Q2 2021 Atmos Energy Corp Earnings Call
Hello, and welcome to the a T O Q2, 2021 conference call and webcast. At this time all participants are in a listen only mode. If anyone should require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation. As a reminder, this conference is being worked.
Corded and it's now my pleasure to turn the call over to Dan <unk>, Vice President of Investor Relations and Treasurer. Please go ahead Sir.
Thank you Kevin.
Morning, everyone and thank you for joining us today with me. This morning 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 will be which we will reference in our prepared remarks are available at Atmos energy Dot com and.
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.
As we review these financial results and discuss future expectations. Please keep in mind that some of our discussion might contain forward looking statements within the meaning of the Securities Act and the Securities Exchange Act on.
Our forward looking statements and projections could differ materially from actual results and.
Factors that could cause such material differences are outlined on slide 29, and more fully described in our SEC filings.
With that I will turn the call over to our president and CEO, Kevin Akers Kevin.
Thank you Dan and good morning, everyone. We appreciate you joining us today and your continued interest and Atmos energy.
During this quarter, we continued to successfully execute our proven investment strategy of operating safely and reliably.
La modernize our natural gas distribution.
And as mentioned and storage systems.
This strategy along with the exceptional dedication and effort of all 4700 employees at Atmos energy continue to benefit our customers and the form of safe and reliable natural gas service.
This was clear during winter storm here as.
As the modernization of our systems, especially over the last 10 years provided the reliability necessary to meet the human needs requirements of our customers.
And I take this opportunity to highlight and thank our gas supply and gas control teams and the many operations transmission and underground storage employees, the desiccated countless hours and keeping natural gas safely flowing during winter storm Yuri.
The winter storms, certainly highlighted the importance that reliable natural gas systems.
And <unk> supply portfolios CIS.
System versatility, along with underground storage capacity brain to delivering safe and reliable natural gas service.
As an example of system modernization and reliability on our.
A highlight our third atmos pipeline and storage Salt Dome project. This project nearing 50% completion will provide an additional five to six bcf.
And if cavern storage capacity when and full service late 'twenty two early 'twenty three.
This new cabinet will provide us the continued capability to meet the growing demand and the Dallas Fort worth Metroplex.
As well as allow us to safely perform the required regulatory compliance work.
While meeting the current needs of our customers.
Additionally, a P. T has started our line S. Two replacement project that will create and enhance supply hub to the east of the growing Dallas Fort worth Metroplex.
And bring additional supply and so on the Haynesville and Cotton Valley shale plays and we.
We anticipate this 36 inch 90 mile project to be completed in three phases with.
And with the final phase being complete in 2020 three.
The storm once again highlighted the strength of our balance sheet and.
After incurring unprecedented gas costs during the storm, we were able to quickly finance these purchases with the issuance of $2.2 billion and long term debt or and all in debt cost of 83.4 basis points.
This financing is structured to provide us flexibility.
And so we work with our regulators to recover these costs.
In Kansas, and Texas, where we incurred most of our extraordinary gas costs, new legislation was introduced to minimize the impact on the customer Bill.
By extending the recovery periods for these unprecedented cost.
Through securitization the.
The legislation and Kansas was signed into law on April nine and allows utilities to file for the permission from the commission.
To securitize these costs for a period and up to 32 years.
And Texas the legislature is considering a statewide securitization program.
Under this program natural gas utilities would have the opportunity to apply to the Railroad Commission.
They have their extraordinary cost securitized.
On the Texas public financing authority and to use the net proceeds to pay off the debt incurred to finance these natural gas purchases.
This legislation has been passed by the house.
And is currently being considered in the Senate.
And our remaining states, we anticipate recovering gas cost or a normal purchase gas cost mechanisms over a 12 to 18 month timeframe.
I am very proud of all 4700, Atmos energy employees and the work. They do every day to provide safe and reliable natural gas service to our 1400 communities and $3 2 million customers there.
And their dedication and commitment have atmos energy well positioned for success and the second half of the fiscal year.
