AGL Resources
2012 Investor Conference
2012 Investor Conference
March 20, 2012
Agenda
8:00 - 8:30 | REGISTRATION & BREAKFAST | |
8:30 - 8:35 | Welcome Remarks | Sarah Stashak Director, Investor Relations |
8:35 - 8:50 | CEO Remarks | John Somerhalder Chairman, President & CEO |
8:50 - 9:20 | Financial Overview | Drew Evans EVP & CFO |
9:20 - 10:00 | Distribution Operations | Hank Linginfelter EVP, Distribution Operations |
10:00 - 10: 15 | BREAK | |
10:15 - 10:45 | Retail Operations | Mike Braswell - President, Retail Energy Beth Reese - President, Retail Services |
10:45 - 11:15 | Wholesale Services & Midstream | Pete Tumminello EVP, Wholesale Services |
11:15 - 11:30 | Cargo Shipping | Drew Evans EVP & CFO |
11:30 - 12:00 | Final Q&A | |
12:00 - 1:00 | LUNCH |
2
Cautionary Statements and Supplemental Information
Forward-Looking Statements
Certain expectations and projections regarding our future performance referenced in this presentation, in other reports or statements we file with the SEC or otherwise release to the public, and
on our website, are forward-looking statements. Senior officers and other employees may also make verbal statements to analysts, investors, regulators, the media and others that are forward-
looking. Forward-looking statements involve matters that are not historical facts, such as statements regarding our future operations, prospects, strategies, financial condition, economic
performance (including growth and earnings), industry conditions and demand for our products and services. Because these statements involve anticipated events or conditions, forward-looking
statements often include words such as "anticipate," "assume," "believe," "can," "could," "estimate," "expect," "forecast," "future," "goal," "indicate," "intend," "may," "outlook," "plan," "potential,"
"predict," "project," "seek," "should," "target," "would," or similar expressions. Forward-looking statements contained in this presentation include, without limitation, statements regarding future
earnings per share, capital expenditures, pension expenses, contracted capacity rates, costs related to our asset portfolio, dividend growth and EBIT contribution and our priorities for 2012. Our
expectations are not guarantees and are based on currently available competitive, financial and economic data along with our operating plans. While we believe 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.
on our website, are forward-looking statements. Senior officers and other employees may also make verbal statements to analysts, investors, regulators, the media and others that are forward-
looking. Forward-looking statements involve matters that are not historical facts, such as statements regarding our future operations, prospects, strategies, financial condition, economic
performance (including growth and earnings), industry conditions and demand for our products and services. Because these statements involve anticipated events or conditions, forward-looking
statements often include words such as "anticipate," "assume," "believe," "can," "could," "estimate," "expect," "forecast," "future," "goal," "indicate," "intend," "may," "outlook," "plan," "potential,"
"predict," "project," "seek," "should," "target," "would," or similar expressions. Forward-looking statements contained in this presentation include, without limitation, statements regarding future
earnings per share, capital expenditures, pension expenses, contracted capacity rates, costs related to our asset portfolio, dividend growth and EBIT contribution and our priorities for 2012. Our
expectations are not guarantees and are based on currently available competitive, financial and economic data along with our operating plans. While we believe 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; the impact of changes in state and federal
legislation and regulation, including changes related to climate change; actions taken by government agencies on rates and other matters, including regulatory approval of new partnerships;
concentration of credit risk; utility and energy industry consolidation; the impact on cost and timeliness of construction projects by government and other approvals, development project delays,
adequacy of supply of diversified vendors, unexpected change in project costs, including the cost of funds to finance these projects; the impact of acquisitions and divestitures including the
Nicor merger; limits on natural gas pipeline capacity; direct or indirect effects on our 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, including disruptions in the capital markets and lending environment and the current economic
uncertainty; general economic conditions; uncertainties about environmental issues and the related impact of such issues; the impact of changes in weather, including climate change, on the
temperature-sensitive portions of our business; the impact of natural disasters such as hurricanes on the supply and price of natural gas; the outcome of litigation; acts of war or terrorism; and
other factors which are provided in detail in our filings with the Securities and Exchange Commission. Forward-looking statements are only as of the date they are made, and we do not
undertake to update these statements to reflect subsequent changes.
legislation and regulation, including changes related to climate change; actions taken by government agencies on rates and other matters, including regulatory approval of new partnerships;
concentration of credit risk; utility and energy industry consolidation; the impact on cost and timeliness of construction projects by government and other approvals, development project delays,
adequacy of supply of diversified vendors, unexpected change in project costs, including the cost of funds to finance these projects; the impact of acquisitions and divestitures including the
Nicor merger; limits on natural gas pipeline capacity; direct or indirect effects on our 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, including disruptions in the capital markets and lending environment and the current economic
uncertainty; general economic conditions; uncertainties about environmental issues and the related impact of such issues; the impact of changes in weather, including climate change, on the
temperature-sensitive portions of our business; the impact of natural disasters such as hurricanes on the supply and price of natural gas; the outcome of litigation; acts of war or terrorism; and
other factors which are provided in detail in our filings with the Securities and Exchange Commission. Forward-looking statements are only as of the date they are made, and we do not
undertake to update these statements to reflect subsequent changes.
Supplemental Information
Company management evaluates segment financial performance based on earnings before interest and taxes (EBIT), which includes the effects of corporate expense allocations and on
operating margin. EBIT is a non-GAAP (accounting principles generally accepted in the United States of America) financial measure that includes operating income, other income and
expenses. Items that are not included in EBIT are financing costs, including debt and interest expense and income taxes. 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 operating revenues minus cost of goods sold and revenue taxes, 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 goods sold and revenue taxes are generally passed directly through to customers. In addition, in this presentation, the company has
presented a non-GAAP measure of both its net income and its earnings per share each adjusted to exclude expenses incurred with respect to the Nicor merger. As the company does not
routinely engage in transactions of the magnitude of the Nicor merger, and consequently does not regularly incur transaction related expenses with correlative size, the company believes
presenting net income and EPS excluding Nicor merger expenses provides investors with an additional measure of the company’s core operating performance. EBIT, operating margin, net
income excluding merger expenses (also referred to as adjusted net income) and EPS excluding merger expenses (also referred to as adjusted EPS) should not be considered as alternatives
to, or more meaningful indicators of, the company's operating performance than operating income, net income attributable to AGL Resources Inc. or EPS as determined in accordance with
GAAP. In addition, the company's EBIT, operating margin, adjusted net income and adjusted EPS may not be comparable to similarly titled measures of another company. Reconciliations of
non-GAAP financial measures referenced in this presentation are available on the company’s Web site at www.aglresources.com
operating margin. EBIT is a non-GAAP (accounting principles generally accepted in the United States of America) financial measure that includes operating income, other income and
expenses. Items that are not included in EBIT are financing costs, including debt and interest expense and income taxes. 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 operating revenues minus cost of goods sold and revenue taxes, 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 goods sold and revenue taxes are generally passed directly through to customers. In addition, in this presentation, the company has
presented a non-GAAP measure of both its net income and its earnings per share each adjusted to exclude expenses incurred with respect to the Nicor merger. As the company does not
routinely engage in transactions of the magnitude of the Nicor merger, and consequently does not regularly incur transaction related expenses with correlative size, the company believes
presenting net income and EPS excluding Nicor merger expenses provides investors with an additional measure of the company’s core operating performance. EBIT, operating margin, net
income excluding merger expenses (also referred to as adjusted net income) and EPS excluding merger expenses (also referred to as adjusted EPS) should not be considered as alternatives
to, or more meaningful indicators of, the company's operating performance than operating income, net income attributable to AGL Resources Inc. or EPS as determined in accordance with
GAAP. In addition, the company's EBIT, operating margin, adjusted net income and adjusted EPS may not be comparable to similarly titled measures of another company. Reconciliations of
non-GAAP financial measures referenced in this presentation are available on the company’s Web site at www.aglresources.com
3
Presenter Bios
4
John W. Somerhalder II
Chairman, President and Chief Executive Officer
AGL Resources
AGL Resources
John W. Somerhalder II was named president and chief executive officer of AGL Resources (NYSE:GAS) in March 2006 and
elected as chairman of the company's board of directors in November 2007.
elected as chairman of the company's board of directors in November 2007.
Mr. Somerhalder joined AGL Resources from El Paso Corporation where he spent almost 30 years, rising through the ranks
from engineer to president of El Paso Pipeline Group and executive vice president of El Paso Corporation.
from engineer to president of El Paso Pipeline Group and executive vice president of El Paso Corporation.
Mr. Somerhalder is a member of the board of directors of the American Gas Association, which he chaired in 2011. He also
serves on the boards of the Gas Technology Institute, the Georgia Chamber of Commerce and the Metro Atlanta Chamber of
Commerce. He has served as past chairman of the Interstate Natural Gas Association of America. He was elected director of
Crestwood Gas Services GP LLC in July 2007.
serves on the boards of the Gas Technology Institute, the Georgia Chamber of Commerce and the Metro Atlanta Chamber of
Commerce. He has served as past chairman of the Interstate Natural Gas Association of America. He was elected director of
Crestwood Gas Services GP LLC in July 2007.
Mr. Somerhalder is chairman of the board of the Beltline Partnership, which supports development of the Atlanta BeltLine
along 22 miles of historic railroad around the city. A member of the board of the United Way of Metropolitan Atlanta, he
successfully chaired the 2009 United Way Campaign for metro Atlanta during difficult economic times and served an
unprecedented second term as chair of the 2010 campaign.
along 22 miles of historic railroad around the city. A member of the board of the United Way of Metropolitan Atlanta, he
successfully chaired the 2009 United Way Campaign for metro Atlanta during difficult economic times and served an
unprecedented second term as chair of the 2010 campaign.
Mr. Somerhalder holds a bachelor of science degree in chemical engineering from the University of Arizona.
He and his wife, Rebecca, live in Atlanta. They have four grown children and five grandchildren.
