Q1 2025 Summary
Published Feb 7, 2025, 7:58 PM UTC- Atmos Energy is experiencing solid customer growth across all sectors, adding over 59,000 new customers in the last 12 months, including over 46,000 in Texas, and 11 new industrial customers utilizing 2.3 Bcf of gas annually, demonstrating ongoing demand for natural gas.
- The company's higher capital expenditure plan reflects growth opportunities and system modernization to support ongoing and anticipated customer growth, which could drive future earnings growth.
- Atmos Energy has effective regulatory mechanisms in place across most jurisdictions to recover costs, supporting financial stability and reducing regulatory lag.
- Planned significant equity issuances of $600 million to $800 million in 2025, with expectations of increasing equity issuances in future years, may lead to ongoing shareholder dilution, potentially impacting earnings per share growth.
- The company's increased capital expenditure plan may result in regulatory lag, with potential delays or challenges in recovering costs through rate cases, especially as they reach the end of the 5-year GRIP cycle in Texas, which could pressure earnings and ROE.
- Uncertainty in securing new large-scale industrial and power generation customers, with the company withholding specifics until contracts are signed, may indicate potential challenges in achieving anticipated customer growth, potentially limiting future revenue growth.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Earnings Per Share (EPS) | FY 2025 | $7.05 to $7.25 | $7.05 to $7.25 | no change |
Capital Spending | FY 2025 | $3.7 billion | $3.7 billion | no change |
Equity Issuance | FY 2025 | no prior guidance | $600 million to $800 million | no prior guidance |
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Equity Issuance Plan
Q: How much equity should we model for 2025?
A: Atmos expects to issue $600 million to $800 million in equity for fiscal 2025, consistent with previous years. As capital grows, this number is expected to increase annually. -
Capital Plan Growth
Q: Will long-term financing needs increase over the next few years?
A: Yes, with a $24 billion capital plan over five years, annual capital expenditures will grow from $3.7 billion this year. Long-term financing will grow accordingly, balancing debt and equity funding. -
Customer Growth
Q: Any updates on large industrial customer additions?
A: Atmos added 11 new industrial customers this quarter, contributing 2 to 2.5 Bcf of anticipated load. These customers include industries like distilling, manufacturing, battery plants, and automotive. -
Moody's Credit Outlook
Q: What's the status of Moody's rating outlook?
A: Moody's placed Atmos on negative outlook in April 2024. The company is in regular communication with Moody's and, even if downgraded one notch, expects minimal impact on financing costs. -
Regulatory Rate Cases
Q: Any issues anticipated with Texas rate cases?
A: Atmos is focusing on refreshing ROE and capital structure in upcoming Texas rate cases, which follow the end of the 5-year GRIP cycle. These are routine proceedings, and the company aims to conclude them by spring. -
Tariff Impact on Costs
Q: Will tariffs affect O&M and CapEx costs?
A: Atmos is monitoring potential tariff impacts but currently expects minimal effect. The company is working with suppliers to assess exposure to overseas components. -
APT Spread Benefit
Q: How does the APT spread benefit affect guidance?
A: The spread widened early in the quarter but returned to normal levels. Future impact depends on weather and market conditions, so the company is cautious about making predictions. -
Regulatory Cost Recovery
Q: How will increased costs be recovered?
A: Atmos has annual mechanisms in most jurisdictions to recover costs. In states like Kentucky, Virginia, and Kansas, traditional rate cases are used. -
Power Generation Opportunities
Q: Are new power plants among the new customers?
A: No, the 11 new industrial customers are not power plants. Atmos continues to receive inquiries but won't disclose details until contracts are signed. -
Potential Growth in Abilene
Q: Will added gas consumption in Abilene impact business?
A: Additional load would likely be on the APT system, where Atmos has a 75-25 sharing mechanism with customers.