atmos enerrgy _nonutility101705

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Atmos Energy CorporationNonutility Operations

JD WoodwardSenior Vice President

October 17, 2005

2

Nonutility Leadership Participants

JD Woodward Senior VP, Nonutility Operations, Atmos Energy Corporation

Richard A. Erskine President, Mid-Tex Division and President, Atmos Pipeline-Texas

Mark Johnson VP, Nonutility Operations and President, Atmos Energy Marketing

Rick Alford SVP, Finance & Administration, Atmos Energy Holdings

3

Forward Looking Statements

The matters discussed or incorporated by reference in this presentation may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this presentation are forward-looking statements made in good faith by the Company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this presentation or in any of the Company’s other documents or oral presentations, the words “anticipate,” “believes,” “estimate,” “expect,” “forecast,” “goal,” “intends,” “objective,” “plans” “projection,” “seek,” “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this presentation, including the successful integration of the Company’s acquisition of the operations of TXU Gas, the Company’s ability to continue to access the capital markets and the other factors discussed in the Company’s SEC filings. These factors include the risks and uncertainties discussed in the Company’s Form 10-K for the fiscal year ended September 30, 2004 and the Company’s Form 10-Q for the three and nine month periods ended June 30, 2005. Although the Company believes these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. The Company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

4

Corporate Structure

Atmos Energy Holdings, Inc.(Nonutility Businesses)


KentuckyKentucky

Atmos Energy Corporation(Natural Gas Utility Divisions)


West TexasWest Texas

Colorado-KansasColorado-Kansas

LouisianaLouisiana

Mid-StatesMid-States

Mid-Tex *Mid-Tex *

MississippiMississippi

Atmos Energy Marketing• Storage (Trading)• Transportation (Marketing)


Atmos Pipeline & Storage• Atmos Pipeline-Texas• Non-Texas Assets


Other Nonutility• Atmos Energy Services• Atmos Power Systems


* Effective 10/1/04, includes LDC and pipeline operations of former TXU Gas. Pipeline operations functionally reported under the nonutility businesses in Fiscal 2005.

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Owensboro7

Franklin23

Dallas72

Jackson6

New Orleans16

Houston 72

AEH Staff Energy Pipeline & Energy PowerOffice Locations Levels Marketing Storage Services Systems

Houston, TX 72 X X X XNew Orleans, LA 16 X X X -Franklin, TN 23 X - X XOwensboro, KY 7 X - - -Dallas, TX (APT) 69 X - XDallas, TX (AEM) 3 XJackson, MS 6 - - X -

196

Office Locations and Staffing

196 Employees 6 Main Locations

Overview of Nonutility Operations

6

Gas MarketingMarketingUtilizes storage and transportation assets that are leased or managed to: (1) provide bundled city-gate services (including base-load sales, peaking sales, risk management and demand based storage services), to municipal, industrial, power generator, LDC and affiliate utility customers and (2) capture time and location price differentials (arbitrage) through various trading strategies.

Pipeline & StorageOwns or leases storage and pipeline assets in Texas, Kentucky and Louisiana that are utilized to provide storage and transportation services to municipal, industrial, power generator and affiliate utility customers Includes recently acquired pipeline and storage assets from TXU Gas (6,162 miles of intrastate pipelines and 5 storage facilities). Effective 10/1/04, these pipeline operations are functionally reporting under the nonutility businesses.

Other NonutilityProvides gas supply services to Atmos utility divisions and peaking power construction services

Overview of Nonutility OperationsBusiness Segments

7

Nonutility Operations



KentuckyKentucky





LouisianaLouisiana


Mid-Tex *Mid-Tex *








* Effective 10/1/04, includes LDC and pipeline operations of former TXU Gas. Pipeline operations functionally reported under the nonutility businesses in Fiscal 2005.

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Atmos Energy Marketing

• AEM is a transportation and storage logistics company that generates margins through commercial transactions with its various customer classes. These transactions cover the the movement of gas from wellhead to burner-tip.