5
Andrew W. (Drew) Evans
Executive Vice President and Chief Financial Officer
AGL Resources
Andrew Evans was named senior vice president and chief financial officer of AGL Resources (NYSE:GAS) in September 2005
and promoted to executive vice president, chief financial officer in May 2006. In this capacity, Mr. Evans directs finance,
accounting and information technology for all AGL Resources businesses, as well as investor relations and the company’s
strategic planning functions. He also has responsibility for various unregulated subsidiaries.
and promoted to executive vice president, chief financial officer in May 2006. In this capacity, Mr. Evans directs finance,
accounting and information technology for all AGL Resources businesses, as well as investor relations and the company’s
strategic planning functions. He also has responsibility for various unregulated subsidiaries.
Mr. Evans joined AGL Resources in May 2002 as vice president of finance and treasurer, where he was responsible for the
company’s treasury and finance operations including corporate finance, cash management, rating agency relationships,
pension management and corporate planning and analysis. He also played a key role in supporting the company’s corporate
development and growth initiatives, and assisted in deal evaluation, structuring and financing.
company’s treasury and finance operations including corporate finance, cash management, rating agency relationships,
pension management and corporate planning and analysis. He also played a key role in supporting the company’s corporate
development and growth initiatives, and assisted in deal evaluation, structuring and financing.
Mr. Evans came to AGL Resources from Mirant Corporation (formerly Southern Energy Inc.) where he served in various
finance and business development roles over a nine-year period. Prior to Mirant, Mr. Evans was employed by National
Economic Research Associates and the Federal Reserve Bank of Boston.
finance and business development roles over a nine-year period. Prior to Mirant, Mr. Evans was employed by National
Economic Research Associates and the Federal Reserve Bank of Boston.
Mr. Evans serves as chairman of the board of Zoo Atlanta and on the finance committees of Grady Memorial Hospital,
Refugee Family Services and the Georgia Council for Economic Education, where he is also a board member.
Refugee Family Services and the Georgia Council for Economic Education, where he is also a board member.
Mr. Evans is a graduate of Emory University and lives in Atlanta with his wife, Faye.
6
Henry P. (Hank) Linginfelter
Executive Vice President, Distribution Operations
AGL Resources
Henry P. “Hank” Linginfelter was named executive vice president, distribution operations, for AGL Resources (NYSE:GAS) in
December 2011. As chairman and CEO of the company's seven utilities, Mr. Linginfelter is responsible for all operating
functions of the utilities including field operations, customer experience, gas operations, construction, energy efficiency
programs and utility marketing and sales. In addition he has corporatewide responsibility for regulatory and governmental
affairs, economic development, supply chain, engineering and environmental health and safety.
December 2011. As chairman and CEO of the company's seven utilities, Mr. Linginfelter is responsible for all operating
functions of the utilities including field operations, customer experience, gas operations, construction, energy efficiency
programs and utility marketing and sales. In addition he has corporatewide responsibility for regulatory and governmental
affairs, economic development, supply chain, engineering and environmental health and safety.
In his years of service with AGL Resources, Mr. Linginfelter has assumed increasing levels of responsibility and has played a
key role in the company’s operations, marketing and regulatory activities. He has more than 28 years of experience in utility
operations with AGL Resources.
key role in the company’s operations, marketing and regulatory activities. He has more than 28 years of experience in utility
operations with AGL Resources.
Prior to his current role, Mr. Linginfelter had oversight responsibilities for the company’s mid-Atlantic operations. This included
the integration and management of Virginia Natural Gas (Virginia) in 2000 and Elizabethtown Gas (New Jersey) in 2004. He
resided in Virginia and served as president of each of those utilities along with Elkton Gas (Maryland) until 2007 when he
returned to Atlanta to oversee utility operations companywide.
the integration and management of Virginia Natural Gas (Virginia) in 2000 and Elizabethtown Gas (New Jersey) in 2004. He
resided in Virginia and served as president of each of those utilities along with Elkton Gas (Maryland) until 2007 when he
returned to Atlanta to oversee utility operations companywide.
Mr. Linginfelter currently serves on the boards of Central Atlanta Progress, Metro Atlanta Chamber of Commerce, The Nature
Conservancy of Georgia, Georgia Allies, Boy Scouts Atlanta Area Council, Southern Gas Association and Jekyll Island
Foundation, where he is chairman. He also serves on the Leadership Council of the American Gas Association and is a
graduate of the Leadership Atlanta Class of 2009.
Conservancy of Georgia, Georgia Allies, Boy Scouts Atlanta Area Council, Southern Gas Association and Jekyll Island
Foundation, where he is chairman. He also serves on the Leadership Council of the American Gas Association and is a
graduate of the Leadership Atlanta Class of 2009.
Mr. Linginfelter has a bachelor’s degree in industrial management from Georgia Tech and a master’s degree in business
administration from Georgia State University.
administration from Georgia State University.
He and his wife, Sandy, and their two children reside in Atlanta and attend Buckhead Church.
7
Michael (Mike) Braswell
Michael Braswell
President of Retail Energy, AGL Resources
President and CEO, SouthStar Energy Services
AGL Resources
Michael Braswell was named president of retail energy for AGL Resources (NYSE:GAS) in December 2011. He is responsible
for ensuring the expansion and continued success of AGL Resources' retail energy operations in multiple states. To that end,
he continues to serve as CEO of SouthStar Energy Services, LLC, a joint venture between AGL Resources and Piedmont
Natural Gas Company. SouthStar serves more than half a million customers.
for ensuring the expansion and continued success of AGL Resources' retail energy operations in multiple states. To that end,
he continues to serve as CEO of SouthStar Energy Services, LLC, a joint venture between AGL Resources and Piedmont
Natural Gas Company. SouthStar serves more than half a million customers.
Mr. Braswell has more than 20 years of experience in the natural gas industry, working in both regulated and deregulated
environments. Prior to being named CEO of SouthStar, he served as executive vice president and chief operating officer for
SouthStar. He also has held positions as vice president, retail markets, and as vice president, customer service and strategic
planning.
environments. Prior to being named CEO of SouthStar, he served as executive vice president and chief operating officer for
SouthStar. He also has held positions as vice president, retail markets, and as vice president, customer service and strategic
planning.
Before joining SouthStar, Mr. Braswell held various key positions over a 10-year period with AGL Resources, working in
marketing, sales management, rates and strategic planning.
marketing, sales management, rates and strategic planning.
Mr. Braswell 's commitment to giving back to the communities that SouthStar serves has resulted in his team of employee
volunteers receiving national and local awards for outstanding community service.
volunteers receiving national and local awards for outstanding community service.
A graduate of Georgia Tech, Mr. Braswell earned a bachelor's degree in industrial engineering. He later earned a master of
business administration degree (concentration in finance) from Georgia State University.
business administration degree (concentration in finance) from Georgia State University.
He resides in Atlanta with his wife and four children.
8
Elizabeth W. (Beth) Reese
Senior Vice President and President of Retail Services
AGL Resources
Elizabeth W. "Beth" Reese was named senior vice president and president of retail services for AGL Resources (NYSE:GAS) in
December 2011. She is responsible for overseeing and expanding the company's home services and solutions. Currently, the
company offers proven, turnkey solutions for the home, delivered and sustained through service excellence, to customers
through Nicor National.
December 2011. She is responsible for overseeing and expanding the company's home services and solutions. Currently, the
company offers proven, turnkey solutions for the home, delivered and sustained through service excellence, to customers
through Nicor National.
Previously, Ms. Reese played an integral role in leading the complex integration planning efforts for AGL Resources' acquisition
of Nicor Inc. She was responsible for executing the company's integration strategy and achieving results while ensuring that the
cultural and change management aspects of the effort were realized. The successful integration planning created the largest
natural gas-only distribution company in the United States based on customer count.
of Nicor Inc. She was responsible for executing the company's integration strategy and achieving results while ensuring that the
cultural and change management aspects of the effort were realized. The successful integration planning created the largest
natural gas-only distribution company in the United States based on customer count.
Prior to that, Ms. Reese served as vice president, Operational Planning and Analysis, overseeing operational and financial
planning for the company's largest business segment which was comprised of six utilities -- Atlanta Gas Light, Chattanooga Gas,
Elizabethtown Gas, Elkton Gas, Florida City Gas and Virginia Natural Gas.
planning for the company's largest business segment which was comprised of six utilities -- Atlanta Gas Light, Chattanooga Gas,
Elizabethtown Gas, Elkton Gas, Florida City Gas and Virginia Natural Gas.
Since joining AGL Resources in November 2000, she has also served the company as vice president in various functions
including business innovation, customer service, finance and controller. Prior to joining AGL Resources, she was a senior
manager for the worldwide accounting and consulting firm of Deloitte LLP.
including business innovation, customer service, finance and controller. Prior to joining AGL Resources, she was a senior
manager for the worldwide accounting and consulting firm of Deloitte LLP.
While an Atlanta-based executive, Ms. Reese served on the board of directors for CHRIS Kids, a community-based multi-service
mental health treatment organization for children and families, and on the board of directors for Imagine It! - The Children's
Museum of Atlanta, whose mission is to spark imagination and inspire discovery and learning for all children through the power
of play.
mental health treatment organization for children and families, and on the board of directors for Imagine It! - The Children's
Museum of Atlanta, whose mission is to spark imagination and inspire discovery and learning for all children through the power
of play.
A native of Maryland, Ms. Reese received her bachelor's degree in business administration and economics from St. Andrew's
Presbyterian College and her master's of accountancy from the University of Georgia.
Presbyterian College and her master's of accountancy from the University of Georgia.
Ms. Reese is based in Naperville, Ill. She and her husband are raising one daughter.
9
Peter (Pete) Tumminello
Executive Vice President, Wholesale Services
President, Sequent Energy Management
AGL Resources
Peter Tumminello was named executive vice president, wholesale services, for AGL Resources (NYSE:GAS) in December 2011. In this
role, he has executive oversight for AGL Resources’ marketing and trading business, storage business and fuels business.
role, he has executive oversight for AGL Resources’ marketing and trading business, storage business and fuels business.
He continues to serve as president of Sequent Energy Management, leading all aspects of Sequent's operations including natural gas
asset management, origination, trading, producer services, support functions and long-term growth strategy.
asset management, origination, trading, producer services, support functions and long-term growth strategy.
