Greetings, and welcome to the Atmos Energy Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Dan Meziere, Vice President of Investor Relations and Treasurer. Thank you, sir. Please go ahead..

Thank you, Diana. Good morning, everyone, and thank you for joining us. With me today are Kevin Akers, President and Chief Executive Officer; and Chris Forsythe, Senior Vice President and Chief Financial Officer.

Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the Investor Relations tab. Today's presentation also includes references to non-GAAP financial measures.

You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of non-GAAP measures to the closest GAAP financial measure.

As we review these financial results and discuss future expectations, please keep in mind that some of our discussions might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Our forward-looking statements and projections could differ materially from actual results.

The factors that could cause such material differences are outlined on Slide 37 and more fully described in our SEC filings. I will now turn the call over to Kevin..

operations, fleet, facilities, gas supply, and customers. Our efforts in fiscal '21 to reduce emissions in our environmental impact included such things as our ongoing distribution transmission, and underground storage system modernization programs mentioned earlier.

It also included the installation of gas cloud imaging capabilities that APT's troughs at each storage fields, and we will complete the remaining installation of that equipment, that APT sales in fiscal 22.

We will also deploy additional wellhead, fixed based, or gas cloud imaging detection technologies at our distribution storage fields in fiscal 22 We developed a plan to replace our pneumatic devices with no bleed or low bleed devices.

We expanded advanced late detection technology, and developed a strategy to capture methane emissions from pipeline maintenance activities. We've continued our R&G strategy of identifying customers who wish to use our system to transport the R&G they produce.

We increased the amount of R&G transported across our system to approximately 8 BCF a year, and we are evaluating nearly 30 opportunities that this time that could further expand these transportation opportunities.

In fiscal '22, we will begin transitioning our light-duty vehicle fleet to gasoline hybrid vehicles and to C and G for our heavy-duty vehicles. In September, we completed our first zero net energy home in partnership with the Greeley-Weld Habitat for Humanity in Evans, Colorado.

This home uses high-efficiency natural gas appliances, rooftop solar panels, and insulation to produce more energy than it consumes at a very affordable cost of approximately $50 a month for a combined gas and electric bill. We're currently developing 2 more of these type homes in Texas.

Projects like these demonstrate the value of using all energy sources to reduce carbon emission. In this summer, we joined the low carbon resources initiative.

As a reminder, this joint research and development effort between the Gas Technology Institute and the Electric Power Research Institute is working to accelerate commercial deployment of low and 0 carbon technologies. Finally, we are nearing the completion of a fuel cell at one of our data facilities to generate low carbon electricity.

This fuel cell will be powered with natural gas and is anticipated to substantially reduce the carbon footprint from that facility. To wrap up fiscal '21, our 4,700 employees still are feeling safe and thriving communities initiatives made a difference in the lives of others this year.

All about supporting schools and students with books, meals, and snacks. We honored our community heroes and healthcare workers by providing them with meals as they were working. We planted trees, worked in community gardens.

We hosted utility fares, Energy Assistance Blitz to share the warmth for over 9,000 customers as we donated $3 million of financial support, and for nearly 300 local food banks and shelters. The financial and volunteer resources of our team provided translated into nearly 8 million meals for our neighbors in need across 1,400 communities.

I'm very proud of our team because of their investment of time, talent, and resources, we are making a difference in our communities. A successful fiscal '21 has us well-positioned as we move into the second decade of our strategy.

I will now turn the call over to Chris, who will provide some additional color around our fiscal '21 financial results and discuss our fiscal '22 guidance, as well as our updated 5-year plan through fiscal 26. I will then return with some closing remarks. Chris, over to you..

Thank you, Kevin, and good morning, everybody. Our fiscal '21 diluted earnings per share of $5.12, representing 8.5% increase over adjusted diluted earnings per share of $4.72 reported in the prior year.

As a reminder, our fiscal 2020 GAAP results included a one-time non-cash income tax benefit of $21 million or $0.17 per diluted share related to the enactment of new tax legislation in Kansas. As we entered fiscal 21, we conservatively planned for lower non-residential revenues while planning to execute our normal O and M program.

