SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997 Commission File Number 1-14174
AGL RESOURCES INC.
(Exact name of registrant as specified in its charter)
Georgia 58-2210952
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
303 Peachtree Street, N.E., Atlanta, Georgia
30308 404-584-9470
(Address and zip code of (Registrant's telephone
principal executive offices) number, including
area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $5 Par Value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
(Title of Class) (Name of exchange on
which registered)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing price of such stock as of
November 28, 1997: $1,112,067,483.
The number of shares of Common Stock outstanding as of November 28, 1997 was
56,665,859 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1997 Annual Report to Shareholders for AGL Resources Inc. for
the fiscal year ended September 30, 1997 are incorporated herein by reference in
Part II and portions of the Proxy Statement for the 1998 Annual Meeting of
Shareholders are incorporated herein by reference in Part III.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
PART I
Item 1. Business......................................................................................... 1
Item 2. Properties....................................................................................... 11
Item 3. Legal Proceedings................................................................................ 12
Item 4. Submission of Matters to a Vote of Security Holders.............................................. 13
Item 4.(A). Executive Officers of the Registrant............................................................. 14
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters........................................................................................ 15
Item 6. Selected Financial Data.......................................................................... 15
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition............................................................................ 15
Item 8. Financial Statements and Supplementary Data...................................................... 15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................................................... 16
PART III
Item 10. Directors and Executive Officers of the Registrant............................................... 17
Item 11. Executive Compensation........................................................................... 17
Item 12. Security Ownership of Certain Beneficial Owners and Management................................... 17
Item 13. Certain Relationships and Related Transactions................................................... 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................. 18
Signatures .................................................................................................. 27
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides for the
use of cautionary statements accompanying forward-looking statements.
Disclosures provided contain forward-looking statements concerning, among other
things, deregulation, restructuring and environmental remediation.
Important factors that could cause actual results to differ materially
from those in the forward-looking statements include, but are not limited to,
the following: changes in price and demand for natural gas and related products;
uncertainty as to state and federal legislative and regulatory issues; the
effects of competition, particularly in markets where prices and providers
historically have been regulated; changes in accounting policies and practices;
uncertainty with regard to environmental issues and competitive issues in
general.
General
AGL Resources Inc. (AGL Resources) is a Georgia corporation incorporated
on November 27, 1995, for the primary purpose of becoming the holding company
for Atlanta Gas Light Company (AGL), a natural gas distribution utility, and its
subsidiaries. Unless noted specifically or otherwise required by the context,
references to AGL Resources include AGL, AGL's wholly owned natural gas
distribution utility subsidiary, Chattanooga Gas Company (Chattanooga), and AGL
Resources' nonregulated subsidiaries: AGL Energy Services, Inc. (AGL Energy
Services); AGL Investments, Inc. (AGL Investments); AGL Resources Service
Company (Service Company); and The Energy Spring, Inc. (Energy Spring). AGL
Energy Services has one nonregulated subsidiary, Georgia Gas Company. AGL
Investments has six nonregulated subsidiaries: AGL Propane, Inc. (formerly known
as Georgia Gas Service Company) (AGL Propane); AGL Consumer Services, Inc.; AGL
Gas Marketing, Inc.; AGL Power Services, Inc.; AGL Energy Wise Services, Inc.
and Trustees Investments, Inc. Unless noted specifically or otherwise required
by the context, references to AGL include the operations and activities of AGL
and Chattanooga.
AGL Resources' principal business is the distribution of natural gas to
customers in central, northwest, northeast and southeast Georgia and the
Chattanooga, Tennessee area through its natural gas distribution subsidiary,
AGL. AGL's major service area is the ten county metropolitan Atlanta area.
Metropolitan Atlanta has an estimated population of 3 million, constituting
approximately 41% of the total population of Georgia. Approximately 66% of AGL's
customers are located in the Atlanta metropolitan area. These customers consume
44% of the natural gas sold and transported and provide approximately 61% of the
gas revenues of AGL. AGL's other principal service areas in Georgia are the
Athens, Augusta, Brunswick, Macon, Rome, Savannah and Valdosta areas. During the
fiscal year ended September 30, 1997, AGL supplied natural gas service to an
average of approximately 1.4 million customers in Georgia including 490
centrally metered customers serving 48,056 apartment units. AGL provides natural
gas service in 231 cities and surrounding areas in Georgia.
In addition to AGL's service areas in Georgia, natural gas service was
supplied by Chattanooga to an average of approximately 54,000 customers in
Chattanooga and Cleveland, Tennessee, and surrounding portions of Hamilton
County and Bradley County, Tennessee during the fiscal year ended September 30,
1997. All of AGL's natural gas service area is certificated by the Georgia
Public Service Commission (Georgia Commission) and the Tennessee Regulatory
Authority (TRA).
1
<PAGE>
Both industry and agriculture are currently important to the economies of
the areas served by AGL outside metropolitan Atlanta. In addition to the
industries that use local natural resources such as pulpwood, clay, marble, talc
and kaolin, AGL serves a number of nationally known organizations that operate
installations in Georgia. These operations increase substantially the
diversification of industry in AGL's service area.
During fiscal 1997, AGL added approximately 32,000 customers, based on
twelve-month average calculations, representing an increase over the prior year
of approximately 2.3%. Substantially all of this growth was in the residential
and small commercial service categories.
The ten largest customers of AGL accounted for 1.0% and .9% of AGL
Resources' total operating revenues and operating margin, respectively, for the
fiscal year ended September 30, 1997. For the same period, volumes of gas sold
and transported to the ten largest customers accounted for 11.6% of total
volumes of gas sold and transported.
AGL Resources' consolidated operating revenues during the fiscal year
ended September 30, 1997, were $1.3 billion, of which $1.2 billion
(approximately 95%) was derived from regulated operations and $72 million
(approximately 5%) from nonregulated operations. See Gas Sales and Statistics
below.
AGL Resources engages in nonregulated business activities through its
wholly owned subsidiaries, AGL Energy Services, a gas supply services company;
AGL Investments, a subsidiary established to develop and manage certain
nonregulated businesses; and The Energy Spring, a retail energy marketing
company. Service Company is a corporate support services company that allocates
its expenses to AGL Resources and its subsidiaries.
AGL Gas Marketing, Inc., a wholly owned subsidiary of AGL Investments,
holds a 35% ownership interest in Sonat Marketing Company L.P. (Sonat
Marketing). Sonat Marketing offers natural gas sales, transportation, risk
management and storage services to natural gas users and producers in key
natural gas producing and consuming areas of the United States. AGL Investments
has certain rights through August 2000 to sell its interest in Sonat Marketing
to Sonat, Inc. (Sonat) at a predetermined fixed price, as defined, or for fair
market value at any time.
AGL Power Services, Inc., a wholly owned subsidiary of AGL Investments
(AGL Power Services), holds a 35% ownership interest in Sonat Power Marketing,
L.P., which provides power marketing and all related services in key market
areas throughout the United States.
During December 1996 AGL Resources signed a letter of intent with
Transcontinental Gas Pipe Line Corporation (Transco) to form a joint venture,
which would be known as Cumberland Pipeline Company (Cumberland), to provide
interstate pipeline services to customers in Georgia and Tennessee. The
transaction is subject to various regulatory approvals. Initially, the 135-mile
Cumberland pipeline will include existing pipeline infrastructure owned by the
two companies extending from Walton County, Georgia, to Catoosa County, Georgia.
Projected to enter service by November 1, 2000, Cumberland will be positioned to
serve AGL, Chattanooga and other markets throughout the eastern Tennessee
Valley, northwest Georgia and northeast Alabama. Affiliates of Transco and AGL
Resources each will own 50% of Cumberland, and an affiliate of Transco will
serve as operator. It currently is anticipated that an open season for
subscriptions for capacity on Cumberland will be announced during the first
quarter of calendar year 1998, and the project will be submitted to the Federal
Energy Regulatory Commission (FERC) for approval during fiscal year 1998.
During November 1997, AGL Resources and Southern Natural Gas Company
(Southern), a subsidiary of Sonat, entered into a letter of intent to jointly
construct, own and operate a new liquefied natural gas peaking facility, Etowah
LNG (Etowah), in Polk County, Georgia. The transaction contemplated by the
letter of intent, is
2
<PAGE>
subject to execution of a definitive agreement and to regulatory approvals. AGL
Resources and Southern each will own 50 percent of Etowah, the operations of
which will be subject to jurisdiction of the FERC.
The proposed plant will connect directly into AGL's and Southern's
pipelines. Etowah will provide natural gas storage and peaking services to AGL
and other southeastern customers. The new facility will cost approximately $90
million, with 3 billion-cubic-feet of natural gas storage capacity and 450
million-cubic-feet per day of vaporization capacity. Affiliates of AGL Resources
will manage the construction of the facility and operate it. Southern will
provide administrative services.
The companies announced an open season from December 1, 1997 to January
30, 1998 for Etowah subscriptions for peaking services and expect to file a
certificate application with the FERC in March 1998. Subject to receiving timely
FERC approval, construction will begin in early 1999 in order to provide peaking
services during the 2001-2002 winter heating season.
On September 30, 1997, AGL Resources and its subsidiaries had 3,035
employees. Approximately 724 employees working for AGL and 50 employees working
for Service Company are covered by provisions of collective bargaining
agreements. Those agreements provide for a $500 lump sum payment to each
bargaining unit employee in 1997 and 1998. It is anticipated that the majority
of bargaining unit employees will not receive an increase in base rates until
fiscal year 2000, at which time base rates are scheduled to increase by 3.5%.
The collective bargaining agreements expire in 2000 and 2001.
AGL holds franchises, permits, certificates and rights which management
believes are sufficient for the operation of its properties without any
substantial restrictions and adequate for the operation of its gas distribution
business.
In addition to its predominant business of natural gas distribution and
its investments in joint ventures, AGL Resources, through wholly owned
subsidiaries, engages in retail propane sales (AGL Propane), and has minor
interests in natural gas production activities (Georgia Gas Company) and real
estate holdings (Trustees Investments, Inc.). Effective February 1, 1997, AGL
Propane acquired eight related companies, the Jordan Gas Propane Companies.
Effective June 12, 1997, AGL Propane acquired Capitol Fuels, Inc., a retail
propane distribution company headquartered in Blairsville, Georgia. The
acquisitions of the Jordan Gas Propane Companies and Capitol Fuels, Inc. are
expected to increase the retail sales of AGL Propane's operations from 7 million
gallons annually to approximately 33 million gallons annually. As a result of
the acquisitions, AGL Propane will serve approximately 48,000 customers in
northern Georgia, northern Alabama and western North Carolina. The aggregate net
income contributed by nonregulated operations in fiscal 1997 was $3.1 million,
compared with $3.7 million in fiscal 1996.
The remainder of this page was intentionally left blank.
3
<PAGE>
<TABLE>
<CAPTION>
Gas Sales and Statistics
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues (Millions of Dollars)
Sales of natural gas
Residential $ 728.5 $ 708.8 $ 610.6 $ 700.7 $ 658.2
Commercial 290.9 288.8 243.2 285.8 268.1
Industrial 148.0 178.8 169.4 172.1 154.2
Transportation revenues 28.5 21.5 23.9 22.6 33.8
Miscellaneous revenues 20.2 19.7 15.9 18.7 16.0
- -----------------------------------------------------------------------------------------------------------------------------
Total utility operating revenues 1,216.1 1,217.6 1,063.0 1,199.9 1,130.3
- -----------------------------------------------------------------------------------------------------------------------------
Other operating revenues 71.5 11.0 5.5
- -----------------------------------------------------------------------------------------------------------------------------
Total operating revenues $ 1,287.6 $ 1,228.6 $ 1,068.5 $ 1,199.9 $ 1,130.3
- -----------------------------------------------------------------------------------------------------------------------------
Utility Throughput
Therms sold (Millions)
Residential 986.1 1,165.4 916.8 1,003.1 1,001.4
Commercial 455.5 538.2 454.0 478.9 478.5
Industrial 344.9 449.6 526.0 424.8 388.7
Therms transported 1,014.5 738.7 722.8 697.4 795.6
- -----------------------------------------------------------------------------------------------------------------------------
Total utility throughput 2,801.0 2,891.9 2,619.6 2,604.2 2,664.2
- -----------------------------------------------------------------------------------------------------------------------------
Average Utility Customers (Thousands)
Residential 1,319.0 1,289.4 1,250.4 1,215.2 1,182.7
Commercial 104.5 102.5 100.0 98.0 95.7
Industrial 2.7 2.6 2.6 2.5 2.5
- -----------------------------------------------------------------------------------------------------------------------------
Total 1,426.2 1,394.5 1,353.0 1,315.7 1,280.9
- -----------------------------------------------------------------------------------------------------------------------------
Sales, Per Average Residential Utility Customer
Gas sold (Therms) 748 904 733 825 847
Revenue $ 552.00 $ 550.00 $ 488.32 $ 576.61 $ 556.52
Revenue per therm (cents) 73.9 60.8 66.6 69.9 65.7
Degree Days - Atlanta Area
30-year normal 2,991 2,991 2,991 2,991 3,021
Actual 2,402 3,191 2,121 2,565 2,852
Percentage of actual to 30-year normal 80.3 106.7 70.9 85.8 94.4
Gas Account (Millions of Therms)
Natural gas purchased 1,323.4 1,632.9 1,406.9 1,453.6 1,629.9
Natural gas withdrawn from storage 472.4 596.0 520.7 500.3 276.4
Natural gas transported 1,014.5 738.7 722.8 697.4 795.6
- -----------------------------------------------------------------------------------------------------------------------------
Total send-out 2,810.3 2,967.6 2,650.4 2,651.3 2,701.9
Less
Unaccounted for 1.3 60.4 20.4 37.2 29.0
Company use 8.0 15.3 10.4 9.9 8.7
- -----------------------------------------------------------------------------------------------------------------------------
Sold and transported to utility customers 2,801.0 2,891.9 2,619.6 2,604.2 2,664.2
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Cost of Gas (Millions of Dollars)
Natural gas purchased $ 532.5 $ 547.1 $ 389.4 $ 550.1 $ 595.7
Natural gas withdrawn from storage 175.7 171.6 182.4 186.7 105.3
- -----------------------------------------------------------------------------------------------------------------------------
Cost of gas - utility operations 708.2 718.7 571.8 736.8 701.0
- -----------------------------------------------------------------------------------------------------------------------------
Cost of gas - other 58.3 6.8 2.3
- -----------------------------------------------------------------------------------------------------------------------------
Total cost of gas $ 766.5 $ 725.5 $ 574.1 $ 736.8 $ 701.0
- -----------------------------------------------------------------------------------------------------------------------------
Utility Plant - End of Year (Millions of Dollars)
Gross plant $ 2,069.1 $ 1,969.0 $ 1,919.9 $ 1,833.2 $ 1,740.6
Net plant $ 1,420.3 $ 1,361.2 $ 1,336.6 $ 1,279.6 $ 1,217.9
Gross plant investment per utility customer
(Thousands of Dollars) $ 1.5 $1.4 $ 1.4 $ 1.4 $ 1.4
Capital Expenditures (Millions of Dollars) $ 147.7 $ 132.5 $ 121.7 $ 122.5 $ 122.2
Gas Mains - Miles of 3" Equivalent 30,261 29,045 28,520 27,972 27,390
Employees - Average 2,986 2,942 3,249 3,764 3,764
Average Btu Content of Natural Gas 1,024 1,024 1,027 1,032 1,027
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Gas Supply Services, Pricing and Competition
General. AGL is served directly by four interstate pipelines: Southern
Natural Gas Company (Southern), South Georgia Natural Gas Company (South
Georgia), Transcontinental Gas Pipe Line Company (Transco) and East Tennessee
Natural Gas Company (East Tennessee) in combination with its upstream pipeline,
Tennessee Gas Pipeline Company (Tennessee), the parent company and primary
source of gas for East Tennessee.
As a result of the FERC's Order 636 deregulation initiative, AGL, along
with the nation's other local distribution companies, bear responsibility for
gas supply strategy decisions which are ultimately subject to review by state
regulatory commissions. AGL's business is highly seasonal in nature and heavily
dependent on weather because of the substantial use of natural gas for heating
purposes.
Gas Supply Plan Filing. Pursuant to legislation enacted by the Georgia
General Assembly, each investor-owned local gas distribution company is required
to file on or before August 1 of each year a proposed gas supply plan for the
subsequent year, as well as a proposed cost recovery factor.
AGL's 1997 Gas Supply Plan, that was approved by the Georgia Commission
included limited gas supply hedging activities. On August 1, 1997, AGL filed its
Gas Supply Plan for fiscal year 1998, which consists of gas supply,
transportation and storage options designed to provide reliable service to firm
customers at the best cost. On September 12, 1997, the Georgia Commission
approved the entire supply portfolio contained in the Gas Supply Plan for fiscal
year 1998.
As part of the Gas Supply Plan for fiscal year 1998, AGL is authorized to
enter into an expanded program to hedge up to one half of its estimated monthly
winter wellhead purchases and establish a price for those purchases at an amount
other than the beginning of the month index price to create an additional
element of diversification and price stability. The financial results of all
hedging activities are passed through to firm service customers under the
purchased gas provisions of AGL's rate schedules. Accordingly, there is no
earnings impact as a result of the hedging program.
Additionally, the approved plan contains a gas supply incentive mechanism
for off-system sales and capacity release revenues that is consistent with the
incentive mechanism in the Natural Gas Competition and Deregulation Act (Georgia
Gas Act), signed into law on April 14, 1997, whereby AGL and its firm customers
share in any benefits produced from the incremental use of gas supply assets.
Firm Pipeline Transportation and Underground Storage. The table on the
following page shows the amount of firm transportation and describes the types
and amounts of underground storage that both AGL and Chattanooga have elected or
been assigned under Order 636. The table also shows services that were not
affected by the implementation of Order 636.
5
<PAGE>
<TABLE>
Production Area Supplemental
Maximum Underground Underground
Firm Storage Maximum Storage Maximum
Transportation Withdrawal Withdrawal Expiration
DT/Day (1) DT/Day (2) DT/Day (3) Date
------------ -------------- -------------- ---------
<S> <C> <C> <C> <C>
ATLANTA GAS LIGHT COMPANY
Southern
Firm Transportation 617,559 August 31, 2002
Firm Transportation 46,223 August 31, 2003
Firm Transportation 111,192 April 30, 2007
Firm Transportation 1,021 June 30, 2007
CSS 390,113 August 31, 2002
CSS 24,640 August 31, 2003
ANR - 50 113,000 March 31, 2003
ANR - 100 55,500 March 31, 2003
Transco
Firm Transportation 111,366 March 31, 2010
Firm Transportation 15,525 July 1, 2005
Firm Transportation 6,440 March 17, 2008
Firm Transportation 4,658 October 31, 2009
WSS 73,059 March 31, 2010
ESS 31,357 October 31, 2013
GSS 59,012 June 30, 2001 (4)
GSS 70,296 March 31, 2013 (4)
LSS 18,040 March 31, 1994 (5)
SS-1 20,918 March 31, 2009
LGA 42,975 October 31, 1991 (5)
Cove Point LNG 69,000 April 15, 2001
Supplemental Peaking 15,000 March 31, 2001
Tennessee/East Tennessee
Firm Transportation 63,860 November 1, 2000
FS Storage 30,572 November 1, 2000
CNG 3,404 March 31, 2001
South Georgia
Firm Transportation 12,115 April 30, 2007
ANR - 100 708 March 31, 2003
CSS 6,906 February 28, 1998
============ ============== ==============
Total 989,959 560,051 464,449
============ ============== ==============
CHATTANOOGA GAS COMPANY
Southern
Firm Transportation 4,747 August 31, 2003
Firm Transportation 14,346 August 31, 2003
Firm Transportation 3,369 April 30, 2007
Firm Transportation 5,105 November 1, 2006
CSS 14,346 August 31, 2003
Tennessee/East Tennessee
Firm Transportation 46,350 November 1, 2000
FS Storage 21,400 November 1, 2000
CNG 2,471 March 31, 2001
============ ==============
Total 73,917 38,217
============ ==============
<FN>
(1) Contracts that formerly were stated in thousands of cubic feet (Mcf) now
are stated in dekatherms (DT), in accordance with new Gas Industry
Standards Board standards. All contracts of AGL and Chattanooga have been
amended to comply with the new standards.
(2) Production area storage requires a complementary amount of the firm
transportation capacity identified in the first column to move storage gas
withdrawals to AGL's service area.
(3) Supplemental underground storage withdrawals include delivery to AGL's
service area and do not require any of the firm transportation capacity
identified in the first column. Injections into supplemental underground
storage require incremental transportation, primarily from transportation
identified in Column 1.
(4) Expiration dates are shown for these contracts although contracts have not
yet been executed. AGL is operating under Natural Gas Act (NGA)
certificate authority while negotiating these contracts.
(5) AGL is operating under NGA certificate authority while negotiating these
contracts.
</FN>
</TABLE>
6
<PAGE>
Wellhead Supply. AGL and Chattanooga have entered into firm wellhead
supply contracts for 378,205 DT/day and 34,696 DT/day, respectively, to supply
their firm transportation and underground storage capacity. AGL is finalizing
contract negotiations for additional firm wellhead supply contracts of 130,000
DT/day. Those contracts will be completed during the first quarter of 1998. AGL
also purchases spot market gas as needed during the year.
Liquefied Natural Gas. To meet the demand for natural gas on the coldest
days of the winter months, AGL must also maintain sufficient supplemental
quantities of liquefied natural gas (LNG) in its supply portfolio. AGL's three
strategically located Georgia-based LNG plants -- north and south of Atlanta and
near Macon -- provide a combined maximum daily supplement of approximately
815,000 Mcf and a combined usable storage capacity of 72 million gallons,
equivalent to 5,952,000 Mcf. Chattanooga's LNG plant provides a maximum daily
supplement of approximately 90,000 Mcf and has a usable storage capacity of 13
million gallons, equivalent to 1,076,000 Mcf.
Competition
Alternative Fuels and Competitive Pricing. AGL competes to supply natural
gas to interruptible customers who are capable of switching to alternative
fuels, including propane, fuel and waste oils, electricity and, in some cases,
combustible wood by-products. AGL also competes to supply gas to interruptible
customers who might seek to bypass its distribution system.
AGL can price distribution services to interruptible customers four ways.