Mr. Tumminello brings more than 20 years experience in natural gas marketing and trading and more than 27 years in the energy industry
to his position. He previously served as executive vice president of business development and support for Sequent and as vice president
of corporate development for AGL Resources. In this capacity, Mr. Tumminello and his team helped expand Sequent’s business into new
regions and products while supporting AGL Resources’ affiliate utilities through successful asset management programs.
to his position. He previously served as executive vice president of business development and support for Sequent and as vice president
of corporate development for AGL Resources. In this capacity, Mr. Tumminello and his team helped expand Sequent’s business into new
regions and products while supporting AGL Resources’ affiliate utilities through successful asset management programs.
Mr. Tumminello joined the executive management team of Sequent in August 2003 as vice president of asset management and
origination. He has served on the AGL Resources Policy Committee since April 2010.
origination. He has served on the AGL Resources Policy Committee since April 2010.
Prior to joining AGL Resources and Sequent, Mr. Tumminello was vice president of energy supply for Green Mountain Energy Company,
and he worked for TPC Corp and ARCO Oil and Gas Company in various capacities in energy marketing, storage and transportation
asset management, petroleum engineering, finance and planning, and project evaluation.
and he worked for TPC Corp and ARCO Oil and Gas Company in various capacities in energy marketing, storage and transportation
asset management, petroleum engineering, finance and planning, and project evaluation.
Mr. Tumminello earned his master of business administration from the University of Southwestern Louisiana and his bachelor of science
in petroleum engineering from Louisiana Tech University. He serves on the advisory board for Tulane University's Energy Institute and
the advisory board for the Arc of Katy.
in petroleum engineering from Louisiana Tech University. He serves on the advisory board for Tulane University's Energy Institute and
the advisory board for the Arc of Katy.
A native of New Orleans, Mr. Tumminello lives with his wife and two daughters in Katy, Texas.
10
CEO Perspective
John Somerhalder
Chairman, President & Chief Executive Officer
11
Corporate & Retail Energy
Distribution Operations &
Retail Services
Retail Services
AGL Resources Footprint
Wholesale & Midstream
Cargo Shipping
Nation's largest natural gas-only distributor based on customer count.
12
2011 Key Accomplishments
• Achieved total shareholder return for 2011 of 24%
• Excluding $64 million in after-tax costs related to the Nicor merger, we recorded
diluted EPS of $2.92 on a non-GAAP basis
diluted EPS of $2.92 on a non-GAAP basis
o Strong growth from distribution operations supported primarily by new rate and
infrastructure programs at Atlanta Gas Light
infrastructure programs at Atlanta Gas Light
o Another year of solid performance from retail operations; despite an increasingly
competitive marketplace, we retained our leading market share position in
Georgia
competitive marketplace, we retained our leading market share position in
Georgia
o Low volatility and reduced natural gas transportation and storage spreads,
combined with warm 4Q11 weather, created headwinds for our wholesale and
midstream segments in 2011
combined with warm 4Q11 weather, created headwinds for our wholesale and
midstream segments in 2011
• Completed acquisition of Nicor Inc. on December 9, 2011, effectively doubling the
size of our regulated asset and customer base
size of our regulated asset and customer base
• Maintained safe and efficient operation of our natural gas distribution systems
13
2011 Total Shareholder Return
Source: Thomson Reuters
Peer Avg = 23.7%
LDC Avg = 18.4%
14
Source: Thomson Reuters
Peer Avg = 77.4%
LDC Avg = 47.1%
3-Year Total Shareholder Return
15
2012 Opportunities and Risks
• Integration of Nicor businesses
o Reduction in corporate overhead
expenses well underway
expenses well underway
o All business services being analyzed
for efficiencies
for efficiencies
• Extension filings for infrastructure
investment programs in Georgia and New
Jersey, with new program expected to
begin in Virginia in 2H12
investment programs in Georgia and New
Jersey, with new program expected to
begin in Virginia in 2H12
• Leverage legacy AGLR and Nicor retail
businesses to grow both energy and
services components
businesses to grow both energy and
services components
• Legacy fixed cost contracts begin to roll
off at Sequent
off at Sequent
• Complete construction at Golden Triangle
and Central Valley and contract additional
capacity
and Central Valley and contract additional
capacity
Opportunities
Risks
• Continuation of warmer than normal
temperatures across our service
territories
temperatures across our service
territories
o Through mid-March, EBIT impact of
warmer weather ~$15 million across
distribution and retail
warmer weather ~$15 million across
distribution and retail
• Utility growth mitigated by bonus
depreciation, no planned rate case filings
and continued slow/minimal customer
growth
depreciation, no planned rate case filings
and continued slow/minimal customer
growth
• Increasing competition at the retail level in
Georgia and other choice markets
Georgia and other choice markets
• Continued environment of low natural gas
price volatility and narrow transportation
and storage spreads
price volatility and narrow transportation
and storage spreads
o Margin compression for wholesale and
reduced storage rates for midstream
reduced storage rates for midstream
• Ongoing weak economic environment and
high fuel prices for cargo shipping
high fuel prices for cargo shipping
16
2012 Priorities and Objectives
• Make necessary capital investment to enhance and maintain the safety and
reliability of our distribution systems, while minimizing regulatory lag
reliability of our distribution systems, while minimizing regulatory lag
• Remain a low-cost leader within the industry
• Maintain market share in Georgia and Illinois while expanding further into new
territories such as Ohio and Florida
territories such as Ohio and Florida
• Leverage experience across SouthStar and Nicor’s retail businesses
• Renew affiliated and non-affiliated asset management agreements and add new asset
management, gas-fired power generation and producer services contracts
management, gas-fired power generation and producer services contracts
• Continually enhance risk management, credit management and overall controls
Distribution
Retail
Wholesale
Midstream
Cargo Shipping
Expense &
Balance Sheet
Discipline
Balance Sheet
Discipline
• Complete construction of Golden Triangle Cavern 2 and Central Valley Gas
Storage and execute contracts for newly available capacity
Storage and execute contracts for newly available capacity
• Reduce project development costs in response to low volatility environment
• Effectively control expenses and focus on capital discipline in each of our
business segments
business segments
• Maintain strong balance sheet and liquidity profile
• Expand market share in key service areas while providing quality total
transportation and logistics solutions for our customers
transportation and logistics solutions for our customers
• Prudently deploy capital investment and diligently manage operating costs
17
Financial Overview
Drew Evans
EVP & Chief Financial Officer
18
Business
Financial
Investors
• Centralize service
functions that are
scalable
functions that are
scalable
• Improve utility returns
by operating
complementary non-
regulated businesses
by operating
complementary non-
regulated businesses
• Accelerate returns on
regulated infrastructure
investments
regulated infrastructure
investments
• Maximize return on
invested capital
invested capital
• Maintain financial
integrity in utility and
non-regulated
businesses
integrity in utility and
non-regulated
businesses
• Grow dividends and
earnings
earnings
• Focus on total
shareholder return
shareholder return
• Ensure management
and employee
incentives are properly
aligned with
shareholder interests
and employee
incentives are properly
aligned with
shareholder interests
Strategic Priorities
19
20
Note: Please review the AGL Resources 10-K as filed with the SEC on 2/22/12 for detailed information. EBIT, Adjusted Net
Income and Adjusted EPS are non-GAAP measures. Please see the appendix to this presentation or visit the investor
relations section of www.aglresources.com for a reconciliation to GAAP.
Income and Adjusted EPS are non-GAAP measures. Please see the appendix to this presentation or visit the investor
relations section of www.aglresources.com for a reconciliation to GAAP.
(1) Change represents y/y change of 2011 Combined vs. 2010 Legacy AGLR.
(2) Adjusted net income and adjusted EPS exclude Nicor-related merger costs of approximately $64 million, net of tax.
2011 Financial Results
Earnings Before Interest & Taxes
Annual EBIT by Operating Segment
(in millions)
2011 EBIT Contribution by Operating
Segment
Segment
1%
79%
18%
2%
(1) There was no EBIT impact from the Cargo Shipping segment for the 22 days of Nicor results recorded in 2011.
NOTE: EBIT is a non-GAAP measure. Please see the appendix to this presentation or the investor relations section of www.aglresources.com for a
reconciliation to GAAP.
reconciliation to GAAP.
21
(1) Retail Energy Operations segment includes EBIT related to SouthStar at the 100% level. AGL Resources owned a 70% interest during
2007, 2008 and 2009, and received an approximate 75% share of the earnings each year (except in Ohio and Florida, which were 70%).
Effective January 1, 2010, AGL owns 85% of the joint venture partnership and receives 85% of its earnings. The total earnings per
diluted share for AGL Resources represented here reflects these sharing levels in each year.
2007, 2008 and 2009, and received an approximate 75% share of the earnings each year (except in Ohio and Florida, which were 70%).
Effective January 1, 2010, AGL owns 85% of the joint venture partnership and receives 85% of its earnings. The total earnings per
diluted share for AGL Resources represented here reflects these sharing levels in each year.
(2) 2010 and 2011 EPS and 2012 estimated EPS are adjusted for expenses related to the merger with Nicor. See the appendix to this
presentation or the investor relations section of www.aglresources.com for a reconciliation to GAAP.
presentation or the investor relations section of www.aglresources.com for a reconciliation to GAAP.
2012 Segment EBIT Estimates
22
$3.15
$0.07
$0.03
$0.27
$0.11
$0.12
$0.03
$0.10
$2.88
EPS Reconciliation: Prior Expectations to 2012 Guidance
23
EPS Track Record
$2.80-
2012 EPS Guidance between $2.80-$2.95 per diluted share
2000-2011 CAGR: 6.98%
Diluted Earnings Per Share
(1) 2010: $3.00 diluted GAAP EPS; $3.05 adjusted, excluding Nicor merger costs; 2011: $2.12 diluted GAAP EPS, $2.92 adjusted. Please see the appendix to this
presentation or visit the investor relations section of www.aglresources.com for a reconciliation to GAAP.
presentation or visit the investor relations section of www.aglresources.com for a reconciliation to GAAP.
(2) Estimate excludes all effects from the merger with Nicor.
24
Dividend Track Record
(1) 2011 payout ratio based on adjusted EPS of $2.92.