Though nonresidential sales volumes declined 10% period-over-period during the first quarter and early into the second quarter, we carefully manage our O&M spending focusing on compliance-related activities.

Non-residential sales volumes rebounded sooner than we anticipated, which created the opportunity to expand our O&M spending in the second half of the fiscal year. Additionally, the timing difference between the impact of refunding excess deferred taxes on our revenues and deferred income tax expense contributed about a penny to fiscal 21 results.

As a result, actual earnings-per-share slightly exceeded the higher-end of our guidance range. Taking a closer look, consolidated operating income rose approximately 10% to $905 million. Slides 5 and 6 provide details of the year-over-year changes to operating income for each of our segments. I will touch on a few of the fiscal year highlights.

Rate increases in both of our operating segments driven by increased safety and reliability capital spending totaled $207 million. We continue to benefit from strong customer growth and most of our jurisdictions, resulting in a $19 million increase in distribution operating income.

During fiscal '21, we added 51,000 new customers, which represents a 1.6% increase over the last 12 months. Sales volumes for our commercial customers recovered fiscal '21, rising almost 6% over last year.

Service order revenue in our distribution segment declined about $8.5 million primarily due to the waiver of our customer service fees for disconnections and reconnections. Additionally, our bad debt expense increased about $18 million year-over-year.

Bulk collection activities resume in the third quarter, and we continue to offer flexible payment arrangements, help customers find financial assistance, and remain in close contact with our regulators. We continue to believe this bad debt will be recovered over time.

Consolidated [Indiscernible] and expense, excluding bad debt, increased $31 million with a focus on system safety, including enhanced leak surveys, pipeline integrity work, and continued records establishment, and retention.

Additionally, line locate requests increased over 9% as a result of increased economic activity and the effects of our third-party damage awareness efforts. Capital and spending increased to $2 billion with 88% of our spending directed towards investments to modernize the safety, reliability, and environmental performance of our system.

In fiscal 21, over 90% of our capital spending began to earn a return within 6 months of the test period end. We accomplished this by implementing $226 million of annualized operating income increases. Excellent in the amortization of excess deferred tax liabilities.

Since the end of fiscal year, we have reached agreement for the regulators and additional $69 million annualized operating income during our fiscal 2022 first quarter. As of today, we have four filings pending seeking about $22 million. Slides 27 to 36 summarize our regulatory activities.

During fiscal '21, we completed over $1.2 billion of long-term debt and equity financing to support our ongoing operations. We fully satisfied or fiscal '21 equity needs through our ATM equity sales program.

Under that program, we issued approximately 6 million shares under forward agreements for $578 million, and we settled approximately 6 million shares for net proceeds of $607 million.

As of September 30th, we had approximately $300 million remaining under existing equity forward arrangements that will satisfy a significant portion of our fiscal '22 equity needs. This equity financing complemented the $600 million of long-term debt financing we issued last fall. Additionally, we improved our financial flexibility during fiscal '21.

During the second quarter, we renewed, extended, an increase in non-liquidity under our credit facilities.

Our primary 5-year $1.5 billion facility was extended to March of 2026 and retained the $250 million accordion feature, and we replaced our expiring 364 day, $600 million credit facility with a new $900 million, 3-year credit facility with a $100 million accordion feature. We now have $2.5 billion available under 4 credit facilities.

The financial flexibility these facilities provide improves our ability to respond to unforeseen events such as winter storm hearing. Additionally, we issued a new $5 million shelf registration statement and a new $1 billion ATM program to support our financing plans for fiscal '22 and beyond.

Additionally, during the fourth quarter we mitigated future interest rate risk by executing $875 million of forward starting interest rate swaps. Currently we have $1.85 billion in swaps to support our future long-term debt financing needs.

Finally, our treasury team did an outstanding job in upstanding for $2.2 billion in cost effective interim financing to pay for the gas costs incurred during winter storm Uri, all of which preserved our ability to continue supporting our operational needs.

As a result of these financing activities, our equity capitalization, excluding the $2.2 billion of winter storm financing, was 60.6% as of September 30th. Additionally, we finished the fiscal year with approximately $2.9 billion of total liquidity, and strength of our balance sheet and liquidity, we just well-positioned as we move into fiscal '22.