I will now turn the call over to Chris for an update on our financial performance Chris.
Thank you Kevin and good morning, everyone last night, we reported for fiscal 'twenty, one second quarter net income of $297 million or two about $2 30 per share compared to $240 million and $1 95 per share on the prior year quarter.
Year to date earnings were $514 million or $4.01 per share compared with earnings of $418 million or $3 42 per share and the prior year period.
Our second quarter and year to day performance largely reflects positive rate outcomes, driven by safety and reliability spending customer growth and our distribution segment, lower O&M spending and a reduction and our annual effective tax rate.
During the second quarter, a P. T began refunding $107 million and excess deferred tax liabilities to its customers over three year period.
Additionally, and Tennessee, we began refunding $17 million and excess deferred taxes over a three year period.
As a reminder, these refunds, resulting in reduction to revenue and a corresponding reduction in income tax expense.
<unk> and no material impact on net income.
Since these excess deferred taxes were approved and the second quarter, we adjusted our annual effective tax rate reflect the lower tax expense that we will realize this fiscal year.
The application and this lower annual effective tax rate to our results for six months ended March 31, resulting in 11 and benefit during the second quarter.
However, we can only recognize the associated reduction in revenue as it has built over the last six months and the fiscal year.
Therefore, this 11 cent benefit and be fully offset during the third and fourth quarters as we build those lower revenues.
Consolidated operating income increased about 17% to $681 million during the six months and March 31st slides four and five summarize the key performance drivers for each of our operating segments.
Rate increases on both of our operating segments, driven by increased safety and reliability capital spending totaled $130 million.
Customer growth and our distribution segment contributed an incremental $11 million and as we've continued to benefit from strong population growth and several of our service areas. The 12 months ended March 31st we experienced 1.87% net customer growth and on North, Texas distribution business and 1.61% net growth across our eight state.
Footprint we.
And we'd experienced an 8 million dollar decline and service order Bad news and our distribution segment, primarily due to the temporary suspension of collection activities.
Additionally, our provision for bad debt expense and reached almost $9 million and our distribution segment compared to the same period last year.
This combined 17 million dollar decrease.
Presented the most significant impact on financial performance through the economic downturn caused by the pandemic on.
Commercial sales volumes and trying to significantly better than our expectations and since the start of the fiscal year.
After 15% period over period decrease and sales volumes during the first quarter commercial sales volumes increased 16% and the second quarter compared to the same period last year, and we're about 2% higher year over year.
On some of this increase is attributed to the significantly colder weather experienced during the second quarter commercial sales volume should trend and less than 5% below the two year weather normalized average, which much of that much of that decrease experienced during the first fiscal quarter.
Throughout the second quarter, we have noticed steady improvement as economic activity has started to pick up.
Consolidated O&M and O&M expense, excluding bad debt expense decreased $14 million.
O&M and our distribution segment was about $6 million lower than the prior year, primarily reflecting lower travel costs.
O&M and our pipeline and storage segment was approximately $8 million lower than the prior year, primarily due to the completion of some non recurring well integrity work and the prior year period and Conservative O&M management.
Weighted how our revenues materialize on the first six months in the fiscal year.
Consolidated capital spending decreased 15% $846 million with 87% of our spending directed towards safety and reliability spending.
The decrease largely reflects the timing of spending and our distributions segment.
And on track to spend two to $2 $2 billion and capital expenditures. This fiscal year to further enhance the safety and reliability of our distribution and transmission network, while reducing methane emissions.
We continue to execute our well established regulatory strategy focused on annual falling back and doesn't which mitigate the incremental impact to customer bills, while reducing lag.
We have implemented $110 million and annualized regulatory outcomes.
And we are currently about $145 million and progress slides 27, and 28 summarizes the key attributes for these outcomes and slide 17 summarizes our planned activities for the remainder of the fiscal year.
