AGL Resources Reports Third Quarter Earnings And Increases Year End Earnings Guidance

Company Exceeds FirstCall Consensus Estimates; Driven by Improvements in All Three Operating Segments

ATLANTA, GEORGIA - AGL Resources Inc. (NYSE: ATG) today reported net income for the quarter of $9.4 million, or $0.17 per basic and diluted share, compared with $4.8 million, or $0.09 per basic and diluted share, reported in the third quarter of last year. These results exceed FirstCall consensus estimates for the quarter of $0.14 per share.

The key drivers of earnings improvement for the quarter were improved performance in the energy investments segment from SouthStar Energy Services and better performance in the wholesale services segment due to significant volatility in the quarter as compared to 2001. In addition, the distribution operations segment contributed to the company's improved earnings as a result of decreased expenses and higher revenue due to the recovery of prior operating and capital expenditures related to adding replacement pipeline to rate base. Earnings also were enhanced by lower corporate interest expense during the quarter. The increase in earnings was offset somewhat by reserves established during the quarter related to the cancellation of a technology project.

“It's obvious that all energy companies are not alike,” said Paula G. Rosput, chairman, president and chief executive officer of AGL Resources. “We've carefully navigated the shoals of a turbulent energy market to deliver sustained value to shareholders. Business has not gotten any easier, so our unrelenting focus on details remains our hallmark.”

DISTRIBUTION OPERATIONS
The distribution operations segment performed well in the third quarter 2002, contributing earnings before interest and taxes (EBIT) of $45.0 million for the quarter, a $3.3 million increase over the $41.7 million in third quarter 2001. Lower corporate overhead costs charged to the segment and lower bad debt expense at Chattanooga Gas Company, combined with higher operating revenues in Atlanta Gas Light Company's pipeline replacement rider program, drove the EBIT increase for the quarter.

Operating margin decreased to $127.6 million, compared with $129.4 million in the same period last year. Revenues at AGLC decreased, as expected, as a result of lower rates under the performance-based rate plan approved by the Georgia Public Service Commission earlier this year offset by increased revenues from the pipeline replacement program. Also, margins were slightly lower at Virginia Natural Gas and Chattanooga Gas Company as a result of lower revenues and volumes.

Distribution operations reduced costs and overhead, resulting in a $5.9 million decline in operating expenses, from $91.2 million in 2001 to $85.3 million in 2002. The primary drivers were lower bad debt expense at Chattanooga Gas Company and an overall decrease in corporate overhead costs charged to the segment. Depreciation expense also was lower in the third quarter 2002 than in the same period last year, principally due to a change in depreciation rates established as part of the new performance-based rate plan at AGLC.

WHOLESALE SERVICES
Sequent Energy Management benefited in third quarter 2002 from increased volatility compared with the same period last year. Sequent contributed $1.3 million in EBIT for the quarter, compared with a loss of $5.5 million for the same period last year, a $6.8 million increase. A period of warmer weather in the northeast and two hurricanes during the quarter helped improve revenues and operating margin, despite slightly higher operating expenses in the quarter as compared with last year. In addition, third-quarter 2001 EBIT for the segment included a one-time charge of $2.6 million related to the dissolution of a liquefied natural gas (LNG) joint venture formed in 1997.

ENERGY INVESTMENTS
The energy investments segment realized an EBIT loss for the quarter of $3.2 million compared with a loss of $10.1 million in the same period one year ago. The $6.9 million improvement year-over-year reflects a one-time downward adjustment to correct unbilled revenues at SouthStar Energy Services taken in the third quarter of 2001. Results were also enhanced by improved contributions year-over-year from AGL Networks and AGL Resources' investment in Heritage Propane.

CORPORATE
Corporate EBIT decreased $12.0 million compared with the previous year primarily due to a one-time adjustment to establish reserves during the current quarter related to a contemplated settlement of a technology contract dispute (as previously discussed in the company's SEC filings) and a one-time adjustment in the prior year quarter to reduce reserves related to the investment in SouthStar. Consolidated interest expense decreased by $2.6 million for the third quarter of 2002, principally due to a decrease in average interest rates for the period as compared to last year.