First, multiple rates are established under the rate schedules of AGL's tariff
approved by the Georgia Commission. If an existing tariff rate does not produce
a price competitive with a customer's relevant competitive alternative, three
alternate pricing mechanisms exist: Negotiated Contracts, Interruptible
Transportation and Sales Maintenance (ITSM) discounts and Special Contracts.
On February 17, 1995, the Georgia Commission approved a settlement that
permits AGL to negotiate contracts with customers who have the option of
bypassing AGL's facilities (Bypass Customers) to receive natural gas from other
suppliers. The bypass avoidance contracts (Negotiated Contracts) can be
renewable, provided the initial term does not exceed five years, unless a longer
term specifically is authorized by the Georgia Commission. The rate provided by
the Negotiated Contract may be lower than AGL's filed rate, but not less than
AGL's marginal cost of service to the potential Bypass Customer. Service
pursuant to a Negotiated Contract may commence without Georgia Commission
action, after a copy of the contract is filed with the Georgia Commission.
Negotiated Contracts may be rejected by the Georgia Commission within 90 days of
filing; absent such action, however, the Negotiated Contracts remain in effect.
All of the Negotiated Contracts filed to date with the Georgia Commission are in
effect.
The settlement also provides for a bypass loss recovery mechanism to
operate until the earlier of September 30, 1998, or the effective date of new
rates for AGL resulting from a general rate case. Under the recovery mechanism,
AGL is allowed to recover from other customers 75% of the difference between (a)
the nongas cost revenue that was received from the potential Bypass Customer
during the most recent twelve-month period and (b) the nongas cost revenue that
is calculated to be received from the lower Negotiated Contract rate applied to
the same volumetric level. Concerning the remaining 25% of the difference, AGL
is allowed to retain 44% of firm customers' share of capacity release revenues
in excess of $5 million until AGL is made whole for discounts from Negotiated
Contracts.
In addition to Negotiated Contracts, which are designed to serve existing
and potential Bypass Customers, AGL's ITSM Rider continues to permit discounts
for short-term transactions to compete with alternative fuels. Revenue
shortfalls, if any, from interruptible customers as measured by the test-year
interruptible revenues
7
<PAGE>
determined by the Georgia Commission in AGL's 1993 rate case, will continue to
be recovered under the ITSM Rider.
The settlement approved by the Georgia Commission also provides that AGL
may file contracts (Special Contracts) for Georgia Commission approval if the
service cannot be provided through the ITSM Rider, existing rate schedules, or
Negotiated Contract procedures. A Special Contract, for example, could involve
AGL providing a long-term service contract to compete with alternative fuels
where physical bypass is not the relevant competition.
Pursuant to the approved settlement, AGL has filed and is providing
service pursuant to more than 50 Negotiated Contracts. Additionally, the Georgia
Commission has approved Special Contracts between AGL and seven interruptible
customers.
On November 27, 1996, the TRA approved an experimental rule allowing
Chattanooga to negotiate contracts with large commercial and industrial
customers who have long-term competitive options, including bypass. The
experimental rule provides that before any such customer is allowed a discounted
rate, both the large customer and Chattanooga must petition the TRA for prior
approval of the rates set forth in the contract. On October 7, 1997, the TRA
denied petitions filed by Chattanooga and four large customers for discounted
rates pursuant to the experimental rule upon a finding that customer bypass was
not imminent.
Natural Gas Competition and Deregulation Act (Georgia Gas Act). For
information regarding competitive initiatives as a result of the implementation
of the Georgia Gas Act, see Part I, Item 1, "Business - State Regulatory
Matters" immediately below.
State Regulatory Matters
Atlanta Gas Light Company - Unbundling and Rate Filing. The 1997 session
of the Georgia General Assembly enacted legislation that provides a legal
framework for comprehensive deregulation of many aspects of the natural gas
business in Georgia. The Georgia Gas Act was signed into law by Governor Zell
Miller on April 14, 1997.
On November 26, 1997, AGL filed with the Georgia Commission notice of its
election to be subject to this new law and to establish separate rates for
unbundled services. AGL filed contemporaneously an application with the Georgia
Commission to have its distribution rates, charges, classifications and services
regulated pursuant to performance-based regulation. The filing requests an
increase in revenues of $18.6 million annually. The requested increase includes
the costs to support changes in AGL's business systems to ensure reliable
service to customers and that the systems are in place to serve new gas
suppliers in the competitive marketplace.
Within seven months from the date of such filing, the Georgia Commission
must issue an order approving the plan as filed or with modification. Retail
marketing companies, including AGL affiliates, may now file with the Georgia
Commission separate certificate of authority applications to sell natural gas to
firm customers connected to AGL's delivery system. It is currently anticipated
that marketers who become certificated by the Georgia Commission may begin
offering natural gas sales services to customers of AGL by November 1998.
The Georgia Gas Act provides a transition period leading to a condition
of effective competition in all natural gas markets. AGL, as an electing
distribution company, will unbundle all services to its natural gas customers,
allocate firm delivery capacity to certificated marketers selling the gas
commodity and create a secondary market for interruptible transportation
capacity. Certificated marketers, including nonregulated affiliates of AGL, will
compete to sell natural gas to all customers at market-based prices. AGL will
continue to provide intrastate delivery of gas to end users through its existing
system, subject to continued rate regulation by the Georgia Commission. As a
result of the election to be subject to the Georgia Gas Act, it is expected that
the
8
<PAGE>
purchased gas adjustment provisions included in AGL's rate schedules will be
discontinued during fiscal 1999. The November 26, 1997, filing contains a
provision to true-up any over-recovery or under-recovery that may exist at the
time such purchased gas adjustment provisions are discontinued. Accordingly, AGL
will no longer defer any over-recoveries or under-recoveries of gas costs when
the purchased gas adjustment provisions are discontinued. In addition, the
Georgia Commission will continue to regulate safety, access and quality of
service pursuant to an alternative form of regulation.
The Georgia Gas Act provides marketing standards and rules of business
practice to ensure the benefits of a competitive natural gas market are
available to all customers on AGL's system. The act imposes on marketers an
obligation to serve with a corresponding universal service fund that provides a
funding mechanism for uncollectible accounts and enables AGL to expand its
facilities and serve the public interest.
Additionally, the Georgia Gas Act requires that the Georgia Commission
issue rules and regulations by December 31, 1997, for certification of marketers
and assignment of firm customers to marketers for customers who ultimately do
not select a marketer after competition is fully developed.
AGL supported the regulatory initiatives provided for by the Georgia Gas
Act for several reasons. AGL currently makes no profit on the purchase and sale
of gas because actual gas procurement costs are passed through to customers
under the purchased gas provisions of AGL's rate schedules. Earnings are
provided through revenues received for intrastate transportation of the
commodity. Consequently, allowing AGL to cease its sales service function and
the associated sales obligation would not affect AGL's ability to earn a return
on its distribution system investment. Allowing gas to be sold to all customers
by numerous retail marketing companies, including nonregulated subsidiaries of
AGL Resources, would provide new business opportunities.
On May 21, 1996, the Georgia Commission adopted a Policy Statement
concerning changes in state regulatory guidelines to respond to trends toward
increased competition in natural gas markets. Consistent with the specific goals
expressed in the Policy Statement, AGL filed on June 10, 1996, the Natural Gas
Service Provider Selection Plan (the Plan), a comprehensive plan for serving
interruptible markets. The Plan proposed further unbundling of services to
provide large customers more service options and the ability to purchase only
those services they required. As a result of various procedural delays, a
decision on the proposed Plan had not been reached by the Georgia Commission
prior to AGL's election to be subject to the Georgia Gas Act. Since
implementation of the Plan would be unlikely to occur significantly in advance
of implementation of AGL's election under the Georgia Gas Act, the Plan could
not serve as a meaningful opportunity for AGL, marketers and end-use customers
to gain experience with pooling and aggregation of loads. Consequently,
simultaneous with the filings of the notice of election under the Georgia Gas
Act on November 26, 1997, AGL filed with the Georgia Commission a notice of
withdrawal of the Plan.
Chattanooga Gas Company - Rate Filing. On May 1, 1997, Chattanooga filed
a rate proceeding with the TRA seeking an increase in revenues of $4.4 million
annually. Revenues from the rate increase would be used to improve and expand
Chattanooga's natural gas distribution system; to recover increased operation,
maintenance and tax expenses; and, to provide a reasonable return to investors.
Under the TRA's rules and regulations, the effective date of the requested new
rates was suspended until November 1, 1997. Hearings in the rate proceeding were
scheduled to begin on October 13, 1997. On October 3, 1997, all parties to the
proceeding filed a motion with the TRA requesting that the hearings be continued
and that the suspended effective date for new rates be extended to afford an
opportunity to pursue settlement discussions. On October 7, 1997, the TRA
granted the motion. The TRA has rescheduled the hearings in this case to begin
on February 9, 1998.
AGL cannot predict the outcome of those state regulatory proceedings nor
determine the ultimate effect, if any, such proceeding may have on AGL.
9
<PAGE>
Federal Regulatory Matters
FERC Order 636 Transition Costs Settlement Agreements. During the past
decade, the FERC has dramatically transformed the natural gas industry through a
series of generic orders promoting competition in the industry. As part of this
transformation, the interstate pipelines that serve AGL have been required to
unbundle their transportation and gas supply services and to provide
transportation service on a nondiscriminatory basis for gas supplied by numerous
gas producers or other third parties. The FERC is considering further changes to
its regulatory structure, including, but not limited to, potential revisions to
its policies governing secondary market transactions and revisions to permit
pipelines and their customers to establish individually negotiated terms and
conditions of service that depart from pipeline tariff rules. AGL cannot predict
the likelihood that such initiatives will be adopted or the effect of those
potential changes upon AGL.
Based on filings with the FERC by its pipeline suppliers, AGL currently
estimates that its total portion of transition costs from all of its pipeline
suppliers will be approximately $105.8 million. Approximately $92.2 million of
such costs has been incurred by AGL as of September 30, 1997, and is being
recovered from its customers under the purchased gas provisions of AGL's rate
schedules.
In conjunction with the regulatory changes mandated by the FERC, AGL has
been required to pay transition costs associated with the unbundling of its
interstate pipeline suppliers, including substantial gas supply realignment
(GSR) costs billed to AGL by Southern and Tennessee. AGL and other parties have
entered into restructuring settlements with Southern and Tennessee which resolve
all transition cost issues for those pipelines. Pursuant to the Southern
settlement, AGL's share of Southern's transition costs is estimated to be $87.6
million, $79.4 million of which has been incurred by AGL as of September 30,
1997. The Southern settlement has been approved by the FERC, but is subject to
judicial review; thus, AGL's ultimate liability for Southern's transition costs
is not finally established. Pursuant to the Tennessee settlement, AGL's share of
Tennessee's transition costs is estimated to be $14.7 million, $9.6 million of
which has been incurred by AGL as of September 30, 1997. The Tennessee
settlement is final, as it has been approved by the FERC and is no longer
subject to judicial review. See Part I, Item 1, "Business - Gas Supply Services,
Pricing and Competition" in this Form 10-K for further discussion of recovery of
gas costs.
FERC Rate Proceedings. AGL also is participating in various rate
proceedings before the FERC involving applications for rate changes filed by its
pipeline suppliers. These proceedings typically involve numerous issues
concerning the pipeline's cost of service, allocation of costs to different
services, and rate design. A variety of cost allocation and rate design
proposals typically are advanced by the pipeline's customers, making it
impossible to forecast the precise effect of any given rate change filing on
AGL's operations. AGL is authorized to recover the costs paid to its pipeline
suppliers from its customers through the purchased gas provisions of its rate
schedules. To the extent that these cases have not been settled, as described
below, the rates filed in these proceedings have been accepted, and made
effective subject to refund and the outcome of the FERC proceedings.
Southern. As noted above, the FERC has approved the restructuring
settlement agreement between AGL, Southern and other customers that resolves all
issues between AGL and Southern for Southern's outstanding rate proceedings,
subject to judicial review.
Tennessee. AGL is involved in two ongoing Tennessee rate proceedings.
The FERC has approved a comprehensive settlement providing for a reduction of
approximately $83 million in the cost of service underlying Tennessee's rates in
effect since July 1, 1995. The FERC's orders approving the settlement are being
challenged on judicial review. AGL's estimated annual reduction in cost is $2.2
million. The FERC's orders in a prior Tennessee rate case involving rate design
changes to be effective prospectively are being challenged on judicial review.
10
<PAGE>
Transco. AGL is involved in three ongoing Transco rate proceedings. The
FERC has approved a partial settlement providing for a reduction of
approximately $58 million in the cost of service underlying Transco's rates that
were in effect between September 1, 1995 and April 30, 1997. The estimated
annual reduction in costs to AGL is $2.4 million. The partial settlement also
reserves certain issues for litigation, which is ongoing. The FERC's orders
approving the settlement are being challenged on judicial review. In addition,
parties are litigating a subsequent Transco rate filing, under which Transco has
increased its rates by approximately $51 million effective May 1, 1997, subject
to refund and a hearing. Finally, the FERC's orders in a prior Transco rate
proceeding are being challenged on judicial review.
ANR Pipeline. In the ANR Pipeline Company (ANR) rate case, a FERC
administrative law judge has issued an initial decision upholding AGL's position
that ANR's proposed rate was excessive for certain transportation services
Southern purchases from ANR for AGL's benefit. Under the initial decision, which
is subject to approval by the FERC, Southern would receive refunds from ANR, as
well as future rate reductions, which would flow through to AGL. The FERC has
not yet acted upon the initial decision.
AGL cannot predict the outcome of those federal proceedings nor
determine the ultimate effect, if any, such proceedings may have on AGL.
Year 2000
AGL Resources uses several computer application programs written over
many years using two-digit year fields to define the applicable year, rather
than four-digit year fields. Programs that are time-sensitive may recognize a
date using "00" as the year 1900 rather than the year 2000. That
misinterpretation of the year could result in incorrect computation or computer
shutdown.
AGL Resources has identified the systems that could be affected by the
year 2000 issue and is developing a plan to resolve the issue. The plan
contemplates, among other things, the replacement or modification of existing
data processing systems as necessary. Management is in the process of developing
cost estimates associated with the implementation of the plan. Those costs are
not expected to significantly impact AGL Resources' consolidated financial
statements.
Management believes that with the appropriate modification, AGL Resources
will be able to operate its time-sensitive business systems through the turn of
the century.
ITEM 2. PROPERTIES
AGL Resources considers its property and the property of its subsidiaries
to be well maintained, in good operating condition and suitable for their
intended purposes.
AGL's properties consist primarily of distribution systems and related
facilities and local offices serving 235 cities and surrounding areas in the
State of Georgia and 12 cities and surrounding areas in the State of Tennessee.
As of September 30, 1997, AGL had 26,379 miles of mains and 5,952,000 Mcf of LNG
storage capacity in three LNG plants to supplement the gas supply in very cold
weather or emergencies. Chattanooga
had 1,373 miles of mains and 1,076,000 Mcf of LNG storage capacity in its one
LNG plant. At September 30, 1997, AGL's gross utility plant amounted to
approximately $2.1 billion.
AGL Resources' gross nonutility property amounted to approximately $106
million, consisting principally of assets related to Service Company.
11
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The nature of the business of AGL Resources and its subsidiaries
ordinarily results in periodic regulatory proceedings before various state and
federal authorities and/or litigation incidental to the business. For
information regarding regulatory proceedings, see the preceding sections in Part
I, Item 1, "Business - State Regulatory Matters" and "Business - Federal
Regulatory Matters."
Environmental Matters
AGL has identified nine sites in Georgia where it currently owns all or
part of a manufactured gas plant (MGP) site. In addition, AGL has identified
three other sites in Georgia which AGL does not own, but that may have been
associated with the operation of MGPs by AGL or its predecessors.
Those sites are potentially subject to a variety of regulatory programs.
AGL's response to MGP sites in Georgia is proceeding under two state regulatory
programs: the Georgia Hazardous Waste Management Act (HWMA) and the Hazardous
Site Response Act (HSRA). Some degree of response action, under one or both of
those programs, is likely to be required at most of the Georgia sites.
AGL also has identified three sites in Florida which may have been
associated with AGL or its predecessors. AGL does not own any of the former MGP
sites in Florida. However, AGL has been contacted by the current owners of two
of those sites. In addition, AGL has received a "Special Notice Letter" from the
U.S. Environmental Protection Agency (EPA) with respect to one of the two sites.
AGL expects that some degree of response action is likely to be required at
those two sites. AGL currently is negotiating with both regulatory authorities
and other potentially responsible parties to determine the extent of its
responsibility for the two sites.
AGL has estimated the investigation and remediation expenses likely to be
associated with the former MGP sites. First, AGL has identified several sites
where it has concluded that no significant response actions are reasonably
likely in the foreseeable future and therefore has not made any cost projections
for these sites. Second, since response cost liabilities are often spread among
potentially responsible parties, AGL's ultimate liability will, in some cases,
be limited to AGL's equitable share of such expenses under the circumstances.
Therefore, where reasonably possible, AGL has attempted to estimate the range of
AGL's equitable share, given current cost sharing arrangements, combined with
AGL's current knowledge of relevant facts, including the current methods of
equitable apportionment and the solvency of potential contributors. Where such
an estimation was not reasonably possible, AGL has estimated a range of expenses
without adjustment for AGL's equitable share. Finally, AGL has, with the
assistance of outside consultants, prepared estimates of the range of future
investigation and remediation costs for those sites where further action appears
likely.
Applying these concepts to those sites where some future action presently
appears reasonably possible, AGL currently estimates that the future cost to AGL
of investigating and remediating the former MGP sites could be as low as $37.3
million or as high as $76.5 million. That range does not include other expenses,
such as unasserted property damage claims, for which AGL may be held liable, but
for which neither the existence nor the amount of such liabilities can be
reasonably forecast. Within the stated range of $37.3 million
to $76.5 million, no amount within the range can be identified reliably as a
better estimate than any other estimate. Therefore, a liability at the low end
of that range has been recorded in the financial statements.
AGL has two means of recovering the expenses associated with the former
MGP sites. First, the Georgia Commission has approved the recovery by AGL of
Environmental Response Costs, as defined, pursuant to an Environmental Response
Cost Recovery Rider (ERCRR). For purposes of the ERCRR, Environmental Response
Costs include investigation, testing, remediation and litigation costs and
expenses or other liabilities relating to or arising from MGP sites. A
regulatory asset in the amount of $55 million has been recorded in the financial
statements to reflect the recovery of those costs through the ERCRR.
12
<PAGE>
In connection with the ERCRR, the staff of the Georgia Commission has
undertaken a financial and management process audit related to the MGP sites,
cleanup activities at the sites, and environmental response costs that have been
incurred for purposes of the ERCRR. On October 10, 1996, the Georgia Commission
issued an order to prohibit funds collected through the ERCRR from being used
for payment of any damage award, including punitive damages, as a result of any
litigation associated with the MGP sites in which AGL is involved. On October
22, 1997, the Georgia Commission issued an order rescinding its 1996 order. The
Georgia Commission has scheduled a hearing for February 16, 1997 to consider
three issues relating to the ERCRR. Specifically, the Georgia Commission is to
consider whether the term "Environmental Response Costs" should include punitive
damages, whether AGL should be required to provide an annual accounting for
revenue recovered from customers through the ERCRR, and whether a schedule
should be established for site remediation.
Second, AGL intends to seek recovery of appropriate costs from its
insurers and other potentially responsible parties. During fiscal 1997 AGL
recovered $5.7 million from its insurance carriers and other potentially
responsible parties. In accordance with provisions of the ERCRR, AGL recognized
other income of $1.4 million and established regulatory liabilities for the
remainder of the recoveries.
On February 10, 1995, a class action lawsuit captioned Trinity Christian
Methodist Episcopal Church, et al. v. Atlanta Gas Light Company, No. 95-RCCV-93,
was filed in the Superior Court of Richmond County, Georgia, seeking to recover
for damage to property owned by persons adjacent to and nearby the former
manufactured gas plant site in Augusta, Georgia. On December 13, 1996, the
parties reached a preliminary settlement, which was approved by the Court on
April 15, 1997. Pursuant to the settlement, there is a claims process before an
umpire to determine either the full fair market value of properties tendered to
AGL or the diminution in fair market value of properties not tendered to AGL.
Settlements have been paid to 188 property owners in the class totaling
approximately $2.9 million, including legal fees and expenses of the plaintiffs.
There are seven settlements yet to be paid. One settlement of approximately
$64,000, including attorney's fees, is pending reconsideration, and AGL has
filed motions to vacate six settlements totaling approximately $4.3 million.
Orders were entered denying the motions to vacate. AGL has filed notices of
appeal with the Georgia Court of Appeals seeking to reverse the denial of the
motions to vacate.
Other Legal Proceedings
With regard to other legal proceedings, AGL Resources is a party, as both
plaintiff and defendant, to a number of other suits, claims and counterclaims on
an ongoing basis. Management believes that the outcome of all litigation in
which it is involved will not have a material adverse effect on the consolidated
financial statements of AGL Resources.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
13
<PAGE>
ITEM 4.(A) EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below, in accordance with General Instruction G(3) of Form 10-K
and Instruction 3 of Item 401(b) of Regulation S-K, is certain information
regarding the executive officers of AGL Resources. Unless otherwise indicated,
the information set forth is as of September 30, 1997.
David R. Jones, age 60, President and Chief Executive Officer of AGL Resources
since January 1996; Chairman and Chief Executive Officer of AGL since August
1997; President and Chief Executive Officer of AGL from 1988 until August 1997;
Chairman and Chief Executive Officer of Service Company since August 1997;
President and Chief Executive Officer of Service Company from August 1996 until
August 1997; director of AGL Resources since November 1995; director of AGL
since January 1985; and Chairman of the Board of Directors of the Federal
Reserve Bank of Atlanta.
Charles W. Bass, age 50, Executive Vice President and Chief Operating Officer of
AGL Resources since August 1996; Executive Vice President Market Service and
Development of AGL from 1994 until 1996; and Senior Vice President Governmental
and Regulatory Affairs of AGL from 1988 until 1994.
Thomas H. Benson, age 52, Executive Vice President of AGL Resources since August
1996; President and Chief Operating Officer of AGL since August 1997; Executive
Vice President and Chief Operating Officer of AGL from August 1996 until August
1997; Executive Vice President Customer Operations of AGL from 1994 until 1996;
and Senior Vice President Operations and Engineering of AGL from 1988 until
1994.
