AGL Resources, Inc. (GAS)

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Nicor Inc. (GAS)

Q2 2011 Earnings Call

August 3, 2011 10:00 AM ET

Executives

Russ Strobel – Chairman, President and CEO

Kary Brunner – Director, IR

Richard Hawley – CFO

Analysts

Mark Barnett – MorningStar

Presentation

Operator

Good day ladies and gentlemen, and welcome to Nicor’s Second Quarter 2011 Earnings Conference Call. My name is Stacy and I will be your conference moderator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the call over to your host for today to Mr. Russ Strobel, Chairman, President, and CEO of Nicor. Please proceed.

Russ Strobel

Thanks, Stacy and good morning to everybody on the: Thank you for joining us. With me today are Rick Hawley, our CFO; and Kary Brunner, our Director of Investor Relations.

This morning we’re going to discuss our 2011 second quarter financial results and our outlook for 2011 earnings. When we have completed our remarks, we will be happy to take your questions.

Before we get into the numbers, let me provide a brief update on our pending merger with AGL Resources. As you all know, in December 2010 we entered into a merger agreement with AGL Resources. The completion of the transaction is subject to the customary conditions, including among others regulatory approvals and shareholder approvals by both companies.

During the second quarter we made significant progress on those items. On June 14, Nicor shareholders voted overwhelmingly to approve the merger. On the same-day AGL shareholders also voted overwhelmingly on their merger-related proposals.

In late May, the California PUC approved the transfer of ownership of Nicor’s Central Valley Gas Storage Project to AGL Resources. Back in April we were granted early termination of the HSR waiting period by both the Federal Trade Commission and the Department of Justice, and later that month the SEC completed its review on the merger transaction.

A key regulatory approval process that is ongoing is with the only commerce commission. You may recall that we and AGL Resources filed a joint application with the ICC in January for approval of the merger.

The staff of the ICC and several interveners submitted testimony, which is available on the ICC website, recommending that the ICC deny our joint application or impose various conditions on approval.

Since that time, we’ve submitted additional testimony and participated in the ICC’s evidentiary hearings. We are now working with the ICC staff and with the interveners in an attempt to narrow the unresolved issues and to reach solutions that are agreeable to all the parties. We will continue to work diligently to get this merger approved. The ICC has 11 months to act upon the application.

As we have stated in the past, we believe that Nicor has found a strong partner in AGL Resources who shares a commitment to providing safe, reliable and low-cost service to its customers.

As we have previously discussed, AGL Resources has committed to establish its national gas distribution headquarters right here in Illinois to maintain jobs at Nicor gas and to honor our current philanthropic and civic involvement.

These commitments by AGL Resources mean that are 2.2 million utility customers can continue to rely upon Nicor gas to provide high-value, cost-effective service, just as we have done for over half a century.

Nicor gas is proud of the fact that its distribution rates are almost 40% lower than the average for all major utilities in Illinois. We also have consistently among the lowest gas costs. As a result Nicor gas customers enjoy hundreds of millions of dollars a year in savings. We believe that our combination with AGL will not merely continue this tradition, but will enhance it.

And with that introduction, let me now turn things over to Kary as we get into the numbers.

Kary Brunner

Thanks, Russ, and good morning, everyone. First I would like to remind you that this call includes certain forward-looking statements about the operations and expectations of our Company, subsidiaries and affiliates.

Although we believe our representations are based on reasonable assumptions, actual results may vary materially from stated expectations. Information concerning the factors that could cause materially different results can be found in our periodic filings with the Securities and Exchange Commission and in this morning’s press release.

As we reported in our press release this morning, preliminary second quarter 2011 diluted earnings per share were $0.42 compared to $0.53 per share for the same period in 2010. For the six months ended period, diluted earnings per share were $1.40 compared to $1.85 per share in 2010.

Without the approximately $0.42 per share benefit related to the bad debt tracker, last year’s June year-to-date results would have been about $1.43 per share.

Let me now turn things over to Rick for the discussion of our second quarter results and our annual outlook for 2011.

Richard Hawley

Thanks, Kary, and good morning, everyone. Thanks for joining us on the call. Second quarter 2011 diluted earnings per share compared to 2010 reflected higher operating income in our gas distribution business more than offset by lower operating results at our shipping and other energy related businesses, as well as lower corporate operating results.

The second quarter comparisons also reflected higher pre-tax equity investment income and lower interest expense, partially offset by a higher effective income tax rate in 2011.

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