© 2005 AGL Resources. All rights reserved.
Bank of America
35th Annual
35th Annual
Investment Conference
September 20, 2005
San Francisco, CA
Paula Rosput Reynolds
Chairman, President and Chief Executive Officer
Bank of America Investor Conference - AGL Resources
2
Important Note to Investors –
Forward Looking Statements
Forward Looking Statements
Statements in this presentation that are not historical facts, including statements regarding our
estimates, beliefs, expectations, intentions, strategies or projections, may be “forward-looking
statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve matters that are not historical facts and because these statements involve
anticipated events or conditions, forward-looking statements often include words such as "anticipate,"
"assume," "can," "could," "estimate," "expect," "forecast," "indicate," "intend," "may," "plan," "predict,"
"project,” "future," "seek," "should," "target," "will," "would," or similar expressions. Our expectations
are not guarantees and are based on currently available competitive, financial and economic data
along with our operating plans. While we believe that our expectations are reasonable in view of the
currently available information, our expectations are subject to future events, risks and uncertainties,
and there are several factors - many beyond our control - that could cause results to differ
significantly from our expectations. Such events, risks and uncertainties include, but are not limited to,
changes in price, supply and demand for natural gas and related products, impact of changes in
state and federal legislation and regulation, actions taken by government agencies on rates and other
matters, concentration of credit risk, utility and energy industry consolidation, impact of acquisitions
and divestitures, direct or indirect effects on AGL Resources' business, financial condition or liquidity
resulting from a change in our credit ratings or the credit ratings of our counterparties or competitors,
interest rate fluctuations, financial market conditions and general economic conditions, uncertainties
about environmental issues and the related impact of such issues, impacts of changes in weather
upon the temperature-sensitive portions of the business, acts of war or terrorism, and other factors
which can be found in our filings with the Securities and Exchange Commission, which we incorporate
by reference in this presentation. Forward-looking statements are only as of the date they are made,
and we do not undertake any obligation to update these statements to reflect subsequent changes.
estimates, beliefs, expectations, intentions, strategies or projections, may be “forward-looking
statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve matters that are not historical facts and because these statements involve
anticipated events or conditions, forward-looking statements often include words such as "anticipate,"
"assume," "can," "could," "estimate," "expect," "forecast," "indicate," "intend," "may," "plan," "predict,"
"project,” "future," "seek," "should," "target," "will," "would," or similar expressions. Our expectations
are not guarantees and are based on currently available competitive, financial and economic data
along with our operating plans. While we believe that our expectations are reasonable in view of the
currently available information, our expectations are subject to future events, risks and uncertainties,
and there are several factors - many beyond our control - that could cause results to differ
significantly from our expectations. Such events, risks and uncertainties include, but are not limited to,
changes in price, supply and demand for natural gas and related products, impact of changes in
state and federal legislation and regulation, actions taken by government agencies on rates and other
matters, concentration of credit risk, utility and energy industry consolidation, impact of acquisitions
and divestitures, direct or indirect effects on AGL Resources' business, financial condition or liquidity
resulting from a change in our credit ratings or the credit ratings of our counterparties or competitors,
interest rate fluctuations, financial market conditions and general economic conditions, uncertainties
about environmental issues and the related impact of such issues, impacts of changes in weather
upon the temperature-sensitive portions of the business, acts of war or terrorism, and other factors
which can be found in our filings with the Securities and Exchange Commission, which we incorporate
by reference in this presentation. Forward-looking statements are only as of the date they are made,
and we do not undertake any obligation to update these statements to reflect subsequent changes.
Management does not affirm or update earnings guidance during private and one-on-one meetings
with investors, but only updates or confirms earnings guidance through public disclosure and filing
with the commission. Earnings guidance is only effective as of the date it is given. The company
further disclaims any duty to update its guidance.
with investors, but only updates or confirms earnings guidance through public disclosure and filing
with the commission. Earnings guidance is only effective as of the date it is given. The company
further disclaims any duty to update its guidance.
Bank of America Investor Conference - AGL Resources
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Important Note to Investors
Non-GAAP Measures
Non-GAAP Measures
Company management evaluates segment financial performance based on earnings before
interest and taxes (EBIT), which includes the effects of corporate expense allocations. EBIT is a
non-GAAP (accounting principles generally accepted in the United States of America) financial
measure. Items that are not included in EBIT are financing costs, including debt and interest
expense, income taxes and the cumulative effect of changes in accounting principles. The
company evaluates each of these items on a consolidated level and believes EBIT is a useful
measurement of our performance because it provides information that can be used to evaluate the
effectiveness of our businesses from an operational perspective, exclusive of the costs to finance
those activities and exclusive of income taxes, neither of which is directly relevant to the efficiency
of those operations.
interest and taxes (EBIT), which includes the effects of corporate expense allocations. EBIT is a
non-GAAP (accounting principles generally accepted in the United States of America) financial
measure. Items that are not included in EBIT are financing costs, including debt and interest
expense, income taxes and the cumulative effect of changes in accounting principles. The
company evaluates each of these items on a consolidated level and believes EBIT is a useful
measurement of our performance because it provides information that can be used to evaluate the
effectiveness of our businesses from an operational perspective, exclusive of the costs to finance
those activities and exclusive of income taxes, neither of which is directly relevant to the efficiency
of those operations.
