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AGL Resources Reports Net Income Up 32 Percent In Second Quarter

Company Exceeds FirstCall Consensus Estimates; Operating Efficiencies, Energy Investments Drive Improvements

ATLANTA, GEORGIA - AGL Resources Inc. (NYSE: ATG) today reported a 32 percent increase in second quarter net income compared to the same period in 2001. Net income in the quarter was $12.3 million, or $0.22 per basic and diluted share, compared with $9.3 million, or $0.17 per basic and diluted share, reported in the second quarter of last year. These results exceeded FirstCall consensus estimates for the quarter of $0.20 per share.

The key drivers of earnings for the quarter were lower operation and maintenance costs and depreciation expense in the distribution operations segment, improved contributions in the energy investments segment from SouthStar Energy Services, and lower corporate interest expense.

"The seas are more turbulent, but we're still on course,” said Paula G. Rosput, chairman, president and chief executive officer of AGL Resources. "Despite the challenges within our industry, we are able to stay focused on strategies that are strengthening our cash flows, balance sheet and earnings.”

DISTRIBUTION OPERATIONS
The distribution operations segment contributed earnings before interest and taxes (EBIT) of $47.5 million for the quarter, a $3.0 million increase over the $44.5 million contributed in the same quarter last year. The increase in EBIT was achieved despite a decline in operating margin for the segment, primarily as a result of lower utility operating and maintenance costs.

The segment operating margin of $133.7 million represents a $5.9 million decline compared to operating margin of $139.6 million in the same period last year. The decline was driven primarily by lower margins at Atlanta Gas Light Company resulting from the new performance-based rate plan implemented on May 1, 2002, as well as a loss of customers at Atlanta Gas Light Company and a one-time adjustment related to inventory costs of natural gas stored underground recorded during the prior year.

The margin decline was more than offset by a $9.0 million decline in operating and maintenance costs, from $97.5 million in 2001 to $88.5 million in 2002. The lower operating costs resulted from operational efficiencies and synergies related to the company's acquisition and integration of Virginia Natural Gas, particularly through headcount reductions achieved in 2001, as well as a decrease in corporate allocations to the segment and a decrease in bad debt expense at Virginia Natural Gas and Chattanooga Gas Company. Also, depreciation expense was lower in second quarter 2002 than in the same period last year principally due to a change in depreciation rates established as part of Atlanta Gas Light Company's new performance-based rate plan.

WHOLESALE SERVICES
Sequent Energy Management's EBIT contribution in second quarter 2002 declined approximately $0.9 million to a loss of $2.3 million, compared with a loss of $1.4 million for the same period last year. Despite increased volumes and revenue contribution, Sequent's overall contribution was limited by lower volatility in the Southeast energy market and increased expenses for the continued implementation of the back- and mid-offices.

ENERGY INVESTMENTS
The energy investments segment's EBIT contribution in the quarter increased $2.2 million, or about 40 percent, compared to the same period one year ago. This increase is principally due to increased contributions from SouthStar Energy Services compared with last year, the result of lower wholesale gas costs relative to retail prices. Despite improved contributions on a quarterly comparative basis, the energy investments segment had an EBIT loss of $3.3 million in the current quarter (as compared to an EBIT loss of $5.5 million in the prior year), primarily because of the seasonality of SouthStar and AGL Resources' investment in Heritage Propane.

CORPORATE
Corporate EBIT decreased $2.1 million compared with the previous year, due to costs related to liabilities accrued at the corporate level in 2002 that were not allocated to operating units. Consolidated interest expense decreased by $2.0 million for the second 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 six months ended June 30, 2002, net income was $62.4 million, compared to $61.6 million for the same period in 2001. Net income for the period in 2001 included a non-recurring after-tax gain of $7.1 million related to the sale of Utilipro. Excluding that gain, net income was $54.5 million. Consolidated EBIT for the six months ended June 30, 2002 was $140.5 million, down from the $144.8 million reported in the previous year. Excluding the Utilipro pre-tax gain of $10.9 million, EBIT for the 2001 period was $133.9 million. Operating revenues for the six months ended June 30, 2002 were $1.1 billion, compared to $526.3 million in the prior year. This increase reflects the increased activities in the wholesale services segment.

EARNINGS OUTLOOK
Looking ahead, AGL Resources management said it expects to meet or exceed the earnings guidance previously stated for fiscal year 2002 of $1.65 to $1.70 per share. “Given the year-to-date performance of our business units in executing our strategy, we continue to be comfortable with the current consensus estimates for fiscal 2002,” said Richard T. O'Brien, executive vice president and chief financial officer.

Earnings Conference Call Webcast: The AGL Resources second quarter 2002 earnings conference call, scheduled for July 25, 2002, at 9 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 six-month periods ended June 30, 2002, as well as other general corporate updates. The call will be archived on the website through the close of business on August 1, 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 the performance based rate plan issued by the Georgia Public Service Commission in connection with the review of Atlanta Gas Light Company's rates; 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.