Robert L. Goocher, age 47, Executive Vice President of AGL Resources since
August 1996; President and Chief Operating Officer of Service Company since
August 1997; Executive Vice President and Chief Operating Officer of Service
Company from August 1996 until August 1997; Executive Vice President Business
Support of AGL from 1994 until 1996; Senior Vice President and Chief Financial
Officer of AGL from 1992 until 1994; and Vice President Finance of AGL from 1991
until 1992.
Charlie J. Lail, age 58, Senior Vice President Operations Improvement of AGL
since 1994; Senior Vice President Divisions of AGL from 1992 until 1994; and
Vice President Divisions of AGL from 1991 until 1992.
Richard H. Woodward, age 50, Vice President of AGL Resources and President of
AGL Investments since August 1996; Senior Vice President Business Development of
AGL from 1994 until 1996; and Senior Vice President Corporate Services of AGL
from 1988 until 1994.
Michael D. Hutchins, age 46, Vice President Operations and Engineering of AGL
since 1994; and Vice President Engineering of AGL from 1989 until 1994.
Clayton H. Preble, age 50, Vice President of AGL Resources since August 1996;
President of The Energy Spring since July 1996; Vice President Marketing of AGL
from November 1994 until July 1996; Vice President Corporate Planning of AGL
from February 1994 until November 1994; Director Corporate Planning of AGL from
1992 until 1994; and Northeast Georgia Division manager of AGL from 1991 until
1992.
J. Michael Riley, age 46, Vice President and Chief Financial Officer of AGL
Resources since August 1996 and Vice President and Chief Financial Officer of
AGL since November 1996; Vice President Finance and Accounting of AGL from 1994
until 1996; and Vice President and Controller of AGL from 1991 until 1994.
There are no family relationships among the executive officers.
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information relating to the market for holders of and dividends on AGL
Resources' common stock is set forth under the caption "Shareholder Information"
on page 55 in the AGL Resources' 1997 Annual Report. Such information is
incorporated herein by reference. Portions of the 1997 Annual Report are filed
as Exhibit 13 to this report.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for AGL Resources for each year of the five-year
period ended September 30, 1997 is set forth under the caption "Selected
Financial Data" on page 51 of AGL Resources' 1997 Annual Report referred to in
Item 5 above. Such five-year selected financial data is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
A discussion of AGL Resources' results of operations and financial
condition is set forth under the caption "Management's Discussion and Analysis
of Results of Operations and Financial Condition" on pages 22 through 31 of AGL
Resources' 1997 Annual Report referred to in Item 5 above. Such discussion is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of AGL Resources, which are set forth
on pages 32 through 50 of AGL Resources' 1997 Annual Report referred to in Item
5 above, are incorporated herein by reference:
Statements of Consolidated Income for the years ended September 30, 1997,
1996 and 1995.
Statements of Consolidated Cash Flows for the years ended September 30,
1997, 1996 and 1995.
Consolidated Balance Sheets as of September 30, 1997 and 1996.
Statements of Consolidated Common Stock Equity for the years ended
September 30, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
The remainder of this page was intentionally left blank.
15
<PAGE>
The supplementary financial information required by Item 302 of
Regulation S-K is set forth in Note 15 in Notes to Consolidated Financial
Statements in AGL Resources' 1997 Annual Report to Shareholders.
The following supplemental data is submitted herewith:
Financial Statement Schedule - Valuation and Qualifying Account -
Allowance for Uncollectible Accounts.
Independent Auditors' Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
The remainder of this page was intentionally left blank.
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to nominees for director of AGL Resources is set
forth under the caption "Election of Directors" in the Proxy Statement for the
1998 Annual Meeting of Shareholders. Such information is incorporated herein by
reference. The definitive Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days after AGL Resources' fiscal year end.
Information relating to the executive officers of AGL Resources, pursuant to
Instruction 3 of Item 401(b) of Regulation S-K and General Instruction G(3) of
Form 10-K, is set forth at Part I, Item 4(A) of this report under the caption
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is set forth under the
caption "Executive Compensation" in the Proxy Statement referred to in Item 10
above. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to ownership of common stock of AGL Resources by
certain persons is set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement referred to in Item 10
above. Such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to existing or proposed relationships or
transactions between AGL Resources and any affiliate of AGL Resources is set
forth under the caption "Compensation Committee Interlocks and Insider
Participation" in the Proxy Statement referred to in Item 10 above. Such
information is incorporated herein by reference.
The remainder of this page was intentionally left blank.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Documents Filed as Part of This Report:
1. Financial Statements
Included under Item 8 are the following financial statements:
Statements of Consolidated Income for the Years Ended September
30, 1997, 1996 and 1995.
Statements of Consolidated Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995.
Consolidated Balance Sheets as of September 30, 1997 and 1996.
Statements of Consolidated Common Stock Equity for the Years
Ended September 30, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. Supplemental Consolidated Financial Schedules for Each of the
Three Years in the Period Ended September 30, 1997:
Independent Auditors' Report.
II. Valuation and Qualifying Account--Allowance for Uncollectible
Accounts.
Schedules other than those referred to above are omitted and are
not applicable or not required, or the required information is
shown in the financial statements or notes thereto.
3. Exhibits
Where an exhibit is filed by incorporation by reference to a
previously filed registration statement or report, such
registration statement or report is identified in parentheses.
3.1 Amended and Restated Articles of Incorporation filed January
5, 1996, with the Secretary of State of the State of Georgia
(Exhibit B, Proxy Statement and Prospectus filed as a part of
Amendment No. 1 to Registration Statement on Form S-4, No.
33-99826).
18
<PAGE>
3.2 Bylaws, as amended and restated on February 7, 1997.
4.1 Specimen form of Common Stock certificate (Exhibit 4.1, Form
10-K for the fiscal year ended September 30, 1996).
4.2 Specimen form of Right certificate (Exhibit 1, 8-K filed March
6, 1996).
4.3 Indenture, dated as of December 1, 1989, between Atlanta Gas
Light Company and Bankers Trust Company, as Trustee (Exhibit
4(a), Atlanta Gas Light Company Registration Statement on Form
S-3, No. 33-32274).
4.4 First Supplemental Indenture, dated as of March 16, 1992,
between Atlanta Gas Light Company and NationsBank of Georgia,
National Association, as Successor Trustee (Exhibit 4(a),
Atlanta Gas Light Company Registration Statement on Form S-3,
No. 33-46419).
10.1 Executive Compensation Plans and Arrangements.
10.1.a Executive Severance Pay Plan of AGL Resources Inc. (Exhibit
10.1.a, Form 10-K for the fiscal year ended September 30,
1996).
10.1.b AGL Resources Inc. Long-Term Stock Incentive Plan of 1990
(Exhibit 10(ii), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1991).
10.1.c First Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990 (Exhibit B to the Atlanta Gas Light
Company Proxy Statement for the Annual Meeting of Shareholders
held February 5, 1993).
10.1.d Second Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990.
10.1.e Third Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990 (Exhibit C to the Proxy Statement and
Prospectus filed as a part of Amendment No. 1 to Registration
Statement on Form S-4, No. 33-99826).
10.1.f Fourth Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990.
10.1.g Fifth Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990.
10.1.h AGL Resources Inc. Nonqualified Savings Plan (Exhibit 10(a),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.1.i First Amendment to the AGL Resources Inc. Nonqualified Savings
Plan.
10.1.j Second Amendment to the AGL Resources Inc. Nonqualified
Savings Plan.
19
<PAGE>
10.1.k AGL Resources Inc. Non-Employee Directors Equity Compensation
Equity Plan (Exhibit B, Proxy Statement and Prospectus filed
as a part of Amendment No. 1 to Registration Statement on Form
S-4, No. 33-99826).
10.2 Service Agreement under Rate Schedule GSS dated April 13,
1972, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation (Exhibit 5(c), Registration No.
2-48297).
10.3 Service Agreement under Rate Schedule LG-A, effective August
16, 1974, between Atlanta Gas light Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 5(d),
Registration No. 2-58971).
10.4 Storage Transportation Agreement, dated June 1, 1979, between
Atlanta Gas Light Company and Southern Natural Gas Company,
(Exhibit 5(n), Registration No. 2-65487).
10.5 Letter of Intent dated September 18, 1987, between Atlanta Gas
Light Company and Jupiter Industries, Inc. relating to the
purchase by Atlanta Gas Light Company of the assets of the
Chattanooga Gas Company Division of Jupiter Industries, Inc.
(Exhibit 10(p), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1987).
10.6 Agreement for the Purchase of Assets dated April 5, 1988,
between Atlanta Gas Light Company and Jupiter Industries,
Inc., (Exhibit 10(q), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1988).
10.7 100 Day Storage Service Agreement, dated June 1, 1979, between
Atlanta Gas Light Company and South Georgia Natural Gas
Company, (Exhibit 10(r), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1989).
10.8 Service Agreement under Rate Schedule LSS, dated October 31,
1984, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation, (Exhibit 10(s), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1989).
10.9 Storage Transportation Agreement, dated June 1, 1979, between
Atlanta Gas Light Company and South Georgia Natural Gas
Company, (Exhibit 10(v), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1990).
10.10 Firm Seasonal Transportation Agreement, dated June 29, 1990,
between Atlanta Gas Light Company and Transcontinental Gas
Pipe Line Corporation, (Exhibit 10(bb), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1990).
20
<PAGE>
10.11 Service Agreement under Rate Schedule WSS, dated June 1, 1990,
between Atlanta Gas Light Company and Transcontinental Gas
Pipe Line Corporation, (Exhibit 10(cc), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1990).
10.12 Limited-Term Transportation Agreement Contract # A970 dated
April 1, 1988, between Atlanta Gas Light Company and CNG
Transmission Corporation, (Exhibit 10(bb), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1991).
10.13 Service Agreement System Contract #.2271 under Rate Schedule
FT, dated August 1, 1991, between Atlanta Gas Light Company
and Transcontinental Gas Pipe Line Corporation, (Exhibit
10(dd), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1991).
10.14 Service Agreement System Contract #.4984 dated August 1, 1991,
between Atlanta Gas Light Company and Transcontinental Gas
Pipe Line Corporation, (Exhibit 10(ee), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1991).
10.15 Service Agreement Contract #830810 under Rate Schedule FT,
dated March 1, 1992, between Atlanta Gas Light Company and
South Georgia Natural Gas Company (Exhibit 10(aa), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1992).
10.16 Firm Gas Transportation Contract #3699 under Rate Schedule FT,
dated February 1, 1992, between Atlanta Gas Light Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 10(dd),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1992).
10.17 Firm Gas Transportation Agreement under Rate Schedule FT-1,
dated July 1, 1992, between Atlanta Gas Light Company and East
Tennessee Natural Gas Company (Exhibit 10(ff), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1992).
10.18 Service Agreement Applicable to the Storage of Natural Gas
under Rate Schedule GSS, dated October 25, 1993, between
Atlanta Gas Light Company and CNG Transmission Corporation
(Exhibit 10(y), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1993).
10.19 Service Agreement Applicable to the Storage of Natural Gas
under Rate Schedule GSS, dated September, 1993, between
Chattanooga Gas Company and CNG Transmission Corporation
(Exhibit 10(z), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1993).
10.20 Firm Seasonal Transportation Agreement, dated February 1,
1992, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation amending Exhibit 10(bb), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1990 (Exhibit 10(cc), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1993).
21
<PAGE>
10.21 Service Agreement under Rate Schedule SS-1, dated April 1,
1988, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation (Exhibit 10(z), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1994).
10.22 Firm Gas Transportation Agreement #5049 under Rate Schedule
FT-A, dated November 1, 1993, between Atlanta Gas Light
Company and Tennessee Gas Pipeline Company (Exhibit 10(aa),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994).
10.23 Firm Gas Transportation Agreement #5051 under Rate Schedule
FT-A, dated November 1, 1993, between Chattanooga Gas Company
and Tennessee Gas Pipeline Company (Exhibit 10(bb), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994).
10.24 Gas Storage Contract #3998 under Rate Schedule FS, dated
November 1, 1993, between Atlanta Gas Light Company and
Tennessee Gas Pipeline Company (Exhibit 10(cc), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.25 Gas Storage Contract #3999 under Rate Schedule FS, dated
November 1, 1993, between Chattanooga Gas Company and
Tennessee Gas Pipeline Company (Exhibit 10(dd), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.26 Gas Storage Contract #3923 under Rate Schedule FS, dated
November 1, 1993, between Atlanta Gas Light Company and
Tennessee Gas Pipeline Company (Exhibit 10(ee), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.27 Gas Storage Contract #3947 under Rate Schedule FS, dated
November 1, 1993, between Chattanooga Gas Company and
Tennessee Gas Pipeline Company (Exhibit 10(ff), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.28 Service Agreement #902470 under Rate Schedule FT, dated
September 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(hh), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.29 Service Agreement #904460 under Rate Schedule FT, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(ii), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.30 Service Agreement #904480 under Rate Schedule FT, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(jj), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
22
<PAGE>
10.31 Service Agreement #904461 under Rate Schedule FT-NN, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(kk), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.32 Service Agreement #904481 under Rate Schedule FT-NN, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(ll), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.33 Service Agreement #S20140 under Rate Schedule CSS, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(mm), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.34 Service Agreement #S20150 under Rate Schedule CSS, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(nn), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.35 Service Agreement #904470 under Rate Schedule FT, dated
November 1, 1994, between Chattanooga Gas Company and Southern
Natural Gas Company (Exhibit 10(oo), Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1994).
10.36 Service Agreement #904471 under Rate Schedule FT-NN, dated
November 1, 1994, between Chattanooga Gas Company and Southern
Natural Gas Company (Exhibit 10(pp), Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1994).
10.37 Service Agreement #S20130 under Rate Schedule CSS, dated
November 1, 1994, between Chattanooga Gas Company and Southern
Natural Gas Company (Exhibit 10(qq), Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1994).
10.38 Firm Storage (FS) Agreement, dated November 1, 1994, between
Atlanta Gas Light Company and ANR Storage Company (Exhibit
10(a), Atlanta Gas Light Company Form 10-Q for the quarter
ended March 31, 1996).
10.39 Firm Storage (FS) Agreement, dated November 1, 1994, between
Atlanta Gas Light Company and ANR Storage Company (Exhibit
10(b), Atlanta Gas Light Company Form 10-Q for the quarter
ended March 31, 1996).
10.40 Firm Transportation Agreement, dated March 1, 1996, between
Atlanta Gas Light Company and Southern Natural Gas Company
amending Exhibits 10(jj), 10(ll) and 10(mm), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1994
(Exhibit 10(c), Atlanta Gas Light Company Form 10-Q for the
quarter ended March 31, 1996).
23
<PAGE>
10.41 Firm Transportation Agreement, dated March 1, 1996, between
Atlanta Gas Light Company and Southern Natural Gas Company
amending Exhibits 10(hh), 10(ii), 10(kk) and 10(nn), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(d), Atlanta Gas Light Company
Form 10-Q for the quarter ended March 31, 1996).
10.42 Firm Transportation Agreement, dated March 1, 1996, between
Chattanooga Gas Company and Southern Natural Gas Company
amending Exhibits 10(oo), 10(pp) and 10(qq), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30, 1994
(Exhibit 10(a), Atlanta Gas Light Company Form 10-Q for the
quarter ended June 30, 1996).
10.43 Firm Transportation Agreement, dated June 1, 1996, between
Atlanta Gas Light Company and Southern Natural Gas Company
amending Exhibit 10(ii), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(tt),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.44 Firm Storage Agreement, effective December 1, 1994, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company
amending Exhibit 10(ff), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(uu),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.45 Firm Storage Agreement, effective July 1, 1996, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company
amending Exhibit 10(ff), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(vv),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.46 Firm Storage Agreement, effective July 1, 1996, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company
amending Exhibit 10(dd), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(ww),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.47 Firm Transportation Agreement, dated September 26, 1994,
between Atlanta Gas Light Company and South Georgia Natural
Gas Company amending Exhibit 10(s), Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1994
(Exhibit 10(xx), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1995).
10.48 Firm Storage Agreement, effective July 1, 1996, between
Atlanta Gas Light Company and Tennessee Gas Pipeline Company
amending Exhibit 10(ee), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(yy),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
24
<PAGE>
10.49 Firm Storage Agreement, effective July 1, 1996, between
Atlanta Gas Light Company and Tennessee Gas Pipeline Company
amending Exhibit 10(cc), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(zz),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.50 Firm Storage Agreement, effective January 1, 1996, between
Atlanta Gas Light Company and Tennessee Gas Pipeline Company
amending Exhibit 10(z) and replacing Exhibit 10(u), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995 (Exhibit 10(a), Atlanta Gas Light Company
Form 10-Q for the quarter ended December 31, 1995).
10.51 Firm Storage Agreement, effective January 1, 1996, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company
amending Exhibit 10(aa) and replacing Exhibit 10(dd), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995 (Exhibit 10(b), Atlanta Gas Light Company
Form 10-Q for the quarter ended December 31, 1995).
10.52 Gas Sales Agreement between Seller and Atlanta Gas Light
Company, as Buyer (Exhibit 10(a), Atlanta Gas Light Company
Form 10-Q for the quarter ended March 31, 1995).
10.53 FPS-1 Service Agreement, dated July 9, 1996, between Atlanta
Gas Light Company and Cove Point LNG Limited Partnership
(Exhibit 10(a), Atlanta Gas Light Company Form 10-Q for the
quarter ended June 30, 1996).
10.54 Amendment to FS Agreement, dated September 13, 1994, between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10.54, Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1996).
10.55 Amendment to Letter Agreement, dated July 13, 1994, among and
between Southern Natural Gas Company, Atlanta Gas Light
Company and Chattanooga Gas Company (Exhibit 10.55, Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1996).
10.56 Three-party agreement between ANR Storage Company, Atlanta Gas
Light Company and Southern Natural Gas Company, effective
November 1, 1994 (Exhibit 10.56, Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1996).
10.57 Displacement Service Agreement, effective December 15, 1996,
between Washington Gas Light Company and Atlanta Gas Light
Company (Exhibit 10.57, Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1996).
25
<PAGE>
10.58 Amendment to Firm Storage Agreement, effective July 26, 1996,
between Chattanooga Gas Company and Southern Natural Gas
Company amending Exhibit 10(jj) , Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1995
(Exhibit 10.58, Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1996).
10.59 Amendatory Agreement, effective August 23, 1996, between
Southern Natural Gas Company and Atlanta Gas Light Company
amending Exhibits 10(ee), 10(ff), 10(hh) and 10(kk), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995 (Exhibit 10.59, Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1996).
10.60 Service Agreement and Amendments under Rate Schedule FS
between Atlanta Gas Light Company and Transcontinental Gas
Pipe Line Corporation.
10.61 Gas Transportation Agreement under Rate Schedules FT-A and
FT-GS, dated October 16, 1997, between Atlanta Gas Light
Company and East Tennessee Natural Gas Company.
10.62 Gas Transportation Agreement under Rate Schedules FT-A and
FT-GS, dated October 16, 1997, between Chattanooga Gas Company
and East Tennessee Natural Gas Company.
13 Portions of the AGL Resources Inc. 1997 Annual Report to
Shareholders.
21 Subsidiaries of AGL Resources Inc.
23 Independent Auditors' Consent.
24 Powers of Attorney (included with Signature Page hereto).
27 Financial Data Schedule.
(b) Reports on Form 8-K
On September 8, 1997, AGL Resources filed a Current Report on
Form 8-K dated September 8, 1997, containing: "Item 5 - Other
Events"; Exhibit 99 - Form of Press Release, dated September 8,
1997.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on November 7, 1997.
AGL RESOURCES INC.
By: /s/ David R. Jones
David R. Jones
President and Chief Executive Officer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David R. Jones, J. Michael Riley and
Albert G. Norman, Jr., and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Annual Report on Form 10-K for the fiscal year
ended September 30, 1997 and any and all amendments to such Annual Report, and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of November 7, 1997.
Signatures Title
/s/David R. Jones President and Chief Executive Officer
David R. Jones (Principal Executive Officer) and Director
/s/J. Michael Riley Vice President and Chief Financial Officer
J. Michael Riley (Principal Accounting and Financial Officer)
27
<PAGE>
/s/Frank Barron, Jr. Director
Frank Barron, Jr.
/s/W. Waldo Bradley Director
W. Waldo Bradley
/s/Otis A. Brumby, Jr. Director
Otis A. Brumby, Jr.
/s/L.L. Gellerstedt, III Director
L.L. Gellerstedt, III
/s/Albert G. Norman, Jr Director
Albert G. Norman, Jr.
/s/D. Raymond Riddle Director
D. Raymond Riddle
/s/Betty L. Siegel Director
Betty L. Siegel
/s/Ben J. Tarbutton, Jr. Director
Ben J. Tarbutton, Jr.
/s/Charles McKenzie Taylor Director
Charles McKenzie Taylor
/s/Felker W. Ward, Jr. Director
Felker W. Ward, Jr.
28
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of AGL Resources Inc.:
We have audited the consolidated balance sheets of AGL Resources Inc. and its
subsidiaries as of September 30, 1997 and 1996, and the related statements of
consolidated income, common stock equity, and cash flows for each of the three
years in the period ended September 30, 1997, and have issued our report thereon
dated November 7, 1997 (November 26, 1997 as to Note 14); such financial
statements and report are included in your 1997 Annual Report to Shareholders
and are incorporated herein by reference. Our audits also included the financial
statement schedule of AGL Resources Inc. and subsidiaries, listed in Item 14.
This financial statement schedule is the responsibility of AGL Resources Inc.'s
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
November 7, 1997
(November 26, 1997 as to Note 14)
29
<PAGE>
SCHEDULE II
AGL RESOURCES INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNT
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(IN MILLIONS)
- --------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Balance, beginning of year $ 2.8 $ 4.4 $ 2.8
Additions:
Provisions charged to income 9.8 4.7 5.3
Recovery of accounts
previously written off
as uncollectible 7.1 8.6 6.6
- --------------------------------------------------------------------------------
Total 19.7 17.7 14.7
Deduction:
Accounts written off
as uncollectible 17.1 14.9 10.3
- --------------------------------------------------------------------------------
Balance, end of year $ 2.6 $ 2.8 $4.4
- --------------------------------------------------------------------------------
30
<PAGE>
Index to Exhibits
Exhibit
Number Description
3.1 Amended and Restated Articles of Incorporation filed January
5, 1996, with the Secretary of State of the State of Georgia
(Exhibit B, Proxy Statement and Prospectus filed as a part of
Amendment No. 1 to Registration Statement on Form S-4, No.
