|
|
|
|
||
Atmos execs point to productive relationship with states as supporting growth from SNL Daily Gas Report Atmos execs point to productive relationship with states as supporting growth BYLINE: Sibyl Layag SECTION: Extra Atmos Energy Corp. is banking on its strategy of using state regulatory mechanisms and continued capital investments in safety and reliability to overcome drag from the return of tax benefits to customers and drive growth in the long run, executives said Feb. 7. The 2017 Tax Cuts and Jobs Act already affected the utility company's fiscal first-quarter results, stemming from a reduced net deferred tax liability not included in cost-of-service rates, as well as a lower effective tax rate of 26.8%, compared to the previous 35.9%. This resulted in income tax expense dropping by $16 million compared to the previous quarter. "We anticipate our effective income tax rate for fiscal 2018 to range from 26% to 28% for any return of excess deferred tax liabilities to our utility customers," Christopher Forsythe, senior vice president and CFO, said on Atmos' earnings call Feb. 7. "We support our regulators' efforts to ensure our utility customers receive the full benefit of changes in our rates due to tax reform." Atmos is in talks with regulators in its service territories of Colorado, Kansas, Kentucky, Louisiana, Mississippi, Tennessee, Texas and Virginia to figure out the best way to pass on the tax benefits to customers, Forsythe added. The fiscal second quarter's results would reflect the tax benefit being returned to customers, which would result in lower operating cash flow. Along with regulatory liabilities related to the tax changes, Atmos expects this to raise estimated financing through fiscal 2022 by about $500 million to $600 million. However, Atmos still expects stronger earnings in the fiscal year due to the effects of the lower effective tax rate on pretax income, Forsythe said. This would be augmented by customer growth and increased economic activity. Atmos' distribution segment gained 32,000 customers, or 1% net customer growth, over the past year, along with new transportation customers and increased demand, particularly in the Kentucky/Mid-States division, adding almost $3.5 million in incremental gross profit. Atmos also posted quarter-over-quarter growth from modernization of distribution and transmission systems, supported by regulatory recovery mechanisms. The company boosted its consolidated capital spending year over year to $383 million, over 82% of which was allocated for system improvements in safety and reliability. The spending is on track with Atmos' $1.3 billion to $1.4 billion in estimated CapEx for fiscal 2018, with about 80% dedicated to safety and reliability not just in the current year but over the next five years. The executives praised regulators in Atmos' jurisdictions for supporting the company's continued investments in modernizing its distribution and transmission system. "Our regulatory mechanisms provided the opportunity to make these needed investments by allowing us to minimize lag, recover our costs and provide a competitive return opportunity for investors who entrust us with the capital to invest in the safety and reliability of our system," said President and CEO Michael Haefner. Most recently, a comprehensive settlement approved by the Mississippi Public Service Commission that added new rates and investments is "a great example of how we collaborate with our regulators to develop win-win outcomes that benefit our customers, the economy in the states we serve and the company," Haefner said. Atmos on Feb. 6 reported adjusted net income of $152.2 million, or $1.40 per share, in the first quarter of its fiscal 2018, up from $114.0 million, or $1.08 per share, in the prior-year period. |
return to message board, top of board |