Risk – During an injection cycle, physical gas can be accelerated, deferred or delivered
based on the monthly index price, which creates arbitrage opportunities.
Risk Management - AEM can elect to inject into storage per plan or accelerate or defer storage
injections to capture arbitrage value, which is hedged by buying and selling forward NYMEX. These
optimization strategies are typically executed during the summer injection period when usage is set.
Margin Impact - The economic value is derived from the difference between the weighted average
sales price (WASP) of gas, the weighted average cost of gas (WACOG), adjusted for the gain or loss
on financial hedges, less any injection or withdrawal charges, fuel and any interest costs on holding
inventory.

14

Park and Loan Transactions
Example
Parking Gas

Cash Market = $8.00 per dth
Parking gas Forward NYMEX = $8.20 per dth

AEM buys physical gas at $8.00 and lends to pipeline

Spread Captured $ 0.20 / dth
Less: Parking Fees (0.10) / dth
Parking Gas - Storage or line pack service for which
AEM contracts from time to time.
Associated Risk - Title to gas is transferred to counterparty and returned to AEM at predetermined
dates for a fee. A transaction usually executed in a contango pricing market (prices rising over time).

Risk Management – The gas transferred to counterparty is treated as inventory and is
hedged in the same manner as proprietary storage, with the exception of the time
components of the purchase and sale of gas. These are usually fixed, which eliminates roll
back and roll forward optionality
Margin Impact -The economic value is derived from the difference between the injection cost and the
gas sold on withdrawal, the gain or loss on hedges, less any interest costs on holding inventory.

15

Park and Loan Transactions
Example
Loaning Gas

Cash Market = $8.20 per dth
Loaning gas Forward NYMEX = $8.00 per dth

AEM sells physical gas at $8.20 and borrows from pipeline
AEM buys forward NYMEX futures at $8.00

Less: Lending Fees (0.10) / dth
Loaning Gas - Storage or line pack service for which Unit Margin $ 0.10 / dth
AEM contracts from time to time.
Associated Risk - Title to gas is transferred from counterparty to AEM and returned to counterparty at
predetermined dates for a fee. Usually executed in a backward-dated market (prices declining).
Risk Management – The gas transferred to AEM is treated as negative inventory and is
hedged in the same manner as proprietary storage, with the exception that AEM buys forward
NYMEX contracts to hedge the short position created (as opposed to selling). In addition, the
time components of the purchase and sale of gas are usually fixed, which eliminates roll back
and roll forward optionality.

Margin Impact -The economic value is derived from the difference between the withdrawal cost and
the gas sold on injection, the gain or loss on hedges, plus any interest revenue associated with
negative inventory.
16

Trading Margin Description
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 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 and is
reflective of relatively high price volatility of the prompt month, and the relatively low volatility of the
offsetting forward months.

17

Storage – Economic Value vs. GAAP Reported Results

Economic Value
Economic Value
Reported GAAP
Reported GAAP
Value
Value - -Physical and Financial
Physical and Financial
Positions
Positions
- -Physical and Financial
Physical and Financial
Positions
Positions
$16.4 MM
$16.4 MM
($7.8 MM)
($7.8 MM)
Storage
Embedded margin
difference

$24.2 MM Realizing Economic value
is dependent on
execution of trading strategies.

At June 30, 2005
18


Schedule of Economic Value (Storage)
(in millions)

Economic Reported GAAP Value Excess
Value Total Timing Value
September 30, 2004 $ 12.3 $ (0.8) $ (2.9) $ 13.1

December 31, 2004 $ 12.9 $ 11.8 $ 0.9 $ 1.1

March 31, 2005 $ 8.0 $ (8.8) $ (2.8) $ 16.8

June 30, 2005 $ 16.4 $ (7.8) $ - $ 24.2

19

Storage Book – Accounting Issue
AEM utilizes fair value hedge accounting for its storage activity in
accordance with the guidelines prescribed by FAS 133.

Under this methodology, the changes in value of the physical inventory
and the corresponding financial hedges are marked-to-market with the
changes in fair value being recognized in current period earnings

There is potential volatility in earnings related to the accounting treatment
for storage in two different areas:

1. The differential in the movement of the price for the forward
months. In other words, the prompt month is likely to be much
more volatile than a future period.

