Atmos Energy 2013 Annual Report Download - page 19

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Nonregulated operations contributed
the remaining 5 percent of net income
in scal 2013. e segment’s $11 million
of earnings reected strong performance
from focusing on its core delivered-gas
business. Our gas marketing business
continues to score high ratings in cus-
tomer satisfaction and to maintain the
loyalty of our long-time gas customers.
Focused Strategy
About 95 percent of our consolidated net
income today comes from predictable
rate-base-driven earnings. Our focused
strategy is to modernize our infra-
structure and ensure safe and reliable
operations.
We have invested more than $1.4 bil-
lion during the past three years to repair,
rehabilitate or replace aging segments of
our pipeline network. We plan to accel-
erate our capital spending through the
end of scal 2018 to advance our highest
priorities of safety and reliability.
Investors are applauding natural gas
utilities for making these critical infra-
structure investments. e market rec-
ognizes the potential gains and reduced
operational risks for innovative distribu-
tion companies like Atmos Energy that
increase safeguards for the public. is
support was evident on November 14,
2013, when our share price set an all-
time high of $47.44.
In scal 2013, we invested a record
$845.0 million in capital expenditures
primarily for system improvements. For
nearly 93 percent of that investment, we
expect to begin earning a return on it
within one year. Approximately 70
percent, or $589 million, of our scal
2013 capital spending was dedicated to
safety and reliability projects.
e $112.1 million year-over-year
increase in our scal 2013 capital
expenditures was due to major pipeline
expansion projects and more spend-
ing on cathodic protection to prevent
corrosion of pipelines in our regulated
transmission and storage segment.
Atmos Pipeline–Texas (APT), our
regulated intrastate transmission and
storage unit, completed major pipeline
expansions that added capacity and
capability to serve local gas utility distri-
bution systems, including our Mid-Tex
Division. Of note was the installation
of 69 miles of 24-inch Line WX west of
Fort Worth.
APT also added two 1,590-horsepower
compressors at the Waha Hub, which is
a conuence of several large pipelines,
gas treatment plants and processors
southwest of Monahans, Texas. ese
powerful compressors increase the
opportunity to connect more natural gas
supplies from the Permian Basin.
Solid Financial Foundation
Atmos Energy’s solid nancial foun-
dation is reected by its strong balance
sheet. At scal year-end on September
30, 2013, our debt capitalization ratio
was 52.2 percent, compared with 51.7
percent at September 30, 2012. At year-
end, available liquidity of approximately
$715 million was sucient to meet our
anticipated needs.
In January 2013, we reduced the
weighted average cost of our long-term
debt to 6.23 percent when we issued
$500 million of 4.15 percent 30-year
senior notes. Earlier, in October 2012, we
executed forward starting interest-rate
swaps. ese swaps eectively xed the
treasury component of future debt issues
at 3.13 percent for an expected $500 mil-
lion issuance in scal 2015 and at 3.37
percent for an expected $250 million
issuance in scal 2017.
e company’s dividend payout ratio,
which we expect to be between 53 per-
cent and 55 percent in scal 2014, allows
for continued dividend growth.
Recognizing the strength of the
company’s nancial position, Standard &
Poor’s Corporation upgraded our senior
secured debt rating from BBB+ to A- in
October 2013. S&P cited an improved
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
2013 2014E 2015E 2016E 2017E 2018E
n Natural Gas Distribution n Regulated Transmission and Storage
Our rate base of regulated assets is projected to grow to between $6.9 billion and
$7.1 billion by the end of fiscal 2018. Our continuing investments in infrastructure
improvements will be the primary driver for the growth in our future earnings.
Capital Spending Results in Rate Base Growth
Dollars in millions
“ We have invested more
than $1.4 billion during
the past three years to
repair, rehabilitate or
replace aging segments
of our pipeline network.”
—KIM R. COCKLIN
$6.9–$7.1 billion