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Natural Gas Industry Future DirectionsKevin McCrackinVice President Utility Marketing 1

Corporate Overview

Corporate Headquarters

Distribution Operations Headquarters

Natural Gas Utility

Midstream Operations

Retail Operations

Wholesale Operations

Cargo ShippingNations largest natural gas distributor 4.5 MM customers One of largest retail natural gas marketers in the countryTop 10 wholesale natural gas marketer2KEY MESSAGES:Before getting started, for those who are not as familiar with us, would like to tell you a little bit about who we are:

Our business is Natural Gas, and over the years, we have grown from a Georgia-based gas utility into a leading energy company.

After combining with Nicor Inc. last year, we became the nations largest natural gas [only] distributor [based on customer count] and: Serve nearly 4.5 million utility customers across 7 states (note: save the 1 in 15 meters stat for later in presentation) Maintain about 80,000 miles of pipeline throughout our territory

We are one of the largest retail natural gas marketers in the country, serving over 1.2 million retail customers. We hold a majority stake in SouthStar Energy, known locally as Georgia Natural Gas, and also own a retail entity (Nicor National) that markets energy-related home services to utilities and end-use customers (Nicor).

We also are a top 10 wholesale natural gas marketer. Based in Houston, Sequent Energy Management helps companies across North America (and most of our utilities) optimize their natural gas asset portfolio. We also have a business development unit that specializes in natural gas storage, and our sites feature 31 Bcf of non-utility storage. (this # does not include the new Trussville facility)

And finally, we own one of the leading cargo shippers serving the Bahamas and Caribbean region (Tropical Shipping)

Now lets talk about Natural Gas

The Trends in Natural Gas UsageResidentialCommercialIndustrialPower GenerationSource: U.S. Department of Energy, Energy Information Administration% of natural gas throughputNatural gas use for power generation has increased 87% in the past 25 yearsIndustrial customer usage has decreased by 21% in that same periodKEY MESSAGES: While NG touches every segment of American life, there have been some notable shifts in consumption patterns over the last decade And overall, since 1997, the total number of natural gas customers (residential, commercial and industrial) has INCREASED 16% (from about 61M to 71M) while consumption by these customer groups as a whole has DECREASED 28% (usage per customer across these segments is down) Why is this?? Primary driver behind this trend is efficiency more energy efficient appliances, better building techniques, more efficient processes in commercial and industrial applications. Additionally, consumers are more conservation-minded regarding energy than they were a decade ago largely because they have a better understanding of how their behavior can positively affect their bottom line. The changing mix in electric generation, however, has resulted in an increased use of natural gas to generate electricity. Both environmental regulations (for reduced emissions) and economics (lower gas prices) have played a role in more natural gas being used to generate electricity.

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Natural Gas - Abundant, Clean, Affordable, Domestic

Trillion Cubic Feet 4Changing Economics: Natural Gas Prices Exceptionally LowSource: U.S. Department of Energy, Energy Information AdministrationBetween June 2008 and August 2012, Henry Hub natural gas prices have decreased 78%Hurricanes Katrina and Rita2008 Oil ShockKEY MESSAGES: Even at less than a quarter of current supply, shale is making an impact in the natural gas industry. With the recent boom in production and its [shale gas] role in safely delivering a reliable, domestic supply, natural gas prices have fallen considerably from where they were just a few years ago.

The chart here shows that in the past 4 years or so, natural gas prices at Henry Hub, the standard for pricing natural gas in the Southeast, have decreased 78%. In June 2008, spot prices were $12.685 per MMBtu. In August of this year, that was down to $2.838 per MMBtu.

Another important point about natural gas prices is how much they have diverged from oil prices in recent years (after historically tracking very closely), providing even greater confidence that natural gas will remain affordable for many years to come.

Note: These figures are normal dollars and are not adjusted for inflation.5 Wood Mackenzie

Price outlookSource: Wood Mackenzie (North America Gas Service, Coal Market Service, Macro Oils Service)Where are fuel prices headed in North America markets?