2. The physical gas is marked to the Inside FERC (determined on
the last day of the month), while the financials are marked to
the NYMEX (which settles on the 3rd to last business day of the
month).

20

Storage Margin Volatility
(Potential Impact of Change in GAAP Reported Spread Values)

$16.0

$14.0

$12.0

$10.0
($ in Millions)

$8.0

$6.0

$4.0

$2.0

$0.0
5
4 4 5
n-0
p-0 c-0 r -0
Ma
De Ju
Se
$.25 Price Move $.50 Price Move $1 Price Move

Sep-04 Dec-04 Mar-05 Jun-05
Storage Volumes: BCF 5.4 6.4 12.5 14.7
21

Atmos Energy Marketing - Transportation

Transportation

22

Asset Optimization

Transportation optimization is defined as utilizing “excess” capacity to
capture time and location price differentials through customer sales.

Vol/Day

12,000

10,000
Capacity Capacity
8,000 Utility Usage
Available Available
Profile
For Industrial
6,000 For Industrial
Utilization Utilization
4,000

2,000

Month Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun

23

Transportation Opportunities

Transportation Assets
Transportation Assets Zone 5

- -Asset Management
Asset Management Tennessee Gas Pipeline
Supply to Market
- -Proprietary
Proprietary Zone 6

• • Capture arbitrage spreads on pipeline grid
Capture arbitrage spreads on pipeline grid Zone 4

• • Excess transport capacity
Excess transport capacity
Zone 2
• • Pipeline segmentation
Pipeline segmentation

Zone 3

Example: Zone 1

Transportation

Cash Market at 500 leg supply pool = $5.00 per dth
Cash Market at Nashville Gas = $5.35 per dth
Zone 0

AEM buys physical gas at $5.00 at supply pool
AEM sells physical gas at $5.35 at Nashville Gas

Less: transport commodity & fuel (0.18) / dth Zone L
Unit Margin & Demand Recovery $ 0.17 / dth

24

Gas Pricing Components for Marketing Services Provided


Base Commodity
- Fixed Price
- Hedge forward
- Current Month
- Index Price
- Flat/Plus/Minus
Marketing Transactions Customers
Transport / Basis
- Baseload sales - Asset Managed
• Utilities
- Bundled sales - Proprietary
• Municipals
- Peaking sales
- Balancing services • Industrials
Fuel
- Risk Management - Pass thru
• Marketers
- Other - Non pass-thru
• Power Gen.
• Others
Management / Admin. Fee

- Per Unit

- Fixed Amount
25


AEM owns or manages
approximately 1.3 Bcfd of
firm pipeline capacity and
approximately 39.1 Bcf of
storage on various
71

interstate pipelines
Owensboro
58 &
59

through contractual
Franklin relationships.
Dallas
Houston
New Orleans
Transport Storage
Duke (ETN) 225,000 Mcfd .99 BCF
Owned Storage CMS (Trunkline) 30,000 1.16
Primary Office Location El Paso (SNG) 70,000 1.53
Transco 20,000 .57
Distributed Generation
345,000 Mcfd 4.25 BCF

Transport Storage
El Paso (TGP) 200,000 Mcfd 4.30 BCF
Transport Storage Transport Storage
Duke (TETCO) 40,000 1.50
Columbia Gulf 40,000 - El Paso (TGP) 41,000 Mcfd 1.88 BCF Atmos P/L-T 24,000 Mcfd 1.0 BCF
Gulf South(Koch) 277,000 8.72 Texas Gas 187,000 13.30
Gulf South / ISS - .75 Duke (TETCO) 20,000
LIG (AEP) 80,000 .60 Columbia Gas 5,000 .78
Bridgeline 30,000 .30 Dominion - .88
Acadian 10,000 .45 National Fuel 8,000 .42
697,000 Mcfd 16.62 BCF 261,000 Mcfd 17.26 BCF 26

Current Gross Margin Composition

Margin Type Commercial Activity
Impacted by customer volume demand
•
Marketing
Marketing • Sales prices are:
(Bundled gas deliveries &
(Bundled gas deliveries & • Cost plus profit margin
peaking sales)
peaking sales) • Fee based