• AEM aggregates gas supply, transports it across pipelines, stores gas and withdraws it for delivery to various strategic geographical markets, based upon the terms of its customer agreements. Customers include municipals, industrials, power generators, LDCs and utility affiliates.

• AEM manages its commercial transactions and related business processes through a disciplined and conservative risk management philosophy.

Aggregate and Purchase Transportation and Storage Logistics Sales to Markets

Commercial Business Flow

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Storage Assets

• Optimize Value(trading to capture

time and location price differentials)

Transportation Assets• Support Customer Marketing

(optimize value of capacity)

Asset Management

• Customer obligation

• Partial optionality

Proprietary

• No customer obligation

• 100% optionality

Customer Sales• Base-load• Peaking• Balancing

The portfolio of assets that AEM manages is either acquired, leased or results from various asset management transactions with 3rd parties. Also, transportation and storage assets are contracted for (proprietary). These assets are utilized to capture value and create commercial opportunities.


Proprietary



Asset Management



Customer Sales• Full Requirements• Billable Plan• Other

Business Model

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Atmos Energy Marketing-Storage

Atmos Energy Marketing –Storage

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Full Requirements(12.4 BCF)

Full Requirements(12.4 BCF)BCF

• Egan 1.5 • Atmos P/L-T 1.0 • Gulf South 6.0

8.5

BCF • Egan 1.5 • Atmos P/L-T 1.0 • Gulf South 6.0

8.5

Billable Plans(18.2 BCF)

Billable Plans(18.2 BCF)

Atmos Energy Marketing - Storage

Parking Gas(deposited with pipeline)

Parking Gas(deposited with pipeline)

Loaning Gas(borrowed from pipeline)

Loaning Gas(borrowed from pipeline)

Proprietary Asset Management





Types of Storage

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StorageStorage

Example

Proprietary storage - is physical storage that is leased by AEM.

Associated Risk - the economic value of this storage is subject to market price changes (both physical and financial) and is realized by withdrawing or injecting gas according to the hedge strategy designed for the facility.

Risk Management - Gas injected and held as inventory will be hedged with forward NYMEX sales in the month the gas is to be withdrawn. Forward spreads may be locked-in ahead of time in line with injectionand withdrawal capabilities of each storage facility. If the relationships between and among NYMEXforward prices change, hedges may be moved (rolled back or forward) to move withdrawals to the higherpriced months and injections to the lower priced months.

Proprietary

Cash Market = $8.00 / dthForward Nymex = $8.60 / dth

AEM buys physical at $8.00 and injects in storageAEM sells forward NYMEX futures at $8.60

Spread captured $ 0.60 / dthLess: Storage fees (0.20) / dthUnit Margin $ 0.40 / dth

Margin Impact - The economic value is derived from the difference between the weighted average sales price (WASP) of gas, the weighted average cost of gas (WACOG), adjusted for the gain or loss on financial hedges, less any injection or withdrawal charges, fuel and any interest costs on holding inventory.


Proprietary Storage

13

StorageStorage

Example

Full Requirements Storage - Storage that is managed on behalf of customers that require all of their gas usage requirements to be delivered to their city-gate by their provider (AEM).Associated Risk - The economic value of this storage is subject to market price changes, based on the monthly index. There is also the risk of customer usage being more or less than expected during the winter heating season, which may create price risk.

Margin Impact - Same as proprietary with the potential changes in economic value that could occur due to swings in customer usage. These swings may erode or increase some of the time spread and daily optionality profits.

Risk Management - Same as proprietary storage with the following additional steps taken: (1) set up conservative withdrawal profile based on customer usage patterns over the contract period and (2) monitor customer usage and storage activity (especially swing on storage customers) such that NYMEX contracts or physical gas is bought back or sold (whichever is the best value) to ensure hedges and inventory balance as close as possible.

Full Requirements


AEM buys physical at $8.00 and injects in storageAEM sells forward NYMEX futures at $8.60

Spread captured $ 0.60 / dthLess: Storage fees (0.20) / dthUnit Margin $ 0.40 / dth


Full Requirements Storage

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StorageStorage

Example

Margin Impact - The economic value is derived from the difference between the weighted average sales price (WASP) of gas, the weighted average cost of gas (WACOG), adjusted for the gain or loss on financial hedges, less any injection or withdrawal charges, fuel and any interest costs on holding inventory.