(2) 2012 payout ratio based on mid-point of EPS guidance range and assumption that Board of Directors approves each quarterly dividend.
2000-2011 CAGR: 4.75%
Dividends Declared
• Management and the Board of Directors have demonstrated a commitment to dividend
growth and have established a strong track record of regular dividend increases
growth and have established a strong track record of regular dividend increases
25
Capital Expenditures
Note: “Other” includes a number of capital items, including information technology funding; building and leasehold improvements; and facility and
fleet investments.
fleet investments.
$825
26
Bonus Depreciation - Impact on AGL Rate Base Growth
27
Pension and Other Retirement Plans
Funding Requirements
• Current underfunded status for AGL and NUI plans is $214 million (as measured by accumulated
benefit obligation minus plan assets)
benefit obligation minus plan assets)
• Current overfunded status of Nicor plan is $27 million
• Current financing assumptions include pension funding of $36 million in 2012
• Evaluation underway to combine all pension plans
Expenses (Pension and Post-Retirement)
• 2012 expense is projected at approximately $55 million, compared to $41 million in 2011 (AGL
legacy plans plus Nicor)
legacy plans plus Nicor)
• Estimated impact to 2012 earnings per share of approximately $0.07 vs. 2011 on a tax effected
basis
basis
• Increase is driven by reduction in the discount rates
o AGL Plan - 5.40% reduced to 4.60%
o NUI Plan - 5.20% reduced to 4.50%
o Nicor Plan - 5.40% reduced to 4.60%
• Pension expenses are typically recoverable in general rate cases in our jurisdictions (no pension
tracker mechanisms)
tracker mechanisms)
28
Debt Maturity Schedule
• AGLR average interest rate: 5.3% / Peer group average interest rate: 5.7%
• AGLR average duration: 14 years / Peer group average duration: 11 years
29
AGLR Liquidity Profile
(as of 12/31/11)
NOTE: Utilization impacted by seasonality and historically peaks in the fourth quarter.
Liquidity
Nicor Gas Liquidity Profile
(as of 12/31/11)
30
• Solid balance sheet with significant
opportunity to fund capital requirements
opportunity to fund capital requirements
• Good access to capital markets
• Company credit metrics support solid,
investment-grade ratings
investment-grade ratings
• $4.9 billion debt outstanding
• Long-term debt $3.6 billion
• Short-term debt of $1.3 billion
• Quarterly High Debt to Cap Ratio 2011: 58%
• Average Debt to Cap Ratio 2011: 55%
• 2012 cap ex estimated at $825 million
• Approximately $725 million of utility cap ex
expected in 2012 vs. $604 million in 2011 for
legacy AGLR utilities + Nicor Gas
expected in 2012 vs. $604 million in 2011 for
legacy AGLR utilities + Nicor Gas
• $300 million of 2012 utility cap ex is rider-
based
based
• Approximately $100 million of non-utility cap
ex expected in 2012
ex expected in 2012
Balance Sheet Highlights
31
2012 Priorities
• Successfully integrate Nicor merger, including combining systems
and personnel and utilizing best practices across businesses
and personnel and utilizing best practices across businesses
• Prudently invest capital, with a strong bias toward regulated
projects with minimal or no recovery lag
projects with minimal or no recovery lag
• Optimize current wholesale and midstream businesses in a
sustained low volatility market
sustained low volatility market
• Continue aggressive cost-control throughout the business
• Maintain strong balance sheet and liquidity profile and solid
investment-grade ratings
investment-grade ratings
• Deliver on our commitments to shareholders
32
Distribution Operations
Hank Linginfelter
EVP, Distribution Operations
33
Distribution Operations - Overview
• 4.5 million customers
• 80,000 miles of pipeline
• Aggregate rate base of $4 billion
• Annual capex ~$725 million
Approximately 40% of capex under
specific recovery programs
specific recovery programs
• ~4,400 employees
• Top quartile safety ratings for on-the-job
injuries and days away from work
injuries and days away from work
Key Statistics
34
• Approved regulatory cost recovery mechanisms have reduced lag between
infrastructure investments and recovery
infrastructure investments and recovery
• Continued focus on cost containment
Distribution Operations - EBIT Track Record
EBIT Growth
(1) Includes $15 million of EBIT from Nicor Gas, excluding change in control payments.
(2) Reflects mid-point of guidance range for Distribution Operations segment.
35
Note: EBIT is a non-GAAP measure. Please see the appendix to this presentation or visit www.aglresources.com for a reconciliation to GAAP.
Key 2011 Results - Distribution Operations
• Settled Virginia Natural Gas rate case
including recovery for the Hampton Roads
Crossing pipeline project; modest earnings
increase due to previous AFUDC and
carrying costs booked for the project
including recovery for the Hampton Roads
Crossing pipeline project; modest earnings
increase due to previous AFUDC and
carrying costs booked for the project
• Hired 100 additional employees and invested
in technology, equipment, and fleet at Atlanta
Gas Light for customer service and safety-
oriented programs funded in 2010 rate case
in technology, equipment, and fleet at Atlanta
Gas Light for customer service and safety-
oriented programs funded in 2010 rate case
• Replaced ~100 miles of pipeline in Georgia
under the infrastructure replacement
programs; over 2,500 miles of pipeline
replaced in Georgia since 1998
under the infrastructure replacement
programs; over 2,500 miles of pipeline
replaced in Georgia since 1998
• Reduced O&M costs by 1% and below
inflation for 2011
inflation for 2011
• Completed installation of automated meter
reading devices at several of our utilities
ahead of schedule and under budget
reading devices at several of our utilities
ahead of schedule and under budget
36
COG = Cost of Goods Sold
Rate Case History
Utility | Last Rate Case | Key Outcomes | Agreements on Rate Case Stay outs |
Nicor Gas | Mar. 2009 | • $80 million rate increase • Bad debt rider approved in February 2010 providing recovery from (or credit to) customers the difference of actual expense and $63 million benchmark • Rate case reset heating degree days from 5,830 to 5,600 | Stay out concludes Dec. 2014 |
Atlanta Gas Light | Oct. 2010 | • $26.7 million rate increase approved • Included ~$10 million in new customer service and safety programs • Adopted new acquisition synergy sharing policy | None |
Virginia Natural Gas | Dec. 2011 | • $11 million rate increase in base rates • Recovery of $3.1 million in costs previously recovered through base rates now recovered through PGA • Approval to recover gas portion of bad debts through the PGA | None |
Elizabethtown Gas | Dec. 2009 | • $3 million rate increase • New depreciation rates decreased expense $5 million • Two-year rate freeze concluded in 2011 | None |
Florida City Gas | Feb. 2004 | • $7 million rate increase • Approval in late 2007 to include acquisition adjustment amortization expense in operating income and acquisition adjustment asset balance in rate base for regulatory surveillance reporting purposes • 2007 approval included a 5-year stay-out provision | Stay out concludes Oct. 2012 |
Chattanooga Gas | May 2010 | • Instituted new rate design that encourages customer conservation • First decoupled rate design for TN utility • New depreciation rates decreased expense of $2 MM annually | None |
37
Regulatory Recovery Mechanisms
Utility | Rate Decoupling | Weather Normalization | Bad Debt Recovery | Conservation Program Recovery | Infrastructure Replacement |
Nicor Gas | P | P | |||
Atlanta Gas Light | P | P | |||
Virginia Natural Gas | P | P | P* | ||
Elizabethtown Gas | P | P | P | ||
Florida City Gas | P | ||||
Chattanooga Gas | P | P | P | P |
* VNG filed for approval of an infrastructure replacement program in January 2012. Application deemed complete and program should begin
August 2012.
August 2012.
38
Nicor Gas
• Bad debt recovery rider
o Approved in February 2010
o Provides for the recovery from (or credit to)
customers the difference between actual annual
bad expense and a $63 million benchmark bad
debt expense included in its base rates for the year
customers the difference between actual annual
bad expense and a $63 million benchmark bad
debt expense included in its base rates for the year
• Weather risk
o No weather normalization mechanism in place
o 50% of usage is space heating and 75% of usage
and revenues occur October - March
and revenues occur October - March
o Customer charge significantly reduces margin
subject to weather risk
subject to weather risk
o 100 degree-day variation from normal weather
equates to a $1 million impact to margin net of
income taxes
equates to a $1 million impact to margin net of
income taxes
o 2009 rate case reset heating degree days from
5,830 to 5,600
5,830 to 5,600
• Energy conservation program
o Approved in May 2011 pursuant to Illinois law
requiring such programs
requiring such programs
o Program costs recovered through rider
o Estimate ~$155 million would be billed to
customers under the rider over a 3-year period
customers under the rider over a 3-year period
39
(1) AGLR owned Nicor for 22 days in 2011, as such full year actual
ROR and ROE are not available.
ROR and ROE are not available.