33-99826).
3.2 Bylaws, as amended and restated on February 7, 1997.
4.1 Specimen form of Common Stock certificate (Exhibit 4.1, Form
10-K for the fiscal year ended September 30, 1996).
4.2 Specimen form of Right certificate (Exhibit 1, 8-K filed
March 6, 1996).
4.3 Indenture, dated as of December 1, 1989, between Atlanta Gas
Light Company and Bankers Trust Company, as Trustee (Exhibit
4(a), Atlanta Gas Light Company Registration Statement on
Form S-3, No. 33-32274).
4.4 First Supplemental Indenture, dated as of March 16, 1992,
between Atlanta Gas Light Company and NationsBank of Georgia,
National Association, as Successor Trustee (Exhibit 4(a),
Atlanta Gas Light Company Registration Statement on Form S-3,
No. 33-46419).
10.1 Executive Compensation Plans and Arrangements.
10.1.a Executive Severance Pay Plan of AGL Resources Inc. (Exhibit
10.1.a, Form 10-K for the fiscal year ended September 30,
1996).
10.1.b AGL Resources Inc. Long-Term Stock Incentive Plan of 1990
(Exhibit 10(ii), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1991).
10.1.c First Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990 (Exhibit B to the Atlanta Gas Light
Company Proxy Statement for the Annual Meeting of
Shareholders held February 5, 1993).
10.1.d Second Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990.
10.1.e Third Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990 (Exhibit C to the Proxy Statement and
Prospectus filed as a part of Amendment No. 1 to Registration
Statement on Form S-4, No. 33-99826).
10.1.f Fourth Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990.
10.1.g Fifth Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990.
10.1.h AGL Resources Inc. Nonqualified Savings Plan (Exhibit 10(a),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.1.i First Amendment to the AGL Resources Inc. Nonqualified
Savings Plan.
10.1.j Second Amendment to the AGL Resources Inc. Nonqualified
Savings Plan.
10.1.k AGL Resources Inc. Non-Employee Directors Equity Compensation
Equity Plan (Exhibit B, Proxy Statement and Prospectus filed
as a part of Amendment No. 1 to Registration Statement on
Form S-4, No. 33-99826).
10.2 Service Agreement under Rate Schedule GSS dated April 13,
1972, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation (Exhibit 5(c), Registration No.
2-48297).
10.3 Service Agreement under Rate Schedule LG-A, effective August
16, 1974, between Atlanta Gas light Company and
Transcontinental Gas Pipe Line Corporation (Exhibit 5(d),
Registration No. 2-58971).
10.4 Storage Transportation Agreement, dated June 1, 1979, between
Atlanta Gas Light Company and Southern Natural Gas Company,
(Exhibit 5(n), Registration No. 2-65487).
<PAGE>
10.5 Letter of Intent dated September 18, 1987, between Atlanta
Gas Light Company and Jupiter Industries, Inc. relating to
the purchase by Atlanta Gas Light Company of the assets of
the Chattanooga Gas Company Division of Jupiter Industries,
Inc. (Exhibit 10(p), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1987).
10.6 Agreement for the Purchase of Assets dated April 5, 1988,
between Atlanta Gas Light Company and Jupiter Industries,
Inc., (Exhibit 10(q), Atlanta Gas Light Company Form 10-K for
the fiscal year ended September 30, 1988).
10.7 100 Day Storage Service Agreement, dated June 1, 1979,
between Atlanta Gas Light Company and South Georgia Natural
Gas Company, (Exhibit 10(r), Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1989).
10.8 Service Agreement under Rate Schedule LSS, dated October 31,
1984, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation, (Exhibit 10(s), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1989).
10.9 Storage Transportation Agreement, dated June 1, 1979, between
Atlanta Gas Light Company and South Georgia Natural Gas
Company, (Exhibit 10(v), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1990).
10.10 Firm Seasonal Transportation Agreement, dated June 29, 1990,
between Atlanta Gas Light Company and Transcontinental Gas
Pipe Line Corporation, (Exhibit 10(bb), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1990).
10.11 Service Agreement under Rate Schedule WSS, dated June 1,
1990, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation, (Exhibit 10(cc), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1990).
10.12 Limited-Term Transportation Agreement Contract # A970 dated
April 1, 1988, between Atlanta Gas Light Company and CNG
Transmission Corporation, (Exhibit 10(bb), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1991).
10.13 Service Agreement System Contract #.2271 under Rate Schedule
FT, dated August 1, 1991, between Atlanta Gas Light Company
and Transcontinental Gas Pipe Line Corporation, (Exhibit
10(dd), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1991).
10.14 Service Agreement System Contract #.4984 dated August 1,
1991, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation, (Exhibit 10(ee), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1991).
10.15 Service Agreement Contract #830810 under Rate Schedule FT,
dated March 1, 1992, between Atlanta Gas Light Company and
South Georgia Natural Gas Company (Exhibit 10(aa), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1992).
10.16 Firm Gas Transportation Contract #3699 under Rate Schedule
FT, dated February 1, 1992, between Atlanta Gas Light Company
and Transcontinental Gas Pipe Line Corporation (Exhibit
10(dd), Atlanta Gas Light Company Form 10-K for the fiscal
year ended September 30, 1992).
10.17 Firm Gas Transportation Agreement under Rate Schedule FT-1,
dated July 1, 1992, between Atlanta Gas Light Company and
East Tennessee Natural Gas Company (Exhibit 10(ff), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1992).
10.18 Service Agreement Applicable to the Storage of Natural Gas
under Rate Schedule GSS, dated October 25, 1993, between
Atlanta Gas Light Company and CNG Transmission Corporation
(Exhibit 10(y), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1993).
<PAGE>
10.19 Service Agreement Applicable to the Storage of Natural Gas
under Rate Schedule GSS, dated September, 1993, between
Chattanooga Gas Company and CNG Transmission Corporation
(Exhibit 10(z), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1993).
10.20 Firm Seasonal Transportation Agreement, dated February 1,
1992, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation amending Exhibit 10(bb), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1990 (Exhibit 10(cc), Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1993).
10.21 Service Agreement under Rate Schedule SS-1, dated April 1,
1988, between Atlanta Gas Light Company and Transcontinental
Gas Pipe Line Corporation (Exhibit 10(z), Atlanta Gas Light
Company Form 10-K for the fiscal year ended September 30,
1994).
10.22 Firm Gas Transportation Agreement #5049 under Rate Schedule
FT-A, dated November 1, 1993, between Atlanta Gas Light
Company and Tennessee Gas Pipeline Company (Exhibit 10(aa),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994).
10.23 Firm Gas Transportation Agreement #5051 under Rate Schedule
FT-A, dated November 1, 1993, between Chattanooga Gas Company
and Tennessee Gas Pipeline Company (Exhibit 10(bb), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994).
10.24 Gas Storage Contract #3998 under Rate Schedule FS, dated
November 1, 1993, between Atlanta Gas Light Company and
Tennessee Gas Pipeline Company (Exhibit 10(cc), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.25 Gas Storage Contract #3999 under Rate Schedule FS, dated
November 1, 1993, between Chattanooga Gas Company and
Tennessee Gas Pipeline Company (Exhibit 10(dd), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.26 Gas Storage Contract #3923 under Rate Schedule FS, dated
November 1, 1993, between Atlanta Gas Light Company and
Tennessee Gas Pipeline Company (Exhibit 10(ee), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.27 Gas Storage Contract #3947 under Rate Schedule FS, dated
November 1, 1993, between Chattanooga Gas Company and
Tennessee Gas Pipeline Company (Exhibit 10(ff), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.28 Service Agreement #902470 under Rate Schedule FT, dated
September 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(hh), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.29 Service Agreement #904460 under Rate Schedule FT, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(ii), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.30 Service Agreement #904480 under Rate Schedule FT, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(jj), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.31 Service Agreement #904461 under Rate Schedule FT-NN, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(kk), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.32 Service Agreement #904481 under Rate Schedule FT-NN, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(ll), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
<PAGE>
10.33 Service Agreement #S20140 under Rate Schedule CSS, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(mm), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.34 Service Agreement #S20150 under Rate Schedule CSS, dated
November 1, 1994, between Atlanta Gas Light Company and
Southern Natural Gas Company (Exhibit 10(nn), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.35 Service Agreement #904470 under Rate Schedule FT, dated
November 1, 1994, between Chattanooga Gas Company and
Southern Natural Gas Company (Exhibit 10(oo), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.36 Service Agreement #904471 under Rate Schedule FT-NN, dated
November 1, 1994, between Chattanooga Gas Company and
Southern Natural Gas Company (Exhibit 10(pp), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.37 Service Agreement #S20130 under Rate Schedule CSS, dated
November 1, 1994, between Chattanooga Gas Company and
Southern Natural Gas Company (Exhibit 10(qq), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994).
10.38 Firm Storage (FS) Agreement, dated November 1, 1994, between
Atlanta Gas Light Company and ANR Storage Company (Exhibit
10(a), Atlanta Gas Light Company Form 10-Q for the quarter
ended March 31, 1996).
10.39 Firm Storage (FS) Agreement, dated November 1, 1994, between
Atlanta Gas Light Company and ANR Storage Company (Exhibit
10(b), Atlanta Gas Light Company Form 10-Q for the quarter
ended March 31, 1996).
10.40 Firm Transportation Agreement, dated March 1, 1996, between
Atlanta Gas Light Company and Southern Natural Gas Company
amending Exhibits 10(jj), 10(ll) and 10(mm), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994 (Exhibit 10(c), Atlanta Gas Light Company Form 10-Q
for the quarter ended March 31, 1996).
10.41 Firm Transportation Agreement, dated March 1, 1996, between
Atlanta Gas Light Company and Southern Natural Gas Company
amending Exhibits 10(hh), 10(ii), 10(kk) and 10(nn), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1994 (Exhibit 10(d), Atlanta Gas Light Company
Form 10-Q for the quarter ended March 31, 1996).
10.42 Firm Transportation Agreement, dated March 1, 1996, between
Chattanooga Gas Company and Southern Natural Gas Company
amending Exhibits 10(oo), 10(pp) and 10(qq), Atlanta Gas
Light Company Form 10-K for the fiscal year ended September
30, 1994 (Exhibit 10(a), Atlanta Gas Light Company Form 10-Q
for the quarter ended June 30, 1996).
10.43 Firm Transportation Agreement, dated June 1, 1996, between
Atlanta Gas Light Company and Southern Natural Gas Company
amending Exhibit 10(ii), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(tt),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.44 Firm Storage Agreement, effective December 1, 1994, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company
amending Exhibit 10(ff), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(uu),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.45 Firm Storage Agreement, effective July 1, 1996, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company
amending Exhibit 10(ff), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(vv),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
<PAGE>
10.46 Firm Storage Agreement, effective July 1, 1996, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company
amending Exhibit 10(dd), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(ww),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.47 Firm Transportation Agreement, dated September 26, 1994,
between Atlanta Gas Light Company and South Georgia Natural
Gas Company amending Exhibit 10(s), Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1994
(Exhibit 10(xx), Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1995).
10.48 Firm Storage Agreement, effective July 1, 1996, between
Atlanta Gas Light Company and Tennessee Gas Pipeline Company
amending Exhibit 10(ee), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(yy),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.49 Firm Storage Agreement, effective July 1, 1996, between
Atlanta Gas Light Company and Tennessee Gas Pipeline Company
amending Exhibit 10(cc), Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1994 (Exhibit 10(zz),
Atlanta Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995).
10.50 Firm Storage Agreement, effective January 1, 1996, between
Atlanta Gas Light Company and Tennessee Gas Pipeline Company
amending Exhibit 10(z) and replacing Exhibit 10(u), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995 (Exhibit 10(a), Atlanta Gas Light Company
Form 10-Q for the quarter ended December 31, 1995).
10.51 Firm Storage Agreement, effective January 1, 1996, between
Chattanooga Gas Company and Tennessee Gas Pipeline Company
amending Exhibit 10(aa) and replacing Exhibit 10(dd), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995 (Exhibit 10(b), Atlanta Gas Light Company
Form 10-Q for the quarter ended December 31, 1995).
10.52 Gas Sales Agreement between Seller and Atlanta Gas Light
Company, as Buyer (Exhibit 10(a), Atlanta Gas Light Company
Form 10-Q for the quarter ended March 31, 1995).
10.53 FPS-1 Service Agreement, dated July 9, 1996, between Atlanta
Gas Light Company and Cove Point LNG Limited Partnership
(Exhibit 10(a), Atlanta Gas Light Company Form 10-Q for the
quarter ended June 30, 1996).
10.54 Amendment to FS Agreement, dated September 13, 1994, between
Atlanta Gas Light Company and Transcontinental Gas Pipe Line
Corporation (Exhibit 10.54, Atlanta Gas Light Company Form
10-K for the fiscal year ended September 30, 1996).
10.55 Amendment to Letter Agreement, dated July 13, 1994, among and
between Southern Natural Gas Company, Atlanta Gas Light
Company and Chattanooga Gas Company (Exhibit 10.55, Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1996).
10.56 Three-party agreement between ANR Storage Company, Atlanta
Gas Light Company and Southern Natural Gas Company, effective
November 1, 1994 (Exhibit 10.56, Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1996).
10.57 Displacement Service Agreement, effective December 15, 1996,
between Washington Gas Light Company and Atlanta Gas Light
Company (Exhibit 10.57, Atlanta Gas Light Company Form 10-K
for the fiscal year ended September 30, 1996).
10.58 Amendment to Firm Storage Agreement, effective July 26, 1996,
between Chattanooga Gas Company and Southern Natural Gas
Company amending Exhibit 10(jj) , Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1995
(Exhibit 10.58, Atlanta Gas Light Company Form 10-K for the
fiscal year ended September 30, 1996).
10.59 Amendatory Agreement, effective August 23, 1996, between
Southern Natural Gas Company and Atlanta Gas Light Company
amending Exhibits 10(ee), 10(ff), 10(hh) and 10(kk), Atlanta
Gas Light Company Form 10-K for the fiscal year ended
September 30, 1995 (Exhibit 10.59, Atlanta Gas Light Company
Form 10-K for the fiscal year ended September 30, 1996).
<PAGE>
10.60 Service Agreement and Amendments under Rate Schedule FS
between Atlanta Gas Light Company and Transcontinental Gas
Pipe Line Corporation.
10.61 Gas Transportation Agreement under Rate Schedules FT-A and
FT-GS, dated October 16, 1997, between Atlanta Gas Light
Company and East Tennessee Natural Gas Company.
10.62 Gas Transportation Agreement under Rate Schedules FT-A and
FT-GS, dated October 16, 1997, between Chattanooga Gas
Company and East Tennessee Natural Gas Company.
13 Portions of the AGL Resources Inc. 1997 Annual Report to
Shareholders.
21 Subsidiaries of AGL Resources Inc.
23 Independent Auditors' Consent.
24 Powers of Attorney (included with Signature Page hereto).
27 Financial Data Schedule.
BYLAWS
OF
AGL RESOURCES INC.
ARTICLE I
SHAREHOLDERS
SECTION 1.1. Annual Meetings. The annual meeting of the Shareholders of
the Corporation shall be held each year for the purposes of electing Directors
and of transacting such other business as properly may be brought before the
meeting. To be properly brought before the meeting, business must be brought
before the meeting (i) by or at the direction of the Board of Directors or (ii)
by any Shareholder of the Corporation entitled to vote at the meeting who
complies with the procedures set forth in Sections 1.2 through 1.2.2 of this
Article; provided, in each case, that such business proposed to be conducted is,
under the law, an appropriate subject for Shareholder action.
SECTION 1.2. Notice of Business to Be Brought Before Annual Meetings.
For business to be properly brought before an annual meeting by a Shareholder,
the Shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, in the case of an annual meeting of
Shareholders, a Shareholder's notice must be delivered to or mailed and received
at the principal executive offices of the Corporation, in accordance with
Securities and Exchange Commission Rule 14a-8(a)(3)(i), not less than 120
calendar days prior to the date of the Corporation's proxy statement released to
Shareholders in connection with the previous year's annual meeting of
Shareholders, except that if no annual meeting of Shareholders was held in the
previous year or if the date of the annual meeting of Shareholders has been
changed by more than 30 calendar days from the date contemplated at the time of
the previous year's proxy statement, the notice shall be received at the
principal executive offices of the Corporation not less than the later of (i)
150 calendar days prior to the date of the contemplated annual meeting or (ii)
the date which is 10 calendar days after the date of the first public
announcement or other notification to the Shareholders of the date of the
contemplated annual meeting.
SECTION 1.2.1. Notice of Business to Be Brought Before Special
Meetings. In the case of special meetings of Shareholders, held pursuant to
Section 1.3 of this Article, a Shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, in
accordance with Securities and Exchange Commission Rule 14a-8(a)(3)(i), not less
than 120 calendar days prior to the date of the special meeting.
SECTION 1.2.2. Contents of Notice. A Shareholder's notice to the
Secretary shall set forth as to each matter such Shareholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for
-1-
<PAGE>
conducting such business at the annual meeting; (ii) the name and address, as
they appear on the Corporation's books, of the Shareholder proposing such
business; (iii) the class and number of shares of the Corporation which are
beneficially owned by such Shareholder; (iv) the dates upon which the
Shareholder acquired such shares; (v) documentary support for any claim of
beneficial ownership, (vi) any material interest of such Shareholder in such
business; (vii) a statement in support of the matter and any other information
required by said Rule 14a-8; and (viii) as to each person whom the Shareholder
proposes to nominate for election or reelection as Director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, and Rule 14a-1 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a Director if elected).
SECTION 1.2.3. Determination of Validity of Notice. The chairman of an
annual meeting may, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
provisions of Sections 1.2 through 1.2.2 of this Article, and, if he should so
determine, he shall so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted, or in the case of persons so nominated, not be eligible for
election.
SECTION 1.3. Special Meetings. The Corporation shall hold a special
meeting of Shareholders on call of the Board of Directors or the Executive
Committee, the Chairman of the Board of Directors, the President, or, upon
delivery to the Corporation's Secretary of a signed and dated written request
setting out the purpose or purposes for the meeting, on call of the holders of
100% of the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting. Only business within the purpose or purposes
described in the notice of special meeting required by Section 1.5 below may be
conducted at a special meeting of the Shareholders.
SECTION 1.4. Date, Time and Place of Meetings. Annual meetings of the
Shareholders shall be held on such date and at such time and place, within or
without the State of Georgia, as may be fixed by the Board of Directors. Special
meetings of Shareholders shall be held on such date and at such time and place,
within or without the State of Georgia, as may be fixed from time to time by the
Board of Directors. The date, time and place of all meetings shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof. If no
designation is made, the place of the meeting shall be the principal executive
offices of the Corporation.
SECTION 1.5. Notice of Meetings. The Secretary or an Assistant
Secretary shall deliver, either personally or by mailing it, postage prepaid, a
written notice of the place, day, and time of all meetings of the Shareholders
not less than ten (10) nor more than sixty (60) days before the meeting date to
each Shareholder of record entitled to vote at such meeting. Unless otherwise
required or permitted by law, written notice is effective when mailed, if mailed
with postage prepaid and correctly addressed to the Shareholder's address shown
in the Corporation's current record of Shareholders. It shall not be necessary
that notice of an annual meeting include a description of the
-2-
<PAGE>
purpose or purposes for which the meeting is called. In the case of a special
meeting, the purpose or purposes for which the meeting is called shall be
included in the notice of the special meeting. If an annual or special
Shareholders' meeting is adjourned to a different date, time, or place, notice
of the new date, time, or place need not be given if the new date, time, or
place is announced at the meeting before adjournment. However, if a new record
date for the adjourned meeting is or must be fixed under Section 1.9 herein,
notice of the adjourned meeting must be given to persons who are Shareholders as
of the new record date.
SECTION 1.6. Record Date. The Board of Directors, in order to determine
the Shareholders entitled to notice of or to vote at any meeting of the
Shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, shall fix in advance a record date that may not be more
than seventy (70) days before the meeting or action requiring a determination of
Shareholders. Only such Shareholders as shall be Shareholders of record on the
date fixed shall be entitled to such notice of or to vote at such meeting or any
adjournment thereof, or to receive payment of any such dividend or other
distribution or allotment of any rights, or to exercise any such rights in
respect of stock, or to take any such other lawful action, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid. The record date shall apply to any
adjournment of the meeting except that the Board of Directors shall fix a new
record date for the adjourned meeting if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
SECTION 1.6. Shareholders' List for Meeting. After fixing a record date
for a meeting, the Corporation shall prepare an alphabetical list of the names
of all Shareholders who are entitled to notice of the Shareholders' meeting. The
list shall be arranged by voting group (and within each voting group by class or
series of shares) and show the address of and number of shares held by each
Shareholder. The Corporation shall make the Shareholders' list available for
inspection by any Shareholder, his agent, or his attorney at the time and place
of the meeting.
SECTION 1.8. Quorum. Subject to any express provision of law or the
Articles of Incorporation, a majority of the votes entitled to be cast by all
shares voting together as a group shall constitute a quorum for the transaction
of business at all meetings of the Shareholders. Whenever a class of shares or
series of shares is entitled to vote as a separate voting group on a matter, a
majority of the votes entitled to be cast by each voting group so entitled shall
constitute a quorum for purposes of action on any matter requiring such separate
voting. Once a share is represented, either in person or by proxy, for any
purpose at a meeting other than solely to object to holding a meeting or
transacting business at the meeting, it is deemed present for quorum purposes
for the remainder of the meeting and for any adjournment of that meeting unless
a new record date is set for the adjourned meeting.
-3-
<PAGE>
SECTION 1.9. Adjournment of Meetings. The holders of a majority of the
voting shares represented at a meeting, or the Chairman of the Board or the
President, whether or not a quorum is present, shall have the power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each Shareholder of record entitled to vote at the adjourned meeting.