Oil/gas ratioSource: Wood Mackenzie (North America Gas Service)6 Wood Mackenzie But, an Industrial Renaissance is underway due to abundant supplies and low natural gas pricesSource: Wood Mackenzie North America Gas ServiceSource: Wood Mackenzie North America Gas ServiceAnnual gas demand growth (US & Canada)Demand growth (vs. 2010)7Looming Natural Gas Demand: Coal retirements will accelerate in mid-decade with Mercury & Air Toxics Standards (MATS) Wood Mackenzie

Source: Wood Mackenzie North America Power Service US coal retirements8

New Markets for Natural Gas

Power GenerationCombined Heat & PowerCompressed Natural Gas Liquefied Natural Gas

KEY MESSAGES: The economic and environmental advantages of natural gas, when coupled with an abundant, domestic supply, are opening up new markets for natural gas:

Power Generation: Significant number of producers have or are transitioning from coal-fired plants to natural gas plants. Combined Heat and Power, a distributed energy resource generally located at or near the point of use, is most commonly used in industrial applications and today represents about 8% of U.S. generating capacity. (source: DOE, EPA report, 2012)

CNG/LNG: Natural gas vehicles can reduce greenhouse gas emissions by 29% compared to gasoline-powered vehicles.

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Source: U.S. Department of Energy, Energy Information AdministrationPower Generation MixMillion megawattsCoalNatural GasOtherNuclearPetroleum ProductsKEY MESSAGES: As mentioned earlier, natural gas consumption for electric generation has increased 87% in the past 25 years. For the first time in history (in April of this year) natural gas tied with coal as a percentage of source for electricity generation -- as much electricity is generated by natural gas as is generated by coal. Energy generation from natural gas-fired plants became virtually equal to energy generation from coal-fired plants in April with natural gas generating 95.9 million megawatt hours just slightly less than coal, at 96 million megawatt hours. Increased use of natural gas for electric generation is also contributing to reduced emissions. In fact, greater use of natural gas for electric generation has helped reduce U.S. power sector carbon emissions to levels not seen in two decades. In the past two decades, 57 million additional energy consumers have been added to the U.S. population. This means that U.S. carbon emissions have dropped about 20 percent per capita. As a result, carbon emissions per capita are at their lowest levels since President Eisenhower left office in 1961. (source: Ceres report, anga.us)

10NATURAL GAS vs. ELECTRICThe Big Picture Direct Use is Most Efficient.so, distributed generation at the home makes sense.

11Distributed Generation is Direct Use In Partnership with Georgia Tech

Proof-of-Concept Microscale Monolithic Absorption Heat Pump (300 W Cooling) Direct use of natural gas to produce electricity, heating and cooling for residential customers creating a higher level of efficiency and reliability.

Invented by Prof. Srinivas Garimella and Dr. Matthew D. Determan of the Sustainable Thermal Systems Laboratory (STSL) at Georgia Tech.

Combined Heat and Power (CHP) is more Efficient13

http://www.aga.org/our-issues/playbook/Documents/AGA_Playbook2012_HI_RES.pdfU.S. CHP Generation Capacity Vision14Source: Combined Heat and Power: Effective Energy Solutions for a Sustainable Future Sponsored by the U.S. Department of Energy

The U.S. is the worlds largest natural gas producer, but lags behind other nations in natural gas transportation

There are more than 12.7 million natural gas vehicles on the road worldwide but less than 125,000 are in the United States.Source: NGV GlobalKEY MESSAGE: With safe and environmentally responsible access to new sources of natural gas, there is significant opportunity for other uses. Specifically in the transportation sector, great opportunities exist, which help increase our nations energy security and reduce emissions that are harmful to air quality. Replacing one traditionally-fueled garbage truck with a natural gas-powered alternative has the environmental equivalent of taking 325 gasoline-fueled personal vehicles off the road. But as you can see from this slide, the number of natural gas vehicles used in our nation compared to others is incredibly lowthere are 12.7m natural gas vehicles worldwide, but less than 125,000 are in the United States.

