December 2010
2
Safe Harbor Pages
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Forward Looking Statements
To the extent any statements made in this presentation contain information that is not historical, these statements are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, “forward-
looking statements”).
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, “forward-
looking statements”).
These forward-looking statements relate to, among other things, the expected benefits of the proposed merger such as efficiencies, cost savings, tax benefits,
enhanced revenues and cash flow, growth potential, market profile and financial strength; the competitive ability and position of the combined company; and the
expected timing of the completion of the transaction. Forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”,
“expect”, “estimate”, “intend”, “continue”, “plan”, “project”, “will”, “may”, “should”, “could”, “would”, “target”, “potential” and other similar expressions. In addition, any
statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Although certain of
these statements set out herein are indicated above, all of the statements in this presentation that contain forward-looking statements are qualified by these
cautionary statements. Although AGL Resources and Nicor believe that the expectations reflected in such forward-looking statements are reasonable, such
statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in
making forward-looking statements, including, but not limited to, factors and assumptions regarding the items outlined above. Actual results may differ materially
from those expressed or implied in such statements. Important factors that could cause actual results to differ materially from these expectations include, among
other things, the following: the failure to receive, on a timely basis or otherwise, the required approvals by AGL Resources and Nicor stockholders and
government or regulatory agencies (including the terms of such approvals); the risk that a condition to closing of the merger may not be satisfied; the possibility
that the anticipated benefits and synergies from the proposed merger cannot be fully realized or may take longer to realize than expected; the possibility that costs
or difficulties related to the integration of AGL Resources and Nicor operations will be greater than expected; the ability of the combined company to retain and
hire key personnel and maintain relationships with customers, suppliers or other business partners; the impact of legislative, regulatory, competitive and
technological changes; the risk that the credit ratings of the combined company may be different from what the companies expect; and other risk factors relating to
the energy industry, as detailed from time to time in each of AGL Resources’ and Nicor’s reports filed with the Securities and Exchange Commission (“SEC”).
There can be no assurance that the proposed merger will in fact be consummated.
enhanced revenues and cash flow, growth potential, market profile and financial strength; the competitive ability and position of the combined company; and the
expected timing of the completion of the transaction. Forward-looking statements can generally be identified by the use of words such as “believe”, “anticipate”,
“expect”, “estimate”, “intend”, “continue”, “plan”, “project”, “will”, “may”, “should”, “could”, “would”, “target”, “potential” and other similar expressions. In addition, any
statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Although certain of
these statements set out herein are indicated above, all of the statements in this presentation that contain forward-looking statements are qualified by these
cautionary statements. Although AGL Resources and Nicor believe that the expectations reflected in such forward-looking statements are reasonable, such
statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in
making forward-looking statements, including, but not limited to, factors and assumptions regarding the items outlined above. Actual results may differ materially
from those expressed or implied in such statements. Important factors that could cause actual results to differ materially from these expectations include, among
other things, the following: the failure to receive, on a timely basis or otherwise, the required approvals by AGL Resources and Nicor stockholders and
government or regulatory agencies (including the terms of such approvals); the risk that a condition to closing of the merger may not be satisfied; the possibility
that the anticipated benefits and synergies from the proposed merger cannot be fully realized or may take longer to realize than expected; the possibility that costs
or difficulties related to the integration of AGL Resources and Nicor operations will be greater than expected; the ability of the combined company to retain and
hire key personnel and maintain relationships with customers, suppliers or other business partners; the impact of legislative, regulatory, competitive and
technological changes; the risk that the credit ratings of the combined company may be different from what the companies expect; and other risk factors relating to
the energy industry, as detailed from time to time in each of AGL Resources’ and Nicor’s reports filed with the Securities and Exchange Commission (“SEC”).
There can be no assurance that the proposed merger will in fact be consummated.
Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements may be found in AGL
Resources’ and Nicor’s release regarding the merger, as well as under Item 1.A. in each of AGL Resources’ and Nicor’s Annual Report on Form 10-K for the fiscal
year ended 2009, and Item 1.A in each of AGL Resources’ and Nicor’s most recent Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2010. AGL Resources and Nicor caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-
looking statements to make decisions with respect to AGL Resources and Nicor, investors and others should carefully consider the foregoing factors and other
uncertainties and potential events. All subsequent written and oral forward looking statements concerning the proposed merger or other matters attributable to
AGL Resources or Nicor or persons acting on their behalf are expressly qualified by the cautionary statements referenced above. The forward-looking statements
contained herein speak only as of the date of this presentation. Neither AGL Resources nor Nicor undertakes any obligation to update or revise any forward-
looking statement, except as may be required by law.
Resources’ and Nicor’s release regarding the merger, as well as under Item 1.A. in each of AGL Resources’ and Nicor’s Annual Report on Form 10-K for the fiscal
year ended 2009, and Item 1.A in each of AGL Resources’ and Nicor’s most recent Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2010. AGL Resources and Nicor caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on forward-
looking statements to make decisions with respect to AGL Resources and Nicor, investors and others should carefully consider the foregoing factors and other
uncertainties and potential events. All subsequent written and oral forward looking statements concerning the proposed merger or other matters attributable to
AGL Resources or Nicor or persons acting on their behalf are expressly qualified by the cautionary statements referenced above. The forward-looking statements
contained herein speak only as of the date of this presentation. Neither AGL Resources nor Nicor undertakes any obligation to update or revise any forward-
looking statement, except as may be required by law.
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Additional Information About the Merger
and Where to Find It
and Where to Find It
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In connection with the proposed merger, AGL Resources plans to file with the SEC a Registration Statement on Form S-4 that will include a joint proxy statement
of AGL Resources and Nicor that also constitutes a prospectus of AGL Resources. AGL Resources and Nicor will mail the joint proxy statement/prospectus to
their respective stockholders. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. You will be able to obtain the joint proxy statement/prospectus, as well as other filings containing
information about AGL Resources and Nicor, free of charge, at the website maintained by the SEC at www.sec.gov. You may also obtain these documents, free
of charge, from AGL Resources’ website (www.aglresources.com) under the tab Investor Relations/SEC Filings or by directing a request to AGL Resources, P.O.
Box 4569, Atlanta, GA, 30302-4569. You may also obtain these documents, free of charge, from Nicor’s website (www.nicor.com) under the tab Investor
Information/SEC Filings or by directing a request to Nicor, P.O. Box 3014, Naperville, IL 60566-7014.
of AGL Resources and Nicor that also constitutes a prospectus of AGL Resources. AGL Resources and Nicor will mail the joint proxy statement/prospectus to
their respective stockholders. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. You will be able to obtain the joint proxy statement/prospectus, as well as other filings containing
information about AGL Resources and Nicor, free of charge, at the website maintained by the SEC at www.sec.gov. You may also obtain these documents, free
of charge, from AGL Resources’ website (www.aglresources.com) under the tab Investor Relations/SEC Filings or by directing a request to AGL Resources, P.O.
Box 4569, Atlanta, GA, 30302-4569. You may also obtain these documents, free of charge, from Nicor’s website (www.nicor.com) under the tab Investor
Information/SEC Filings or by directing a request to Nicor, P.O. Box 3014, Naperville, IL 60566-7014.