40
• On February 16, 2012 Nicor Gas filed a stipulated resolution along with Illinois
Commerce Commission (ICC) Staff that includes crediting $64 million to customers
relating to the long-running Performance Based Rate (PBR) case pending before the
ICC
Commerce Commission (ICC) Staff that includes crediting $64 million to customers
relating to the long-running Performance Based Rate (PBR) case pending before the
ICC
o Nicor Gas had already reserved $27 million for this issue
o Assuming the ICC approves the proposed stipulation, no impact to AGLR earnings
expected going forward
expected going forward
• Stipulation requires approval by ICC
• Illinois Attorney General’s Office and Citizens Utility Board are not parties to the
current stipulation
current stipulation
• Stipulation will be considered simultaneously with all issues in the case
o Evidentiary hearings began the week of 2/27/12
o Briefing expected to be complete by 4/26/12
o ICC ruling anticipated later this year
Nicor Gas - PBR Settlement with ICC Staff
Atlanta Gas Light
• Strategic Infrastructure Development and
Enhancement (STRIDE) program
Enhancement (STRIDE) program
o Provides system upgrades to meet customer
deliveries on the coldest days of the year
deliveries on the coldest days of the year
o Includes the pipeline replacement program which
is replacing aging infrastructure
is replacing aging infrastructure
o Includes program to extend facilities in areas
without access and promote economic
development
without access and promote economic
development
o Expenditure recovery provided by program riders
• Synergy sharing policy allowing for the
recovery/credit of 50% of net synergy
savings achieved on acquisitions
recovery/credit of 50% of net synergy
savings achieved on acquisitions
• 100% of operating margin decoupled (AGL
does not directly serve retail customers in
Georgia), so weather risk largely mitigated
does not directly serve retail customers in
Georgia), so weather risk largely mitigated
• Received approval in 2011 to use $11.6
million of Universal Service Funds to aid in
the construction of CNG stations and
equipment to serve retail and commercial
fleet customers
million of Universal Service Funds to aid in
the construction of CNG stations and
equipment to serve retail and commercial
fleet customers
41
Virginia Natural Gas
• Steps to Advance Virginia’s Energy (SAVE) Act
o Filed for an accelerated infrastructure replacement
program in January 2012
program in January 2012
o Proposed 5-year program with $25 million maximum
allowance per year, not to exceed $105 million for
the 5-year period
allowance per year, not to exceed $105 million for
the 5-year period
o Accelerated recovery of $10 million over 5-year
period
period
• Weather Risk
o Approved WNA program using 30 year normal
weather
weather
o Coverage of commercial customers became
permanent as part of the 2011 rate case
permanent as part of the 2011 rate case
• 2011 Rate Case Outcomes - Recovery
Mechanisms
Mechanisms
o Gas portion of bad debts are now recovered through
the purchased gas adjustment
the purchased gas adjustment
o $3.1 million of costs previously recovered through
base rates now recovered through the company’s
gas cost recovery rate
base rates now recovered through the company’s
gas cost recovery rate
42
Elizabethtown Natural Gas
• Utility Infrastructure Enhancement (UIE)
o Accelerated enhanced infrastructure program
created in response to Governor’s request for
increasing infrastructure investments to spur
economic recovery
created in response to Governor’s request for
increasing infrastructure investments to spur
economic recovery
o First phase of the program completed in 2010
o Received approval in May 2011 to invest an
additional $40 million under the program through
2012
additional $40 million under the program through
2012
o Costs recovered through periodic adjustments to
base rates
base rates
o Expect to file for extension of the program in 2012
• Operating margin weather normalization
program in effect
program in effect
o Required to return portion of WNA surcharge to
customers if return on equity exceeds authorized
return of 10.3%
customers if return on equity exceeds authorized
return of 10.3%
• Focus on conversion opportunities from fuel
oil users
oil users
• Expect additional capital projects to augment
supply diversity and system reliability and
explore CNG fueling
supply diversity and system reliability and
explore CNG fueling
43
Florida City Gas & Chattanooga Gas
• Florida City Gas
o Agreed to stay-out in 2007 when approval
received to include acquisition adjustment
amortization in operating income and acquisition
adjustment asset balance in rate base for
regulatory reporting
received to include acquisition adjustment
amortization in operating income and acquisition
adjustment asset balance in rate base for
regulatory reporting
o Five-year stay-out provision ends in 2012; rate
case filing will be evaluated after full integration
of Nicor
case filing will be evaluated after full integration
of Nicor
o Minimal weather risk
o Energy conservation program in place and
funded by customers via a per therm surcharge
funded by customers via a per therm surcharge
• Chattanooga Gas
o Gas portion of bad debts recovered through the
purchased gas adjustment
purchased gas adjustment
o Energy conservation program provides
programmable thermostats and customer
education; costs recovered through asset
management agreement proceeds
programmable thermostats and customer
education; costs recovered through asset
management agreement proceeds
o 72% of operating margin decoupled with weather
normalization program in effect
normalization program in effect
44
2012 Priorities and Objectives
• Make necessary capital investments to enhance and maintain the safety and
reliability of our distribution systems, while minimizing regulatory lag
reliability of our distribution systems, while minimizing regulatory lag
o Maintain leadership role in pipeline safety and infrastructure replacement
o Execute approved infrastructure replacement programs in Georgia and New Jersey
o Receive approval of an infrastructure replacement program from the Virginia State Corporation
Commission and accomplish program goals
Commission and accomplish program goals
• Position utilities for growth
o Promote natural gas as the better alternative due to low natural gas commodity prices and
increased spreads between natural gas and oil/propane
increased spreads between natural gas and oil/propane
o Prepare for housing markets stabilization and increasing industrial and commercial demand
o Foster natural gas for transportation (CNG behind the city gates)
• Remain a low-cost leader within the industry
o Continue to control costs by focusing on productivity improvements, leveraging common
systems, standardization and scale
systems, standardization and scale
o Complete Nicor integration and set the foundation to be the industry leader in natural gas
distribution
distribution
o Standardize AGL and Nicor operational best practices for increased efficiencies and best-of-
class service
class service
45
Retail Operations
Mike Braswell - President, Retail Energy
Beth Reese - President, Retail Services
46
Key 2011 Results - Retail Operations
• Achieved full year 2011 EBIT of $93
million
million
• Maintained market share (33%) in
Georgia despite continued high levels of
competitor activity and consumer
shopping
Georgia despite continued high levels of
competitor activity and consumer
shopping
• Leveraged new marketing channels such
as Delta SkyMiIes to enroll new
customers and improve retention
as Delta SkyMiIes to enroll new
customers and improve retention
• Began integration of Nicor Advanced
Energy and Nicor Solutions businesses
in late Q4
Energy and Nicor Solutions businesses
in late Q4
• Commercial business created
incremental value from asset
management and, in addition, managed
risks inherent to retail business
incremental value from asset
management and, in addition, managed
risks inherent to retail business
• SE large C&I customers contributed an
incremental $6 MM to EBIT (includes
Georgia system balancing value)
incremental $6 MM to EBIT (includes
Georgia system balancing value)
• Ohio and Florida markets contributed
an incremental $3 MM to EBIT in 2011
an incremental $3 MM to EBIT in 2011
• Expanded customer choice business into
markets of New York & Maryland
markets of New York & Maryland
47
Profitable
market expansion
market expansion
(market environment of
lower commercial opportunities
lower commercial opportunities
and increased retail
competition)
competition)
Historically
high storage
spreads
high storage
spreads
Note: Earnings before interest and tax. Results include 100% of SouthStar earnings, which effective January 1, 2010 are split 85% to AGL Resources and 15% to
Piedmont Natural Gas.
Piedmont Natural Gas.
Retail Operations - EBIT Track Record
48
Addition of Nicor
retail businesses
& continued
market
expansion
retail businesses
& continued
market
expansion
$125-
$135
$135
Georgia
•Georgia Natural Gas
•Customers & Equivalents: 485,000
•Annual Throughput (Bcf) : 35
Ohio & Florida
•Ohio Natural Gas
•Florida Natural Gas
•Customers & Equivalents: 96,000
•Annual Throughput (Bcf) : 9
Illinois
•Nicor Advanced Energy
•Nicor Solutions
•Customers & Equivalents: 80,000
•Annual Throughput (Bcf): 9
PRIMARY MARKETS
Retail Energy - Overview
Core Retail Market
Expanded Retail Market
49
Manage risks
inherent to retail
business and
maintain compliance;
create incremental
value from asset
management
inherent to retail
business and
maintain compliance;
create incremental
value from asset
management
Manage retail
customer portfolio
for long-term value
and profitability
customer portfolio
for long-term value
and profitability
Proactively
advocate to
protect and
improve our
markets and
business model
advocate to
protect and
improve our
markets and
business model
Brands
Retail
Book
Customer
Care
Asset /
Risk
Mgmt.
Risk
Mgmt.
Market
Advocacy
Retail Energy
Competencies
Competencies
Deliver high quality,
cost efficient billing
and customer service
through outsourced
vendors
cost efficient billing
and customer service
through outsourced
vendors
Retail Energy - Competencies
50
Georgia Customer and Market Overview
• Atlanta Gas Light Company is the only local
distribution company (LDC) in the U.S. that
has fully unbundled (market deregulated in
1998)
distribution company (LDC) in the U.S. that
has fully unbundled (market deregulated in
1998)
• 10 active competitors in marketplace, with
top 4 representing approximately 85% of
market
top 4 representing approximately 85% of
market
• Serving customers under the Georgia
Natural Gas (GNG) brand (via our
SouthStar (SSE) partnership with Piedmont
Natural Gas (85% AGLR / 15% PNY))
Natural Gas (GNG) brand (via our
SouthStar (SSE) partnership with Piedmont
Natural Gas (85% AGLR / 15% PNY))
• GNG is the long-standing market leader and
has maintained market share at 33% for 3
consecutive years
has maintained market share at 33% for 3
consecutive years
• Focus on new products and marketing
partnerships to sustain market leadership
and margins; Examples: price protection
guarantee and pre-pay plans, Delta
SkyMiles partnership
partnerships to sustain market leadership
and margins; Examples: price protection
guarantee and pre-pay plans, Delta
SkyMiles partnership
51
Customer and Throughput Information | ||
Customers (000s) | Normalized Annual Throughput (Bcf) | |
Residential | 460 | 30 |
Choice C&I | 25 | 10 |
Large C&I | 0.2 | 12 |
Total | 485 | 52 |
Customer and Throughput Information | ||
Customers (000s) | Normalized Annual Throughput (Bcf) | |
Nicor Gas Financial Fixed Bill Physical Fixed Bill Variable / Fixed Price | 37.3 21.3 14.5 73.1 | 4.5* 3.0 1.5 9.0 |
North Shore Gas Physical Fixed Bill Variable / Fixed | 0.7 0.9 1.6 | 0.2 0.1 0.3 |
Peoples Gas Physical Fixed Bill Variable / Fixed Price | 0.6 2.0 2.6 | 0.1 0.2 0.3 |
Total | 77.3 | 9.6 |
*Nicor Solutions does not supply the physical commodity as part of
the Financial Fixed Bill program. The throughput equivalent is
based on the gas supplied by Nicor Gas to enrolled customers.
the Financial Fixed Bill program. The throughput equivalent is
based on the gas supplied by Nicor Gas to enrolled customers.