Associated Risk – During an injection cycle, physical gas can be accelerated, deferred or delivered based on the monthly index price, which creates arbitrage opportunities.

Billable Plan Storage


AEM sells physical at $8.20 and defers injection into storageAEM buys forward NYMEX futures at $8.00

Spread captured $ 0.20 / dthLess: Storage fees 0.00 / dthUnit Margin $ 0.20 / dth

Billable Plan Storage - Storage that is managed on behalf of customers (primarily the Atmos Affiliates and ETN Municipal customers) under a ratable / billing plan arrangement. Prices from injection months are set at monthly indices and billed, and then later withdrawn and delivered per the plan.

Atmos Energy Marketing - StorageBillable Plan Storage

Risk Management - AEM can elect to inject into storage per plan or accelerate or defer storage injections to capture arbitrage value, which is hedged by buying and selling forward NYMEX. These optimization strategies are typically executed during the summer injection period when usage is set.

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Example

Margin Impact -The economic value is derived from the difference between the injection cost and the gas sold on withdrawal, the gain or loss on hedges, less any interest costs on holding inventory.

Parking Gas - Storage or line pack service for which AEM contracts from time to time.Associated Risk - Title to gas is transferred to counterparty and returned to AEM at predetermined dates for a fee. A transaction usually executed in a contango pricing market (prices rising over time).

Risk Management – The gas transferred to counterparty is treated as inventory and is hedged in the same manner as proprietary storage, with the exception of the time components of the purchase and sale of gas. These are usually fixed, which eliminates roll back and roll forward optionality

Parking gas

Parking Gas

Cash Market = $8.00 per dthForward NYMEX = $8.20 per dth

AEM buys physical gas at $8.00 and lends to pipelineAEM sells forward NYMEX futures at $8.20

Spread Captured $ 0.20 / dthLess: Parking Fees (0.10) / dthUnit Margin $ 0.10 / dth

Atmos Energy Marketing - StoragePark and Loan Transactions

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Example

Margin Impact -The economic value is derived from the difference between the withdrawal cost and the gas sold on injection, the gain or loss on hedges, plus any interest revenue associated with negative inventory.

Loaning Gas - Storage or line pack service for which AEM contracts from time to time.Associated Risk - Title to gas is transferred from counterparty to AEM and returned to counterparty at predetermined dates for a fee. Usually executed in a backward-dated market (prices declining).Risk Management – The gas transferred to AEM is treated as negative inventory and is hedged in the same manner as proprietary storage, with the exception that AEM buys forward NYMEX contracts to hedge the short position created (as opposed to selling). In addition, the time components of the purchase and sale of gas are usually fixed, which eliminates roll back and roll forward optionality.

Loaning gas

Loaning Gas

Cash Market = $8.20 per dthForward NYMEX = $8.00 per dth

AEM sells physical gas at $8.20 and borrows from pipelineAEM buys forward NYMEX futures at $8.00

Spread Captured $ 0.20 / dthLess: Lending Fees (0.10) / dthUnit Margin $ 0.10 / dth

Atmos Energy Marketing - StoragePark and Loan Transactions

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We commercially manage our storage assets by capturing arbitrage value through optimization strategies that create embedded (forward) value in the portfolio. We financially report the transactions for external reporting purposes in accordance with GAAP.

GAAP Reported Value is the period to period net change in fair value of the portfolio reported in the income statement that results from the process of marking to market the physical storage volumes and corresponding financial instruments in an interim period.

Economic Value is the period to period forward margin of our storage portfolio that results from the process of calculating our weighted average cost of inventory (WACOG), and our weighted average sales price of our forward financials (WASP), then multiplying the difference times inventory volumes. This margin will be realized in cash when the hedged transaction is executed or when financials are settled and then reset to stay hedged against physical volumes.