Details of our financing activities and financial profile can be found on Slides 9 to 12. We've also fair to winter operations for the next fiscal year. You heard Kevin discuss that our procurement team has mitigated supply chain and inflation risk in our operations.

Our gas supply chain has also done an excellent job preparing our gas supply strategy for the upcoming winter heating season. Our proprietary contracted storage is over 95% full and a weighted average cost of gas for approximately $3.

Additionally, we have physically and financially hedged about 1/3 of our expected purchase requirements in approximately $4. Through the use of storage and hedge purchases, we have stabilized prices for approximately 1/2 of our normal winter usage in the mid-$3 range.

The remainder of anticipating gas supply needs, we satisfied through a combination of baseline purchases at person on prices, peaking contracts, and spot purchases but needed.

Today, we had transportation capacity on 37 pipelines across our 8-state footprint which provides our gas supply team access to a wide variety of producing basins to ensure supply reliability and competitive natural gas prices for our customers.

As a reminder, all the gas costs we incur are recovered through purchase gas cost mechanisms generally over 12 months, and the process journey involves a weighted average approach, which helps us move the impact in customer bills.

Finally, we've been actively communicating with our customers about how they can mitigate the potential impact of higher gas prices to energy conservation, as well as the various ways we can help them with their bills through installment plans, budget billing, and locating energy assistance agencies.

Looking forward, fiscal '22 will begin the second decade of pursuing our safety-focused organic growth strategy. Yesterday, we initiated our fiscal '22 earnings-per-share guidance in the range of $5.40 to $5.60. Consistent to prior years, we expect about 2/3 of our earnings will come from our distribution segment.

Details surrounding our fiscal '22 guidance can be found on Slides 20 and 21. Also yesterday, Atmos Energy's Board of Directors approved a 152nd consecutive quarterly cash dividend. The indicated annual dividend for fiscal '22 is $2 and 72%, with 8.8% increase over fiscal '21.

Finally, fiscal '22, capital spending is expected to rise by 25%, and it's expected to be in the range of $2.4 billion to $2.5 billion. Most of this increase will be incurred at APT, which represent approximately 1/3 of our capital spending in fiscal '22 as a result of the project work that Kevin described a few minutes ago.

Over 90% of fiscal '22 capital spending is expected to begin earning return within 6 months when the test period end. Slide 19 summarizes the key themes underlying our fiscal '22 5-year plan. Over the next 5 years, we anticipate earnings per share will grow 6% to 8% per year.

By fiscal '26, we anticipate earnings per share to be in the range of $7 and $7.40. We also anticipate dividends per share to increase annually in line with earnings per share.

Continued spending per system replacement modernization, and environmental improvements, consistent expansion will be the primary driver for the anticipated increase in capital spending, net income and earnings per share through fiscal '26. Over the next five years, we anticipate total spending at approximately $13 billion to $14 billion.

This level of spend is expected to support rate-based growth of about 11% to 13% per year. This translates into an estimated right base of $21 billion to $23 billion in fiscal '26, up from about $12 billion at the end of fiscal '21. From an O&M perspective, we continue to focus on compliance-based activities that address system safety.

For fiscal '22, we anticipate O&M to range from $690 million to $710 million and we assumed O&M inflation of 3% to 3.5% annually through fiscal '26. In addition to the spending plans I outlined; we had assumed approximately $600 million in excess deferred tax refunds over the next 5 years will flow back to customers.

As a result, we expect our effective tax rate in fiscal '22 to be between 9% and 11%. This rate assumes no tax changes are currently being considered at the federal level, and the financing perspective, we will continue to follow the financing strategy we've been executing the last few years to preserve the strength of our Balance Sheet.

Excluding securitization, we anticipate the need to raise between $7 billion and $8 billion incremental long-term financing over the next 5 years. The strength of our Balance Sheet analysis to use a prudent mix of long-term debt and equity financing to target a 50% to 60% equity capitalization ratio, inclusive of short-term debt.

This financing plan has been fully reflected in our earnings-per-share guidance through fiscal '26.