Illinois Customer and Market Overview
• Illinois local distribution companies
(LDCs) began offering choice to retail
customers in the late 1990s, however
approximately 90% of customers remain
with the LDC
(LDCs) began offering choice to retail
customers in the late 1990s, however
approximately 90% of customers remain
with the LDC
• Active behind Nicor Gas, Peoples Gas
and North Shore Gas
and North Shore Gas
• Product offerings include: annual fixed
bill products (physical and financial),
price per therm products (fixed and
variable)
bill products (physical and financial),
price per therm products (fixed and
variable)
• The annual fixed bill products are a
natural offset to the financial impacts of
warmer than normal weather for Nicor
Gas
natural offset to the financial impacts of
warmer than normal weather for Nicor
Gas
52
Expanded, C&I and Emerging Markets Overview
Market Designation | State(s) / Brand | Retail Energy Position | Key Market Objectives |
Expanded Markets | OH / Ohio Natural Gas | Active behind Dominion East Ohio, Vectren Delivery of Ohio & Columbia of Ohio | • Choice market growth • Launched Delta SkyMiles program • Expansion into Duke territory |
FL (Florida Natural Gas) | Active behind Central Florida Gas, Tampa Electric, Florida Public Utilities & Florida City Gas | • Steady, moderate growth | |
NY (New York Natural Gas) | Active behind O&R and National Grid | • Choice market growth | |
MD (Maryland Energy) | Active behind BG&E; Preparing to enter WGL | • Establish and grow customer base | |
Large C&I | GA, TN, SC, NC | Principally operating behind AGLC, PNG, CGC and Nashville Gas | • Balanced customer portfolio |
Emerging Markets | NE / WY / CO | Evaluating market entry behind SourceGas LDCs | • Evaluating key metrics for potential market entry |
PA, NJ, IN, MI, VA | Evaluating timing for pursuing certification | • Evaluating key metrics for potential market entry |
53
Retail Energy - Market Fundamentals
54
Natural Gas Market
• 10 year low NYMEX prices improves some retail drivers,
e.g. bad debt
e.g. bad debt
• Low price volatility has reduced commercial opportunities
Sustained high
gas production
and record warm
winter
gas production
and record warm
winter
LDC Factors
• Universe of natural gas customer prospects experiencing
limited growth
limited growth
Low system
growth
growth
Retail Markets
• Increased pressure on retail spreads, market share & price
plan mix
plan mix
• Greater investment required for customer acquisition and
retention
retention
• Top line growth opportunities challenged
Increased
competition and
consumer
involvement
competition and
consumer
involvement
Area / Topic
Environment
Business Impact
Retail Energy - Weather Hedging
55
Market | Exposure | Weather Station | Hedge Strategy |
Georgia | Net long HDDs | Atlanta Hartsfield Jackson Airport | Utilize HDD swaps and purchase put options to mitigate warmer-than-normal weather and participate in colder-than-normal outcomes |
Illinois | Net short HDDs • Short fixed bill • Long per therm | Midway Airport | Utilize HDD swaps to mitigate impacts from deviations from normal weather |
Ohio | Net long HDDs | Cincinnati Airport | Utilize HDD swaps and purchase put options to mitigate warmer-than-normal weather and participate in colder-than-normal outcomes |
FL, NY and MD | Net long HDDs | N/A | Each market’s weather risk is currently not material |
Retail Energy - 2012 Priorities and Objectives
• Maintain Georgia market share and mitigate degradation of portfolio mix in a
mature market and difficult economy
mature market and difficult economy
• Integrate Nicor retail energy businesses to maintain business continuity and
generate customer growth
generate customer growth
• Continue to grow customers and margins in expanded markets of Ohio,
Florida, New York and Maryland. We also continue to monitor and evaluate
new markets for potential entry.
Florida, New York and Maryland. We also continue to monitor and evaluate
new markets for potential entry.
• Position commercial business to create incremental value from asset
management and manage risks inherent in retail business
management and manage risks inherent in retail business
• Evaluate new products and services including:
o Introducing fixed bill product behind Georgia Natural Gas and evaluate
for other markets
for other markets
o Development of plans for bundling gas commodity with warranty
products
products
56
Areas Served | Illinois, Indiana, Ohio |
Customers (2011) | 513,000 |
Employees | ~ 420 |
EBIT (full year 2011) | $ 10 million |
• Offer a suite of warranty protection and home solutions that include line repair (gas
and electric), equipment repair and maintenance
and electric), equipment repair and maintenance
• Partner with utilities (Nicor Gas as well as third parties) to leverage inbound calls to
sell products and services
sell products and services
• Leverage partner utility’s brand
• Bill for products on utility bill
• Fulfill claims through network of in-house and third-party service providers
Retail Services - Overview
57
Line Repair
Gas Lines
Equipment Repair
Appliances
Home Systems
Electronics
Electric Repair
Electric Lines
Surge Protection
Maintenance
Heating & Cooling
Appliance Safety
Energy Efficiency
Increasing Customer Satisfaction
Retail Services - Product Offerings
58
• All customers are on a month-to-
month contract
month contract
• Warranty products are billed a fixed
monthly amount, which differs per
product, per market and range from
$3.95 to $63.95
monthly amount, which differs per
product, per market and range from
$3.95 to $63.95
• Services that are entitlement based
(a specific service is rendered as
part of the contract) are charged to
the customer on a monthly basis;
revenue is recognized at the lesser
of when the service is rendered or
the end of an annual period
(a specific service is rendered as
part of the contract) are charged to
the customer on a monthly basis;
revenue is recognized at the lesser
of when the service is rendered or
the end of an annual period
Retail Services - Business Structure
• Claims
o Warranty claims - costs incurred
when warranty issues arise
when warranty issues arise
o Entitlement claims - costs
incurred when customer requests
service
incurred when customer requests
service
• Customer marketing
o Call center primary cost driver,
with additional marketing
expenses to contact customers
beyond the call
with additional marketing
expenses to contact customers
beyond the call
o Multiple structures for revenue
sharing/cost reduction for our
partners
sharing/cost reduction for our
partners
• SG&A costs relatively fixed, with some
near-term opportunities to leverage
shared services model
near-term opportunities to leverage
shared services model
Revenues
Expenses
59
• Nicor National formed in 1992 to provide self-administered Heating and A/C
Repair & Maintenance plans
Repair & Maintenance plans
• In 2000 Nicor National began taking calls for Nicor Gas and leveraged calls
to offer other products and services
to offer other products and services
• The relationship between Nicor National and Nicor Gas is governed through
an Operating Agreement approved by the ICC
an Operating Agreement approved by the ICC
• ICC issued a ruling in conjunction with merger approval stating that Nicor
Gas can no longer use its customer phone calls to offer products and
services
Gas can no longer use its customer phone calls to offer products and
services
o Ruling expected, as discussions on operating agreement had been ongoing prior
to merger announcement
to merger announcement
o No impact on existing customer base
o Nicor Services continues to market to prospective customers throughout Illinois
territory utilizing other methods
territory utilizing other methods
Retail Services - Nicor Gas Partnership
60
• Two types of competitors
o Utilities offering products and
services through affiliates
within own territories
services through affiliates
within own territories
o National warranty companies
offering products and services
through utilities and direct to
consumers
offering products and services
through utilities and direct to
consumers
• Utility competitors include:
o Dominion Retail
o NiSource Retail
• National competitors include:
o Home Serve USA
o Macquarie Capital / Utility
Service Partners
Service Partners
o American Home Shield
o Cross Country Services
Retail Services - Competitive & Regulatory Overview
Regulatory oversight differs by state
• Illinois
o Company registered with
Department of Insurance
Department of Insurance
o Products regulated by Illinois
Service Contract Act
Service Contract Act
• Indiana
o Products regulated by Indiana
Department of Insurance
Department of Insurance
o Must maintain a funded reserve
• Ohio
o Products regulated by
Consumer Sales Practices
Code
Consumer Sales Practices
Code
• Georgia
o Products exempt from
insurance if backed by surety
bond
insurance if backed by surety
bond
Competitive Landscape
Regulatory Overview
61
• Grow existing customer base and increase EBIT contribution to segment
• Implement new partnerships
o Georgia Natural Gas - Summer 2012
o Chattanooga Gas - Target Fall 2012*
o Virginia Natural Gas - Target Fall 2012*
o Other non-affiliated utility prospects - one for 2012
• Market to end use consumers using means other than the move calls
• Develop e-commerce strategy for customer self service and leverage social
media
media
• Leverage AGL Resources’ shared services
• Continue cost containment
Retail Services - 2012 Priorities and Objectives
*Assumes affiliate regulatory approvals are met
62
Wholesale Services
Pete Tumminello
EVP, Wholesale Services & President Sequent
Energy Management
Energy Management
63
Key 2011 Results - Wholesale Services
• 2011 EBIT down $44 million vs. 2010 due to
lower commercial activity
lower commercial activity
• Commercial activity lower by $45 million y/y
• $18 million related to Marcellus take-away
constraints
constraints
• $4 million related to customer bankruptcy
• Remainder due to ongoing low volatility and tight
storage and transportation spreads
storage and transportation spreads
• $21 million higher MTM gains/losses on hedges y/y
• $24 million higher LOCOM, net of current period
recoveries, y/y
recoveries, y/y
Wholesale Operating Margin Components
®
64
Key 2011 Results Cont. - Wholesale Services
• Nicor Enerchange - consolidated fully with wholesale services segment
• Ongoing re-contracting of storage leases at significantly lower market rates
• Stabilized Marcellus pipeline constraint impacts by contracting for firm transportation