And the historic nature of Winter storm, Yuri we experienced unforeseen unforeseeable and unprecedented market pricing for gas costs, which resulted and aggregated and natural gas purchases during the month in February and up approximately $2 $3 billion to help pay for these costs, we completed $2 $2 billion of long term debt financing in March as it.
Minder gas costs are a pass through cost and and recoverable and all of our jurisdictions.
And in Kansas, and Texas due to the size of the costs incurred are regulators issued orders authorizing natural gas utilities through corp, regulatory assets to account for the extraordinary costs associated with the storm.
As of March 31st and we recorded a $2 1 billion regulatory asset with approximately 2 billion recorded in Texas and approximately $77 million recorded and Kansas as Kevin mentioned, we had the ability to securitize these costs and Kansas and we are carefully monitoring the proposed statewide securitization legislation in Texas.
We also executed for sales forward sales arrangements under our ATM for approximately two 5 million shares for $239 million.
And we southern and Forbes and arrange for them and agreements on $4 5 million shares for approximately $461 million and net proceeds as of March 31st we have approximately $116 million and net proceeds available under existing forward sales agreements and.
And we have about $313 million available for issuance under the ATM program.
We intend to satisfy our remaining fiscal 'twenty, one equity needs through our ATM program as.
As a result, and this financing activity our equity capitalization, excluding the $2 $2 billion of storm related financing issue. During the second quarter was 64% as of March 31, and.
And we finished the quarter with approximately $3 5 billion and liquidity.
Details of our financing activities and our financial profile can be found on slides seven through 10.
Yesterday, we reaffirmed our fiscal 'twenty, one earnings per share guidance, and a range of $4.90 to $5.10 per diluted share.
As a reminder, approximately 70% of our distribution revenues are earned through the first six months and fiscal year.
And substantially all of our pipeline and storage and other segments revenues are earned under a straight fixed variable rate design.
Now that the winter season winter heating season is over we have more clarity around our revenues for the remainder of the fiscal year and we believe fiscal 'twenty one earnings per share will be at the upper end of our guidance range.
And we anticipate our sales volumes to be consistent with what we typically experienced during the second half of the fiscal year.
We also anticipate that our service sort of revenues from friend consistently with the first six months and the fiscal year.
We've also reflected in this guidance the decrease in revenue over the last six months on the fiscal year as your brief on excess deferred taxes to our customers.
And we have updated our income tax expense guidance range to reflect the impact of these refunds.
Finally, we anticipate that O&M will increase modestly during the second half of the fiscal year and be in line with our original O&M guidance range. We continue to meet all of our compliance requirements and we begin to address and system maintenance work, we were able to safely delay during the first half and the fiscal year.
Slides 11, and 12 combined additional details around our guidance.
Thank you for your time today, and I'll now turn it back over to Kevin and for his closing remarks, Kevin.
Thank you, Chris and I appreciate that financial update and.
As you heard we continue to be focused on the long term sustainability of Atmos energy and remain on track to meet our fiscal 2020 one targets as.
As we look to the second half of the year, we will continue to execute on our strategy that supports our vision to be the safest provider of natural gas services.
During our last two quarterly calls I've share the progress, we're making to minimize our carbon footprint as well as our water and land impacted some of our offices and service centers and.
Including the work we are doing to increase the amount of R&D, we have on our system today and to help customers reduce their carbon emissions the day.
We are evaluating approximately 30 R&D projects across our systems.
As a reminder, our and our environmental strategy is focused on five key areas gas supply and operations fleet facilities and customers today.
Today I want to highlight how atmos energy is working to reduce methane emissions as we modernize our business and infrastructure by investing in innovation and technology.
And examples of how Atmos energy.
Our goal to reduce methane emissions, 50% by 2035 as well as how we are helping customers understand the role that natural gas plays and reducing their carbon footprint at home and and affordable manner.
We recently installed a new methane monitoring technology, and our Tri cities underground storage facility called a glass cloud imaging camera.
This 360 degree fixed states camera, we'll continuously monitor our compression and storage field assets for methane emissions and if necessary.