Economic Value represents the “forward” economic margin of the transactions, while GAAP reported results reflect that portion of our “forward” margin that has been recorded in the income statement. Volatility in earnings includes the impact of the accounting treatment of our storage portfolio and is reflective of relatively high price volatility of the prompt month, and the relatively low volatility of the offsetting forward months.

Trading Margin Description

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Economic Value

- Physical and FinancialPositions

$16.4 MM

Economic Value


$16.4 MM

StorageEmbedded margin

difference

$24.2 MM Realizing Economic value is dependent on

execution of trading strategies.

Reported GAAPValue


($7.8 MM)

Reported GAAPValue


($7.8 MM)

At June 30, 2005

Atmos Energy Marketing - StorageStorage – Economic Value vs. GAAP Reported Results

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Economic ExcessValue Total Timing Value

September 30, 2004 12.3$ (0.8)$ (2.9)$ 13.1$

December 31, 2004 12.9$ 11.8$ 0.9$ 1.1$

March 31, 2005 8.0$ (8.8)$ (2.8)$ 16.8$

June 30, 2005 16.4$ (7.8)$ -$ 24.2$

Reported GAAP Value

(in millions)


Schedule of Economic Value (Storage)

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AEM utilizes fair value hedge accounting for its storage activity in accordance with the guidelines prescribed by FAS 133.

Under this methodology, the changes in value of the physical inventory and the corresponding financial hedges are marked-to-market with the changes in fair value being recognized in current period earnings

There is potential volatility in earnings related to the accounting treatment for storage in two different areas:

1. The differential in the movement of the price for the forward months. In other words, the prompt month is likely to be much more volatile than a future period.

2. The physical gas is marked to the Inside FERC (determined on the last day of the month), while the financials are marked to the NYMEX (which settles on the 3rd to last business day of the month).

Atmos Energy Marketing - StorageStorage Book – Accounting Issue

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$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

Sep-04Dec-04

Mar-05Jun-05

($ in

Mill

ions

)

$.25 Price Move $.50 Price Move $1 Price Move

Storage Volumes:


Storage Margin Volatility (Potential Impact of Change in GAAP Reported Spread Values)

Sep-04 Dec-04 Mar-05 Jun-05BCF 5.4 6.4 12.5 14.7

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Atmos Energy Marketing - Transportation

Atmos Energy Marketing –Transportation

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Capacity Available

For IndustrialUtilization

Capacity Available

For IndustrialUtilization

12,000

10,000

8,000

6,000

4,000

2,000

Vol/Day

Month Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun

Utility UsageProfile

Transportation optimization is defined as utilizing “excess” capacity to capture time and location price differentials through customer sales.

Asset Optimization


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Zone 5

Zone 6

Zone 4

Zone 2

Zone 3

Zone 1

Zone 0

Zone L

Supply to MarketTennessee Gas Pipeline

Transportation Assets

- Asset Management- Proprietary

• Capture arbitrage spreads on pipeline grid• Excess transport capacity• Pipeline segmentation

Transportation Assets

- Asset Management- Proprietary

• Capture arbitrage spreads on pipeline grid• Excess transport capacity• Pipeline segmentation

Example:

Transportation

Cash Market at 500 leg supply pool = $5.00 per dthCash Market at Nashville Gas = $5.35 per dth

AEM buys physical gas at $5.00 at supply pool AEM sells physical gas at $5.35 at Nashville Gas

Spread Captured $ 0.35 / dthLess: transport commodity & fuel (0.18) / dthUnit Margin & Demand Recovery $ 0.17 / dth

Atmos Energy Marketing - TransportationTransportation Opportunities

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Gas Pricing Components for Marketing Services Provided

Customers

• Utilities

• Municipals

• Industrials

• Marketers

• Power Gen.