In October, we completed a $600 million 30-year senior note issuance with a coupon of 2.85% after factoring in a favorable settlement of forward starting interest rate swaps, the effective rate on this issuance is 2.58%, and our debt profile remains very manageable with a weighted average maturity of 19 years, excluding the $2.2 billion of incremental winter storm financing.

Finally, as I previously mentioned, we have hedged a substantial portion of our anticipated long-term debt needs to mitigate interest rate risk. From an equity perspective, utilizing our ATM program continues to be our preferred method for raising equity.

As I mentioned earlier, the equity forwards we executed during fiscal '21 will satisfy a significant portion of our expected equity needs for fiscal '22. we expect to rage our remaining fiscal '22 equity needs through our ATM program. Regarding Securitization, we have made substantial progress in the last few months.

Yesterday, the Bureau Commission of Texas unanimously issued a final determination of regulatory asset that will be securitized under the Statewide program. The final order stipulated that all of our gas and storage costs are prudently incurred and are fully recoverable. The next step is for the Railroad Commission to issue a financing order.

Following the issuance of the financing order, the Texas Public Financing Authority has up to 180 days to complete the securitization transaction. Upon receipt of the securitization funds, we will repay the $2.2 billion of winter storm financing we issued last March. In Kansas, we filed our Securitization application in mid-September.

We are currently responding to various questions, and a procedural schedule has been set, with all proceedings expected to begin in January. Finally, annual filing mechanisms with the primary means to which we'd recover capital spending.

These mechanisms enable us to more efficiently deploy our capital spend, and generate returns necessary to attract the capital we made to finance our investments, and these mechanisms produce a smaller impact to customer bills while providing the regular rate adjustments that support our system modernization efforts.

We have assumed no material changes these mechanisms to fiscal '26. In fiscal '22, we anticipate completing filings for $215 million to $225 million in annualized regulatory outcomes that will impact fiscal years, '22 and '23.

The execution of this plan to modernize our system to disciplined capital spending, timely recovery of those investments through our various regulatory mechanisms, and balanced long-term financing, all supports our ability to grow earnings per share and dividends in the 6 to 8% range annually through fiscal 2026, and as you can see on Slide 25.

The execution of this plan will also keep customer bills affordable and it help us sustain this plan for the long term. Thank you for your time this morning. I will now turn the call back to Kevin for his closing remarks.

Kevin?.

Thank you, Chris. Looking forward, I'm very excited about the direction and long-term sustainability of our Company.

The foundation has been set with a proven safety driven strategy accompanied with organic growth that yield, as Chris said, 6% to 8% fully regulated earnings per share commensurate dividend per share growth, supported by a strong financial profile.

We operate in a diversified and growing jurisdictional footprint that is supportive of the investment in natural gas infrastructure. 97% of our rate basis situated in 6 of our 8 states that have passed legislation in support of energy choice.

The constructive regulatory mechanisms in our jurisdiction support the necessary capital investments to modernize our natural gas distribution, transmission, and storage systems. We have a long runway of work to support the planned $13 billion to $14 billion in capital spending over the next 5 years as you can see on Slide 16 and 17.

That spending will support replacement of 5,000 to 6,000 miles of distribution and transmission pipe, or about 6% to 8% of our total system. We also plan to replace between 100,000 to 150,000 steel service lines, which is expected to reduce our inventory by approximately 20%.

This level of replacement work is expected to reduce methane emissions from our system by 15% to 20% over that 5-year period. Additionally, you've heard us discuss the growth in our jurisdiction. 8 of the 11 fastest-growing counties we serve are in the DFW Metroplex and to the north of Austin.

Additionally, our Middle Tennessee, service territory ranks among the fastest growing areas in the U.S. as well, and we continue to see industrial customers in our footprint choose natural gas.

In fiscal '21, we added approximately 45 new industrial customers with an estimated annual load of between 10 to 12 BCF a year once they are fully online, and these customers are from various industry, manufacturing, food processing, hospitals and distilleries.

Focusing on the long-term sustainability has always been a part of our strategy as reflected in the vital role we play every day in our communities. Delivering safe, reliable, and efficient natural gas to homes, businesses, and industries to fuel our energy needs now and into the future.

We appreciate your time this morning, and we'll now open the call for questions..