Technology will send alerts, including pop up alerts with images to our plant operations employees.
In addition to text and email alerts and.
In addition to our existing methane monitoring and detection equipment, we are finalizing plans to deploy fixed base and mobile technologies throughout our underground storage operations.
Additionally, we are and the process of installing a fuel cell to generate low carbon electricity and one of our facilities.
The fuel cell will be powered with natural gas and is anticipated to substantially reduce the carbon footprint for that facility.
We anticipate the fuel cell will be operational by the end of this calendar year.
With affordability and community support always top of mind force.
Colorado team partnered with the Greeley Weld County habitat for humanity group to build a zero net energy home for a local family.
This will be the first of its kind for local habitat homes.
This home, it's designed to recede a home energy rating system score of zero.
Which means the home produces the same amount of energy it consumes over the course of the year by using efficient natural gas appliances, better insulation and solar technology.
The total utility costs for this home is anticipated to be approximately $350 per year, which is expected to provide about $2000 and annual utility bill savings relative to the average U S home.
This solution is significantly less expensive and an all electric car.
We are also working with builders and two Texas locations to design homes that are expected to yield similar environmental results.
Our employees put their heart soul and time and energy and a projects like these every day to modernize our system to do our part to protect and preserve our environment for generations to come and to support the communities, where they live and work.
And I'm very humbled by their compassion and commitment to be good neighbors.
Providing this family with a natural gas on that is environmentally friendly and cost efficient and just one way atmos energy feels safe and thriving communities.
Last year legislation designed to promote the use of all energy sources and maintain customer energy choice, which we refer to as all fuels legislation was passed and Louisiana and Tennessee during.
During the second quarter, similar legislation was passed and Kansas, Kentucky, and Mississippi and earlier this week, the Texas Senate passed H B 17, and it is now on its way to the governor for signature assuming it is signed six of our eight states will have passed all fuels slides.
Slashing.
The successful execution of our strategy and our financial position have us well positioned to continue safely delivering reliable affordable and efficient and abundant natural gas to homes businesses and industries to fuel, our energy needs now and well and into the future.
I will now open up the call for questions, Dan and I'll turn it back over to you and the operator.
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Our first question today is coming from and Soo Kim from Goldman Sachs. Your line is now live.
Thank you and good morning.
Maybe first question for Chris.
For the quarter.
And for explaining part of what drove that year over year increase it seems like there was a timing of the.
And the asset lower tax rate, but that's going to be true it up by the end of the year with no yearly impact, but even without that it seems like it was a relatively strong quarter.
Versus what we had expected at least could you just describe how much of that increase was largely expected by you and how much was just on additional benefit whether its from rates or non weather normal volumes and.
And.
Guiding reiterating your guidance or your position pretty well.
At least at that midpoint at this point.
Sure and Suzanne and good morning, So yeah, and so a couple of things and maybe the regulatory outcomes and we're pretty much in line with our expectations, primarily because that reflects the capital spending that.
And that we did in the prior fiscal year. So we when we made those filings are late last year that carryover and did this year. So we had pretty good visibility and so those outcomes.
You noted the temporary timing difference around the the updates and the annual effective tax rate, which will unwind by the net of the year and.
And then also too we were very conservative on the O&M spending and the first half of the fiscal year as we were able to kind of just take a wait and see approach with respect and how our commercial customers in particular.
Would would behave.
During the pandemic and then and as I mentioned, a few minutes ago. The the performance there has been better than what we anticipated.
So we did we did hold back some of the spending on the O&M side until we had a better sense of where were those revenues will begin to materialize and now that we're out of the winter heating season and focused on the second half of the year.
And we'll be modestly increase and that O&M spend and ER and then you know given the momentum that we see with the regulatory outcomes. The commercial sales volume is beginning to trend on the right direction as economic activity picks up and the fact that we'll do some modest increases or O&M spending and we feel confident that we'll be at the upper end of the range.
By the end of the fiscal year.
Okay. So upper okay.
Got it.
And that's definitely helpful.