• Others

- Fixed Price - Hedge forward - Current Month

- Index Price - Flat/Plus/Minus

- Asset Managed

- Proprietary

- Pass thru

- Non pass-thru

- Per Unit

- Fixed Amount

Base Commodity

Transport / Basis

Fuel

Management / Admin. Fee

Marketing Transactions

- Baseload sales - Bundled sales - Peaking sales - Balancing services - Risk Management - Other



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El Paso (TGP) 200,000 Mcfd 4.30 BCFDuke (TETCO) 40,000 1.50Columbia Gulf 40,000 -Gulf South(Koch) 277,000 8.72Gulf South / ISS - .75LIG (AEP) 80,000 .60Bridgeline 30,000 .30Acadian 10,000 .45

697,000 Mcfd 16.62 BCF

El Paso (TGP) 41,000 Mcfd 1.88 BCFTexas Gas 187,000 13.30 Duke (TETCO) 20,000Columbia Gas 5,000 .78 Dominion - .88National Fuel 8,000 .42

261,000 Mcfd 17.26 BCF

Duke (ETN) 225,000 Mcfd .99 BCFCMS (Trunkline) 30,000 1.16 El Paso (SNG) 70,000 1.53 Transco 20,000 .57

345,000 Mcfd 4.25 BCF

Owned StoragePrimary Office LocationDistributed Generation

5859

&

71

New OrleansHouston

Franklin

Owensboro

Transport Storage

Transport Storage

Transport Storage

AEM owns or manages approximately 1.3 Bcfd of firm pipeline capacity and approximately 39.1 Bcf of

storage on various interstate pipelines through contractual

relationships.Dallas

Atmos P/L-T 24,000 Mcfd 1.0 BCF

Transport Storage


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Marketing (Bundled gas deliveries &

peaking sales)

- Transport management

Marketing (Bundled gas deliveries &

peaking sales)

- Transport management

Trading

- Storage management

Trading

- Storage management

Total AEMMarginsTotal AEMMargins

• Impacted by customer volume demand • Sales prices are:

• Cost plus profit margin• Fee based

Margins: More predictable

• Impacted by:• Gas price spread values in the

market (arbitrage opportunity)• Physical storage capabilities• Available storage and transport

capacityMargins: More variable

Total margins reflect:• Stability from marketing margins • Upside from trading around storage

and transportation assets to capture arbitrage value

Current Gross Margin Composition

Margin Type Commercial Activity


28

Operating and Financial Statistics

FinancialNine Months Ended June 30, 2005(In thousands, except storage balances)

Marketing ActivitiesRealized margin: $ 43,182Unrealized margin: (3,200)Total Marketing Activities: $ 39,982

Storage ActivitiesRealized margin: $ 15,482Unrealized margin: (7,065)Total Storage Activities: $ 8,417

Gross profit: $ 48,399

Ending storage balance 14.7 BcfSales volumes 203.8 Bcf

Operations

• Approx. 1,000 customers (FY 2004)

• Currently operates in 22 states

• Operating revenues (FY 2004): $1.6 billion

• Gas Purchases (FY 2004): 228 BCF

• Transports on over 18 major interstate pipelines

• Own, manage or contract • 1.3 BCF/d of transportation• 39 BCF of storage


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Deal Valuation & Risk Assessment

Trading- Risk Management- Optimize storage

and transport capacity

Deal Management

& Confirmation

Gas Scheduling & Logistics

Gas Accounting & Settlements

Financial Reporting &

Analysis

Post Audit of Deal

Economics

Marketing & Origination

* Start

- Continuous cycle of integrated processes

- Start to finish execution (from deal origination to post audit of deal economics)

- Discipline and controlled processes, done correctly the first time

- Established metrics to measure compliance

- Excellent communication between all process owners is critical

$ Value

Risk Management

Atmos Energy Marketing - TransportationBusiness Process Cycle

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Atmos Energy Marketing –Business Strategies and

Market Overview

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Storage & Transportation Strategies

Commercial Transport & Storage StrategiesControl storage in strategic areas (with focus on high deliverable salt storage)Maximize value from storage and transportation assets, as markets provide opportunities through price movement:

Storage ArbitrageTransport arbitragePark and Loans Mid-stream business

ChallengesIncreased competition in securing storage capacity (putting pressure on returns)Pipelines tightening operational flexibility



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Gas Marketing Strategies

Commercial Marketing StrategiesRetain existing customers by providing excellent value for products and services.Expand Asset Management business; including use of asset replication strategy