Margins: More predictable
- - Transport management
Transport management

Impacted by:
•
• Gas price spread values in the
Trading
Trading market (arbitrage opportunity)
• Physical storage capabilities
- - Storage management
Storage management • Available storage and transport
capacity
Margins: More variable

Total margins reflect:
• Stability from marketing margins
Total AEM
Total AEM • Upside from trading around storage
Margins
Margins and transportation assets to capture
arbitrage value
27

Operating and Financial Statistics

Financial
Operations
Nine Months Ended June 30, 2005
(In thousands, except storage balances)
• Approx. 1,000 customers (FY 2004)
Marketing Activities
• Currently operates in 22 states Realized margin: $ 43,182
Unrealized margin: (3,200)
Total Marketing Activities: $ 39,982
• Operating revenues (FY 2004): $1.6
billion

Storage Activities
• Gas Purchases (FY 2004): 228 BCF Realized margin: $ 15,482
Unrealized margin: (7,065)
Total Storage Activities: $ 8,417
• Transports on over 18 major interstate
pipelines

Gross profit: $ 48,399
• Own, manage or contract
• 1.3 BCF/d of transportation
Ending storage balance 14.7 Bcf
• 39 BCF of storage
Sales volumes 203.8 Bcf

28

Business Process Cycle
* Start
Marketing & Deal Valuation &
Origination Risk Assessment

- Continuous cycle of
integrated processes

Trading - Start to finish execution
Post Audit of
- Risk Management
Risk Management
Deal (from deal origination
- Optimize storage
Economics to post audit of deal
and transport
capacity economics)

- Discipline and controlled
processes, done correctly
$ Value
the first time

Financial Deal
- Established metrics to
Reporting & Management
measure compliance
Analysis & Confirmation

- Excellent communication
between all process
owners is critical
Gas
Scheduling
Gas Accounting
& Logistics
& Settlements
29


Business Strategies and
Market Overview

30

Storage & Transportation Strategies

Commercial Transport & Storage Strategies
Control storage in strategic areas (with focus on high deliverable salt
storage)
Maximize value from storage and transportation assets, as markets
provide opportunities through price movement:
Storage Arbitrage
Transport arbitrage
Park and Loans
Mid-stream business
Challenges
Increased competition in securing storage capacity (putting pressure on
returns)
Pipelines tightening operational flexibility

31

Gas Marketing Strategies

Commercial Marketing Strategies
Retain existing customers by providing excellent value for products and
services.
Expand Asset Management business; including use of asset replication
strategy
Providing pipeline type services to replace customer held capacity. Expand
into new customer markets (Texas, Mobile Bay, others)
Provide balancing services to customers off of Atmos Pipeline - Texas
Develop new Producer Services business (gas cost reduction strategy)
Challenges
High gas prices (impact on credit risk, working capital, etc.)
Increasing competition in traditionally strong AEM markets (East
Tennessee)
Weather impact on customer demand / usage
32


Colorado-Kansas
Colorado-Kansas
Kentucky
Storage (Trading)
Louisiana
Louisiana
Mid-States

Mid-Tex **
Mid-Tex
Other Nonutility
Other Nonutility
Mississippi
Atmos Power Systems
West Texas
former TXU Gas. Pipeline operations will functionally report
33

Ownership of Strategic Asset Base Provides Revenue Growth & Stability

Atmos Pipeline
& Storage

Storage Assets
Pipeline Assets

UCG Storage, Inc.
Atmos Pipeline –Texas
WKG Storage, Inc.
Trans LA Gas Pipeline
Trans LA Gas Storage, Inc.
Atmos P/L - Texas Storage

Assets supply storage-
Upstream pipeline services type services to Atmos
provided to Atmos Mid-Tex Mid-Tex Division, affiliates
Division, affiliates & third parties & third parties

34


Atmos Pipeline – Texas Assets

35

Atmos Pipeline - Texas
Asset Description
Pipeline transports and stores gas, as well as provides other pipeline
services for distribution, industrial, electric generation, cross haul and
other shippers
Approximately 6,162 miles of intrastate pipeline
•