Thank you. The floor is now open for questions. [Operator Instructions] Our first question is coming from Julien Dumoulin-Smith of Bank of America. Please go ahead..

Hey, it's actually Kody Clark on for Julien. Good morning..

Good morning, Kody.

How are you?.

Good morning, Kody..

Good. So first on the delta between the 11% to 13% rate base growth and the 6% to 8% EPS growth.

I know there's a good deal of equity contemplated in plan, so definitely cognizant of the dilution there, but low like regulatory lag, given the recovery mechanisms that you have across your jurisdiction, so I'm wondering if there are any other drivers of that delta that you would call out..

Yes. At this time, it really is just the financing plan that we've assumed over the next five years as you point out, it's the equity component. But again, that's factored into the 6% to 8% earnings per share growth that we highlighted on the call this morning..

Got it. Okay. And then building off that question a little bit. I'm wondering how you would characterize where you see yourself in that 6% to 8% long-term EPS growth range.

Is it more towards the midpoint or top 10? I'm asking because the past couple of year-end updates I've seen you performed well during the year, rebase off that strong number and then reiterate the 6 to 8% growth after that.

So are you being a little bit conservative or how would you think about that?.

When you look at the ranges that we've put out this morning, the $5.40 to $5.60 for fiscal '22, and then the $7 to $7.40 in fiscal 2026. If you take the midpoint of both of those ranges and kind of do the math and that implies about a 7% annual growth rate per year..

Okay. And then last one if I can just sneak it in that. We've seen the market multiple for gas utilities decline relative to the electric peers throughout the year, and at the same time has seen some healthy transaction multiples for some of the gas utilities.

So how are you thinking about potentially monetizing an asset or assets to offset the ATM equity needs. I know you've stated in the past thing you'd like your business mix, but wondering if that has changed at all..

I'll start on that, Kody, and then Chris can certainly jump in if he wants to. Again, as you said, we've been very proud of our assets. We continue to be very proud of them. You look at the results here.

You talked about the diversified growth that we just mentioned on our call here, the mechanisms, the regulatory relationships that we have out there, our involvement in the communities. We're very proud of the asset mix we have today. So we're not contemplating at this point anything, but continuing the excellent operation of those assets..

Great. That's all I had..

Kody, I’ll add….

Okay. Very good..

Thank you. Our next question is coming from Richard Sunderland of JPMorgan. Please go ahead..

Hi. Good morning. Thanks for taking my questions here. Just wanted to start with this Permian highway project.

Does it create incremental base and takeaway or just better connectivity to the Permian highway pipeline?.

Well, that project you're talking about where we are connecting up in the Permian highway project, that's just to meet the growing demand of that Austin corridor down there to feel that diversification of a load as well for us. So, that's what we're looking to do.

We're connecting to that Permian Highway project to bringing that supply up from the Sal instead of moving gas around from the north or bringing it over from Katy at this point. So for us, again, it's another supply optionality to meet the growing corridor that we have down there, and then some supply diversification..

Understood. And then I realized the entire five-year capital plan is up year-over-year.

But is there anything notable in the 2022 CapEx step-up or just any color there?.

Well, I think nothing that steps up again. We go through a very rigorous and robust planning process each year that looks at the one, three, and five-year projects levels that are out there.

As you've heard us say before, we take a long look at the projects and how I meet integrity management goals, compliance goals, but we also look at it from that growth perspective, what has been the band going to be out in the future and how do we meet that demand? So I think that's all contemplated within this.

That's why we spiked out those projects. So I think this is just a further iteration of meeting the supply needs to demand and diversification that we continue to talk about..

Great. Thank you for the color..

Thank you. Our next question is coming from Insoo Kim of Goldman Sachs. Please go ahead..

Thank you. My first question is on just general gas hedging.

I know that the salt dome is coming on and that's going to help just the storage capacity but whether it's in Texas or other regions, you're following what the hedging rules are that the commissions of those states put on limited to that, but just whether it's a result of Uri or some other spikes we're seeing in the current winter season, any dialogue with any of the commissions on potentially changing the hedging strategy?.

Yes, I'll start out and then see if Chris wants to add any color. We have dialogue every year with our commissions, as you know, laying out what our anticipated gas supply plan is for that year, how we perform the following year. We're open to that feedback.