The respective directors and executive officers of AGL Resources and Nicor, and other persons, may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information regarding AGL Resources’ directors and executive officers is available in its definitive proxy statement filed with
the SEC by AGL Resources on March 15, 2010, and information regarding Nicor directors and executive officers is available in its definitive proxy statement filed
with the SEC by Nicor on March 10, 2010. These documents can be obtained free of charge from the sources indicated above. Other information regarding the
interests of the participants in the proxy solicitation will be included in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC
when they become available. This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any
securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
respect of the proposed transaction. Information regarding AGL Resources’ directors and executive officers is available in its definitive proxy statement filed with
the SEC by AGL Resources on March 15, 2010, and information regarding Nicor directors and executive officers is available in its definitive proxy statement filed
with the SEC by Nicor on March 10, 2010. These documents can be obtained free of charge from the sources indicated above. Other information regarding the
interests of the participants in the proxy solicitation will be included in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC
when they become available. This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any
securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Transaction Overview
Key Terms
• AGL Resources to acquire Nicor Inc. for $3.1 billion based on $53.00 per Nicor share
Ø 40% cash, funded by long-term bonds prior to closing
Ø 60% stock
• Implied transaction premium of ~22% to unaffected closing price on December 1, 2010
• Implied transaction premium of ~17% based on the average volume-weighted Nicor closing
price over the last 20 trading days ending December 1, 2010
price over the last 20 trading days ending December 1, 2010
• Pro forma ownership: 67% AGL Resources / 33% Nicor
Dividend
Profile
Profile
Management &
Governance
Governance
• John Somerhalder to serve as Chairman, President and CEO of combined company
• Four Nicor board members to join AGL Resources board of directors
• Corporate headquarters in Atlanta, GA
• Distribution headquarters in Naperville, IL (Chicago suburb)
Approvals and
Timing
Timing
• Nicor and AGL Resources shareholder votes
• Primary required regulatory approvals
Ø Illinois Commerce Commission
Ø Hart-Scott-Rodino
Ø Federal Communications Commission
• Closing expected in the second half of 2011
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• Dividend maintained for AGL Resources shareholders
• Implied 32% increase for stock portion of Nicor merger consideration
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• Visible and achievable financial and operational benefits driven by
increased scale and scope
increased scale and scope
• Creates one of the lowest cost, most diversified natural gas utilities
• Combination of complementary unregulated businesses enhances
platform for growth
platform for growth
• Leverages AGL Resources’ transaction integration expertise
• Enhances earnings profile through expected EPS accretion and
increased growth rate
increased growth rate
• Combined company expected to maintain solid investment-grade
credit ratings
credit ratings
AGL Resources Combination Rationale
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Combination Creates a Leading Gas
Distribution Business
Note: Map excludes Nicor Tropical Shipping business and Central Valley natural gas storage facility under construction in California.
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Scale Enhancing Transaction
Market Capitalization ($bn)
Last Reported FY Distribution Customers (mm)
Market Cap ($bn)1 | $4.4 |
LTM Revenue ($bn) | $5.1 |
LTM EBITDA ($bn) | $1.1 |
Utility Customers (mm) | 4.5 |
2009 Rate Base ($bn) | $3.8 |
Regulated States | 7 |
Total Employees | 6,400 |
Retail Customers (mm) | 1.1 |
Wholesale Gas Delivery (Bcf/d) | 4.7 |
2012E Non Utility Storage (Bcf) | 31 |
Combined Pro Forma Statistics
Source: SEC filings and Bloomberg as of 01-Dec-2010
1 Illustrative AGL Resources pro forma market capitalization based on AGL Resources share price as of 01-Dec-2010 and pro forma share count of 116.9 AGL Resources shares.