and storage
and storage
• Continued growth in gas-fired power generation and producer services volumes
• Purchasing first volumes from a renewable gas facility (landfill) and selling into
premium market
premium market
• Cost control measurers implemented with a 9% reduction in force in Q4 2011
• Competitors experiencing earnings challenges, resulting in selective industry
consolidation
consolidation
• Actively managed open exposures, resulting in a relatively low average VaR of $1.6
million and consistent with historical periods
million and consistent with historical periods
65
In any given year:
• Sequent has the ability to
capture value in a dynamic
environment
capture value in a dynamic
environment
• 2007 - more “normal” levels of activity
• 2008 - price volatility and transportation gains
• 2009 - basis collapsed, storage spreads strong
• 2010 - expanded regions and new fee based
services, MW-West transportation spreads
weaker - East transport stronger
services, MW-West transportation spreads
weaker - East transport stronger
• 2011 - lower volatility and price spreads, shale
constraints
constraints
66
Sequent Asset Portfolio
Active Pipelines
67
Affiliate Asset Management Overview
• Affiliate asset management agreements core to Sequent’s business
• $192 million of life-to-date sharing payments under the asset agreements
• $69 million under the Atlanta Gas Light AMA ($9 million paid in 2011)
• $48 million under the Virginia Natural Gas AMA ($9 million paid in 2011)
• $44 million under the Elizabethtown Gas AMA ($9 million paid in 2011)
• $25 million under the Chattanooga Gas AMA ($3 million paid in 2011)
• $6 million under the Florida City Gas AMA ($2 million paid in 2011)
• Extended affiliate asset management transactions
• 3-year extension for Elizabethtown Gas through March 2014
• 4-year extension for Virginia Natural Gas through March 2016
• 5-year extension for Atlanta Gas Light through March 2017
• Remaining affiliate asset management agreements expire in 2013 and 2014
• Florida City Gas in March 2013
• Chattanooga Gas in March 2014
68
Growth in Fees & Services Business
69
Wholesale Services History
70
* Forecast
Credit Management and Review
• System resource capabilities leveraged to closely monitor exposure levels and activity
• Active management of reviews for creditworthiness
• Active participation in transaction structuring and negotiation of terms
• Full utilization of market intelligence sources
• Real-time communication regarding counterparty status and exposures
• Immediate elevation of issues through communication to Risk Management Committee, Sequent Credit Committee and
Treasury
Treasury
71
Intrinsic Storage Spreads Widening Compared to Last Year
Intrinsic Spreads Year Ago to Expiry
January 3, 2011, Feb 11 / Jan 12 spread at $0.694
January 3, 2012, Feb 12 / Jan13 spread at $0.885
Source: NYMEX
72
72
Houston Ship Channel / Henry Hub
Henry Hub / TETCO M3
Transportation Spreads - East
73
2007
2010
2011
2012
East Cash Spreads 30-Day Moving Average
2007
2010
2011
2012
Transportation Spreads - West
74
West Cash Spreads 30-Day Moving Average
TETCO M3
Dominion
Forward Northeast Basis Curves
Calendar
2012
2012
Calendar
2013
2013
Calendar
2014
2014
Clearport
75
Premium Northeast citygates
seeing pricing pressure due to
increases in supply from shale
and pipeline expansions
seeing pricing pressure due to
increases in supply from shale
and pipeline expansions
Dec 2011 vs. Dec 2010
Jan 2012 vs. Jan 2011
U.S. Temperatures
76
December & January
Average Anomaly from Prior
Year
Average Anomaly from Prior
Year
• Majority of assets
contracted for 1-3 year
terms
contracted for 1-3 year
terms
• Rolling over most
agreements at lower
fixed payments
agreements at lower
fixed payments
• Focus is more on
adding transportation
and storage assets at
lower rates at/near
intrinsic value
adding transportation
and storage assets at
lower rates at/near
intrinsic value
• Contracted for storage
in the West to add to
the portfolio
in the West to add to
the portfolio
• Estimated EBIT benefit
of asset roll-off is
expected to be in the
range of 10% to 15%
of asset roll-off is
expected to be in the
range of 10% to 15%
Wholesale Services - Fixed Payment Obligations
77
Commitment Summary as of Dec. 31, 2011
($ in Millions)
2012 Industry Outlook
• Extremely low price spreads for storage and transportation remain the key fundamental
challenge
challenge
o Seeing storage spreads improve and transportation spreads decrease
• Rapid shale gas growth to-date likely to slow due to low prices caused by mild winter
o Although challenging for Sequent in Q3 2011, portfolio is better positioned to take
advantage of new constraints if they occur
advantage of new constraints if they occur
• Continued focus on growing pipeline transportation portfolio through existing and expected
constraints - likelihood of constraints is reduced with lower gas rig count
constraints - likelihood of constraints is reduced with lower gas rig count
• Fixed costs of asset portfolio remains high in 2012 with significant 50% drop off of fixed
costs in 2013
costs in 2013
o 2012 is likely a year requiring patience as legacy asset costs roll-off
o 2013 fixed asset cost is projected to be $76 million less than in 2012 - a portion of this
will roll into income
will roll into income
• Competitor earnings challenges should lead to more wholesale consolidation
78
2012 Priorities & Objectives
• Expect to deliver $15 million to $30 million of EBIT
• Significantly grow fuel supply to power generators and other fee-based services
• Strategically enhance Sequent’s position in Canada to complement lower 48
states’ asset position
states’ asset position
• Capitalize on areas of volatility - West/Midwest transport, East constraints
• Renew material AMA’s & asset portfolio at lower fixed costs
• Integrate Nicor wholesale business and combine C&I business into one system
• Extend Compass and Enerchange C&I growth
79
Midstream Operations
Pete Tumminello
EVP, Wholesale Services & President Sequent
Energy Management
Energy Management
80
Midstream - Commercial Storage Overview
• Customers include utilities, gas marketers and E&P companies
• Favorable storage locations with significant pipeline interconnectivity
• Our storage facilities provide customers with firm, interruptible, wheeling, and park
and loan services
and loan services
Current operating facilities:
o Jefferson Island Storage & Hub (JISH)
near Henry Hub in South Louisiana
near Henry Hub in South Louisiana
o Golden Triangle Storage (GTS) in East
Texas
Texas
o Central Valley Gas Storage (CVGS) in
Northern California
Northern California
Focused on high deliverability salt dome and depleted reservoir storage facilities and related
business development opportunities.
business development opportunities.
Central
Valley
Gas
Storage
Valley
Gas
Storage
Golden
Triangle
Storage
and Hub
Triangle
Storage
and Hub
Jefferson
Island
Storage
and Hub
Island
Storage
and Hub
81
2011 Overview - Midstream Operations
82
• EBIT $3 million higher vs. last year
• Jefferson Island Storage & Hub
o 93% subscribed, inclusive of 2 Bcf under contract
with Sequent Energy Management
with Sequent Energy Management
o 3 Bcf of subscribed capacity expires March 2012,
open season held with 1 Bcf re-contracted by
Sequent and expect remaining 2 Bcf to be closed
shortly
open season held with 1 Bcf re-contracted by
Sequent and expect remaining 2 Bcf to be closed
shortly
• Golden Triangle Storage
o Received FERC approval for Caverns 3 and 4
o Cavern 1 - 100% subscribed (2 Bcf expires March
2013), inclusive of 2 Bcf under contract by Sequent
2013), inclusive of 2 Bcf under contract by Sequent
o Cavern 2
o Leaching complete to 7.5 Bcf working
capacity, currently unsubscribed
capacity, currently unsubscribed
o 64% of required pad gas currently hedged
o Pad gas and dewatering injections to begin
and in-service expected second-half of 2012
and in-service expected second-half of 2012
• Central Valley Gas Storage
o Construction commenced with wells drilled and
completed
completed
o 15-mile pipeline to PG&E interconnect completed
and hydro-tested
and hydro-tested
o Required pad gas injections completed
o Customer nomination system implemented
$ in millions
Current and Forecasted Contracted Capacity Rates
83
Jefferson Island Storage & Hub
JISH Facility
• Purchased by AGLR in 2004 for $90 MM
and have since spent approximately $13
million on improvements and upgrades
and have since spent approximately $13
million on improvements and upgrades
• Two current caverns with combined 7.5Bcf
working gas capacity in operation since
1995
working gas capacity in operation since
1995
• Significantly upgraded the facility’s
compression, header and meter capacities
compression, header and meter capacities
• 15 miles dual 16” header with 9
interconnects
interconnects
• Injection / Withdrawal - 0.36 / 0.72 Bcf
JISH Expansion
• In June 2010, filed key applications for
Department of Natural Resources (DNR)
permit and Corps of Engineers permit
Department of Natural Resources (DNR)
permit and Corps of Engineers permit
• Continue to seek permit approval
• Project will commence based on
commercial conditions and will consist of:
commercial conditions and will consist of:
o Completing the raw water and disposal
well facilities
well facilities
o Solution mining Caverns 3 & 4
o Adding 12 Bcf of working gas capacity
Delcambre
Erath
Jefferson Island
Storage and Hub
Storage and Hub
Columbia Gulf Transmission
Gulf South Pipeline
Natural Gas Pipeline Co. of America
Sabine Pipeline
Sea Robin Pipeline
Tennessee Gas Pipeline
Texas Gas Transmission
”
2
-
16
”
Pipelines
-
5.2 miles
Cavern #1
Cavern #2
4-12” Pipelines - 0.8 miles
Trunkline
Gas Pipeline
Columbia Gulf Transmission
Gulf South Pipeline
Natural Gas Pipeline Co. of America
Sabine Pipeline
Sea Robin Pipeline
Tennessee Gas Pipeline
Texas Gas Transmission
Crosstex LIG
9.4 miles
2
-
16
”
Pipelines
-
5.2 miles
Lake Peigneur
Jefferson Island Station
Facilities
Facilities
Cavern #1
Cavern #2
Trunkline
2-16” Pipelines -
84
Golden Triangle Storage
GTS Facility
• FERC permitted December 2007
• Commenced construction May 2008
• Cavern 1 in-service with 6 Bcf working gas capacity
• Cavern 2 leached to 7.5 Bcf in February 2012
• Commercial service of Cavern 2 expected to begin in second half of 2012
• 9 miles of dual 24” pipeline with 6 interconnects
• Injection / Withdrawal - 0.30 / 0.60 Bcf
Contract Status - Cavern 1
• 2 Bcf firm capacity contracted for 4yr
term
term