Providing pipeline type services to replace customer held capacity. Expand into new customer markets (Texas, Mobile Bay, others)Provide balancing services to customers off of Atmos Pipeline - Texas

Develop new Producer Services business (gas cost reduction strategy)

ChallengesHigh gas prices (impact on credit risk, working capital, etc.)Increasing competition in traditionally strong AEM markets (East Tennessee) Weather impact on customer demand / usage



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KentuckyKentucky





LouisianaLouisiana


Mid-Tex *Mid-Tex *








* Effective 10/1/04, includes LDC and pipeline operations of former TXU Gas. Pipeline operations will functionally report under the nonutility businesses in Fiscal 2005.

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Atmos Pipeline & Storage

Storage Assets

UCG Storage, Inc.WKG Storage, Inc.

Trans LA Gas Storage, Inc.Atmos P/L - Texas Storage

Assets supply storage-type services to Atmos

Mid-Tex Division, affiliates & third parties


Pipeline Assets

Atmos Pipeline –TexasTrans LA Gas Pipeline

Upstream pipeline servicesprovided to Atmos Mid-Tex

Division, affiliates & third parties

Ownership of Strategic Asset Base Provides Revenue Growth & Stability

35


Atmos Pipeline – Texas Assets

36

Asset Description

Pipeline transports and stores gas, as well as provides other pipeline services for distribution, industrial, electric generation, cross haul and other shippers

• Approximately 6,162 miles of intrastate pipelineo Total projected transportation volume is approximately 591 Bcf

o Current average volume of approximately 1.6 Bcf/d.

o Demonstrated peak day deliveries of 3.5 Bcf/d

• The Dallas / Fort Worth Metroplex comprises approximately 75% of on-system distribution demand

Five Storage facilities (One salt cavern; four depleted reservoirs)• Working Gas Capacity: 39 Bcf• Maximum withdrawal: 1.2 Bcf/d• Maximum Injection: 270 MMcf/d

Atmos Pipeline - Texas

37


38

- Atmos Utility : Mid-Tex Division - Tariff Based Rates - Weather - Seamless Performance - Firm Service

- Industrial - Tariff Based Rates - Weather - Strong Customer Service - Limited Competition - Timely & accurate information - Limited Credit Exposure

- Electric Generation - Market Based Rates - Weather - Enforceable Contract Language - ERCOT - Strong Customer Service - Competition - Flexible Value added Service

- Through System - Market Based Rates - Basis Differentials - Timely Information- Competition - Marketing Excellence- Available Capacity - Market Knowledge

- Other - Market Based Rates - Basis Differentials - Strong Customer Service- Competition - Volume Monitoring- Available Capacity - Market Knowledge

Maintain/Increase Margins + Increased Throughput + Low Risk Profile = Stable Earnings Growth

Commercial Opportunities Margins Potential Risk Risk Management

Atmos Pipeline - TexasCommercial Business Flow

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• Transport incremental gas• Provide other value - added services

No Capital required

• Transport incremental gas• Provide other value - added services

No Capital required

Multiple Commercial Opportunities for Creating Value


Value$

• Invest capital with commercial and regulatory returns

•Capacity optimization - mainline compression

• North Metro enhancement project• Expand storage capacity

Capital required($40-45 million)

• Invest capital with commercial and regulatory returns

•Capacity optimization - mainline compression

• North Metro enhancement project• Expand storage capacity

Capital required($40-45 million)

Regulatory with GRIP Certain capital projects

will also be eligiblefor GRIP recovery

40


Northside Loop Agreement – Energy TransferAtmos Energy and Energy Transfer Fuel will construct and operate approximately 45 miles of 30" pipeline extending from Justin to Frisco, in the northern part of the DFW Metroplex creating incremental capacity of 200 MMcf/d. Atmos’ initial investment will be approximately $45 million, which can be contributed over a two-year period. The Justin to Line F segment is expected to be in-service by December 2005.Compression is ordered and anticipated to be in-service by March 2006.CAPEX: approximately $4 million in fiscal 2005; $41 million in fiscal 2006.