SECTION 1.10. Vote Required. When a quorum exists, action on a matter
(other than the election of Directors) by a voting group is approved if the
votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the Articles of Incorporation, a bylaw authorized by
the Articles of Incorporation or express provision of law requires a greater
number of affirmative votes. Unless otherwise provided in the Articles of
Incorporation, Directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. Shareholders do not have the right to cumulate their votes unless the
Articles of Incorporation so provide.
SECTION 1.11. Voting Entitlement of Shares. Unless otherwise provided
in the Articles of Incorporation, each Shareholder, at every meeting of the
Shareholders, shall be entitled to cast one vote, either in person or by written
proxy, for each share standing in his or her name on the books of the
Corporation as of the record date. A Shareholder may vote his shares in person
or by proxy. An appointment of proxy is effective when received by the Secretary
of the Corporation or other officer or agent authorized to tabulate votes and is
valid for eleven (11) months unless a longer period is expressly provided in the
appointment of proxy form. An appointment of proxy is revocable by the
Shareholder unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1. General Powers. Subject to the Articles of Incorporation,
and Bylaws approved by the Shareholders, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the Corporation
managed under the direction of, the Board of Directors.
SECTION 2.2. Number and Tenure. The Board of Directors shall consist of
at least five (5) members and not more than fifteen (15) members, the exact
number of Directors to be fixed from time to time by resolution of the Board of
Directors of the Corporation. No decrease in the number or minimum number of
Directors, through amendment of the Articles of Incorporation or of
-4-
<PAGE>
the Bylaws or otherwise, shall have the effect of shortening the term of any
incumbent Director. The Board of Directors shall be divided into three classes
as nearly equal in number as possible, with the term of office of one class
expiring each year. At the first annual meeting of shareholders, the Directors
shall be divided into three classes, as nearly equal in size as may be, with the
Directors of one class to be elected to hold office for a term expiring at the
third annual meeting following the election and until their successors shall
have been duly elected and qualified; with the Directors of the second class to
be elected to serve for a term expiring at the second annual meeting following
the election and until their successors shall have been duly elected and
qualified; and the Directors of the third class to be elected to serve for a
term expiring at the first annual meeting following the election and until their
successors shall have been duly elected and qualified. Thereafter, Directors
shall be elected for terms of three years, and until their successors have been
duly elected and qualified or until there is a decrease in the number of
Directors.
SECTION 2.3. Qualifications of Directors. Directors shall be natural
persons who have attained the age of 18 years who shall own at least 100 shares
of the Common Stock of the Corporation but need not be residents of the State of
Georgia.
SECTION 2.3.1. Re-election After Termination of Principal Employment.
If any Director ceases to hold the position in his or her principal employment
profession, trade or calling that he or she held at he beginning of the current
term for which he or she was elected a Director, such person shall not be
eligible for re-election to the Board of Directors after the expiration of such
current term unless the Board of Directors decides that such person should be
eligible for re-election.
SECTION 2.3.2. Terminating Events; Honorary Directors. Any Director who
either (i) attains his or her seventieth (70th) birthday or (ii) retires from or
discontinues his or her employment with the Corporation, whichever first occurs,
shall thereafter, upon completion of the term for which he or she was elected a
Director, cease to be an active Director; provided, however, anyone who, upon
his or her retirement is Chairman of the Board or President of the Corporation
may, notwithstanding the above provisions of this Section, continue to serve as
an active Director until his attains his seventieth (70th) birthday, and
thereafter until completion of the term for which he or she was elected a
Director.
SECTION 2.3.3. Honorary Directors. Upon appointment by the Board of
Directors, a Director who ceases to be an active Director because of age or
retirement, or any other person who shall be so elected by the Board of
Directors, shall become an Honorary Director for such term or terms as the Board
of Directors may determine, but subject to removal from the position of Honorary
Director at any time at the pleasure of the Board. Except for the regular
November meeting of the Board of Directors, Honorary Directors will not be
expected to attend meetings of the Board unless specially invited. The expenses
of Honorary Directors in attending such November meeting or any other meeting of
the Board of Directors to which they are specially invited will be reimbursed by
the Corporation but they will not receive fees for attending such meetings.
Honorary Directors may participate in an advisory capacity in all discussions
and deliberations of the Board of Directors, but shall have no vote at the
meetings which they attend in accordance with the foregoing provisions.
-5-
<PAGE>
An Honorary Director shall not be included in any calculation of the number of
active Directors authorized and serving under Section 2.2.
SECTION 2.4. Vacancies. Unless the Articles of Incorporation provide
otherwise, if a vacancy occurs on the Board of Directors, including a vacancy
resulting from an increase in the number of Directors, the vacancy may be filled
only by the Board of Directors, or, if the Directors remaining in office
constitute fewer than a quorum of the Board, by the affirmative vote of a
majority of all Directors remaining in office. If the vacant office was held by
a Director elected by a voting group of Shareholders, only the remaining
Directors elected by that voting group are entitled to vote to fill the vacancy.
SECTION 2.5. Meetings. The Board of Directors shall meet annually,
without notice of the date, time, place or purpose of the meeting, immediately
following and at the same place as the annual meeting of Shareholders. Regular
meetings of the Board of Directors or any committee may be held between annual
meetings without notice at such time and at such place, within or without the
State of Georgia, as from time to time shall be determined by the Board or
committee, as the case may be. A majority of the Board of Directors, the
Chairman of the Board, the President or the Executive Committee may call a
special meeting of the Directors at any time by giving each Director two (2)
days notice of the date, time and place of the meeting. Such notice may be given
orally or in writing in accordance with the provisions of Section 4.1. Unless
otherwise provided in the Articles of Incorporation, these Bylaws or by law,
neither the business to be transacted at, nor the purpose of, any regular or
special meeting need be specified in the notice or any waiver of notice.
SECTION 2.6. Quorum and Voting. At all meetings of the Board of
Directors or any committee thereof, a majority of the number of Directors
prescribed, or if no number is prescribed, the number in office immediately
before the meeting begins, shall constitute a quorum for the transaction of
business. The affirmative vote of a majority of the Directors present at any
meeting at which there is a quorum at the time of such act shall be the act of
the Board or of the committee, except as might be otherwise specifically
provided by statute or by the Articles of Incorporation or Bylaws. In the
absence of a quorum, the Directors present by majority vote may adjourn the
meeting from time to time without notice other than by verbal announcement at
the meeting until a quorum shall attend. At any such adjourned meeting at which
a quorum shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 2.7. Action Without Meeting. Unless the Articles of
Incorporation or Bylaws provide otherwise, any action required or permitted to
be taken at any meeting of the Board of Directors or any committee thereof may
be taken without a meeting if the action is taken by all members of the Board or
committee, as the case may be. The action must be evidenced by one or more
written consents describing the action taken, signed by each Director, and filed
with the minutes of the proceedings of the Board or committee or filed with the
corporate records.
SECTION 2.8. Remote Participation in a Meeting. Unless otherwise
restricted by the Articles of Incorporation or the Bylaws, any meeting of the
Board of Directors may be conducted
-6-
<PAGE>
by the use of any means of communication by which all Directors participating
may simultaneously hear each other during the meeting. A Director participating
in a meeting by this means is deemed to be present in person at the meeting.
SECTION 2.9. Compensation of Directors. The Board of Directors may fix
the compensation of the Directors for their services as Directors. Compensation
shall be fixed from time to time by a resolution of the Board of Directors, and
may be on the basis of an annual sum or a fixed sum for attendance at each
regular or special meeting and every adjournment thereof, or a combination of
these methods. Members may be reimbursed for all reasonable traveling expenses
incurred in attending meetings. No provision of these Bylaws shall be construed
to preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 2.10. Removal of Directors by Shareholders. Subject to the
requirements of Section 14-2-808 of the Georgia Business Corporation Code (the
"Code") for the removal of Directors elected by cumulative voting, voting group
or staggered terms, any one or more Directors may be removed from office, only
with cause, at any meeting of Shareholders with respect to which notice of such
purpose has been given, by the affirmative vote of the holder or holders of a
majority of the outstanding shares of the Corporation.
SECTION 2.11. Nomination of Directors. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of Shareholders (i) by the Board of
Directors or at the direction of the Board by any nominating committee or person
appointed by the Board or (ii) by any Shareholder of the Corporation entitled to
vote for the election of Directors at the meeting who complies with the notice
procedures set forth in Sections 1.2 through 1.2.2 of these Bylaws. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. Such notice to the Secretary shall set forth the information
required in Section 1.2.2 of these Bylaws. The Corporation may require any
proposed nominee to furnish such other information as reasonably may be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as a Director of the Corporation. The chairman of the meeting may, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedures, and if he should so determine,
he shall so declare to the meeting and the defective nomination shall be
disregarded.
SECTION 2.15. Indemnification. The indemnification authorized in the
Articles of Incorporation shall be subject to the following provisions and
procedures:
SECTION 2.15.1. Determination of Eligibility for Indemnification. In
the case of actions brought by or in the right of the Corporation, a Director's
right to indemnification as authorized in the Articles of Incorporation shall be
determined:
-7-
<PAGE>
(i) If there are two or more directors not at the time parties
to the proceeding ("Disinterested Directors"), by the board of
directors by a majority vote of all the Disinterested Directors (a
majority of whom shall for such purpose constitute a quorum), or by a
majority of the members of a committee of two or more Disinterested
Directors appointed by such a vote;
(ii) By special legal counsel:
(a) Selected in the manner prescribed in
paragraph (i) of this subsection;
or
(b) If there are fewer than two Disinterested
Directors, the Board of Directors (in which
selection directors who do not qualify as
Disinterested Directors may participate); or
(iii) By the shareholders, but shares owned by or voted under
the control of a director who at the time does not qualify as a
disinterested director may not be voted on the determination.
SECTION 2.15.2. Rights Not Exclusive. The rights to indemnification and
advance of expenses granted in the Articles of Incorporation and in these Bylaws
are not exclusive, and do not limit the Corporation's power to pay or reimburse
expenses to which a Director may be entitled, whether by agreement vote of
shareholders or Disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding office, and
do not limit the Corporation's power to pay or reimburse expenses incurred by a
Director in connection with his appearance as a witness in a proceeding at a
time when he has not been made a named defendant or respondent to the
proceeding.
SECTION 2.15.3. Insurance. The Corporation and its officers shall have
the power to purchase and maintain insurance on behalf of an individual who is
or was a Director, officer, employee or agent of the Corporation or who, while a
Director, officer, employee, or agent of the Corporation, is or was serving as a
Director, officer, partner, trustee employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise against liability asserted against or incurred by him in
that capacity or arising from his status as a Director, officer, employee or
agent, whether or not the Corporation would have the power to indemnify him
against the same liability under the provisions of these Bylaws.
SECTION 2.15.4. Reports to Shareholders. If the Corporation indemnifies
or advances expenses to a Director, otherwise than by action of the shareholders
or by an insurance carrier pursuant to insurance maintained by the Corporation
shall report the indemnification or advance in writing to the shareholders with
or before the notice of the next annual shareholders' meeting.
-8-
<PAGE>
ARTICLE III
COMMITTEES
SECTION 3.1. Committees. The Board of Directors may, by resolution,
designate from among its members one or more committees, each committee to
consist of one or more Directors, except that committees appointed to take
action with respect to indemnification of Directors, Directors' conflicting
interest transactions or derivative proceedings shall consist of two or more
Directors qualified to serve pursuant to the Code. Any such committee, to the
extent specified by the Board of Directors, Articles of Incorporation or Bylaws,
shall have and may exercise all of the authority of the Board of Directors in
the management of the business affairs of the Corporation, except that it may
not (i) approve or propose to Shareholders action that the Code requires to be
approved by Shareholders; (ii) fill vacancies on the Board of Directors or any
of its committees; (iii) amend the Articles of Incorporation; (iv) adopt, amend,
or repeal Bylaws; or (v) approve a plan of merger not requiring Shareholder
approval. All action by any committee shall be reported to the Board of
Directors at its meeting next succeeding such action, and shall be subject to
revision and alteration by the Board of Directors, except that no rights of
third person shall be affected by any such revision or alteration. Vacancies in
any committee shall be filled by the Board of Directors.
SECTION 3.2. Meetings of Committees. Regular meetings of any committee
may be held without notice at such time and at such place, within or without the
State of Georgia, as from time to time shall be determined by such committee.
The Chairman of the Board of Directors, the President, the Board of Directors or
the committee by vote at a meeting, or by two members of any committee in
writing without a meeting, may call a special meeting of any such committee at
any time by giving each such committee member two (2) days notice of the date,
time and place of the meeting. Such notice may be given orally or in writing in
accordance with the provisions of Section 4.1. Unless otherwise provided in the
Articles of Incorporation, these Bylaws or by law, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of any such
committee need be specified in the notice or any waiver of notice.
SECTION 3.3. Quorum of Committee. At all meetings of any committee a
majority of the total number of its members shall constitute a quorum for the
transaction of business. Except in cases in which it is by law, by the Articles
of Incorporation, by these Bylaws, or by resolution of the Board of Directors
otherwise provided, a majority of such quorum shall decide any questions that
may come before the meeting. In the absence of a quorum, the members of the
committee present by majority vote may adjourn the meeting from time to time,
without notice other than by verbal announcement at the meeting, until a quorum
shall attend.
SECTION 3.4. Compensation of Committee Members. The Board of Directors
may fix the compensation of the Directors for their services as members of
committees of the Board of Directors. Compensation shall be fixed from time to
time by a resolution of the Board of Directors, and may be on the basis of an
annual sum or a fixed sum for attendance at each regular or special
-9-
<PAGE>
meeting and every adjournment thereof, or a combination of these methods.
Members of committees shall be reimbursed for all reasonable traveling expenses
incurred in attending meetings. No provision of these Bylaws shall be construed
to preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 3.5. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, may designate an
Executive Committee of three or more Directors, which designation shall include
the Chairman of the Board of Directors and the President. Each Director of the
Corporation who is not designated as a member of the Executive Committee hereby
is designated as an alternate member of the Executive Committee, who may act in
the place and stead of any absent member or members at any meeting of such
Executive Committee in the event (i) a quorum of the Executive Committee is not
present and (ii) the Chairman of the Board or, in his absence, the President,
appoints such alternate member to act for that meeting as a member of the
Executive Committee; and such alternate member shall serve only at the meeting
for which such appointment is made, but shall have at that meeting all the
powers of a regular member of the Executive Committee. During the intervals
between the meetings of the Board of Directors the Executive Committee shall
have and may exercise all of the authority of the Board of Directors in the
management of the business affairs of the Corporation to the extent authorized
by the resolution providing for such Executive Committee or by subsequent
resolution adopted by a majority of the whole Board of Directors, except that it
may not (i) approve or propose to Shareholders action that the Code requires to
be approved by Shareholders; (ii) fill vacancies on the Board of Directors or
any of its committees; (iii) amend the Articles of Incorporation; (iv) adopt,
amend, or repeal bylaws; or (v) approve a plan of merger not requiring
Shareholder approval.
SECTION 3.5.1. Honorary Members of Executive Committee. Upon
appointment by the Board of Directors, a Director who ceases to be an active
Director because of age or retirement, and who at the time has been a member of
the Executive Committee for twelve or more years, shall become an Honorary
Member of the Executive Committee for such term or terms as the Board of
Directors may determine, but subject to removal from the position of Honorary
Member of the Executive Committee at any time at the pleasure of the Board.
Honorary Members of the Executive Committee shall receive the customary fees for
attending regular meetings, and may participate in an advisory capacity in all
discussions and deliberations of the Executive Committee, but shall have no vote
at the meetings which they attend in accordance with the foregoing provisions.
An Honorary Member shall not be included in any calculation of the number of
active Directors authorized and serving under Section 3.5.
SECTION 3.6. Audit Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, may designate an Audit
Committee of four (4) or more Directors. The members of the Audit Committee
shall serve at the pleasure of the Board of Directors or until their successors
shall be duly designated. Each Director of the Corporation who is not designated
as a member of the Audit Committee hereby is designated as an alternate member
of the Audit Committee, who may act in the place and stead of any absent member
or members at any meeting of such Audit Committee in the event (i) a quorum of
the Audit Committee is not present
-10-
<PAGE>
and (ii) the Chairman of the Board or, in his absence, the President, appoints
such alternate member to act for that meeting as a member of the Audit
Committee; and such alternate member shall serve only at the meeting for which
such appointment is made, but shall have at that meeting all the powers of a
regular member of the Audit Committee. The Audit Committee shall consider the
choice of the independent public accountants for the Corporation, shall review
the planned scope of the audit and the results of their examinations of the
financial statements of the Corporation, their opinions thereon and their
recommendations with respect to accounting, internal controls and other matters,
shall convey information to and from the Board of Directors and its independent
public accountants and auditors, shall be available for discussions of internal
auditing problems and procedures, and shall make their report to the Board of
Directors or the Executive Committee, or to both. The Audit Committee shall keep
full and fair accounts of its transactions. All action by the Audit Committee
shall be reported to the Board of Directors at its meeting next succeeding such
action, and shall be subject to revision and alteration by the Board of
Directors; provided that no rights of third persons shall be affected by any
such revision or alteration. Vacancies in the Audit Committee shall be filled by
the Board of Directors.
SECTION 3.7. Nominating and Compensation Committee. The Board of
Directors, by resolution adopted by a majority of the whole Board of Directors,
may designate a Nominating and Compensation Committee of four (4) or more
Directors. The members of the Nominating and Compensation Committee shall serve
at the pleasure of the Board of Directors or until their successors shall be
duly designated. Each Director of the Corporation who is not designated as a
member of the Nominating and Compensation Committee hereby is designated as an
alternate member of the Nominating and Compensation Committee, who may act in
the place and stead of any absent member or members at any meeting of such
Nominating and Compensation Committee in the event (i) a quorum of the
Nominating and Compensation Committee is not present and (ii) the Chairman of
the Board or, in his absence, the President, appoints such alternate member to
act for that meeting as a member of the Nominating and Compensation Committee;
and such alternate member shall serve only at the meeting for which such
appointment is made, but shall have at that meeting all the powers of a regular
member of the Nominating and Compensation Committee. The Nominating and
Compensation Committee shall review the performance of the senior officers of
the Corporation and will recommend to the Board of Directors the appropriate
compensation level for these and the other officers of the Corporation; they
shall review and recommend to the Board of Directors any changes in the various
benefit programs of the Corporation; and shall review the level of fees paid and
the manner in which fees are paid to members of the Corporation's Board of
Directors and shall make recommendations for adjustments as appropriate. The
Nominating and Compensation Committee shall also identify and recommend to the
Board of Directors the nominees for the Board. The Nominating and Compensation
Committee shall keep full and fair accounts of its transactions. All action by
the Nominating and Compensation Committee shall be reported to the Board of
Directors at its meeting next succeeding such action, and shall be subject to
revision and alteration by the Board of Directors; provided that no rights of
third persons shall be affected by any such revision or alteration. Vacancies in
the Nominating and Compensation Committee shall be filled by the Board of
Directors.
-11-
<PAGE>
SECTION 3.8. Corporate Responsibility Committee. The Board of Directors, by
resolution adopted by a majority of the whole Board of Directors, may designate
a Corporate Responsibility Committee of four (4) or more Directors. The members
of the Corporate Responsibility Committee shall serve at the pleasure of the
Board of Directors or until their successors shall be duly designated. Each
Director of the Corporation who is not designated as a member of the Corporate
Responsibility Committee hereby is designated as an alternate member of the
Corporate Responsibility Committee, who may act in the place and stead of any
absent member or members at any meeting of such Corporate Responsibility
Committee in the event (i) a quorum of the Corporate Responsibility Committee is
not present and (ii) the Chairman of the Board or, in his absence, the
President, appoints such alternate member to act for that meeting as a member of
the Corporate Responsibility Committee; and such alternate member shall serve
only at the meeting for which such appointment is made, but shall have at that
meeting all the powers of a regular member of the Corporate Responsibility
Committee. The Corporate Responsibility Committee shall make periodic reviews of
all financing plans, pension plans (including the investment of funds); it shall
identify and monitor broad governmental, social and environmental trends that
could affect the Corporation's performance and the related interests of its
employees, shareholders, customers and the general public; and it shall review
and monitor corporate policy with respect to charitable giving. The results of
said reviews shall be reported to the Board of Directors. The Corporate
Responsibility Committee shall keep full and fair accounts of its transactions.
All action by the Corporate Responsibility Committee shall be reported to the
Board of Directors at its meeting next succeeding such action, and shall be
subject to revision and alteration by the Board of Directors; provided that no
rights of third persons shall be affected by any such revision or alteration.
Vacancies in the Corporate Responsibility Committee shall be filled by the Board
of Directors.
ARTICLE IV
NOTICES
SECTION 4.1. Notice. Whenever, under the provisions of the Articles of
Incorporation or these Bylaws or by law, notice is required to be given to any
Director or Shareholder, such notice may be given in writing, by mail; by
telegram, telex or facsimile transmission; by other form of wire or wireless
communication; or by private carrier. Unless otherwise required or permitted by
law, such notice shall be deemed to be effective at the earliest of when
received, or when delivered, properly addressed, to the addressee's last known
principal place of business or residence; or five days after the same shall be
deposited in the United States mail if mailed with first-class postage prepaid
and correctly addressed; or on the date shown on the return receipt, if sent by
registered or certified mail, and the receipt is signed by or on behalf of the
addressee. Notice to any Director or Shareholder may also be oral if oral notice
is reasonable under the circumstances. Oral notice is effective when
communicated if communicated in a comprehensible manner. If these forms of
personal notice are impractical, notice may be communicated by a
-12-
<PAGE>
newspaper of general circulation in the area where published, or by radio,
television, or other form of public broadcast communication.
SECTION 4.2. Waiver of Notice. Whenever any notice is required to be
given under provisions of the Articles of Incorporation or of these Bylaws or by
law, a waiver thereof, signed by the person entitled to notice and delivered to
the Corporation for inclusion in the minutes or filing with the corporate
records, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting and of all objections to the place or time of
the meeting or the manner in which it has been called or convened, except when
the person attends a meeting for the express purpose of stating, at the
beginning of the meeting, any such objection and, in the case of a Director,
does not thereafter vote for or assent to action taken at the meeting. Neither
the business to be transacted at nor the purpose of any regular or special
meeting of the Shareholders, Directors or a committee of Directors need be
specified in any written waiver of notice; provided, however, that any waiver of
notice of a meeting of Shareholders required with respect to a plan of merger or
a plan of consolidation shall be effective only upon compliance with Section
14-2-706(c) of the Code or successor provisions.