Operating margin is a non-GAAP measure calculated as revenues minus cost of gas, excluding
operation and maintenance expense, depreciation and amortization, and taxes other than income
taxes. These items are included in the company’s calculation of operating income. The company
believes operating margin is a better indicator than operating revenues of the contribution
resulting from customer growth, since cost of gas is generally passed directly through to
customers.
operation and maintenance expense, depreciation and amortization, and taxes other than income
taxes. These items are included in the company’s calculation of operating income. The company
believes operating margin is a better indicator than operating revenues of the contribution
resulting from customer growth, since cost of gas is generally passed directly through to
customers.
EBIT and operating margin should not be considered as alternatives to, or more meaningful
indicators of, the company’s operating performance than operating income or net income as
determined in accordance with GAAP. In addition, the company’s EBIT or operating margin may
not be comparable to similarly titled measures of another company.
indicators of, the company’s operating performance than operating income or net income as
determined in accordance with GAAP. In addition, the company’s EBIT or operating margin may
not be comparable to similarly titled measures of another company.
Bank of America Investor Conference - AGL Resources
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Transco Pipeline
State Customers
(000s)
(000s)
GA 1,566
NJ 267
VA 260
FL 103
TN 61
MD 6
Total 2,263
-
Premier East Coast
Gas Operations
Gas Operations
FGT Pipeline
Florida City Gas
SouthStar
Virginia Natural Gas
The Platform
| • | 2.3 million customers – scale to succeed |
| • | Florida to New Jersey geographic footprint |
| • | Manage 65 Bcf of storage |
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Chairman, President, CEO Paula Rosput Reynolds PG&E, PanEnergy, Duke
SVP, Chief Financial Officer Drew Evans Mirant, Southern Company, Federal Reserve Bank
EVP, Distribution, External Affairs Kevin Madden FERC
SVP, Governmental Affairs Lindsay Thomas US Congress; Georgia Chamber
President - Sequent Energy Doug Schantz Cinergy, Kinder-Morgan, Transco
Chief Information Officer Kristin Kirkconnell BellSouth, NASDAQ
SVP, Engineering and Operations Ralph Cleveland ExxonMobil
SVP, Business Development Dana Grams Shell Oil (Coral), Phibro
| • | Diverse backgrounds in public companies (large and small cap) |
| • | Government, regulatory and civic experience |
| • | Extensive energy industry experience |
| • | Proven track record |
Diverse Management Team Leads
Turnaround To Growth
Turnaround To Growth
Bank of America Investor Conference - AGL Resources
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ATG: Strong Regulated
Earnings and Asset Base
Earnings and Asset Base
YTD 2005 Consolidated
EBIT by Segment
June 2005 Consolidated
Assets by Segment
Bank of America Investor Conference - AGL Resources
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Average End Use Customers
(Thousands)
Rate Base
(Millions)
Atlanta Gas Light
rate base $214
million for PRP
rate base $214
million for PRP
Authorized Rate of Return (Percent)
Atlanta Gas Light 10.9
Chattanooga 10.2
Elkton Gas 12.5
Elizabethtown Gas 10.0
Florida City Gas 11.25
Virginia Natural Gas 10.0-11.4
Growth In EBIT
(Millions)
* Contains $13 million net gain on asset sale
Growth in Our Utilities …
Bank of America Investor Conference - AGL Resources
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If NUI’s O&M per customer
reached AGL’s level, it would
mean savings of ~$58MM, or
52% of NUI’s total O&M.
reached AGL’s level, it would
mean savings of ~$58MM, or
52% of NUI’s total O&M.