Enbridge - Line (Corridor Compression Project)Executed agreement in June 2005 to install compression to enhance re-injection capabilities at Bethel and to transport up to 100 MMcf/d into Enbridge’s new 36” Carthage pipeline at Bethel. Start date anticipated in early 2006, subject to compressor availability.CAPEX: approximately $3 million in fiscal 2005; $17 million in fiscal 2006.

Devon – Line (Corridor Compression Project)Executed agreement in June 2005 to transport up to 50,000 dth/day into Enbridge. Start date anticipated in early 2006, subject to compressor availability.

Katy Capacity ExpansionA Request for Interest was issued in April 2005; subsequently signed agreements with 3 shippers to transport an additional 50,000 dth/day of capacity to the Katy area. Project is expected to come online in June 2006.CAPEX: approximately $13 million to $15 million in fiscal 2006.

Project Update

41


Project Map

North SideLoop

EnbridgeCompression

42


Non-Texas Assets

43

StorageAtmos Pipeline & Storage (AP&S) owns 2 reservoir storage locations that are located in Kentucky and a 25% interest in a reservoir storage location in Louisiana. All three provide a combined usable capacity of 3.9 BCF.

East Diamond is a reservoir storage facility located in Kentucky with 2.2 BCF of usable capacity.

Barnsley is a reservoir storage facility located also in Kentucky with a 1.3 BCF of usable capacity.

Napoleonville is a salt storage facility located in Louisiana. AP&S (through Trans Louisiana Gas Storage) owns a 25% interest in Napoleonville (Acadian owns the remaining 75% and manages the facility). AP&S’s interest is .4 BCF.

PipelineAP&S owns a 21 mile pipeline (24 inch with 270,000 per day capacity) that has receipt interconnects with Gulf South, Bridgeline, Acadian and Columbia Gulf.

This pipeline has the ability to deliver to the Atmos utility, a few industrial customers, an Entergy power plant, and Entergy’s LDC in New Orleans.

Atmos Pipeline & Storage - Non-Texas

44

Pipeline & Storage StrategiesOwn storage and pipeline in strategic areas (with focus on high deliverable salt

storage)Maximize value from storage and transportation assets, as markets provide opportunities through price movement:

Storage ArbitrageTransport arbitragePark and Loans

Atmos Pipeline & Storage - Non-Texas

45

Metropolitan New Orleans AreaTLGP Transmission / TLGP Sales Points

Metropolitan New Orleans AreaTLGP Transmission / TLGP Sales Points

St. Cha

rles P

arish

Jeffe

rson

Par

ish

Orle

ans

Par

ish

N

S

EW

October 26, 2001

TLGP 24”

Bridgeline Gas(Paradis)

S39,T14S,R20E

Bridgeline Gas(Paradis)

S39,T14S,R20EFuture Interconnect

Columbia GulfFuture Interconnect

Columbia Gulf

B’line 14”

Acadian Gas PipelineS48,T13S,R21E

Acadian Gas PipelineS48,T13S,R21E

Gulf South PipelineS48,T13S,R21E

Gulf South PipelineS48,T13S,R21E

TLGP 16”

AEL 18”

Entergy Louisiana(TLGP Sales)S5,T13S,R20E

Entergy Louisiana(TLGP Sales)S5,T13S,R20E

Atmos Energy LouisianaS5,T13S,R23E

Atmos Energy LouisianaS5,T13S,R23E

S24,T13S,R23E

21 Miles of 24” TLGP Pipe.95 Miles of 12” TLGP Pipe

Storage is held on upstream pipelines

• Bridgeline

• Acadian

• Gulf South

TLGP PipelineTLGP Pipeline

Trans Louisiana Gas Pipeline

46




KentuckyKentucky





LouisianaLouisiana


Mid-Tex *Mid-Tex *








* Effective 10/1/04, includes LDC and pipeline operations of former TXU Gas. Pipeline operations will functionally report under the nonutility businesses in Fiscal 2005.

47

StrategyProvide standardized, pro-active and cost effective gas supply functions to Atmos utility divisions.

