To Our Shareholders:
We will long remember the global economic crisis of 2009 and the impact it had on businesses throughout the United States. Perhaps more than anything else, the challenges we faced underscore the importance of staying true to fundamental operating principles and a business model that is straightforward. We did exactly that in 2009. Our strategy is focused on maximizing shareholder value by maintaining a longterm focus on the fundamentals of our business. Despite the economic pressures we faced throughout the year, we remained committed to that strategy, and the results of our approach are evident in our accomplishments for the year.





2009 Performance Highlights

Financial Results

In 2009, we achieved record earnings of $2.88 per share (diluted), compared with earnings of $2.84 per share (diluted) in 2008. Each of our business segments performed well and contributed to these strong results. Our utility businesses overcame substantial challenges to customer growth throughout the year by staying focused on controlling discretionary expenses and on improving business processes. Our non-utility businesses continued to expand their contribution to our business through disciplined growth in strategic areas and capitalizing on market opportunities.

We paid cash dividends of $1.72 per share in 2009, including a 2.4 percent dividend increase announced in February 2009. In February 2010, our Board of Directors approved a 2.3 percent dividend increase, to an indicated annual rate of $1.76 per share. We realize the importance to our shareholders of maintaining a stable dividend, particularly during periods of uncertainty in the financial markets.

For the fiscal year 2009, AGL Resources generated total shareholder return of 23 percent, outperforming our industry peer group of natural gas utility companies.

We were able to successfully navigate the challenges of weakness in the capital and credit markets throughout the year. We maintained our strong balance sheet and credit ratings, and had ample liquidity to support our business. We also continued to have good access to the capital markets, as evidenced by our issuance of $300 million of 10-year senior notes in August 2009 at a very favorable rate of 5.25 percent.

Operating Highlights

In 2009, we achieved a number of important goals that we believe position our business for future success. We made significant progress on each of our large capital projects, we made additional investments in the business that will contribute to our growth and we continued our focus on achieving reasonable regulatory outcomes for our utility businesses.

To enhance the reliability of our distribution system in Virginia, we completed our Hampton Roads Crossing pipeline project, connecting the northern and southern parts of our system. This project is now in commercial operation and providing enhanced reliability and diversity of supply to our customers. We also completed construction on our Magnolia pipeline project in Georgia, with commercial operation beginning in November of 2009. This project provides the ability to transport natural gas from the Elba Island liquefied natural gas (LNG) terminal into some of our key Georgia markets, particularly the metro Atlanta region, and should be an especially valuable source of supply during peak demand periods.

We made significant progress during the year on construction of our Golden Triangle Storage project in Texas. The long-term market fundamentals support the need for additional highdeliverability natural gas storage in the Gulf Coast region. We initially are building two storage caverns deep inside the Spindletop salt dome, which will add 12 billion cubic feet (Bcf) of working gas capacity, with the potential to expand the facility to 38 Bcf of working gas capacity by building three additional caverns in the future and enlarging the first two caverns. We anticipate putting the first cavern into commercial operation during the second half of 2010.

In 2009, we reached an agreement with Piedmont Natural Gas, our partner in the SouthStar Energy Services joint venture, to increase our ownership interest in the partnership from 70 percent to 85 percent. The $58 million purchase closed in early 2010 and should position us to benefit from future growth in this business.

We continued to execute on our regulatory strategy in 2009, and it remains one of our highest priorities in 2010. The goal of that strategy is to enhance our ability to achieve our authorized return levels in each of our utility jurisdictions and to minimize or eliminate regulatory lag associated with the recovery of prudently incurred expenses and capital investments in the business.

In Georgia, we received regulatory approval for a new infrastructure investment program, known as STRIDE (Strategic Infrastructure Development and Enhancement). Implementation of this 10-year, $400 million program is critical to meeting future demand on our system and ensuring the highest system reliability and integrity, particularly in outlying areas of the metro Atlanta region and during peak demand periods. The Georgia Public Service Commission has approved the first phase of the program, allowing us to invest approximately $221 million over a three-year period. We resolved our rate case in New Jersey, resulting in a $3 million base rate increase. We expect to file our general rate case in Georgia, our largest franchise, during the second quarter of 2010. We also have filed for a modest increase in Tennessee, and expect a decision in that case during 2010.

Industry Fundamentals

As the cleanest-burning fossil fuel, natural gas is playing an increasingly important role in America’s future as our nation moves toward a low-carbon energy strategy.

Recent discoveries of natural gas in shale formations throughout the United States, combined with advancements in drilling and extraction technologies, have dramatically increased the longterm domestic supply of natural gas. This expanded supply of natural gas supports America’s goal of energy independence by further reducing our reliance on foreign energy imports.

Natural gas can play a vital role in reducing greenhouse gas emissions and is needed in combination with renewable and intermittent supply sources such as wind and solar. We believe natural gas will be critical to our country’s energy future for many years to come.

We are excited about the long-term fundamentals of our business and about being part of an industry that is so vital to the future economic growth of our country. Our commitment to you, our shareholders, is that we will remain focused on executing on the same long-term strategy that contributed to our success this past year. On behalf of our more than 2,400 employees, we truly appreciate your investment and your continued confidence in our company.

Sincerely,

John W. Somerhalder II

Chairman, President and Chief Executive Officer

February 26, 2010