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• Creates incremental revenue opportunities
• Integration of non-utility businesses enhances leadership position
across natural gas value chain
across natural gas value chain
– Leverages retail experience of both companies, including unique
Nicor service offerings
Nicor service offerings
– Combined company will have experience with salt dome, reservoir,
aquifer and market area LNG storage
aquifer and market area LNG storage
– Synergies expected from expanded geographic scope for Sequent
and consolidation of middle and back-office functions
and consolidation of middle and back-office functions
• Both companies have effectively run asset optimization
businesses
businesses
• Additional cost and revenue opportunities expected as we grow the
business
business
Complementary Unregulated Businesses
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Unregulated Asset Overview
Retail
Wholesale
Storage
• Markets gas commodities to retail
customers in GA & other states
customers in GA & other states
Other
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AGL Resources
Nicor
• Markets energy-related retail
products including warranty plans, bill
management & HVAC-related
services
products including warranty plans, bill
management & HVAC-related
services
• Sequent provides natural gas asset
management, producer and storage
services, full-requirements supply and
peaking needs
management, producer and storage
services, full-requirements supply and
peaking needs
• Asset manager for all AGL Resources
utilities
utilities
• Jefferson Island storage facility in
Louisiana online (7.5 Bcf)
Louisiana online (7.5 Bcf)
• Golden Triangle storage facility in
Texas - first cavern online, second
cavern online in 2012 (12 Bcf total)
Texas - first cavern online, second
cavern online in 2012 (12 Bcf total)
• Central Valley storage facility in
California online 2012 (11 Bcf)
California online 2012 (11 Bcf)
• NA
• Tropical Shipping segment transports
containerized freight in the Caribbean
and Bahamas
containerized freight in the Caribbean
and Bahamas
• Expected to be ~4% of pro forma
EBIT
EBIT
• Enerchange provides wholesale
marketing of gas supply, transport
and storage services
marketing of gas supply, transport
and storage services
• Operates Chicago Hub
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Pro Forma Business Mix
Remains a Highly Regulated Business
Remains a Highly Regulated Business
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AGL Resources Standalone
2009 EBIT
2009 EBIT
AGL Resources Pro Forma 2009
EBIT
EBIT
Nicor Standalone
2009 EBIT
2009 EBIT
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• Substantial upfront value to shareholders
– Implied transaction premium of ~22% to unaffected closing price on December 1, 2010
– Implied transaction premium of ~17% based on the average volume-weighted Nicor closing
price over the last 20 trading days ending December 1, 2010
price over the last 20 trading days ending December 1, 2010
– AGL Resources’ current dividend represents a 32% increase on the stock portion of
consideration for Nicor shareholders
consideration for Nicor shareholders
• Increased scope, scale and diversification of regulated operations
– Creates one of the largest gas utilities with operations in seven states
– Pro forma regulated EBIT contribution expected to remain at ~67%
• Highly complementary unregulated businesses
– Anticipate strong cash flow through additional growth opportunities
– Leverage AGL Resources’ transaction integration experience to generate high degree of
synergy potential
synergy potential
• Experienced management team committed to maintaining solid investment grade credit ratings
• Continued involvement of four Nicor Board members going forward
Nicor Combination Rationale
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Additional Nicor Transaction Benefits
• Customers can rely on same local gas companies
• Continuation of the industry-leading low rates
• Retention of the Nicor Gas brand and personnel
• Integration of Nicor Gas into AGL Resources’ family of gas utilities in a
seamless fashion for customers
seamless fashion for customers
Customers
Employees
• Establish newly expanded natural gas distribution headquarters in Naperville,
Illinois in the Chicago area
Illinois in the Chicago area
• Commitment to maintaining existing Nicor levels of community involvement
and charitable giving in Illinois
and charitable giving in Illinois
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Communities
• Commitment to maintain Nicor Gas employment levels in Illinois for at least
three years
three years
• New opportunities for employees created as part of a larger organization
• Combined company will continue to fully honor union collective bargaining
agreements
agreements
Financial Highlights
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• Anticipate transaction to be neutral to AGL Resources’ EPS in the first year
post closing and accretive thereafter
post closing and accretive thereafter
– Expect accretion through scale benefits, cost efficiencies and the
enhanced revenue opportunities of the combined company
enhanced revenue opportunities of the combined company
• Financial and operational benefits from the combination expected to be highly
achievable
achievable
– Savings through the elimination of duplicate public company costs