ADDITIONAL TALKING POINTS:15Pricing Characteristics

20%13%27%40%Natural GasDistribution & CompressionMarketing & ProfitTaxesCNG (July 2012)Retail Price: $1.85/ggeThe natural gas commodity cost component is about one quarter the crude oil cost component in the make-up of the overall price of the delivered fuel, giving CNG a price dampener against price volatility. 16Price Stability of CNGNatural Gas at $2.88/McfNatural Gas (divide by 7.2) $0.40Transport Costs & Fees $0.20 Electricity Costs per GGE $0.10Maintenance per GGE $0.20Federal and State Taxes $0.25Fuel Card Fees per GGE $0.05Retailer Profit Margin $0.70CNG at the Pump $1.90Natural Gas at $5.76/McfNatural Gas (divide by 7.2) $0.80Transport Costs & Fees $0.20 Electricity Costs per GGE $0.10Maintenance per GGE $0.20Federal and State Taxes $0.25Fuel Card Fees per GGE $0.05Retailer Profit Margin $0.70CNG at the Pump $2.30The natural gas fuel commodity makes up a smaller portion of theoverall price of the delivered fuel when compared to gasoline or diesel.The Economics of Vehicle ClassesType of VehicleIncremental Cost *Annual Use (Gals.)Annual Savings **Simple PaybackHonda Civic (consumer)$7,500500$75010 yrs.Sedan (fleet application)$10,0001,200$1,8006 yrs.Pickup Truck (fleet app.)$11,0002,000$3,0004 yrs.Cargo Van$14,0002,500$3,7504 yrs.Step Van/Box Truck$24,0004,000$6,0004 yrs.School Bus$28,0002,600$3,7507 yrs.Garbage Truck$35,0008,000$12,0003 yrs.Class 8 Truck $65,00015,000$22,5003 yrs.* Cost assumes no grant money, rebates, tax credits, etc. available* * Savings calculated based on savings of $1.50/GGE at retail CNG station18The Light Duty Market Challenge$500,000+ for Centralized Fueling Stations 500 down, 120,000+ to go - $50+ billion? in investment to match gasoline stations The economics work for fleets, so there will continue to be growth $200,000?+ to make a private station public accessible

$8,000+ Vehicle Conversion/Replacement Premium Takes 7 years+ to recover the premium Limited vehicle selection from OEMs, especially vehicles desired by target customers Efforts around conversion, and specifically tank technologies, is ongoing

$5,000 Home Refueling Appliance (HRA) product and Installation Cost An additional 4+ years to recover the HRA cost Limited fill capability, maintenance unknown (historically not good)

Result: $8,000 + $5,000 = $13,000 per vehicle premium, or 11+ years payback

MUST REDUCE VEHICLE CONVERSION COSTS & DEVELOP A LESS EXPENSIVE HRA

19LNG in HHP ApplicationsEnd UseBillions of GallonsOn Highway35.6Residential4.0Commercial3.1Agriculture3.9Railroad2.6Off Highway2.6Industrial2.5Marine1.7Oil/Gas1.4Power Gen0.5Military0.3Total High Horsepower 15.2 billion gallonsKEY MESSAGES: LNG is another area that has become a viable alternative fuel source for heavy-use applications due to the widening spread between NG and oil. While transportation is one area that has embraced LNG as a cost-effective fuel over diesel for use in heavy-duty trucking, it is but one of the many uses for LNG LNG isnt just for trucking. In fact, as you can see here, the ability for natural gas to displace the petroleum-based fuels in these applications presents both economic and environmental advantages. LNG can also be an attractive fuel source for other high-horsepower and transportation applications such as marine, rail, drilling, construction and stationary power generation

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1.5 millionPutting People to WorkThe natural gas industry employs millionsjobs are directly involved in exploring for, producing, transporting and distributing natural gas (direct employment).

additional jobs are created in industries such as agriculture and manufacturing that support and supply goods and services to the natural gas industry (indirect employment).

jobs are supported when direct and indirect natural gas employees introduce their income back into the economy (induced employment).723,000622,000The natural gas industry employs people in all 50 states. 50 StatesSource: Americas Natural Gas Alliance; U.S. Department of Labor, Bureau of Labor Statistics KEY MESSAGE: The natural gas industry employs millionsboth directly and indirectly. The increases supply of domestic natural gas is a boon to our economy, especially during times the like present when unemployment rates are high and many are still struggling. Abundance of domestic natural gas is playing an important role in the rebirth or reshaping of many industries, including U.S. manufacturing, the auto and trucking industries, etc.

21Top Takeaways Natural gas is more relevant than ever to our energy future. New market opportunities for natural gas will potentially reshape entire industries. AGL Resources is uniquely positioned to deliver on the promise of natural gas.

KEY MESSAGES:

With low, stable prices and sufficient domestic supply to meet Americas diverse energy needs for more than a century, natural gas is more relevant than ever to our energy future. New market opportunities for natural gas will potentially reshape industries such as transportation and manufacturing.

With about one of every 15 gas meters in the U.S. as a customer, AGL Resources is uniquely positioned to deliver on the promise of natural gas. 22