YEAR-TO-DATE RESULTS
For the nine months ended September 30, 2002, net income was $71.8 million, compared to $66.5 million for the same period in 2001. Excluding a one-time after-tax gain in 2001, the comparable core net income for the nine months ended September 2001 was $59.4 million.

Consolidated EBIT for the nine months ended September 30, 2002 was $176.5 million, up from the $175.7 million reported in the previous year. Excluding the one time gain in 2001 ($10.9 million pre-tax), EBIT for the 2001 period was $164.8 million. Operating revenues for the nine months ended September 30, 2002 were $619.2 million, compared to $646.1 million in the prior year. These operating revenues for the current and comparative prior year reflect Sequent's adoption of Emerging Issues Task Force Issue No. 02-03, “Accounting for Contracts Involved in Energy Trading and Risk Management Activities,” which requires the net presentation of gains and losses on energy trading contracts beginning in the third quarter of 2002.

EARNINGS OUTLOOK
Looking ahead, as a result of the improved performance in the quarter ended September 30, 2002, AGL Resources is increasing its earnings guidance for 2002 to the range of $1.73 to $1.78 per share for fiscal 2002 from its previously stated earnings guidance of $1.65 to $1.70 per share. “Each of our business units performed strongly in the quarter. We expect that momentum to be sustained for the remainder of the fiscal year,” said Richard T. O'Brien, executive vice president and chief financial officer. The company's Form 10-Q should be filed with the SEC by October 25, 2002.

Earnings Conference Call Webcast: The AGL Resources third quarter 2002 earnings conference call, scheduled for October 17, 2002, at 9:30 a.m. (EDT), can be accessed via the AGL Resources website at www.aglresources.com. The call will address the company's financial results for the three-month and nine-month periods ended September 30, 2002, as well as other general corporate updates. The call will be archived on the website through the close of business on October 24, 2002.

AGL Resources Inc. (NYSE: ATG) is an Atlanta-based energy services holding company. Nearly 2 million natural gas customers are served through subsidiaries Atlanta Gas Light Company, Virginia Natural Gas and Chattanooga Gas Company. Houston-based subsidiary Sequent Energy Management provides asset management services, including the wholesale trading, marketing, gathering and transportation of natural gas. As a member of the SouthStar partnership, AGL Resources markets natural gas to consumers in Georgia under the Georgia Natural Gas brand. AGL Networks, the company's telecommunications subsidiary, owns and operates a fiber optic network in Atlanta. For more information, visit www.aglresources.com.

This press release contains forward-looking statements. AGL Resources wishes to caution readers that the assumptions, which form the basis for the forward-looking statements, include many factors that are beyond AGL Resources' ability to control or estimate precisely. Those factors include, but are not limited to, the following: industrial, commercial, and residential growth in the service territories of AGL Resources Inc. and its subsidiaries; changes in price and demand for natural gas and related products; impact of changes in state and federal legislation and regulation, including Federal Energy Regulatory Commission orders, on the gas and electric industries and on AGL Resources, including the impact of Atlanta Gas Light Company's performance based rate plan; effects and uncertainties of deregulation and competition, particularly in markets where prices and providers historically have been regulated, unknown risks related to nonregulated businesses, and unknown issues such as the stability of certificated marketers; impact of Georgia's Natural Gas Consumers' Relief Act of 2002; concentration of credit risk in certificated marketers; excess network capacity and demand/growth for dark fiber in metro network areas of AGL Networks' customers; AGL Networks' introduction and market acceptance of new technologies and products, as well as the adoption of new networking standards; ability of AGL Networks to produce sufficient capital to fund its business; ability to negotiate new contracts with telecommunications providers for the provision of AGL Networks' dark-fiber services; industry consolidation; impact of acquisitions and divestitures; changes in accounting policies and practices issued periodically by accounting standard-setting bodies; direct or indirect effects on AGL Resources' business, financial condition or liquidity resulting from a change in the company's credit ratings or the credit ratings of its competitors or counterparties; interest rate fluctuations, financial market conditions, and general economic conditions; uncertainties about environmental issues and the related impact of such issues; impact of changes in weather upon the temperature-sensitive portions of the business; and other risks described in our documents on file with the Securities and Exchange Commission.