Kevin maybe a broader strategic question and then coming off of I think one of the.
And other utilities recently announced.
Sale of a couple of other utilities gas utilities had pretty impressive valuations. We've asked you with a strategic question on M&A before and obviously there you talked about how there's robust organic opportunities.
Of your jurisdiction and so definitely appreciate that.
How do you balance you know I guess the valuation that the market is seemingly assigning you know given the recent transaction versus.
The ongoing financing needs you have and at a certain point does it make sense to potentially weigh those two to see what the ultimate portfolio mix will.
And will be ideal for atmos.
Well good morning. Appreciate your question and let let's just start with.
The transaction that you're talking about there and discussion around our assets and and again as you heard Chris go through the financial updates the performance.
For year to day, our historical performance, we remain very happy with our asset mix, our regulatory construct and again into as you know we began to earn on 90% of our investment and the first six months and 99%. After 12 months and we've talked about how that story is very simple very straightforward easy for our folks and <unk>.
And <unk> all stakeholders to understand.
And there are complications with these acquisition as we go forward and that's why we we like our plan and we have laid out today the performance that our diminishes execute on day in and day out, but I think this transaction sends a very strong said and a light to the market and in our opinion.
And it sends a very strong says about the value of natural gas and it breaks, particularly and meeting the energy energy needs on a go forward basis. The value of these assets that have been somewhat question over time, but are now should be coming into clear focus. So I think it sends a very strong signal to everybody about the world.
Natural gas is playing and continue to play going forward and the value of this infrastructure out there for the reliability with certainty the affordability that natural gas range. So very very happy to see that have a curve, but we remain very very happy and positive with our regulatory construct and performance of our assets.
Understood. Thank you so much broken.
Thank you.
Thank you. Our next question today is coming from Stephen Byrd from Morgan Stanley. Your line is non life.
Hey, good morning, Congrats on continued Oh, great performance.
Oh and thank you.
And I wanted to just discuss renewable natural gas a little bit more and maybe just at a high level get your thoughts on the kind of the overall magnitude of that potential and the longer term away from kind of you know very near term just thinking through and you know how meaningful that might might be I know, it's a broad question just.
And shouldn't your longer term and take on that.
Okay.
Yeah, I think and as you've heard US say, we continue to grow the number of projects that we have out there undervalue our evaluation were up to 30 now and it's a mixture of.
Dairy as well as landfill gas, we've got a combination of those things where we're looking at now.
We're doing about five and a half to six days a year, that's a little north of the 2% range I think when you compare that's about.
The average distribution sales volumes that we move across our system on an annual basis I think it will continue to see these projects come up and with the help of some of these energy firms that are out there I think we'll continue to see a good opportunity to bring them on our system, but right now to hang a number on it I think it's still a little bit early as I said.
We're at 2% of our overall distribution sales throughput volumes I think theres opportunity there force but.
Until we can get in and see what infrastructure may be required how near or our systems day or is that going to require pipe on what's required on on the other side of that or Digesters processing Clinton and those sorts of things I think it's still a little bit premature on our side to try and hang on a target on a number out there.
And where this could day, but we remain very optimistic about the opportunities that continue to come up.
Well, that's fair Great and then maybe just and wanted to dig in a little bit more on Texas and lessons learned from the winter Storm you all gave a very good and very thorough update on sort of everything going on and Texas again kind of a longer term question just interested and in your take on sort of other changes that you see that would be needed and.
Texas, whether that's you know operational changes changes to contract structure, just other things on your mind longer term to ensure kind of you know we don't have a repeat of what happened and Texas.
No good question and and I think our team as you heard me say and I mentioned on our gas supply our gas control groups, they're continuing to go through and evaluate things that occurred throughout the 12 to 14 day period. There how we can improve our system things, we can put on our system to monitor that.
Net additional supply diversification that we can maybe bring onto our system. So that's continuing to go on but really those are the things we do each year and I think one other the strength as I pointed out and in my earlier remarks for US is our planning process. Those projects I mentioned are already and our five year plan and have.