Major Services ProvidedGas supply planningGas supply procurementRegulatory compliance supportGas supply invoice reconciliation / reportingCorporate utility hedging

OpportunitiesAccurate and timely communications with each of the Atmos Utilities and headquarters.To the extent possible, standardize gas supply functions across Atmos Energy.Provide proactive strategy and planning process for utility divisions.

Other Nonutility - Atmos Energy Services

48

StrategyContinue to review electric generation opportunities, based on evolving market to meet needs of municipal and industrial customers.

Currently reviewing a new electric product offering, which wouldinclude a 10 year prepaid gas supply component.

A key benefit of electric projects is that it allows us to secure long term fuel management opportunities (eg. Four bcf/year of natural gas for 10 years)

Major Services OfferedConstruct and lease electric peaking power and base-load generating plants and associated facilities.

Other Nonutility - Atmos Power Systems

49

Appendix


50

Gas Marketing

- Bundled delivered gas sales - Contract disputes - Enforceable contract language - Lost customers - Strong customer service - Credit exposure - Credit risk management

- Peaking sales and balancing - Position accuracy - Timely & accurate position monitoring - Volume variances - Physical storage to meet swings - Price risk - Hedging & contract language

Storage & Transportation

- Storage and transportation management - Position accuracy - Timely & accurate position monitoring (asset management, storage and transport - Volume variances - Physical storage to meet swings arbitrage, park and loan, pipeline segmentation) - Price risk - Hedging & contract language

- Basis risk - Hedging & contract language - Capital cost recovery - Valuation analysis and execution - Operational - Adherence to process, controls & contracts

Potential Risks Risk ManagementCommercial Opportunities



Business Risks and Risk Management

51

Risk PolicyAEM has in place a risk policy which serves as an overall guide for all of its employees and contractors regarding managing the business risks of the company.

The policy outlines AEM’s overall risk philosophy and also includes its risk profile, controls, procedures, responsibilities, and reporting requirements.

AEM’s Risk Management Committee monitors this policy for compliance and provide overall oversight of the company’s risk management program.

Risk Management Committee (see next slide)

ReportingAEM utilizes a variety of reports to analyze and report the results of its trading and risk management activities.

Daily Trading reportDaily P&L reportDaily Position reportDeal Validation reportVarious Other reports

Risk Management & Oversight


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ResponsibilitiesThe AEM Risk Management Committee has overall responsibility for the oversight of risk management and trading activities. The Risk Management Committee is chaired by the SVP Finance & Administration and reports through the Atmos Management Committee and the Audit Committee of the Atmos Energy Board of Directors.

The Risk Management Committee’s duties are to establish and oversee compliance with all risk management policies, controls and procedures, as well as to periodically review risk management strategies. The Risk Management Committee receives, reviews and helps resolve (as appropriate) any internal control issues and audit findings related to risk management.

Atmos BoardAudit Committee

AEH Risk ManagementCommittee

AECVP and Corporate

Controller

AEMPresident AEM

SVP - Trading

AEHSVP - Finance

& Admin. (Chair)

Vice PresidentRisk Control,

Credit, Finance

AEHSVP – Business

Development

AEMSVP - Marketing

Atmos ManagementCommittee

Risk Management Committee (Governance)


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AEM’s risk management philosophy is conservative and based on a low risk tolerance.

AEM recognizes that there are various business risks inherent in its business, that could impact its financial results.

Market/price, credit, contract/legal, operational, systems, customer retention, others

AEM is strongly committed to managing these risks prudently, in accordance with its controls, procedures, and other risk management practices.

As it pertains to its marketing and trading positions, it is AEM’s intent to maintain minimal net open positions.

Open positions can create price risk exposure to AEM on a short-term basis and may occur due to the time lag in executing financial hedges and other business factors.

AEM closely monitors its marketing and trading positions and manage the risk related to any open positions that may occur.

Risk Management Philosophy

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Weather

Customer Demand

Supply / Storage levels

Gas Price daily / monthly price volatility (physical and financial transactions)

Position Management

Customer Growth / Retention

Accounting Treatment of Storage (FAS 133)

Items that can impact earnings:

Economy & Finance

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