ATMOS ENERGY Q2 FY25 earnings call ATO

Atmos Energy continues to benefit from robust economic growth in Texas, with the state adding nearly 192,000 jobs over the last 12 months, representing a 1.4% annual growth rate and reaching a record high of over 14.3 million employees. This strong employment trend has driven significant customer growth, with nearly 59,000 new customers added over the past 12 months, 46,000 of which are in Texas. Commercial customer additions remained solid with 850 connections in Q2 and 2,000 year-to-date, alongside 20 new industrial customers year-to-date, contributing an anticipated annual load of 11 Bcf.

The company is actively investing in its APT (Atmos Pipeline-Texas) system to enhance safety, reliability, and supply diversification. Key projects include Phase 2 of APT's Line WA Loop, which involves installing 44 miles of 36-inch pipe west of Fort Worth, expected to be completed by calendar year-end. The Bethel to Groesbeck project, installing 55 miles of 36-inch pipe, is scheduled for service in late calendar year 2025. Additionally, APT completed two interconnect projects in Q2, adding over 1 Bcf of gas supplies year-to-date to support LDC customers.

Atmos Energy is making significant progress on regulatory fronts, having implemented $153 million in annualized regulatory outcomes year-to-date, with an additional $175-$180 million expected in FY25. Notable developments include a proposal for decision in the West Texas general rate case recommending a 9.8% ROE, 60.97% equity layer, $1.2 billion rate base, and approval to capitalize cloud computing costs. A proposed settlement for the Mid-Tex general rate case, representing 15% of the division's customer base, includes similar terms with a $1.1 billion rate base. These outcomes are expected to result in $30.6 million and $6.7 million annual operating income increases, respectively.

Consolidated O&M expense increased by $74 million year-over-year, primarily driven by a $27 million increase in employee-related costs due to headcount and overtime, a $15 million rise in bad debt expense, and a $14 million increase in line locating and inspection activities. The company emphasizes a proactive O&M spending approach, utilizing opportunities to pull forward^📎 maintenance and compliance work during summer months to prepare for the winter heating season and enhance system safety and reliability.

Atmos Energy maintains a strong focus on customer satisfaction, achieving a 98% satisfaction rating from its customers. The company's customer advocacy team and support agents have been instrumental in assisting nearly 32,000 customers in securing over $10 million in energy assistance funding during the first half of the fiscal year, demonstrating a commitment to community support and customer well-being.