ARTICLE V
OFFICERS
SECTION 5.1. Appointment. The Board of Directors at its first meeting
following the annual meeting of Shareholders shall elect such officers as it
shall deem necessary, including a Chairman of the Board, a President, a
Secretary, a Treasurer, one or more Vice Presidents (one or more of whom may be
designated Executive Vice President or Senior Vice President), Assistant Vice
Presidents, Assistant Secretaries and Assistant Treasurers, who shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors. Each such officer shall hold office until the
corresponding meeting of the Board of Directors in the next year and until his
successor shall have been duly elected and qualified or until he shall have
resigned or shall have been removed in the manner provided in Section 5.2 of
this Article V. Any number of offices may be held by the same person unless the
Articles of Incorporation or these Bylaws otherwise provide. The appointment of
an officer does not itself create contract rights.
SECTION 5.2. Resignation and Removal of Officers. An officer may resign
at any time by delivering notice to the Corporation and such resignation is
effective when the notice is delivered unless the notice specifies a later
effective date. The Board of Directors (except in the case of an officer elected
by the Board of Directors) or the Executive Committee or an officer upon whom
such power of removal may have been conferred may remove any officer at any time
with or without cause.
SECTION 5.3. Vacancies. Any vacancy in office resulting from any cause
may be filled by the Board of Directors at any regular or special meeting.
-13-
<PAGE>
SECTION 5.4. Powers and Duties. Each officer has the authority and
shall perform the duties set forth below or, to the extent consistent with these
Bylaws, the duties prescribed by the Board of Directors or by direction of an
officer authorized by the Board of Directors to prescribe the duties of other
officers.
SECTION 5.4.1. Chairman of the Board of Directors. The Chairman of the
Board of Directors may be chosen from among the Directors of the Corporation and
need not be an Executive Officer or employee of the Corporation. The Chairman
shall preside at all meetings of the Shareholders, the Board of Directors, and
the Executive Committee. He shall have the usual powers and duties incident to
the office of the chairman of the board of directors of a corporation and such
other powers and duties as from time to time may be assigned to him by the Board
of Directors.
SECTION 5.4.2. Chief Executive Officer. The Board of Directors may
designate as the Chief Executive Officer of the Corporation the President or any
other officer of the Corporation including the Chairman if the Chairman is a
full-time officer and employee of the Corporation. The Chief Executive Officer
of the Corporation shall have general and active management responsibility for
the business of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. Except where by law the
signature of the President is required, the Chief Executive Officer shall have
the same powers as the President to sign all authorized certificates, contracts,
bonds, deeds, mortgages and other instruments. He shall have the usual powers
and duties incident to the position of chief executive officer of a corporation
and such other powers and duties as from time to time may be assigned by the
Board of Directors. The Board of Directors may, or if it does not, the Chief
Executive Officer may, from time to time designate an Executive Officer of the
Corporation to assume and perform the duties and powers of the Chief Executive
Officer during the absence or disability of the Chief Executive Officer.
SECTION 5.4.3. President. The President shall be responsible for the
general supervision of the affairs of the Corporation and general and active
management of the financial affairs of the Corporation. He shall have the power
to make and execute certificates, contracts, bonds, deeds, mortgages and other
instruments on behalf of the Corporation, except in cases in which the signing
thereof shall have been expressly delegated to some other officer or agent of
the Corporation and to delegate such power to others. He also shall have such
powers and perform such duties as are specifically imposed on him by law and as
may be assigned to him by the Board of Directors. In the event there is no
Chairman of the Board, the President shall also have all the powers and
authority that the Chairman is given in these Bylaws or otherwise. During the
absence or disability of the Chairman of the Board, the President shall preside
at all meetings of the Shareholders, the Board of Directors and the Executive
Committee. He shall have the usual powers and duties incident to the office of a
president of a corporation and such other powers and duties as from time to time
may be assigned to him by the Board of Directors. If the Board of Directors
designates the President as the Chief Executive Officer of the Corporation, the
President shall also have the powers and duties of the Chief Executive Officer.
-14-
<PAGE>
SECTION 5.4.4. Vice Presidents. The Executive Vice Presidents shall be
senior in authority among the Vice Presidents. During the absence or disability
of the President, the Board of Directors shall designate which of the Executive
Vice Presidents shall exercise all the powers and discharge all of the duties of
the President, provided, however, that if he is not a Director he shall not
preside at any meetings of the Board of Directors or the Executive Committee.
The Vice Presidents, shall perform such duties as vice presidents customarily
perform and shall perform such other duties and shall exercise such other powers
as the President or the Board of Directors may from time to time designate.
SECTION 5.4.5. Secretary. The Secretary shall attend all meetings of
the Shareholders and all meetings of the Board of Directors and shall record all
votes and minutes of all proceedings in books to be kept for that purpose, and
shall perform like duties for the standing committees when required. He shall
have custody of the corporate seal of the Corporation, shall have the authority
to affix the same to any instrument the execution of which on behalf of the
Corporation under its seal is duly authorized and shall attest to the same by
his signature whenever required. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest to the same by his signature. The Secretary shall give, or cause to be
given, any notice required to be given of any meetings of the Shareholders, the
Board of Directors and of the standing committees when required. The Secretary
shall cause to be kept such books and records as the Board of Directors, the
Chairman of the Board or the President may require and shall cause to be
prepared, recorded, transferred, issued, sealed and canceled certificates of
stock as required by the transactions of the Corporation and its Shareholders.
The Secretary shall attend to such correspondence and shall perform such other
duties as may be incident to the office of a Secretary of a Corporation or as
may be assigned to him by the Board of Directors, the Chairman of the Board or
the President.
SECTION 5.4.6. Treasurer. The Treasurer shall be charged with the
management of financial affairs of the Corporation and shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust
companies, or other depositaries as shall from time to time be selected by the
Board of Directors. He shall render to the President and to the Board of
Directors, whenever requested, an account of the financial condition of the
Corporation. In general, he shall perform such duties as treasurers usually
perform and shall perform such other duties and shall exercise such other powers
as the Board of Directors, the Chairman of the Board or the President may from
time to time designate and shall render to the Chairman of the Board, the
President and to the Board of Directors, whenever requested, an account of the
financial condition of the Corporation.
SECTION 5.4.7. Controller. The Controller shall have charge of and be
responsible for preparation of financial and management reports, budgeting, rate
material, property accounting, taxes and such other duties as are commonly
incident to the office of Controller. The Controller shall have such power and
duties as from time to time may be properly delegated by the President and such
other powers and duties as may from time to time be assigned by the Board of
Directors.
-15-
<PAGE>
SECTION 5.4.8. Assistant Vice President, Assistant Secretary and
Assistant Treasurer. One or more Assistant Vice Presidents, Assistant
Secretaries and Assistant Treasurers, in the absence or disability of any Vice
President, the Secretary or the Treasurer, respectively, shall perform the
duties and exercise the powers of those offices, and, in general, they shall
perform such other duties as shall be assigned to them by the Board of Directors
or by the person appointing them. Specifically the Assistant Secretaries may
affix the corporate seal to all necessary documents and attest the signature of
any officer of the Corporation.
SECTION 5.4.9. Subordinate Officers. The Board of Directors may elect
such subordinate officers as it may deem desirable. Each such officer shall hold
office for such period, have such authority and perform such duties as the Board
of Directors may prescribe. The Board of Directors may from time to time
authorize any officer to appoint and remove subordinate officers and prescribe
the powers and duties thereof. The Board of Directors may from time to time
authorize the Chairman of the Board of Directors or the President to appoint any
employee or officer of the Corporation (except the President, the Secretary or
an Assistant Secretary elected by the Board of Directors) as an Assistant
Secretary of the Corporation, to prescribe the powers, term, duties and salary,
if any, of such Assistant Secretary, and to remove any Assistant Secretary thus
appointed.
SECTION 5.5. Officers Holding Two or More Offices. Any two of the above
mentioned offices, except those of President and Secretary or Assistant
Secretary, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if such
instrument be required by statute, by the Articles of Incorporation or by these
Bylaws to be executed, acknowledge or verified by any two or more officers.
SECTION 5.6. Compensation. The Board of Directors shall have power to
fix the compensation of all officers of the Corporation. It may authorize any
officer, upon whom the power of appointing subordinate officers may have been
conferred, to fix the compensation of such subordinate officers.
ARTICLE VI
CAPITAL STOCK
SECTION 6.1. Share Certificates. Unless the Articles of Incorporation
or these Bylaws provide otherwise, the Board of Directors may authorize the
issue of some or all of the shares of any or all of its classes or series with
or without certificates. Unless the Code provides otherwise, there shall be no
differences in the rights and obligations of Shareholders based on whether or
not their shares are represented by certificates.
In the event that the Board of Directors authorizes shares with
certificates, each certificate representing shares of stock of the Corporation
shall be in such form as shall be approved by the Board of Directors and shall
set forth upon the face thereof the name of the Corporation and that it is
organized under the laws of the State of Georgia, the name of the person to whom
the certificate
-16-
<PAGE>
is issued, and the number and class of shares and the designation of the series,
if any, the certificate represents. The Board of Directors may designate any one
or more officers to sign each share certificate, either manually or by
facsimile. In the absence of such designation, each share certificate must be
signed by the President or a Vice President and the Secretary or an Assistant
Secretary. If the person who signed a share certificate, either manually or in
facsimile, no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
SECTION 6.2. Record of Shareholders. The Corporation or an agent
designated by the Board of Directors shall maintain a record of the
Corporation's Shareholders in a form that permits preparation of a list of names
and addresses of all Shareholders, in alphabetical order by class or shares
showing the number and class of shares held by each Shareholder. The Corporation
shall be entitled to treat the person in whose name shares are registered in the
records of the Corporation as the owner thereof for all purposes unless it
accepts for its records a nominee certificate naming a beneficial owner of
shares other than the record owner, and shall not otherwise be bound to
recognize any equitable or other claim to or interest in such shares except as
may be provided by law.
SECTION 6.3. Lost Certificates. In the event that a share certificate
is lost, stolen, mutilated or destroyed, the Board of Directors may direct that
a new certificate be issued in place of such certificate. When authorizing the
issue of a new certificate, the Board of Directors may require such proof of
loss as it may deem appropriate as a condition precedent to the issuance
thereof, including a requirement that the owner of such lost, stolen or
destroyed certificate, or his legal representative, advertise the same in such
manner as the Board shall require and/or that he give the Corporation a bond in
such sum as the Board may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 6.4. Transfers of Shares. Transfers of shares of the capital
stock of the Corporation shall be made only upon the books of the Corporation by
the registered holder thereof, or by his duly authorized attorney, or with a
transfer clerk or transfer agent appointed as provided in Section 6.5 hereof,
and, in the case of a share represented by certificate, on surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, to vote as such owner, and for all other purposes, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
SECTION 6.5. Transfer Agents and Registrars. The Board of Directors may
establish such other regulations as it deems appropriate governing the issue,
transfer, conversion and registration of share certificates, including
appointment of transfer agents, clerks or registrars.
ARTICLE VII
-17-
<PAGE>
GENERAL PROVISIONS
SECTION 7.1. Indemnification of Officers, Employees and Agents. The
Corporation shall indemnify any officer who was or is made a party to or is
otherwise involved in any threatened, pending or completed action, suit or
proceeding, whether civil, derivative, criminal, administrative or investigative
(hereinafter, a "proceeding") to the same extent as it is obligated to indemnify
any Director of the Corporation, but without being subject to the same
procedural conditions imposed for the indemnification of Directors. The
Corporation may indemnify and advance expenses to an employee or agent who is
not a Director or officer to the extent permitted by the Articles of
Incorporation, the Bylaws or by law.
SECTION 7.2. Seal. The Corporation may have a seal, which shall be in
such form as the Board of Directors may from time to time determine. In the
event that the use of the seal is at any time inconvenient, the signature of an
officer of the Corporation, followed by the word "Seal" enclosed in parentheses,
shall be deemed the seal of the Corporation.
SECTION 7.3. Voting Shares in Other Corporations. In the absence of
other arrangements by the Board of Directors, shares of stock issued by another
corporation and owned or controlled by the Corporation, whether in a fiduciary
capacity or otherwise, may be voted by the President or any Vice President, in
the absence of action by the President, in the same order as they preside in the
absence of the President, or, in the absence of action by the President or any
Vice President, by any other officer of the Corporation, and such person may
execute the aforementioned powers by executing proxies and written waivers and
consents on behalf of the Corporation.
SECTION 7.4. Amendment of Bylaws. These Bylaws may be amended or
repealed and new bylaws may be adopted by the Board of Directors at any regular
or special meeting of the Board of Directors unless the Articles of
Incorporation or the Code reserve this power exclusively to the Shareholders in
whole or in part or the Shareholders, in amending or repealing the particular
bylaw, provide expressly that the Board of Directors may not amend or repeal
that bylaw. Unless the Shareholders have fixed a greater quorum or voting
requirement, these Bylaws also may be altered, amended or repealed and new
bylaws may be adopted, unless such action has been recommended by the Board of
Directors, by an affirmative vote of the holders of at least two-thirds of all
outstanding shares entitled to vote.
SECTION 7.5. Execution of Bonds, Debentures, Evidences of Indebtedness,
Checks, drafts and other Obligations and Orders for Payment. The signatures of
any officer or officers of the Corporation executing a corporate bond, debenture
or other debt security of the Corporation or attesting the corporate seal
thereon, or upon any interest coupons annexed to any such corporate bond,
debenture or other debt security of the Corporation, and the corporate seal
affixed to any such bond, debenture or other debt security of the Corporation,
may be facsimiles, engraved or printed, provided that such bond, debenture or
other debt security of the Corporation is authenticated or countersigned with
the manual signature of an authorized officer of the corporate trustee
designated by the indenture or other agreement under which said security is
issued by a
-18-
<PAGE>
transfer agent, or registered by a registrar, other than the Corporation itself,
or an employee of the Corporation. If the person who signed such, bond,
debenture or other debt security of the Corporation, either manually or in
facsimile, no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
SECTION 7.6. Business Combinations. All of the requirements of Sections
14-2- 1131 to 1133, inclusive, of the Code, as now in effect and as hereafter
from time to time amended, shall be applicable to this Corporation and to any
business combination approved or recommended by the Board of Directors.
ARTICLE VIII
EMERGENCY BYLAWS
SECTION 8.1. Emergency Bylaws. This Article shall be operative during
any emergency resulting from some catastrophic event that prevents a quorum of
the Board of Directors or any committee thereof from being readily assembled (an
"emergency"), notwithstanding any different or conflicting provisions set forth
elsewhere in these Bylaws or in the Articles of Incorporation. To the extent not
inconsistent with the provisions of this Article, the bylaws set forth elsewhere
herein and the provisions of the Articles of Incorporation shall remain in
effect during such emergency, and upon termination of such emergency, the
provisions of this Article shall cease to be operative.
SECTION 8.2. Meetings. During any emergency, a meeting of the Board of
Directors or any committee thereof may be called by any Director, or by the
President, any Vice President, the Secretary or the Treasurer (the "Designated
Officers") of the Corporation. Notice of the time and place of the meeting shall
be given by any available means of communication by the person calling the
meeting to such of the Directors and/or Designated Officers as may be feasible
to reach. Such notice shall be given at such time in advance of the meeting as,
in the judgement of the person calling the meeting, circumstances permit.
SECTION 8.3 Quorum. At any meeting of the Board of Directors or any
committee thereof called in accordance with this Article, the presence or
participation of two Directors, one Director and a Designated Officer, or two
Designated Officers shall constitute a quorum for the transaction of business.
SECTION 8.4. Bylaws. At any meeting called in accordance with this
Article, the Board of Directors or committee thereof, as the case may be, may
modify, amend or add to the provisions of this Article so as to make any
provision that may be practical or necessary for the circumstance of the
emergency.
-19-
<PAGE>
SECTION 8.5. Liability. Corporate action taken in good faith in
accordance with the emergency bylaws may not be used to impose liability on a
Director, officer, employee or agent of the Corporation.
SECTION 8.6. Repeal or Change. The provisions of this Article shall be
subject to repeal or change by further action of the Board of Directors or by
action of Shareholders, but no such repeal or change shall modify the provisions
of the immediately preceding section of this Article with regard to action taken
prior to the time of such repeal or change.
-20-
SECOND AMENDMENT TO THE
ATLANTA GAS LIGHT COMPANY LONG-TERM
STOCK INCENTIVE PLAN OF 1990
This Second Amendment to the Atlanta Gas Light Company Long-Term Stock
Incentive Plan (the "Plan") is made and entered into this 16th day of December,
1994, by the Atlanta Gas Light Company (the "Company").
W I T N E S S E T H:
WHEREAS, the Company sponsors the Plan to provide incentive and to
encourage proprietary interest in the Company by its key employees, officers and
inside directors; and
WHEREAS, the Company believes that it is in the best interest of the
Company and its employees to amend the Plan to provide for limited beneficiary
designations and the extension of certain exercise periods; and
WHEREAS, Section 10 of the Plan provides that the Company may amend the
Plan at any time; and
WHEREAS, the Board of Directors of the Company has adopted a resolution
authorizing the amendment of the Plan;
NOW, THEREFORE BE IT RESOLVED, that the Plan hereby is amended as
follows:
1. Section 3 of the Plan shall be amended by deleting that section in
its entirety and substituting in lieu thereof the following section:
3. Stock.
The stock subject to the Stock Rights and other provisions
of the Plan shall be authorized but unissued or reacquired
shares of the $5.00 par value common stock of the Company
(the "Common Stock"). Subject to readjustment in accordance
with the provisions of Section 8, the total number of shares
of the Common Stock for which Stock Rights may be granted to
persons participating in the Plan shall not exceed in the
aggregate 800,000 shares of Common Stock, less any shares
used as payment for SAR's pursuant to Section 6(a).
Notwithstanding the foregoing, shares of Common Stock
allocable to the unexercised portion of any expired or
terminated Option may become subject to Stock Rights under
the Plan. Stock not subject to Stock Rights includes (i)
shares of Restricted Stock which are forfeited for any
reason and (ii) shares used in payment of the Option price
for any Option under the Plan.
2. Section 5(j)(ii) of the Plan shall be amended by deleting that
subsection in its entirety and substituting in lieu thereof the following
subsection:
(ii) Upon an Optionee's retirement with the Company's consent or
the termination of an Optionee's employment due to
disability, as determined by the Committee in its sole
discretion, any Option or unexercised portion thereof
granted to him which is otherwise exercisable shall
terminate on and shall not be exercisable after 12 months
from the date of the Optionee's retirement with the consent
of the Company or after 3 months from the date of the
Optionee's termination due to disability; provided, any ISO
or unexercised portion thereof which remains unexercised on
the date three months after the date on which such Optionee
ceases to be an employee of the Company and any Subsidiary
shall convert to a Non-ISO for the remainder of its exercise
period. Notwithstanding the above, the Committee may provide
in the Option Agreement that such Option or any unexercised
portion thereof shall terminate sooner. An Option shall be
exercisable in accordance with its terms and only for the
number of shares exercisable on the date such Optionee's
employment ceases.
3. Section 5(j)(iii) of the Plan shall be amended by deleting that
subsection in its entirety and substituting in lieu thereof the following
subsection:
<PAGE>
(iii) In the event of the death of the Optionee while he or she is
an employee of the Company or a Subsidiary or within 3
months after the date on which such Optionee's employment
terminated due to retirement with the Company's consent or
due to disability, as determined by the Committee in its
sole discretion, any Option or unexercised portion thereof
granted to him or her may be exercised by his or her
beneficiary, as designated pursuant to the provisions of
Section 5(p) of the Plan, at any time prior to the
expiration of 1 year from the date of death of such
Optionee, but in no event later than the date of expiration
of the option period; provided, the Committee may provide in
any Option Agreement that such Option or any unexercised
portion thereof shall terminate sooner. Any exercise by a
designated beneficiary of the Optionee shall be effected
pursuant to the terms of this Section 5 as if such
designated beneficiary were the named Optionee.
4. A new Section 5(p) shall be added to the Plan as follows:
(p) Designation of Beneficiary. Each Optionee shall be permitted
to name one person as beneficiary for each Option he or she
is granted under the Plan. The designated beneficiary shall
have the rights described in Section 5(j)(iii) of the Plan.
Each Optionee shall be provided a beneficiary designation
form by the Committee and may designate one individual as
beneficiary for each Option, and that form should be
completed and returned to the Committee. If no completed
beneficiary designation form has been received by the
Committee for an Option upon the death of the Optionee, the
executor or administrator of the Optionee's estate shall be
considered the Optionee's designated beneficiary for that
Option.
5. The amendments contained in this Second Amendment to the Plan shall
be considered effective for all Options granted after January 1, 1994. In
addition, the amendments made by Items 2, 3 and 4 above shall be considered
applicable to all Options (and their respective option agreements) granted under
the Plan prior to that date, retroactive to the initial effective date of the
Plan, November 3, 1989.
6. Except as specifically set for herein, the terms of the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Second Amendment to the
Plan to be executed by its duly authorized officer as of the date first above
written.
ATLANTA GAS LIGHT COMPANY
BY: /s/ Robert L. Goocher
Executive Vice President-Business Support
and Chief Financial Officer
FOURTH AMENDMENT TO THE
ATLANTA GAS LIGHT COMPANY LONG-TERM
STOCK INCENTIVE PLAN OF 1990
This Fourth Amendment to the Atlanta Gas Light Company Long-Term Stock
Incentive Plan (the "Plan") is made and entered into this 6th day of March,
1996, by the Atlanta Gas Light Company (the "Company").
W I T N E S S E T H:
WHEREAS, the Company sponsors the Plan to provide incentive and to
encourage proprietary interest in the Company by its key employees, officers and
inside directors; and
WHEREAS, in light of the establishment of AGL Resources Inc. and the
change and conversion of all common stock of the Company into common stock of
AGL Resources Inc., the Company believes that it is in the best interest of the
Company and its employees to amend the Plan to provide for and clarify such
change and conversion with regard to all stock issued and options granted under
the Plan; and
WHEREAS, Section 8 of the Plan provides for certain adjustments to be
made to all outstanding Stock Rights under the Plan in the event of a change in
the securities of the Company, and it is the Board's intent to make such
adjustments; and
WHEREAS, Section 10 of the Plan provides that the Company may amend the
Plan at any time; and
WHEREAS, the Board of Directors of the Company has adopted a resolution
authorizing the amendment of the Plan;
NOW, THEREFORE, BE IT RESOLVED, that the Plan hereby is amended as
follows:
1.
