Fei She

Fei She from Barclays asked for clarification on Pinnacle West's equity dilution, specifically the incremental equity needs for 2026-2028 beyond the 85% already covered for 2026, and the expected issuance cadence. She also questioned potential mitigation strategies for equity needs given strong sales growth, sought details on annual transmission CapEx post-2028, including drivers for the $6 billion+ through 2034, and inquired about the confidence level to extend the 7-9% rate-based growth beyond 2028, given the 5-7% sales growth through 2030.

Answer

CFO Andrew Cooper explained that the $1 billion-$1.2 billion represents the incremental equity need for 2026-2028, with issuance cadence tied to project lumpiness, utilizing an ATM. He highlighted mitigation efforts through regulatory lag reduction and upfront cash from the subscription model. Regarding transmission CapEx, Cooper noted a baseline of $300M-$400M annually, with strategic projects driving increments, and confirmed a long runway for rate-based growth, with more clarity expected as larger projects like Redhawk and Desert Sun come online post-2028.

Fei She from Barclays sought clarification on Pinnacle West's equity dilution, specifically the incremental equity needs for 2026-2028 and the cadence of issuance. She also asked about strategies for equity need mitigation, assumptions for annual transmission CapEx post-2028, and the confidence level in extending the 7%-9% rate-based growth beyond 2028.

Answer

CFO Andrew Cooper explained that 2026 equity needs are substantially de-risked, with $1 billion-$1.2 billion incremental need for 2026-2028, managed by an ATM program for lumpy projects. Mitigation efforts include reducing regulatory lag through the rate case and securing upfront cash from large load customers via the subscription model. For post-2028 transmission CapEx, Mr. Cooper indicated a long runway of strategic projects, with the run rate increasing from under $200 million to $300 million-$400 million annually, plus increments from strategic projects. He expressed confidence in extending rate-based growth beyond 2028, driven by higher sales growth from large load customers and ongoing capital development.

Fei She of Barclays requested an update on the company's Moody's rating outlook, which has been negative for nearly a year. She also asked how the FFO to debt metric is expected to trend given the company's capital plan and higher equity issuance.

Answer

Christopher Forsythe, SVP and CFO, stated that Atmos Energy has been in regular communication with Moody's and anticipates an update by early April. He emphasized the company's comfort with its current equity capitalization, which has provided stability through volatile periods. Forsythe noted that a potential one-notch downgrade would likely have a minimal impact on the company's financing costs.

Fei She from Bank of America inquired about Atmos Energy's financing strategy for its expanded five-year capital plan, asking for clarity on the annual ATM program run rate and other financing methods. She also asked about the outlook for interest costs and the company's approach to using interest rate swaps.

Answer

Christopher Forsythe, SVP and CFO, explained that the incremental $15 billion financing need will be met with a balanced 50/50 mix of equity and long-term debt. He confirmed that the company anticipates satisfying all its equity requirements through its ATM program. Forsythe also stated that the company is comfortable with its current debt-to-capitalization ratio and will continue to use interest rate hedging opportunistically to manage costs for customers.