– Mutual leveraging of respective retail business capabilities and services
across a broader geographic base
across a broader geographic base
– Efficiencies from similar and complementary unregulated wholesale and
retail businesses
retail businesses
• AGL Resources successfully integrated previous acquisitions for the
benefit of customers and shareholders
benefit of customers and shareholders
Pro Forma Earnings Profile
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Pro Forma Capital Expenditure Profile
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Total Capital Expenditure Profile
Period of additional discretionary
cash flow for attractive capital
deployment opportunities
cash flow for attractive capital
deployment opportunities
• Pro forma business expected to have greater proportion of regulated capex
• Significant portion of regulatory capex under riders, reducing time for recovery
• Non-utility gas storage construction largely complete
– By year-end 2011, virtually all currently planned construction capex will have been
spent
spent
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Strong Track Record of Dividend Growth
Commitment to Steady Payout Ratio
Commitment to Steady Payout Ratio
AGL Resources Dividend Per Share and Payout Ratio
• Strong cash generation and investment grade balance sheet to support dividend
• Expected to grow dividend in-line with earnings and maintain payout ratio
consistent with peer group
consistent with peer group
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Strong Credit Profile
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Pro Forma Key Credit Ratios | Average 2005-2009 | Year 1 | Year 2 |
Funds from Operations/ Total Debt | 21% | 20% - 22% | 22% - 24% |
Funds from Operations Interest Coverage | 5.2x | 4.8x - 5.2x | 4.8x - 5.2x |
Debt / EBITDA | 3.9x | 3.1x - 3.5x | 2.9x - 3.3x |
Debt / Capitalization | 58% | 52% - 55% | 50% - 53% |
• Combined businesses expected to generate strong operating cash flow
• Solid balance sheet with significant opportunity to fund growth capital requirements
• Combined company credit metrics expected to support solid, investment-grade
credit ratings
credit ratings
(1)
(1)
Value Creation Potential
• Enhanced EPS growth
opportunities
opportunities
• Greater stock liquidity
• Broader equity
research coverage
research coverage
• Expected inclusion in
additional important
indices
additional important
indices
Improved P/E
Potential
Potential
¹ Based on I/B/E/S consensus EPS estimates and market data as of 01-Dec-2010
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Transaction Timeline and Summary
Transaction Timeline
Dec 2010
Closing Expected in the Second Half of 2011
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Transaction
Announced
Announced
File Joint Proxy
Statement
Statement
Secure Regulatory Approvals
AGL Resources and
Nicor Shareholder
Meetings
Nicor Shareholder
Meetings
Develop Transition Implementation Plans
Close Transaction
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Long-Term Financing for Cash
Consideration
Consideration
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Summary
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• Combined company poised to deliver superior returns |
• Additional scope and scale expected to enhance low cost leadership position and optimize capital spending opportunities |
• Complementary unregulated businesses with enhanced opportunities |
• Non-utility storage investment requirements for both companies will be nearly complete at transaction closing |
• Significant cash flow generation for attractive capital deployment opportunities |
• Dividend growth supported by solid investment grade balance sheet |
• Seasoned and well regarded management team with proven track record |
Appendix
Detailed Utility Profile
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State | Rate Base | % of Total | Customers (mm) | % of Total | Regulatory Attributes | |
Illinois | $ 1,338.3 | 35% | 2.2 | 49% | Bad Debt Expense Tracker, Recently Approved Avg. HDD | |
Georgia | 1,323.0 | 35% | 1.6 | 35% | Decoupling | |
New Jersey | 448.0 | 12% | 0.3 | 6% | Weather Normalization | |
Virginia | 442.0 | 12% | 0.3 | 6% | Decoupling, Weather Normalization | |
Florida | 153.0 | 4% | 0.1 | 2% | Negotiated Rates Over 5-yr Period | |
Tennessee | 105.0 | 3% | 0.1 | 1% | Revenue Normalization | |
Maryland | NA | 0.0 | 0% | Revenue Normalization | ||
Total | $ 3,809.3 | 100% | 4.5 | 100% |
Note: Totals may not sum due to rounding.
Nicor Dividend Uplift
Per Share | |
AGL Resources current dividend (maintained for AGL Resources SH’s) | $1.76 |
× Transaction Exchange ratio1 | 1.397x |
Implied Nicor exchange ratio adjusted dividend | $2.46 |
Current Nicor Dividend | $1.86 |
Dividend Uplift for Nicor (Stock Portion of Consideration) | $0.60 or ~32% |
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• Both companies to continue existing dividend policy through closing
• Pro Forma dividend policy expected to retain focus of growing dividend in-line with
earnings
earnings
• Nicor shareholders will receive a dividend uplift for the stock portion of consideration
based on current annual dividends per share. Example below:
based on current annual dividends per share. Example below:
1 Transaction exchange ratio based on the 20 day volume weighted average stock price for AGL for the 20 days ending December 1, 2010.