Ben and our five year plan to allow us to continue to fortify and grow and think about where those next challenges could they just for example, again the storage piece of that so as we develop those salt caverns, we're not only thinking about past performance, we're thinking about growth on the system as well and other places to 40.
<unk> or whether it's a P T infrastructure or distribution systems as well. So I think you know that the ongoing evaluation of that performance continues but I'm very proud of how our system performed through that and we'll look for and whether it's technology solutions or supply diversification again to help.
US through that and the last thing I'll mention on that is is around that supply diversification you look at and I'll just use R. A T T asset as an example here when that supply stopped falling coming in from the west from the Permian and there we were able through the network and we've been building and Florida.
Fine and enforcing over the last 10 years to pull from the north.
And all the Barnett out of Oklahoma, we fortified that with additional supply coming out of Carthage front and as we had our fortifications and place where we could pull from Katie up on the south all of those points helped us get through that situation during that storm and we needed all of those and that burst at the K yet.
<unk> in the system to be able to pull that and pull it at those levels as well as the many suppliers that we have across those areas to be able to bring those and are those point. So.
And I'm very proud of how they performed during that period and how our system continues to price very many options force going forward.
And that's really great color. Thank you so much.
Thank you. Our next question today is coming from Ryan Levine from Citi. Your line is it a lot.
And everybody in terms of the Salt dome storage projects that you highlighted and the Dallas region could you speak to what additional development opportunities you have on salt dome storage within your footprint.
Broadly.
But within our footprint Salt dome and is here and Texas and this is our third cavern here and Texas those are behind the a T. T system to meet the demands of its customer base its firm needs there for human needs customers here.
Here.
On the mid Tex system, so our other storage sales throughout our other properties are all traditional sandstone reservoirs. There are no salt dome projects on or available and those other facilities, but we do.
Have a contract storage services that we use through our interstate supply contracts and with third party.
Sources as well to supplement our peaking capacity needs and some of that may potentially be salt right. Now most of that is generally a sandstone reservoirs itself. So right now we.
We've taken as I said, a good hard look at this third third cavern development here and say that being able to to help us for the near to longer term at this point.
Are there additional opportunities within your footprint on the salt on site that you have the resource or commercial arrangement that you would be able to pursue the extent that it was needed.
And on and again, let's let's think about storage and storage for US is there to supplement our peak day and our Interstate capacity to meet those farm farm name.
And the only opportunity for salt right now as I said is here in Texas or other opportunities are sandstone reservoirs and those are near market near and near our large.
Customer bases and so.
So we continue to use those other 15 fails to exactly do that so they're the only salt dome available is here in Texas and right now our third cavern development. That's the one we're focused on.
Okay, and then in terms of the financing plan appreciate the update around the securitization proceedings and the different service territories to the extent that the Senate and the Governor support the proposal and Texas does that crystallized financing plans for 2021.
And can you provide some color around how you're currently thinking about your equity needs and in light of evolving regulatory decision, making.
Yeah, I'll start and Kevin if you want to chime in as well so yeah, if if securitization does paths and Texas.
Its our intent at this point to participate in that program.
And which then would you really be I think crystallize, what we would do with the $2 $2 billion that we are that we executed and want a long term debt that we executed and March kind of going forward.
And when you think about our financing plan setting aside the.
The $2 $2 billion for a moment, we will continue to finance, our operations and a very balanced fashion using.
And a mix of long term debt and equity to finance our needs. So that we don't anticipate a debt financing strategy to change its worked very well for us over the last 10 years, and it's well understood by our regulators certainly the investment community and.
And we don't see that changing at this point.
So just a follow up to the extent that that were to happen does that put off the table any additional equity financing needs beyond the port agreements and other.
Program to you already have in place.
And if we have the opportunity to participate in the securitization program and Texas and then have obviously be the opportunity to.
And to securitize the costs are in Kansas, We would anticipate that our financing program and our financing strategy.