Section 3 of the Plan shall be amended, effective as of March 6, 1996,
by replacing the first sentence thereof with the following sentence:
"Effective as of March 6, 1996, the stock subject to the Stock
Rights and other provisions of the Plan shall be authorized
but unissued or reacquired shares of the $5.00 par value
common stock of AGL Resources Inc. (the 'Common Stock')."
2.
<PAGE>
Section 8(a) of the Plan shall apply to all outstanding Stock Rights
under the Plan so that appropriate adjustments shall be made under the Plan upon
the conversion of all common stock of the Company into $5.00 par value common
stock of AGL Resources Inc.
3.
Except as specifically set forth herein, the terms of the Plan shall
remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Fourth Amendment to the
Plan to be executed by its duly authorized officer as of the date first above
written.
ATLANTA GAS LIGHT COMPANY
By: /s/ Robert L. Goocher
Robert L. Goocher
Executive Vice President
and Chief Financial Officer
FIFTH AMENDMENT TO THE
AGL RESOURCES INC. LONG-TERM
STOCK INCENTIVE PLAN OF 1990
(Formerly known as the ATLANTA GAS LIGHT COMPANY
LONG-TERM STOCK INCENTIVE PLAN OF 1990)
This Fifth Amendment to the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990 (formerly known as the Atlanta Gas Light Company
Long-Term Stock Incentive Plan of 1990) (the "Plan") is made and entered into
this 1st day of November, 1996, by AGL Resources Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has assumed the sponsorship of this Plan and has
determined that it would be in the best interest of the Company, its employees
and the employees of its subsidiaries to amend the Plan to change the name of
the Plan, to clarify the definition of "fair market value" with regard to stock
under the Plan and to clarify the methods of payment an Optionee may use to
exercise an option; and
WHEREAS, Section 10 of the Plan provides that the Company may amend the
Plan at any time; and
WHEREAS, the Board of Directors of the Company has adopted a resolution
authorizing the amendment of the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
1.
Effective as of July 1, 1996, the name of the Plan is hereby changed to
"AGL Resources Inc. Long-Term Stock Incentive Plan of 1990"; all references to
the "Plan" in the Plan shall mean the AGL Resources Inc. Long-Term Stock
Incentive Plan of 1990 and all references to "Company" shall mean AGL Resources
Inc.
2.
Section 5(c)(ii) is hereby amended, effective as of January 1, 1996, by
deleting that section in its entirety and substituting in lieu thereof the
following:
"(ii) The fair market value per share of Common Stock as of a
date of determination shall mean the following:
<PAGE>
(A) For purposes of transactions under the Plan that
constitute a purchase or sale of Common Stock on the open
market, the fair market value of the Common Stock shall be the
actual market price on the date and time of the purchase or
sale; and
(B) For all other purposes under the Plan, the fair
market value per share of the Common Stock on any particular
date shall be (a) the closing sale price of the stock as
reflected on the National Association of Securities Dealers,
Inc. National Market System on such date, or (b) if the Common
Stock is listed on an established stock exchange, the closing
price of the stock on such exchange on such date. If, for any
reason, the fair market value per share of the Common Stock
cannot be ascertained or is unavailable for a particular date,
the fair market value of such stock shall be determined as of
the nearest preceding date on which such fair market value can
be ascertained pursuant to the terms hereof."
3.
Section 5(h)(i) of the Plan is hereby amended, effective as of January
1, 1996, by replacing the second sentence thereof with the following sentence.
"The Optionee [or his or her successors as provided in Section
5(j)(iii)] may use any of the following methods of payment:
(A) cash; (B) the delivery of a certificate or certificates
for shares of the Common Stock duly endorsed for transfer to
the Company with medallion level signature guaranteed by a
member firm of a national stock exchange or by a national or
state bank (or guaranteed or notarized in such other manner as
the Committee may require); (C) broker-assisted cashless
exercise; or (D) any combination of the above methods or any
other method of exercise permitted by the Committee."
4.
Section 5(h)(i) of the Plan is hereby amended, effective as of November
1, 1996, by deleting the third sentence thereof in its entirety.
5.
Except as specifically set forth herein, the terms of the Plan shall
remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Fifth Amendment to the
Plan to be executed by its duly authorized officer as of the date first above
written.
AGL RESOURCES INC.
By: /s/ Robert L. Goocher
Robert L. Goocher
Executive Vice President
FIRST AMENDMENT TO THE
ATLANTA GAS LIGHT COMPANY
NONQUALIFIED SAVINGS PLAN
This First Amendment to the Atlanta Gas Light Company Nonqualified
Savings Plan (the "Plan") is made and entered into this 6th day of March, 1996,
by the Atlanta Gas Light Company (the "Company").
W I T N E S S E T H:
WHEREAS, the Company sponsors the Plan to provide a select group of
management or highly compensated employees an opportunity to accumulate
retirement savings due to the legal limitations on their savings under the
Atlanta Gas Light Company Retirement Savings Plus Plan; and
WHEREAS, in light of the establishment of AGL Resources Inc. and the
change and conversion of all common stock of the Company into common stock of
AGL Resources Inc., the Company believes that it is in the best interest of the
Company and its employees to amend the Plan to provide for and clarify such
change and conversion with regard to all stock issued under the Plan; and
WHEREAS, Article X of the Plan provides that the Company may amend the
Plan at any time; and
WHEREAS, the Board of Directors of the Company has adopted a resolution
authorizing the amendment of the Plan;
NOW, THEREFORE, BE IT RESOLVED, that the Plan hereby is amended as
follows:
1. Effective as of March 6, 1996, Section 1.14 of the Plan is
amended by replacing that section with the following new
Section 1.14:
"1.14 Company Stock shall mean the $5.00 par value common
stock of AGL Resources Inc."
2. Except as specifically set forth herein, the terms of the
Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this First Amendment to the
Plan to be executed by its duly authorized officer as of the date first above
written.
ATLANTA GAS LIGHT COMPANY
By: /s/ Robert L. Goocher
Robert L. Goocher
Executive Vice President and Chief Financial Officer
SECOND AMENDMENT TO THE
AGL RESOURCES INC.
NONQUALIFIED SAVINGS PLAN
(Formerly known as the ATLANTA GAS LIGHT COMPANY NONQUALIFIED SAVINGS PLAN)
This SECOND AMENDMENT to the AGL RESOURCES INC. NONQUALIFIED SAVINGS
PLAN (the "Plan") is made by AGL Resources Inc. (the "Controlling Company") on
this 14th day of February, 1997.
W I T N E S S E T H:
WHEREAS, the Controlling Company has assumed the sponsorship of the
Plan and has determined that it would be in the best interest of the Controlling
Company, its employees and the employees of its subsidiaries to amend the Plan
to change the name of the Plan and to make certain other changes;
WHEREAS, the Board of Directors of the Controlling Company has
authorized the officers to take this action, and Section 10.1 of the Plan
permits the Company to amend the Plan at any time;
NOW, THEREFORE, the Controlling Company hereby amends the Plan as
follows:
1.
Effective as of July 1, 1996, the name of the Plan is hereby changed to
"AGL Resources Inc. Nonqualified Savings Plan" and all references to "Plan" in
the Plan shall mean the AGL Resources Inc.
Nonqualified Savings Plan.
2.
Effective as of July 1, 1996, Section 1.17 of the Plan is hereby
amended by deleting that section in its entirety and by substituting in lieu
thereof the following:
"1.17 "Controlling Company" shall mean AGL Resources Inc. ,
a Georgia corporation with its principal office in Atlanta,
Georgia, and its successors which adopt the Plan."
<PAGE>
3.
Effective as of March 1, 1997, Section 1.24 of the Plan is hereby
amended by deleting that section in its entirety and by substituting in lieu
thereof the following:
"1.24 "Entry Date" shall mean each January 1, April 1, July 1
and October 1 for all periods beginning on or after July 1,
1995 through February 28, 1997; thereafter, "Entry Date" shall
mean each business day during which the Plan remains in
effect."
4.
Effective as of March 1, 1997, Section 2.1 of the Plan is hereby
amended by deleting that section in its entirety and by substituting in lieu
thereof the following:
"2.1 Initial Eligibility Requirements.
(a) General Rule. Effective as of March 1, 1997,
except as provided in subsection (b) hereof, every Covered
Employee shall become an Active Participant in the Plan on the
Entry Date coincident with or immediately following (i) his
attainment of age 21, and (ii) the completion of thirty (30)
days of employment as a Covered Employee, provided he is a
Covered Employee on such date.
(b) New Participating Companies. For employees of
companies that become Participating Companies after March 1,
1997 , each Covered Employee employed by a Participating
Company on the date such Participating Company first becomes a
Participating Company shall become an Active Participant as of
such Participating Company's effective date of participation
under the Plan, if as of such effective date, the Covered
Employee has attained age 21 and completed thirty (30) days of
employment with such Participating Company."
5.
Effective as of July 1, 1996, Schedule A to the Plan is hereby amended
and shall be reflected as attached hereto. Further, the Administrative Committee
shall hereafter have authority to amend Schedule A hereto from time to time
without further approval of the Board of Directors to properly reflect the
Participating Companies in the Plan.
<PAGE>
6.
Except as specifically amended hereby, the Plan shall remain in full
force and effect.
IN WITNESS WHEREOF, the Controlling Company has caused its duly
authorized officer to execute this amendment and to affix its corporate seal
hereto, all as of the date first above written.
AGL RESOURCES INC.
By: /s/ Robert L. Goocher
Robert L. Goocher
Executive Vice President
<PAGE>
SCHEDULE A
EFFECTIVE DATES FOR PARTICIPATING COMPANIES
Name of Effective Date
Participating Company of Participation
Atlanta Gas Light Company July 1, 1995
Georgia Gas Company July 1, 1995
Chattanooga Gas Company July 1, 1995
Georgia Gas Service Company July 1, 1995
(other than:
Alabama Gas Service Company
GBJ Investment Co., Inc.
Gasco Lending, Inc.
Jordan Gas Company, Inc.
Good Neighbor Gas Company, Inc.
Southern Butane Co., Inc.
Waters L.P. Gas, Inc.
Jordan Gas Service, Inc.
J&H Propane, Inc.)
AGL Resources Inc. July 1, 1996
AGL Investments, Inc. July 1, 1996
(other than:
AGL Consumer Services, Inc.
AGL Gas Marketing, Inc.
AGL Power Services, Inc.
Georgia Energy Company
Trustees Investments, Inc.)
The Energy Spring, Inc. July 1, 1996
AGL Energy Services, Inc. July 1, 1996
(other than:
Peachtree Pipeline Co.)
AGL Resources Service Company, Inc. July 1, 1996
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
between
TRANSCONTINENTAL GAS PIPE LINE COPRORATION
and
ATLANTA GAS LIGHT COMPANY
DATED
AUGUST 1, 1991
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
THIS AGREEMENT entered into this 1st day of August, 1991, by and between
TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware corporation,
hereinafter referred to as "Seller," first party, and ATLANTA GAS LIGHT
COMPANY, hereinafter referred to as "Buyer," second party,
W I T N E S S E T H
WHEREAS, Buyer is a party to the Stipulation and Agreement Regarding
Service Restructuring dated September 17, 1990 in FERC Docket Nos.
CP88-391, et al, and desires to receive service under Seller's Rate
Schedule FS on the terms set forth herein.
NOW, THEREFORE, Seller and Buyer agree as follows:
ARTICLE I
GAS SERVICE
1. Subject to the terms and conditions of Seller's Rate Schedule FS and
this Service Agreement, Seller agrees to make available on a firm basis
each day for purchase by Buyer such quantities of gas as Buyer may
request from time to time not to exceed Buyer's Daily Sales Entitlement
as set forth on Exhibit "A" attached hereto. Such service shall not be
subject to curtailment or interruption except as provided in Articles V
and VI of this Service Agreement. In the event of such curtailment or
interruption Section 11 or 13 of the General Terms and Conditions shall
apply.
ARTICLE II
TERM OF AGREEMENT
1. This Agreement shall be effective as of the later of or the
date on which all necessary Commission authorizations are received and
shall remain in force and effect until ("Primary Term"). For
purposes of this Service Agreement, the term "Contract Year" shall mean
the period from the effective date through March 31, 1991 and each
twelve month period thereafter through the term of this Service
Agreement.
2. Commencing at the end of the Primary Term, and on each anniversary
date thereafter, the term of this Service Agreement shall be extended by
successive one Contract Year periods unless either Buyer or Seller
notifies the other in writing not less than two Contract Years prior to
the end of the Primary Term or two Contract Years prior to any
anniversary date thereafter, as the case may be, of its election not to
extend the term of this Service Agreement.
3. In the event Seller has elected, pursuant to Section 2 above, to
terminate this Service Agreement, but Seller has not received
abandonment authorization under Section 7(b) of the Natural Gas Act on
or before one hundred eighty (180) days prior to the effective date of
such termination, then Buyer and Seller shall negotiate new terms and
conditions pursuant to the procedure set forth in Section 1 of Article
VII of this Service Agreement.
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
It is the intent of the parties that such renegotiated terms and
provisions will provide for a firm sales service under which Buyer would
be entitled to its ratable share, based on Buyer's Daily Sales
Entitlement, of the gas supplies. Such renegotiated terms and
conditions shall govern FS Service during any period after termination
of this Service Agreement but prior to receipt of any necessary
abandonment authorization; provided, however, such renegotiated terms
and provisions shall in no way extend the contractual obligations of the
parties under this Service Agreement (i. e. such renegotiated terms and
conditions are only intended to determine the manner in which service
will be performed under Transco's NGA Section 7(c) Certificate prior to
receipt of abandonment authorization).
ARTICLE III
RATES AND CHARGES
1. Buyer shall pay Seller each month as invoiced the sum of the
following charges:
(a) Firm Service Charge: the product of (i) Buyer's Daily Sales
Entitlement and (ii) the applicable Firm Service Fee per Mcf determined
pursuant to the procedures set forth on Exhibit "A" attached to this
Service Agreement;
(b) Non-Gas Demand Charge: the product of (i) Buyer's Daily Sales
Entitlement and (ii) the applicable FS Non-Gas Cost Service Fee as set
forth on Sheet No. 23 of Sellers FERC Gas Tariff; and
(c) Gas Commodity Charge: the product of (i) the Gas Commodity Rate
which is comprised of the Delivered Gas Price per dt less the actual
Transportation Charge per dt and (ii) the total volumes of gas (in dts)
purchased hereunder at the Redelivery Point(s) by Buyer. The Delivered
Gas Price per dt shall be determined each month in accordance with the
provisions of Exhibit "A" attached to this Service Agreement. The
actual Transportation Charge shall equal the commodity portion of all
transportation charges by Seller under Seller's Rate Schedules FT and/or
IT (at the maximum applicable non-discounted rates), including the
imputed unit cost of fuel retained, the GRI Adjustment Charge, the ACA
Charge, Seller's PSP surcharge(s) and any other FERC-approved charge by
Seller, if applicable, to transport gas sold and purchased under
Seller's FS Rate Schedule from the Delivery Point(s) to the Redelivery
Point(s) set forth in Exhibit "B" to this Service Agreement;
2. (a) In the event that Seller is unable on any day to deliver the
quantities of gas requested by Buyer pursuant to the terms of this
Service Agreement up to Buyer's Daily Sales Entitlement, the provisions
set forth in Section 3 of this Article III and Exhibit "C" attached to
this Service Agreement shall apply.
(b) Except as set forth in Section 3 of this Article III, Article VII,
Section 3(e) of Exhibit "A" and Exhibit "C" attached hereto, Buyer and
Seller agree that the price at which gas is purchased and sold
hereunder, including the Firm Service Charge, is final, and that neither
party will contest in any proceeding
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
the appropriateness of such price or of the pricing mechanism set forth
herein, and that neither party will seek or be entitled to any refunds
or adjustment in price as a result of any such proceedings.
3. In the event that Seller is unable on any day to deliver at the
delivery point(s) quantities of gas requested by Buyer up to Buyer's
Daily Sales Entitlement, the Firm Service Charge set forth in Section
1(a) of this Article III shall be reduced for such month by an amount
equal to the product of (a) the difference between Buyer's Nominated
Purchase Quantity (Mcfs) and the volumes actually delivered (Mcf) by
Seller on the day the underdelivery occurred and (b) the Firm Service
Fee per Mcf divided by the number of days in such month.
4. Buyer agrees that Seller shall have the unilateral right to file
with the appropriate regulatory authority and make changes effective in
a) Seller's Rate Schedule FS pursuant to which service hereunder is
rendered, b) any provisions of the General Terms and Conditions of
Seller's FERC Gas Tariff that are applicable to Rate Schedule FS or c)
this Service Agreement; provided, however, Seller shall not have the
right, without the consent of Buyer, unless required to do so pursuant
to applicable laws or regulations, to make any filings pursuant to
Section 4 of the Natural Gas Act to change any of the material terms
and/or provisions of this Service Agreement, including adding any new
provisions to this Service Agreement, the Rate Schedule FS or the
General Terms and Conditions of Seller's Tariff that would modify the
material terms and/or provisions of this Service Agreement. The parties
agree for purposes of this section that only Article I, Article II,
Article III, Article IV, Article V, Article VI, Article VII and the
provisions of Exhibits "A", "B" and "C" hereto shall be considered
material. Seller agrees that nothing herein is intended to limit Buyer's
right to protest or contest the aforementioned filings.
ARTICLE IV
POINT(S) OF DELIVERY AND AGENCY AUTHORITY
1. Gas purchased and sold hereunder will be delivered by Seller for
Buyer's account at (a) the interconnection(s) of Seller's pipeline
facilities of third party seller(s) from whom Seller purchases its gas
supply and/or (b) the interconnection(s) of Seller's pipeline facilities
with the facilities of third party transporter(s) with whom Seller has
contracted for the transportation of gas supplies to its system and/or
(c) the outlet of Seller's system storage facilities ("Delivery
Point(s)").
2. Buyer hereby appoints Seller as its agent for the purpose of
arranging for the transportation of gas purchased and sold hereunder
from the Delivery Point(s) to the ultimate point(s) of delivery
("Redelivery Points") to Buyer listed on Exhibit "B" attached hereto.
In consideration of Buyer's obligation under this Service Agreement,
including the payment of certain fees pursuant to Article III hereof,
Seller agrees to accept such agency appointment. Pursuant to this
agency authority Seller may (a) request and execute on buyer's behalf
transportation Service Agreement(s) under Seller's Rate Schedule IT to
transport gas purchased hereunder and/or (b) nominate and schedule
transportation service under Buyer's IT and FT Agreements for gas
purchased by Buyer hereunder. Seller shall be responsible for all
imbalance penalties incurred in connection with volumes purchased under
this Service Agreement.
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
Buyer agrees not to exercise any rights it has under the FT Agreement or
otherwise which would interfere in any way with Seller's ability to
utilize a pro rata share of capacity entitlements under the FT
Agreement(s), as set forth in Transco's FT Rate Schedule, ("Telescoped
Rights") (including any associated upstream Rate Schedule IT or third
party pipeline capacity entitlements) to arrange for the transportation
of gas purchased and sold to Buyer hereunder. For purposes of the
preceeding sentence, Seller's pro rata share at Station 65 shall be
equal to the product of (i) a percentage calculated by dividing Buyer's
Daily Sales Entitlement by Buyer's Total Daily Transportation Contract
Quantity under the FT Agreement(s) and (ii) a percentage calculated by
dividing the quantity of gas requested hereunder from Seller on such day
by Buyer's total daily sales entitlement under the FS Agreement. For
purposes of determining Seller's pro rata share of capacity at any point
on Seller's system the product of (i) and (ii) above shall be multiplied
by Buyer's Transportation Contract Quantity under the FT Agreement at
the applicable point.
ARTICLE V
GAS SUPPLY UNDERTAKINGS
1. In consideration of Buyer's obligations under this Service
Agreement, including the Firm Service Charge, Seller undertakes to have
available sufficient gas supplies to perform its sales obligation for
the term of this Service Agreement, which shall consist of the Primary
Term and any extension thereto pursuant to Section 2 of Article II
above, subject only to:
(a) the force majeure provisions of Article VI of this Service
Agreement;
(b) the non-interference by the Commission or any other governmental
body (legislative, executive or judicial) with the terms and conditions
of this Service Agreement which are material to Seller's ability to
secure gas supplies. The parties agree for purposes of this subsection
that Article II, Article III, Article IV, this Article V, Article VI,
Article VII, and the provisions in Exhibits "A", "B" and "C" hereto are
material to Seller's ability to secure gas supplies; and
(c) the absence of any marterial change in the regulatory environment
which frustrates Seller's ability to provide service in the manner
contemplated by this Service Agreement. By way of example but not of
limitation, any direct or indirect re-regulation of field prices or any
requirement that interstate pipelines function as common carriers would
constitute such a material change.
The foregoing is not intended nor shall it be construed as obligating
Seller to furnish gas supplies hereunder which are marketable in all of
Buyer's markets at all times during the term of the Service Agreement as
such term is defined above in this Section 1, or as extending Seller's
gas supply undertakings beyond the term of this Service Agreement as
such term is defined above in this Section 1.
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
2. In consideration of Seller's obligations under this Service
Agreement, Buyer undertakes to perform its obligations for the term of
this Service Agreement subject only to:
(a) the force majeure provisions set for in Article VI below;
(b) the non-interference by the Commission or any other governmental
body (legislative, executive or judicial) with the terms and conditions
of FS Service and/or this Service Agreement which are material to
Buyer's ability to perform its obligations; and
(c) the absence of any material change in the regulatory environment
which would frustrate Buyer's ability to perform its obligations in the
manner contemplated by this Service Agreement. By way of example, but
not of limitation, any actions taken by a state and/or local public
utility commission having jurisdiction over Buyer, which prohibits Buyer
from buying gas under this Service Agreement or from recovering the cost
of buying gas under this Service Agreement from Buyer's customer(s)
would constitute such a material change.