Total projected transportation volume is approximately 591 Bcf
o

Current average volume of approximately 1.6 Bcf/d.
o

Demonstrated peak day deliveries of 3.5 Bcf/d
o

The Dallas / Fort Worth Metroplex comprises approximately 75%
•
of on-system distribution demand
Five Storage facilities (One salt cavern; four depleted reservoirs)
Working Gas Capacity: 39 Bcf
•
Maximum withdrawal: 1.2 Bcf/d
•
Maximum Injection: 270 MMcf/d
•
36


37

Commercial Business Flow

Commercial Opportunities Margins Potential Risk Risk Management
- Atmos Utility : Mid-Tex Division - Tariff Based Rates - Weather - Seamless Performance
- Firm Service

- Industrial - Tariff Based Rates - Weather - Strong Customer Service
- Limited Competition - Timely & accurate information
- Limited Credit Exposure

- 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 + Low Risk Profile = Stable Earnings Growth
38

Multiple Commercial Opportunities for Creating Value

••Transport incremental gas
Transport incremental gas
••Provide other value - -added services
Provide other value added services

No Capital required
No Capital required

Value
$
••Invest capital with
Invest capital with
commercial and regulatory returns
commercial and regulatory returns

•Capacity optimization - -mainline
•Capacity optimization mainline
compression
compression
• •North Metro enhancement project
North Metro enhancement project
Regulatory with GRIP
• •Expand storage capacity
Expand storage capacity
Certain capital projects
will also be eligible
Capital required
Capital required
for GRIP recovery
($40-45 million)
($40-45 million)
39

Project Update
Northside Loop Agreement – Energy Transfer
Atmos Energy and Energy Transfer Fuel will construct and operate approximately 45 miles of 30quot; pipeline
extending from Justin to Frisco, in the northern part of the DFW Metroplex creating incremental capacity of
200 MMcf/d. Atmos’ initial investment will be approximately $45 million, which can be contributed over a two-
year period.
The Justin to Line F segment is expected to be in-service by December 2005.
Compression is ordered and anticipated to be in-service by March 2006.
CAPEX: approximately $4 million in fiscal 2005; $41 million in fiscal 2006.

Enbridge - Line (Corridor Compression Project)
Executed agreement in June 2005 to install compression to enhance re-injection capabilities at Bethel and to
transport up to 100 MMcf/d into Enbridge’s new 36” Carthage pipeline at Bethel.
Start date anticipated in early 2006, subject to compressor availability.
CAPEX: approximately $3 million in fiscal 2005; $17 million in fiscal 2006.

Devon – Line (Corridor Compression Project)
Executed agreement in June 2005 to transport up to 50,000 dth/day into Enbridge.
Start date anticipated in early 2006, subject to compressor availability.

Katy Capacity Expansion
A Request for Interest was issued in April 2005; subsequently signed agreements with 3 shippers to transport
an additional 50,000 dth/day of capacity to the Katy area.
Project is expected to come online in June 2006.
CAPEX: approximately $13 million to $15 million in fiscal 2006. 40

Project Map

North Side
Loop

Enbridge
Compression

41


Non-Texas Assets

42

Atmos Pipeline & Storage - Non-Texas

Storage
Atmos Pipeline & Storage (AP&S) owns 2 reservoir storage locations that are located in
Kentucky and a 25% interest in a reservoir storage location in Louisiana. All three provide a
combined usable capacity of 3.9 BCF.

East Diamond is a reservoir storage facility located in Kentucky with 2.2 BCF of usable
capacity.

Barnsley is a reservoir storage facility located also in Kentucky with a 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 .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.

This pipeline has the ability to deliver to the Atmos utility, a few industrial customers, an
Entergy power plant, and Entergy’s LDC in New Orleans.

43

Atmos Pipeline & Storage - Non-Texas

Pipeline & Storage Strategies
Own storage and pipeline in strategic areas (with focus on high deliverable salt
storage)
Maximize value from storage and transportation assets, as markets
provide opportunities through price movement:
Storage Arbitrage
Transport arbitrage
Park and Loans

44

Trans Louisiana Gas Pipeline

h
ris

rish
Pa
s
Storage is held on upstream pipelines

Orleans Pa
rl e
ha

h
.C

ris
St

Jefferson Pa
• 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)
(Paradis) TLGP 16”
S39,T14S,R20E
S39,T14S,R20E Future Interconnect
Future Interconnect
Columbia Gulf
Columbia Gulf
S24,T13S,R23E