• 2 Bcf firm capacity contracted for 3.5yr
term
term
• 2 Bcf firm capacity contracted for 1yr
term
term
Contract Plans - Cavern 2
• None currently subscribed but will
contract closer to in-service date
contract closer to in-service date
Capital Expenditures
• Total project cost remains consistent with
expectations of ~ $325 MM
expectations of ~ $325 MM
Texas
Eastern
Eastern
Houston
Pipeline
Pipeline
Florida Gas
Transmission
Transmission
Kinder
Morgan
TX
Morgan
TX
Centana
Golden
Pass
Pipeline
Pass
Pipeline
Golden Triangle
Storage and Hub
Storage and Hub
Golden Triangle
Pipeline Header
Pipeline Header
2-24”
1-24”
2-24”
Orange
County
County
Neches
River
River
Beaumont
Cavern #1
Cavern #2
85
Central Valley Gas Storage
CVGS Facility
• Located in Colusa County ~ 60 miles north of Sacramento
• Commenced construction in April 2011
• Working capacity of 11.0 Bcf (10.5 Bcf first year / 11.0 Bcf thereafter)
• Expected in service Q2 2012 with 2 anchor shippers contracting for 3 Bcf of capacity
• Remaining working capacity contracts expected to be phased in beginning Q3 2012
• Directly connected to PG&E mainline through 14.7 miles of 24 inch line
• Injection / Withdrawal - 0.20 / 0.30 Bcf
Contract Status
• 2 Bcf firm capacity contracted for 2yr
term
term
• 1 Bcf firm capacity contracted for 3yr
term
term
• Optimizing and marketing remaining
capacity for 2012
capacity for 2012
Capital Expenditures
• Total project capital costs of ~ $158
million
million
Central Valley Gas
Storage
Storage
86
Market Fundamentals
• Storage fundamentals are cyclical - currently in low point of the cycle
o Natural gas market is growing
o Significant barriers now exist to develop new storage
• Natural gas in favor
o Commodity price of natural gas remains low relative to oil
o Initial production from new basins showing promise
o Renewable energy sources are growing, but economics often require subsidies
o Carbon / greenhouse gas legislation signifies shift away from coal and oil
• Salt-dome storage valuations remain high as compared to lease rates
• Growing gas-fired power generation market should require increased balancing
services
services
• Natural gas export market may significantly increase demand and increase gas
volatility
volatility
87
AGLR’s LNG Experience
AGLR LNG Business Perspectives
•Grow natural gas demand by pricing LNG on a cost plus basis
•Use existing idle LNG capacity to seed nodes of demand
•High horsepower/large users will be the early adopters
– Driven by lower natural gas prices relative to crude
– Class 8 trucking expected to emerge as incremental LNG supply becomes available
•Position Pivotal LNG to build LNG facilities to meet growing demand
• Operating LNG facilities since the 1970s
• Largest operator of liquefaction in the U.S. with
capacity of ~540,000 gpd
capacity of ~540,000 gpd
• Established Pivotal LNG to build, own, operate and sell
LNG
LNG
• Pivotal LNG acquired the Trussville LNG facility ~
60,000 gpd capacity
60,000 gpd capacity
• 2011 LNG sales ~ 3 million gallons of LNG
• 2012 LNG sales capacity - over 100,000 gpd
• Own and operate 8 LNG tankers to facilitate deliveries
Trussville LNG
88
Natural Gas Affordable
Henry Hub
Close 1/20/12
Close 1/20/12
$2.34/MMBtu
WTI Close
1/20/12
1/20/12
$98.15/BBl or
$16.85/MMBtu
$16.85/MMBtu
89
2012 Priorities and Objectives
• Expect to deliver $0 to $5 million of EBIT
• Integrate and standardize policies, procedures and systems of the Nicor
storage facilities and of Trussville LNG with those of AGLR
storage facilities and of Trussville LNG with those of AGLR
• Jefferson Island Storage & Hub
o Contract 2 Bcf of capacity expiring in March 2012
o Continue permitting process for Caverns 3 & 4
o Evaluate expansion of existing caverns
• Golden Triangle Storage
o Complete pad and dewater gas injections and successfully put Cavern 2 in-service
second-half of 2012
second-half of 2012
o Contract 7.5 Bcf at Cavern 2
• Central Valley Storage
o Complete construction and successfully put facility in-service in Q2 2012
o Contract remaining 8 Bcf
• Pivotal LNG
o Upgrade Trussville LNG facility to round-the-clock operations
o Position for growth and elevate national profile in the growing LNG and CNG
markets as a substitute fuel industry
markets as a substitute fuel industry
o Evaluate and permit sites for LNG plant locations
90
Cargo Shipping
Drew Evans
EVP & Chief Financial Officer
91
Cargo Shipping - Overview
Tropical Shipping
• Container shipping company started in 1963
• Directly serves 25 ports in the Bahamas and Caribbean, with cargo primarily
sailing southbound out of the Port of Palm Beach, FL and Saint John,
Canada
sailing southbound out of the Port of Palm Beach, FL and Saint John,
Canada
• Fleet of 12 owned and 2 chartered vessels
• Fleet of 11,200 containers and flat racks
• 2,900 temperature controlled (refrigerated) containers
• 7,200 non-temperature controlled (dry) containers and 1,100 flat racks
Seven Seas Insurance Company
• Affiliated company of Tropical Shipping that is
licensed to underwrite cargo insurance
licensed to underwrite cargo insurance
92
Tropical Shipping - TEU Track Record
TEU Track Record
(Twenty Foot Equivalent Units)
93
Tropical Shipping - 2011 Highlights
• Lower Volumes
o Overall market contraction as consumer discretionary spend on tourism
has been slow to recover and construction has been severely curtailed
has been slow to recover and construction has been severely curtailed
• Higher Vessel Fuel Costs
o Tropical experiences timing lags in cost recovery from customer
surcharges in periods of oil price escalation
surcharges in periods of oil price escalation
• Higher Severance Expense
o Formation of a new management team and general workforce downsizing
associated with the reduction in market demand
associated with the reduction in market demand
94
See Inset
Palm
Beach
Nassau
Providenciales
Cayman
Guyana
Trinidad
Grenada
St. Lucia
Barbados
Dominica
San
Tortola
St. Thomas
St. Maarten
St.
Barths
Antigua
Nevis
St. Vincent
Grand Turk
St. Croix
Ports with direct service by
Tropical throughout the
Bahamas and the
Caribbean
Tropical throughout the
Bahamas and the
Caribbean
Caucedo
Tropical Shipping - Service Territory
95
Tropical Shipping - 2011 Volumes
96
Revenue by Island Destination
Tropical Shipping - 2011 Revenue
Revenue by Product Mix
97
2011 Full Container Load Volumes by Service
Type
Type
Tropical Shipping - 2011 FCL Volumes
98
• Despite the sharp economic downturn there has been no reduction in the number of
competitors
competitors
• Competitors have not materially rationalized their capacity to the lower market
demand
demand
• We do expect some future capacity rationalization through competitor consolidation
and/or reduction in excess supply
and/or reduction in excess supply
• Tropical maintains a leading market share position in the majority of its markets
Tropical Shipping - Competitive Landscape
99
• A.M. Best Financial Strength
Rating of “A” (excellent)
Rating of “A” (excellent)
• Approximately 40% of Tropical’s
Bills of Lading carry insurance
(concentrated in the LCL business)
Bills of Lading carry insurance
(concentrated in the LCL business)
• 67% of insurance premiums are
related to cargo moving on
Tropical vessels; 33% are related
to third party transportation
providers
related to cargo moving on
Tropical vessels; 33% are related
to third party transportation
providers
• Loss ratio typically under 20%
(2011 = 12%)
(2011 = 12%)
• Operating margins typically in
excess of 60% (2011 = 70%)
excess of 60% (2011 = 70%)
Seven Seas Insurance - Overview
2011 Revenue Mix
100
Risks
• Continued fuel cost escalation
• Global carriers may seek to enter Tropical’s markets due to weakness in
their markets
their markets
• Potential change in global trade patterns and/or shift of business away
from U.S.-origin cargo could increase competition in our markets
from U.S.-origin cargo could increase competition in our markets
Opportunities
• Increase market share through initiatives of new management team
• Continue reductions in fixed cost structure
• Deploy new capacity to replace poorly capitalized competitors who
ultimately exit certain markets or cease operations completely
ultimately exit certain markets or cease operations completely
Cargo Shipping - 2012 Risks and Opportunities
101
Q & A
102
Appendix and GAAP
Reconciliations
Reconciliations
103
Key Income Statement Components
(in millions, for the year ended 12/31/11)
(1) Net Income reflected is Net Income Attributable to AGL Resources, excluding earnings attributed to SouthStar partner.
(2) Interest Expense for 2011 includes pre-funding for the Nicor merger.
(3) Nicor Merger Expense for 2011 represents O&M expense related to Nicor merger and excludes associated interest expense, noted in (2) above.
Income Statement Highlights
104
GAAP Reconciliation
The following table sets forth a reconciliation of AGL Resources’ operating margin to operating income and earnings before interest and taxes (EBIT) to
earnings before income taxes, net income to net income attributable to AGL - as reported and net income attributable to AGL - as adjusted, and net income
attributable to AGL - as adjusted - to diluted EPS - as adjusted for the twelve months ended December 31, 2011 and 2010.
earnings before income taxes, net income to net income attributable to AGL - as reported and net income attributable to AGL - as adjusted, and net income
attributable to AGL - as adjusted - to diluted EPS - as adjusted for the twelve months ended December 31, 2011 and 2010.
105
The following table sets forth a reconciliation of AGL Resources’ operating margin to operating income and earnings before interest and taxes (EBIT) to
earnings before income taxes, net income to net income attributable to AGL - as reported and net income attributable to AGL - as adjusted, and net income
attributable to AGL - as adjusted - to diluted EPS - as adjusted for the three months ended December 31, 2011 and 2010.
earnings before income taxes, net income to net income attributable to AGL - as reported and net income attributable to AGL - as adjusted, and net income
attributable to AGL - as adjusted - to diluted EPS - as adjusted for the three months ended December 31, 2011 and 2010.
GAAP Reconciliation
106
GAAP Reconciliation
107
The following tables set forth a reconciliation of AGL Resources’ Statement of Income to earnings before interest and taxes (EBIT) by segment for the
twelve months ended December 31, 2011 and December 31, 2010.
twelve months ended December 31, 2011 and December 31, 2010.
GAAP Reconciliation
108