But right now, both our commissions, our gas supply teams are very comfortable with the plans we've been able to put together. And you heard that combined with our storage opportunity, our base load purchases, those sort of things, how well they have us positioned going into this winter heating season.

So we'll continue those dialogues, continue those conversations, we'll continue to meet with our jurisdictions at the end of each winter season and work collaboratively with each of those jurisdictions as they see it going forward..

Got it. And my second question, the proposed methane fee that's in the reconciliation package.

I think more on the upstream and midstream side of things, but just curious on your thoughts or whether it's direct or indirect, any potential impact or ramifications you see for your utilities or just the gas LDC industry in general?.

There's still a lot of moving parts and pieces to that legislation. A lot of conversation is still going on at the federal level with that. And quite frankly, as they continue to do that, we'll monitor that. But I think the thing is you've heard us say before that the United States, as we sit here today, is among the top five producers in natural gas.

We're among the top five and proven reserves in the world today. And for us to continue to have the economic growth, the economic stability, and security that we need from an energy perspective and a national perspective, we're going to need to have a continued diversified energy portfolio.

And we believe natural gas certainly brings that to the table with the flexibility, reliability, and abundance it provides everybody. We just outlined through today's update how natural gas plays a key role in that. So we'll continue to monitor that, but we will look for a diversified energy portfolio to continue to meet the demands of the U.S..

Got it. We'll leave it there. Thank you, both..

Thank you. Our next question is coming from Stephen Byrd of Morgan Stanley. Please go ahead..

Hey, good morning..

Good morning..

Hey, Steve..

Hey. So a lot of topics have been covered. I wanted to touch on two things. Maybe first, just back on the natural gas pricing impact, that Slide 25, I think is quite constructive to your point, we don't see big shocks.

Are there dynamics though, whether it's in 1 jurisdiction, where the impact is greater or an assumption that could change, it could cause that fairly modest increase in '22, for example, to be a little bit different, or worse for any jurisdiction, or I guess, my bottom line question is, what kinds of shocks could cause that to be different, or is it really hard to envision that?.

Go ahead, Kevin..

Go ahead. I'm sorry..

Well, I don't foresee anything that could impact us at this point, those are averages as you know, that we put out there, we continue to look for diversification across our pipes as you heard us mentioned earlier, we're across 37 pipelines, multiple basins. So we tried to blend in as much diversification and flexibility as we can within our systems.

We have these annual mechanisms that tend to level out, increases over time, and I think for conservative on those gold bars there on 25, as you've heard us say before, we're looking way out into the future on some of those prices, and as outlook today, while hard at cash basis is $3.98 Katy to $4.40 and I believe the non-Maxx is at $4.91 today.

So I think again, with the great work, our gas supply team does, where our assets are located on multiple pipes, availability of storage, that sort of thing, we're in a really good position.

Chris, anything you want to add? Yes, I'd say, too as we saw about what could potentially move the needle in terms of pricing, and it's again, it's weather patterns. It sums in the pricing dynamics that Kevin just described.

Also, just customer usage and to all that's very, very difficult to predict and trying to estimate or come up with a true impact, and again, with an 8-state footprint that covers a fairly significant geographical difference that you could have weather patterns that impact the eastern portion of the U.S.

that are completely there from Texas and what we might experience in Colorado. So really, it's, I think, pretty challenging for us to say across the 8-state footprint if there is a trade key driver to watch out for. I think it's going to be a combination of all of the items you just mentioned; pricing, the basins that we have access to.

They're very highly liquid basins. So we were able to have a good keen eye on what that pricing situation customer usage, as well as just general weather patterns..

That's really helpful, and then shifting over to financing, I am going to step back a little bit on this question. Atmos is in a really interesting situation. You have perhaps the fastest growth rate in terms of your rate base among companies we cover. We love the growth outlook.

What's interesting is that the amount of equity needed compared to your market cap is high, and the value of the stock, the PE multiple of the stock is dramatically lower than what we're seeing in private asset sales, including not just sales of a 100%, but just selling a minority stake, we've seen dramatically higher valuations.