And what we've done in the past.
I appreciate that thank you.
Okay.
Thank you. Our next question is coming from Charles Fishman from Morningstar. Your line is now live.
Good morning, Kevin.
So the securitization passions.
We're also seeing signs of inflation across the economy.
People are concerned about which will make it more difficult to control your O&M costs.
Certainly done a phenomenal job all of them for the last.
For years now.
That certainly put some pressure on rates and.
Create some headroom issue.
We obviously know what's important to keep breaks it.
The general inflation or less does that put some pressure on 7% to 8% capex growth or how do you think about that.
Because.
Obviously, that's the key to your.
The earnings growth.
Yeah Yeah.
You broke up there just a little bit so let me see if I can answer your question here I think when you when you look at.
The supply right now the abundance of the supply the pricing, where it's come back down to I think today.
Wal Hall was in the 250 range or so you'll look at the growth across our system and our average sales right now and that 49 to $50.
Dollar range absent what we've gone through this past winter obviously.
And I think get on those supply pricing and and and given the growth we have on our system.
And the signals, we can stand on our on our annual mechanisms right now I think we're very comfortable with our kosti are and how we compare.
On a go forward basis with that as well as meeting our O&M and compliance needs and.
Again, you've heard me talk before about and at our all in cost right now.
And again, assuming a assuming that we get securitization spread out these cost on on these abnormal winter pricing events here that.
At five to $5 50, right now.
And that equates to about <unk>.
Penny to Penny and a half on a kilowatt rate. So I think we still remain very very competitive out there compared to electric pricing.
On a go forward basis for us as well.
Yeah, but as far as and I am sorry, it broke up on put myself on speaker here.
Uh huh.
Obviously regulators look at the general.
Level of rate increases.
And will some of these cost that really arent, well inflation and higher interest rates.
And your control.
Will that put some pressure on your Capex growth is what I was getting up to seven and 8%.
Annual growth rate that you've you've targeted over the next five years.
And I'm not anticipating any any pressure at this point on our on our Capex program again, we've modeled a lot of things going forward into our five year plan. We continue to monitor the need for our projects and can pull things forward or push on things back. So I think right now given given the Lai.
And out that we have for this year and the next few years going forward I feel very comfortable with what we'll be able to execute upon.
Okay, and if I may ask a second question I was intrigued.
Earlier this week.
And when I E. The utility and our Phoenix mentioned and they were very proud of the industrial growth going on in Phoenix, and they said it was second only to Dallas.
And quite frankly.
And that surprised me I know that you know that's electric and we're talking gasior, but.
And on industrial is a small percentage of your revenue I think I'm looking at slide 13, it looks like 2%, but are you seeing and this industrial growth.
Are you seeing a higher gas demand.
Specific to certain you know.
Chemical industries or anything that might.
You know give you an.
And extraordinary boost and.
And revenues from the industrial sector going forward.
Not that I would say would equate to an extra boost if you will I think we see.
Certainly as and the vaccine that started to rollout the economy and to your point and started to pick back up things are opening back up we've seen some of our industrial customers across the eight states.
Get back to what we would call pre pandemic levels now some of them stay at that because they were associated with.
The specific needs of that where they're the medical industry.
Or metals industry, those sorts of things held steady throughout it but those that kind of pulled back Oh, dear and that covered period have now started to pick back up and head on a normal pace to your point, we continue to see new additions and expansions across our system.
But I don't know that I would categorize it at this point is an extra boost where we're very proud to see the growth from an economic and a utilization of natural gas standpoint and it.
And it seems to be a good diversified industrial load.
And from auto too.
Two the distilling industry.
To the metals industry, but we're.
We're very proud to see that but nothing that's been unanticipated at this point.
Okay. That's all I had thank you.
Thank you and we really shouldn't have a question and answer session I would like to turn the floor back over to management for any further closing comments.
Thank you we appreciate your interest and Atmos energy and thank you again for joining US a recording of this call will be available for replay on our website through June 30th 2021 have a good day.