To Our Shareholders,
For more than 150 years, AGL Resources and its predecessor companies have provided safe, reliable
natural gas services to our valued customers. And since becoming a public company more than 60 years
ago, we have delivered financial results that consistently have generated steady and stable returns
for our shareholders.
Today our country faces some of the most challenging economic times we have seen in decades. The
impact has been felt in nearly every industry and company in America, including ours. Despite those
challenges, we performed very well in 2008 by continuing to do the things we have done well
throughout our history focusing on the fundamentals of our business and managing the company
in a way that provides long-term stability and sustainable growth.
2008 Performance Highlights
Record earnings We achieved record diluted earnings per share of $2.84 in
2008, 4.4 percent higher than in 2007, and at the upper end of our earnings guidance range for the
year. Our utility and retail energy operations businesses performed well, despite the challenges of
lower customer growth resulting from a significant downturn in the housing market that affected all
of our service areas. Strong performance in our non-utility business, particularly wholesale
services, drove earnings improvement. Our wholesale services business generated higher economic
results year-over-year by capitalizing on opportunities to market both storage and transportation
capacity to customers throughout the U.S.
|In millions, except per share amounts and market price
|Earnings per common share
|Weighted average number of common shares
|Market capitalization (year end)
|Market price (year end, closing)
Progress on major capital projects We achieved several significant
milestones on our major capital projects during the year. The largest project, Golden Triangle
Storage, is a high-deliverability salt-dome storage facility in Beaumont, Texas that will serve
producers and marketers throughout the Gulf Coast region. We began construction in May 2008 and
expect the first storage cavern to begin commercial operation in late 2010. We also made significant
progress on our Hampton Roads Crossing pipeline project in Virginia, which will connect the northern
and southern parts of our Virginia Natural Gas system to enhance reliability and access to natural
gas supply for our utility customers. The construction of this pipeline includes what we believe to
be the longest underground horizontal directional drilling project in the world for 24-inch steel
pipe nearly a mile and a half under the Elizabeth River. We expect to complete the project by
the end of this year.
Strong liquidity position and capital discipline The turmoil in the
financial markets in recent months only underscores the importance of financial strength and capital
discipline in uncertain capital markets. We have a $1 billion credit facility in place that does not
expire until mid-2011, which puts us in a strong position to meet ongoing working capital needs. We
have a diverse group of banks supporting our credit facility and strong investment-grade credit
ratings that provide good access to the capital markets.
Commitment to dividend growth We recognize the importance of the dividend
component of our total value proposition to investors. In 2008 and 2009 we maintained our commitment
to growing the dividend by increasing our annual dividend $0.04, or 2.4 percent each year, to an
annual rate of $1.68 per share in 2008 and $1.72 per share in 2009.
2009 Operating Priorities
In 2009, we will continue to work toward completing our major capital projects, and we will
continue to run each of our businesses by concentrating on operating fundamentals and discipline
around operating costs and capital deployment. However, one of our highest priorities in 2009 and
2010 will be the successful execution of our regulatory strategy.
Over the next 18 months, we will file required rate cases in our largest jurisdictions. In each
of those states, we have been encouraged by recent regulatory decisions that recognize the need for
utilities to recover costs associated with investments made to increase system reliability and to
enhance the customer experience. While we have sought to maintain rate freezes and long-term rate
stayouts in most of our jurisdictions over the past few years, we do expect to request modest and
reasonable base rate increases to recover major infrastructure investments, inflation, the rising
costs of health care and pension expense.
We also will continue to explore opportunities related to alternative and renewable energy
supply. As the cleanest-burning fossil fuel, natural gas plays an important role in our country's
long-term energy strategy. The direct use of natural gas is highly efficient and has a significantly
lower carbon footprint than traditional fuel sources. We are evaluating a number of potential
opportunities, ranging from new appliance technologies to the conversion of landfill methane gas to
pipeline-quality natural gas.
Strong Fundamentals, Sustainable Future
For more than 150 years, it's the way we have run our business, and it's the way we expect to run
it for many years to come. Our success in 2008 and our ability to meet the challenges ahead of us
are the direct result of the talent, skills and dedication of the more than 2,300 employees of AGL
Resources. I am proud to work with such a committed group of people, who work tirelessly on behalf
of customers and shareholders every day.
On behalf of our Board of Directors and our employees, we
appreciate your investment and continued confidence in AGL Resources.
John W. Somerhalder II
Chairman, President and Chief Executive Officer
February 27, 2009