So I guess the math my suggests that a sale of a minority stake at the kinds of multiples we've been seeing on other situations would be dramatically less dilutive than this kind of volume of equity issuance that we're looking at over the next 5 years.

How do you all kind of think about the possibility of selling non-controlling minority stakes, potentially much higher valuations than just where your own stock is trading? How do you-all think about that?.

It's a challenge for us because we don't have the holding Company structure like many of our peers do. So when you look at each of our divisions or each of our states, that's all under one corporate umbrella. So we can't do a minority sale for a single jurisdiction.

The way we're structured today, it would have to be a partial assets sale or a certain geographic region that we would have to exit, and as you heard Kevin talk earlier with Kody, we're very happy with the assets that we have, the jurisdiction footprints.

We do see the dislocation between what the private market is a place of evaluation on versus what we're seeing from the public traded perspective and we think again to the public and trade perspective, the fact that 97% of our asset base is located in jurisdictions that are supportive of natural gas, both from a policy perspective, the regulatory perspective, the fact that we have very strong customer growth is currently being a little bit underappreciated, and that's where we just need to continue to remind those investors that we are very well-positioned in the country to capture the growth experienced in our jurisdictions and have jurisdictions that have strong support natural gas..

Yes. Chris, I'll just add you've got 19 years of EPS growth and 38 years of consecutive dividend increases all support our strong position as well as what Chris had about our regulatory jurisdiction. So we're going to continue to operate and do the things we do within our strategy. We've outlined, we think it's solid.

We think it fits our jurisdictions well. So really believe we are in a good position going forward, not only for our customers but our communities and all stakeholders..

Understood. Thank you very much..

Thank you. [Operator Instructions] Our next question is coming Ryan Levine of Citi. Please go ahead..

Good morning..

Good morning..

Hey, Ryan..

Hey.

What are the drivers of where you would fall in the 22% range for EPS? Can you talk about some of the pluses or minuses that may determine the outcome?.

Key pluses or minuses obviously will be the execution of the regulatory strategy.

Customer usage patterns, whether although we are [Indiscernible] normalized, 97% of our jurisdictions, we can see a little bit of that weather year-over-year, and just timing of O&M spending as we continue our ongoing system safety and compliance work, those are the key drivers that we generally point to when we're talking about where we can fall within the 6% to 8% range..

On the O&M point, think you're assuming 3%, 8% to 3.5% O&M cost inflation in your '22 outlook, what underpins that? Seeing some more robust inflation figures more recently, can you elaborate on what's driving that assumption?.

Sure. It's the ongoing expansion of our compliance work. You've heard us talk before that we're in a mode now, doing more compliance work every year rather than holding back and waiting for another rate case to occur.

So as we continue to look at the rule making that's happening at the federal and the state level, we work to try to get ahead of that, so that when it comes time for a compliance deadline to have met, we're getting there.

Well in advance on when that deadline is and we're also just looking at the system needs and what we want to be doing from a safety perspective.

So when talked about advanced leak detection technologies and further expanding that across our footprint, as well as just ongoing hydrotesting at inline inspection work on our large-scale distribution in some of transmission lines to make sure that better system is operating as safely as it possibly can..

Okay, and then from the federal legislation, what do you view as the impact to Atmos more broadly?.

Are you referring to the infrastructure bill there, Ryan?.

The infrastructure bill and potential tax reform or tax changes..

On the infrastructure bill itself, as you know, it's very comprehensive, we're still working our way through it, but some of the things that we've seen that we are focusing in on our incentives in there for high-efficiency natural gas appliances, systems that regard hydrogen research and development, as well as there's some, I think, $500 million or so over the next 5-year increase for low heat.

That's in there as well. The rest of it at this point, we're still working our way through the detailed piece of that with, with our peer companies and with the American Gas Association..

Okay, and then last question for me.

Are you talking to any of your regulators within your few jurisdictions about rate-basing electrolyzers within the LDC?.

Short answer is no..

I appreciate it. Thank you..

Thank you. At this time, I would like to turn the floor back over to management for closing comments..

Thank you. We appreciate your interest in Atmos Energy and thank you for joining us today. The recording of this call is available for replay on our website through January 6, 2022. Have a good day..