O&M per Customer
| • | Numbers are on a fiscal year basis. |
| • | NUI is for 2003. |
| • | 2005 is an annualized amount based on consolidated AGL YTD 2nd quarter 2005 O&M per customer of $81. |
Customers per Employee
| • | Numbers are on a fiscal year basis, except NUI (12/04) |
| • | 2005 as of 6/30/05 and assumes approximately 90% of AGL Services Company personnel support Distribution Operations in 2005. |
Distribution Operations Metrics:
“Faster, Better, Cheaper”
“Faster, Better, Cheaper”
Bank of America Investor Conference - AGL Resources
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Working the Regulatory Compact
to Foster Annuity-Like Earnings
to Foster Annuity-Like Earnings
| • | Stay-outs in Georgia (5 years) and New Jersey (5-year rate freeze with 75% sharing in years 4 and 5) |
| • | Straight fixed variable rates in Georgia |
| • | Pipeline replacement program (PRP) in Georgia; applied for in New Jersey |
| • | Weather normalization programs (WNA) in New Jersey, Tennessee and Virginia |
| • | PGA adjustment for bad debt in Tennessee |
| • | Sequent asset manager for all utilities |
Bank of America Investor Conference - AGL Resources
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SouthStar Energy Generates
Annuity-Like Returns
Annuity-Like Returns
| • | Georgia’s leading retail gas marketer with 531,000 average customers as of June 2005 |
| • | Market share consistently in the 36 to 38% range |
| • | Strong margins come largely from fixed charges |
| • | Focused on high-grading customer base and improving efficiency of operations |
| • | Bad debt expense was 0.7% of total revenue for first six months of 2005, compared to 1.4% for first six months of 2004 and 5.2% in 2001. |
*Denotes EBIT for 100% of the partnership.
SouthStar EBIT*
Bank of America Investor Conference - AGL Resources
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Rockies
Chicago
Mid Cont Field
S. Texas
Mid Atlantic
Northeast
Henry Hub
Waha
10.24
8.69
4.18
9.06
4.36
9.79
4.50
9.03
4.305
11.03
4.57
4.56
11.46
5.05
11.33
4.95
Florida Zone 3
11.74
4.865
Locational Spreads
to Henry:
to Henry:
Rock
Waha
MC
Chicago
MA
NE
STX
Florida Z3
2004
(.39)
(.21)
(.265)
(.01)
.38
.48
(.07)
.295
2005
(2.34)
(1.97)
(2.0)
(.79)
.30
.43
(1.24)
.71
(Data as of August 30, 2005)
Source: Gas Daily
Regional Natural Gas Prices and
Location Spreads
Location Spreads
Bank of America Investor Conference - AGL Resources
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1 - 2
Additional
1-2
New
4 - 6 Additional
Existing
Under Construction
Existing, Under Construction and Probable
North American LNG Terminals
Gulf of Mexico Production Decline
to be Offset by LNG Imports
Source: EIA
U.S. Resource Base Requires Gulf Coast
Infrastructure Investment
Infrastructure Investment
Bank of America Investor Conference - AGL Resources
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Salt Dome Geology
| • | Formed from natural salt deposits to form large dome-type structures |
| • | Caverns created using water to dissolve and extract salt from the deposit, leaving a large empty space in the formation |
| • | The process, leaching, involves drilling a well and cycling large amounts of water through the well |
| • | The resulting cavern is essentially impermeable, making it ideal for storing natural gas |
Bank of America Investor Conference - AGL Resources
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Jefferson Island
Storage and Hub
| • | Salt-cavern storage 10 miles northeast of Henry Hub; working gas capacity of 6.9 Bcf |
| • | Accretive to earnings from day of purchase October 2004 |
| • | Caverns now fully subscribed |
| • | As of October 2005; capable of 10- to 12- turn service |
| • | Evaluating economics of leaching third and fourth caverns for minimum 12 Bcf additional working gas capacity |
| • | Strategically located asset with 8 pipeline interconnects positioned to capture both Gulf Coast volatility and LNG growth opportunities |
Bank of America Investor Conference - AGL Resources
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Business Focus
| • | Asset Management |
| • | Wholesale Trading and Marketing |
| • | Origination |
| • | Producer Services |
Market Focus
| • | Southeast, Mid-West, Mid-Atlantic and Northeast regions |
Risk Management
| • | Single commodity: natural gas |
| • | Strong portfolio credit quality and no credit losses to date |
| • | Obsessively tuned-in management |
Sequent Energy Management:
Defined Approach to Marketing, Asset Management
and Risk Management
Defined Approach to Marketing, Asset Management
and Risk Management
Bank of America Investor Conference - AGL Resources
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Volume
Value at Risk (VaR)
Gross Margin
Counterparties & Pipelines
Bank of America Investor Conference - AGL Resources
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Financially Sound with
Excellent Prospects
Excellent Prospects
| • | Annual surplus projected to grow from $100 million to $180 million annually |
| • | Peer group average payout would result in a 24% dividend increase |
| • | Earnings growth goals of 6% could be reflected in dividend |
| • | Excess could reduce debt to 47.5% of total capitalization by 2009 |
| • | Pursuit of Pivotal growth initiatives |
Bank of America Investor Conference - AGL Resources
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What’s Not To Like?
Why ATG?
| • | Solid base of utilities with an efficiency focus |
| • | Supportive regulatory framework |
| • | Well positioned to be both a consolidator and Gulf Coast supply participant |
| • | Highly experienced management |
| • | Earnings trajectory that supports valuation |
| • | Improving cash flow from operations to support competitive dividend and potential to make investments in accretive investments |
NYSE: ATG