TLGP Pipeline
TLGP Pipeline
B’line 14”

October 26, 2001

N

Metropolitan New Orleans Area
Metropolitan New Orleans Area 21 Miles of 24” TLGP Pipe W E
.95 Miles of 12” TLGP Pipe
TLGP Transmission // TLGP Sales Points
TLGP Transmission TLGP Sales Points
45
S


Colorado-Kansas
Colorado-Kansas
Kentucky
Storage (Trading)
Louisiana
Louisiana
Mid-States

Mid-Tex **
Mid-Tex
Other Nonutility
Other Nonutility
Mississippi
Atmos Power Systems
West Texas
former TXU Gas. Pipeline operations will functionally report
46

Other Nonutility - Atmos Energy Services

Strategy
Provide standardized, pro-active and cost effective gas supply
functions to Atmos utility divisions.

Major Services Provided
Gas supply planning
Gas supply procurement
Regulatory compliance support
Gas supply invoice reconciliation / reporting
Corporate utility hedging

Opportunities
Accurate and timely communications with each of the Atmos
Utilities and headquarters.
To the extent possible, standardize gas supply functions across
Atmos Energy.
Provide proactive strategy and planning process for utility divisions.
47

Other Nonutility - Atmos Power Systems

Strategy
Continue to review electric generation opportunities, based on
evolving market to meet needs of municipal and industrial customers.

Currently reviewing a new electric product offering, which would
include a 10 year prepaid gas supply component.

A key benefit of electric projects is that it allows us to secure long
term fuel management opportunities (eg. Four bcf/year of natural gas
for 10 years)

Major Services Offered
Construct and lease electric peaking power and base-load generating
plants and associated facilities.

48


Appendix

49

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
Storage & Transportation

- 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

50

Risk Management & Oversight
Risk Policy
AEM has in place a risk policy which serves as an overall guide for all of its
employees and contractors regarding managing the business risks of the company.
The policy outlines AEM’s overall risk philosophy and also includes its risk profile, controls,
procedures, responsibilities, and reporting requirements.
AEM’s Risk Management Committee monitors this policy for compliance and provide
overall oversight of the company’s risk management program.

Risk Management Committee (see next slide)

Reporting
AEM utilizes a variety of reports to analyze and report the results of its trading and
risk management activities.
Daily Trading report
Daily P&L report
Daily Position report
Deal Validation report
Various Other reports 51

Risk Management Committee (Governance)

Atmos Board
Audit Committee

Atmos Management
Committee

AEH Risk Management
Committee

AEC AEM AEH Vice President AEH
AEM AEM
VP and Corporate President SVP - Finance Risk Control, SVP – Business
SVP - Trading SVP - Marketing
Controller & Admin. (Chair) Credit, Finance Development

Responsibilities
The AEM Risk Management Committee has overall responsibility for the oversight of risk
management and trading activities. The Risk Management Committee is chaired by the
SVP Finance & Administration and reports through the Atmos Management Committee and
the Audit Committee of the Atmos Energy Board of Directors.

The Risk Management Committee’s duties are to establish and oversee compliance with all
risk management policies, controls and procedures, as well as to periodically review risk
management strategies. The Risk Management Committee receives, reviews and helps
resolve (as appropriate) any internal control issues and audit findings related to risk
management.
52

Risk Management Philosophy

AEM’s risk management philosophy is conservative and based on a low risk
tolerance.

AEM recognizes that there are various business risks inherent in its business, that
could impact its financial results.
Market/price, credit, contract/legal, operational, systems, customer retention, others

AEM is strongly committed to managing these risks prudently, in accordance with its
controls, procedures, and other risk management practices.

As it pertains to its marketing and trading positions, it is AEM’s intent to maintain
minimal net open positions.
Open positions can create price risk exposure to AEM on a short-term basis and may
occur due to the time lag in executing financial hedges and other business factors.

AEM closely monitors its marketing and trading positions and manage the risk
related to any open positions that may occur.

53

Items that can impact earnings:

Weather
Customer Demand
Supply / Storage levels

Gas Price daily / monthly price volatility (physical and
financial transactions)
Position Management
Customer Growth / Retention
Accounting Treatment of Storage (FAS 133)

54

atmos enerrgy _nonutility101705

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