3. Subsections 1(b), 1(c), 2(b) and 2(c) of this Article V, insofar as
they would operate to suspend under this agreement the supply
obligations of Seller or purchase obligations of Buyer under certain
specified circumstances and events, shall suspend the rights and
obligations of the parties under this Service Agreement prospectively
only upon written notice to the other party and are not intended, nor
shall they be construed, as excusing any obligations of Seller and/or
Buyer arising under the Service Agreement for periods prior to the date
of receipt of such notice ("Notice Date"). In the event Seller's supply
obligation is suspended pursuant to this subsection 3, such obligation
shall be suspended on a non-discriminatory basis.
The Party giving notice of suspension ("Suspending Party") shall take
all reasonable steps to remedy the situation and remove the cause or
contingencies affecting the performance of the obligations under this
Service Agreement. During any period that the obligations of the Seller
hereunder are suspended pursuant to Sections 1(b) or (c) above, but not
1(a), Seller agrees to continue firm sales service to Buyer; provided
however, the terms and conditions governing such service during such
period of suspension ("Suspension Period") shall not be the terms set
forth in this Service Agreement. Instead, the terms and conditions of
such service shall be negotiated by the parties pursuant to the
procedure set forth in Section 2 of Article VII of this Service Agreement.
It is the intent of the parties that such renegotiated terms and
provisions will provide for a firm sales service on a non-discriminatory
basis under which Buyer would be entitled to its ratable share, based on
Buyer's Daily Sales Entitlement, of the available gas supplies.
ARTICLE VI
FORCE MAJEURE
The term force majeure as employed herein shall mean acts of God,
strikes, lockouts or other industrial disturbances, acts of the public
enemy, wars, blockades, insurrections, riots,
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
epidemics, landslides, lightning, earthquakes, fires, storms, floods,
washouts, arrests, the order of any court or government authority having
jurisdiction while the same is in force and effect, civil disturbances,
explosions, breakage, accidents to machinery or lines of pipe, freezing
of or damage to wells or delivery facilities, National Weather Service
warnings or advisories, whether official or unofficial, that result in
the evacuation or facilities or platforms, well blowouts, inability to
obtain or unavoidable delay in obtaining material, equipment, and any
other cause whether of the kind herein enumerated or otherwise, not
reasonably within the control of the party claiming suspension and which
by the exercise of due diligence such party is unable to prevent or
overcome.
In the event of either party being rendered unable, wholly or in part, by
force majeure to carry out its obligations (other than the continuing
obligation set forth hereinbelow), it is agreed that on such party's
giving notice and full particulars of such force majeure in writing or
by telegraph or telecopy to the other party within a reasonable time
(not to exceed five (5) days) after the occurrence of the cause relied on,
the obligations of both parties, so far as they are affected by such
force majeure, shall be suspended during such period of force majeure,
but for no longer period, and such cause shall so far as possible be
remedied with all reasonable dispatch.
Neither party shall be liable in damages to the other for any act,
omission or circumstance occasioned by, or in consequence of, force
majeure, as herein defined.
Such causes or contingencies affecting the performance by either party,
however, shall not relieve it of liability unless such party shall give
notice and full particulars of such cause or contingency in writing or
by telegraph or telecopy to the other party within a reasonable time
after the occurrence relied upon, nor shall such causes or contingencies
affecting the performance by either party relieve it of liability in the
event of its failure to use due diligence to remedy the situation and
remove the cause with all reasonable dispatch, nor shall such causes or
transportation contingencies affecting the performance relieve Buyer
from its obligation to make payments of amounts in respect of commodity
charges for natural gas delivered, Firm Service Charges and Non-Gas
Demand Charges, except for any adjustment to the Firm Service Charge as
specified in Article III of this Service Agreement.
ARTICLE VII
ARBITRATION AND RENEGOTIATION
1. On or before one hundred eighty (180) days prior to the date on which
this Service Agreement terminates pursuant to Article II hereof, Seller
shall submit an Offer ("Offer") to Buyer setting forth proposed terms
and conditions for continued service. Buyer may submit a Counter Offer
("Counter Offer") within ten (10) working days of receipt of the Offer.
If a Counter Offer is received within the indicated period, the parties
will proceed with negotiations. If a Counter Offer is not received
within ten (10) working days, the Offer will be deemed accepted. If the
parties are unable to agree on the terms and conditions for continued
service within thirty (30) days ("30 day Negotiation Period") following
Seller's receipt of the Counter Offer, the Offer and the Counter Offer
will be submitted to a Board of Arbitration in Washington, D. C. in
accordance with the Commercial Arbitration Rules of the American
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
Arbitration Association (but not administered by the American
Arbitration Association) subject to the parties agreement herein to
modify or override those rules in certain respects by adoption of the
following procedures:
a) Within ten (10) days following the end of the 30 day Negotiation
Period, each party must name its choice of an arbitrator who has
accepted the appointment. In the event either party fails to name an
arbitrator, such party's arbitrator shall be appointed by the Senior
Judge (in service) of the United States District Court for the District
of Columbia. Within ten (10) days after both arbitrators have accepted
appointment, the two arbitrators shall name a third arbitrator, or, if
they are unable to agree upon the third, the third arbitrator shall be
appointed by the Senior Judge (in service) of the United States District
Court for the District of Columbia. The three (3) arbitrators shall be
qualified by education and/or experience to pass on the particular
issues in dispute, and shall not be (i) financially interested in the
outcome of the dispute or (ii) former or current employees of either
party. Each party shall pay the compensation and expenses of the
arbitrator named by or for it, and both shall share equally the
compensation and expenses of the third arbitrator.
(b) The three arbitrators shall meet and hear the parties with respect
to matters relevant to which proposed Offer will, amount other things,
compensate Seller for the value of providing the continued service,
which shall include but not be limited to executed long term sales
agreements between other sellers serving the same or similar markets
and their customers. The jurisdiction of the arbitrators shall be
limited to the selection, based on all relevant evidence presented, of
either the Offer or the Counter Offer proposed either by Seller or by
Buyer pursuant to the provisions of this section. No other provisions
shall be selected by the arbitrators. The decision by the arbitrators
shall be in writing, signed by the arbitrators or a majority of them,
rendered within seventy (70) days of the appointment of the third
arbitrator, and final, binding and non-appealable, except as set forth
in the Uniform Arbitration Act of Delaware [Footnote 1]
as to the parties hereto.
The provisions adopted by the arbitrators shall be effective as of the
first day following termination of this Service Agreement. During any
period prior to a decision by the arbitrators but after the expiration
of the primary term of this Service Agreement, Buyer shall continue to
pay the rates and charges in effect prior to the expiration of the
primary term. Such rates and charges shall be adjusted retroactively as
necessary to conform to the arbitrators' decision.
2. In the event the rights and obligations of the parties hereunder are
suspended pursuant to Section 3 of Article V above, then within ten (10)
working days following the Notice Date, the Suspending Party shall
submit an Offer ("Offer") to the other party setting forth proposed
terms and conditions for continued FS Service. The other party may
submit a Counter
[Footnote 1] 1 Del. Code Ann. tit. 10, Section 5703 (1974)
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
Offer ("Counter Offer") within ten (10) working days of receipt of the
Offer. If a Counter Offer is received within the indicated period, the
parties will proceed with negotiations. If a Counter Offer is not
received within ten (10) working days, the Offer will be deemed
accepted. If the parties are unable to agree on the terms and
conditions for continued FS Service within thirty (30) days ("30 day
Negotiation Period") following the Suspending Party's receipt of the
Counter Offer, the Offer and the Counter Offer will be submitted to a
Board of Arbitration in Washington, D.C. in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
(but not administered by the American Arbitration Association) subject
to the parties' agreement herein to modify or override those rules in
certain respects by adoption of the following procedures:
(a) Within ten (10) days following the end of the 30 day Negotiation
Period, each party must name its choice of an arbitrator who has
accepted the appointment. In the event either party fails to name an
arbitrator, such party's arbitrator shall be appointed by the Senior
Judge (in service) of the United States District Court for the District
of Columbia. Within fifteen (15) days after both arbitrators have
accepted appointment, the two arbitrators shall name a third arbitrator,
or, if they are unable to agree upon the third, the third arbitrator
shall be appointed by the Senior Judge (in service) of the United States
District Court for the District of Columbia. The three (3) arbitrators
shall be qualified by education and/or experience to pass on the
particular issues in dispute and shall not be (i) financially interested
in the outcome of the dispute or (ii) current or former employees of
either party. Each party shall pay the compensation and expenses of the
arbitrator named by or for it, and both shall share equally the
compensation and expenses of the third arbitrator.
(b) The three arbitrators shall meet and hear the parties with respect
to matters relevant to which proposed Offer will, among other things,
compensate Seller for the value of providing the continued service,
which shall include but not be limited to executed long term sales
agreements between other Sellers serving similar markets and their
customers. The jurisdiction of the arbitrators shall be limited to the
selection, based on all relevant evidence presented, of either the Offer
or the Counter Offer proposed either by Seller or by Buyer pursuant to
the provisions of this section. No other provisions shall be selected
by the arbitrators. The decision by the arbitrators shall be in
writing, signed by the arbitrators or a majority of them, rendered
within forty-five (45) days of the appointment of the third arbitrator,
and final, binding and non-appealable, except as set forth in the
Uniform Arbitration Act of Delaware [Footnote 2]
as to the parties hereto. The
provisions adopted by the arbitrators shall be effective as of the first
day following the Notice Date regardless of the actual date of decision
of the arbitrators. In the event the situation that led to the
suspension is not remedied within six (6) months of
[Footnote 2] Del. Code Ann. tit. 10, Section 5703 (1974)
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
the Notice Date, this Service Agreement may be terminated by either
party. In the event Seller elects to terminate this Service Agreement
at such time, but Seller has not yet received authorization under
Section 7(b) of the NGA to abandon service under the FS Rate Schedule,
then the terms and conditions in effect during the Suspension Period
shall continue in effect during the period following Seller's
termination of this Service Agreement until the date any necessary
abandonment authority is received by Seller. During any period prior to
a decision by the arbitrators but after the Notice Date, Buyer shall
continue to pay the rates and charges in effect prior to the Notice
Date, subject to any adjustments to the Firm Service Charge set forth in
Article III of this Service Agreement. Such rates and charges shall be
adjusted retroactively as necessary to conform to the arbitrators'
decision.
ARTICLE VIII
MISCELLANEOUS
1. The subject headings of the Articles of this agreement are inserted
for the purpose of convenient reference and are not intended to be a part
of this agreement nor to be considered in any interpretation of the
same.
2. This agreement supersedes and cancels as of the effective date
hereof the following contract(s) between the parties hereto:
none
3. No waiver by either party of any one or more defaults by the other
in the performance of any provisions of this agreement shall operate or
be construed as a waiver of any future default or defaults, whether of a
like or a different character.
4. THE INTERPRETATION AND PERFORMANCE OF THIS SERVICE AGREEMENT SHALL
BE IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
RECOURSE TO THE LAW GOVERNING CONFLICT OF LAWS, AND TO ALL PRESENT AND
FUTURE VALID LAWS WITH RESPECT TO THE SUBJECT MATTER, INCLUDING PRESENT
AND FUTURE ORDERS, RULES AND REGULATIONS OF DULY CONSTITUTED
AUTHORITIES.
5. Notices to either party shall be in writing and shall be considered
as duly delivered when mailed to the other party at the following
address:
(a) If to Seller:
Transcontinental Gas Pipe Line Corporation
P.O. Box 1396
Houston, Texas 77251
Attention: Senior Vice President - Gas Supply
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
(b) If to Buyer:
Atlanta Gas Light Company
235 Peachtree Street, N.E.
Atlanta, Georgia 30302
Attention: Mr. Stephen J. Gunther
6. This agreement shall be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
signed by their respective Presidents or Vice Presidents thereunto duly
authorized and attested by their respective Secretaries or Assistant
Secretaries the day and year above written.
TRANSCONTINENTAL GAS PIPE LINE
CORPORATION
ATTEST:
By /s/ Grace L. Hughes By /s/ Jay P. Lukens
Asst. Secretary Jay P. Lukens
Senior Vice president - Finance,
Rates & Marketing
SELLER
ATTEST: ATLANTA GAS LIGHT COMPANY
By /s/ Bobbie S. Loggins By /s/ Stephen J. Gunthter
Asst. Secretary
Vice President
Title
BUYER
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
EXHIBIT "A"
SALES ENTITLEMENTS AND GAS PRICE
1. Buyer's Daily Sales Entitlement: Buyer's Daily Sales Entitlement(s)
shall be equal to Mcf/d. [Footnote 3]
2. Procedure to Determine the Delivered Gas Price and Buyer's Nominated
Purchase Quantity:
(a) No later than two (2) business days prior to Seller's receipt point
transportation nomination deadline for the applicable month, Seller
shall propose to Buyer a Delivered Gas Price for the following month.
Such proposed Delivered Gas Price may be revised by Seller at any time
prior to acceptance by Buyer in writing; provided however Seller agrees
not to revise a proposed Delivered Gas Price that Buyer has verbally
agreed to accept, as long as Buyer confirms such acceptance by telecopy
or other written communication as soon as possible but in no event later
than the close of business on the day of verbal acceptance.
(b) During the succeeding period ending on the date set forth in
Subparagraph c) below, Buyer and Seller shall negotiate with the intent
of determining a mutually agreeable Delivered Gas Price for the
following month.
(c) No later than five (5) p.m. C.S.T. on the day prior to the day that
receipt point transportation nominations are due on Seller's system for
the applicable month, Buyer shall notify Seller in writing of Buyer's
daily nominated purchase quantity not to exceed Buyer's Daily Sales
Entitlement ("Nominated Purchase Quantity") for the following month and,
if Buyer and Seller have agreed to a Delivered Gas Price for the
following month, such agreed to Delivered Gas Price. In the event Buyer
and Seller have been unable to agree to a Delivered Gas Price for the
following month, or if during the period from the effective date of this
Service Agreement through March 31, 1991 the agreed to Delivered Gas
Price is higher than the Default Price, the Delivered Gas Price shall be
the Default Price, which shall equal the sum of (1) the Unit Price of
Gas as determined in accordance with Subparagraph (d) below and (2) the
Commodity portion of all transportation charges by seller under Seller's
Rate Schedule FT (calculated on a fully telescoped basis at the maximum
applicable rate) and associated upstream transportation charges under
Seller's Rate Schedule IT (calculated on a fully telescoped basis at the
maximum.
[Footnote 3] Buyer's Daily Sales Entitlement and Nominated Purchase Quantity
shall be increased as appropriate, to the dekatherm equivalent quantity and to
include fuel retained by Seller under its Rate Schedule FT and IT, as
applicable, to transport such gas from the Delivery Point(s) to the
Redelivery Point(s).
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
applicable rate), including the imputed unit cost of fuel retained by
Seller, the GRI Adjustment Charge, the ACA Charge, Seller's PSP
Surcharge(s), and any other charge by Seller which has been approved by
the FERC, if applicable to transport the gas sold and purchased hereunder
to the Redeliver Point(s) ("Transportation Charge").
In the event of a refund and/or surcharge by Seller applicable to the
Transportation Charge for zone(s) 1, 2 and/or 3, Seller's refund and/or
surcharge obligation to Buyer related to the transportation of gas
purchased by Buyer hereunder, shall be determined by multiplying (i) the
per unit amount obtained by dividing the total dollars which Seller is
obligated to refund and/or entitlted to surcharge for zone(s) 1, 2 and/or
3 which are associated with Seller's transportation of gas purchased by
all Buyers under this Rate Schedule FS by the total quantity of gas
purchased by all such Buyers under this Rate Schedule FS during the period
to which such
adjustment is applicable by (ii) the quantity of gas purchased by Buyer
under this Rate Schedule FS during the period to which such adjustment is
applicable. Refunds and/or surcharges applicable to the Transportation
Charge for zone(s) 4, 5 and/or 6 shall be determined based on the actual
volumes purchased and transported for each Buyer. The foregoing
surcharge and/or refund shall be the only adjustment to the Delivered
Gas Price hereunder.
(d) Unit Price of Gas:
The Unit Price of Gas shall be determined by computing the following:
(i) During the period from the effective date of this Service Agreement
througn March 31, 1991 - the simple average of the four regional prices
(rounded to the fourth decimal place) set forth in the table "Gas Price
Report" (in $/MMBtu) published in the first issue for such month of
Natural Gas Week (or any succeeding publication of Oil Daily, Inc.) for
these regions: 1) Texas, Gulf Coast Offshore, Spot Delivered to Pipeline;
2) Texas, Gulf Coast Onshore, Spot Delivered to Pipeline; 3) Louisiana,
Gulf Coast Offshore, Spot Delivered to Pipeline; 4) Louisiana, Gulf
Coast Onshore, Spot Delivered to Pipeline.
(ii) During the period from April 1, 1991 through the term of this
Service Agreement as extended for the Nominated Purchase Quantity - the
simple average of the four regional prices (rounded to the fourth
decimal place) set forth in the table "Gas Price Report" (in $/MMBtu)
published in the first issue for such month of Natural Gas Week (or any
succeeding publication of Oil Daily, Inc.) for these regions: 1) Texas,
Gulf Cost Offshore, Spot Delivered to Pipeline; 2) Texas, Gulf Coast
Onshore, Spot Delivered to Pipeline; 3) Louisiana, Gulf Coast Offshore,
Spot Delivered to Pipeline; 4) Louisiana, Gulf Coast Onshore, Spot
Delivered to Pipeline.
(iii) During the period from April 1,1991 through the term of this
Service
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
Agreement as extended for quantities purchased hereunder in excess of
the Nominated Purchase Quantity-100% of the price set forth in the table
"Gas Price Report" (in $/MMBTU) published in the first issue for such
month of Natural Gas Week (or any succeeding publication of Oil Daily,
Inc.) for the region: Louisiana, Gulf Coast Onshore, Spot Delivered to
Pipeline.
(iv) Either Buyer or Seller may request a change in the price
determination procedures set forth in this Subparagraph (d) in the event
that the operation of such procedures does not reasonably reflect the
weighted average price of spot gas available to Buyer, as reported to
and verified by an independent, nationally recognized public accounting
firm. For purposes of this subparagraph, the results of the existing
procedure shall be deemed to be reasonably reflective of such weighted
average spot gas price so long as it falls within a range of 90 to 110
percent of such price. If such range is exceeded for three consecutive
months, then Seller and Buyer shall meet to undertake to agree upon an
alternative published spot price index. Additionally, in the event Oil
Daily, Inc. ceases publishing Natural Gas Week (and does not replace it
with a successor publication), the parties shall use best efforts to
agree on an alternative publication in a timely manner.
(e) Nothing herein or in the Service Agreement shall require Buyer to
agree prior to any Calendar Month to nominate to purchase any quantity
of gas hereunder during the following Calendar Month and Buyer's failure
to nominate, or undernomination of gas quantities, hereunder for any
month shall not limit Buyer's ability to request or Seller's obligation
to deliver quantities of gas hereunder on any day up to Buyer's Daily
Sales Entitlement; provided, however, Buyer agrees that Buyer's
Nominated Purchase Quantity may be relied upon by Seller as the
approximate quantity of gas which Buyer will purchase from Seller
hereunder during the next Calendar Month unless Buyer is required to
change such purchases as a result of a change in market conditions, and,
provided further, Buyer agrees that a change in the price of gas
supplies available to Buyer shall not constitute such a change in market
conditions.
(f) Buyer and Seller hereby agree that the delivered price of gas is
commercially sensitive information and agree that neither will disclose
such information to any third party unless by mutual consent, which will
not be unreasonably withheld or unless required to do so by judicial or
governmental order, rule or regulation, except that selected data may be
aggregated and composited with comparable data from the contracts for
statistical purposes, by a person subject to reasonable confidentiality
restrictions and provided that neither the identity of Buyer or Seller
nor any data not necessary for such statistical purpose is disclosed.
3. Firm Service Fee
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
a) During the period from the effective date of this Service Agreement
through March 31, 1992, the Firm Service Fee shall be $6.50 per Mcf for
each month.
b) During the period from April 1, 1992 through March 31, 1993, the
Firm Service Fee shall be $6.20 per Mcf for each month.
c) During the period from April 1, 1993 until renegotiated pursuant to
subparagraph d) below, the Firm Service Fee shall be $5.80 per Mcf for
each month.
d) Either party may request that the Firm Service Fee be renegotiated
effective April 1, 1994, and annually thereafter. Either party may
request renegotiation by giving notice to the other party at least one
hundred eighty (180) days prior to the first day of the contract year
for which the Firm Service Fee is being renegotiated. In the event the
parties are unable to agree on a new Firm Service Fee at least one
hundred fifty (150) days prior to the first day of the contract year for
which the Firm Service Fee is being renegotiated then the party
requesting renegotiation shall make a final offer to the other party for
a new Firm Service Fee ("Final Offer") within five days following the
commencement of such one hundred fifty (150) day period. The other
party may submit a final counter offer ("Final Counter Offer") within
ten (10) working days of receipt of the request. If a Final Counter
Offer is received within the indicated period, the parties will proceed
with negotiations. If a Final Counter Offer is not received within ten
(10) working days, the Final Offer submitted by the party requesting
renegotiation will be deemed accepted. If the parties are unable to
agree on a new Firm Service Fee by one hundred twenty (120) days prior
to the first day of the applicable contract year, both the Final Offer
and the Final Counter Offer will be submitted to a board of arbitration
in Washington, D.C. in accordance with the Commercial Arbitration Rules
of the American Arbitration Association (but not administered by the
American Arbitration Association), but subject to the parties' agreement
herein to modify or override those rules in certain respects by adoption
of the following procedures:
(i) No later than one hundred (100) days prior to the first day of the
year for which renegotiation has been requested, each party must name
its choice of an arbitrator who has accepted the appointment. In the
event either party fails to name an arbitrator, such party's arbitrator
shall be appointed by the Senior Judge (in service) of the United States
District Court for the District of Columbia. Within ten (10) days after
both arbitrators have accepted appointment, the two arbitrators shall
name a third arbitrator, or, if they are unable to agree upon the third,
the third arbitrator shall be appointed by the Senior Judge (in service)
of the United States District Court for the District of Columbia. The
three (3) arbitrators shall be
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
qualified by education and/or experience to pass on the particular
issues in dispute and shall not be (i) financially interested in the
outcome of the dispute or (ii) current or former employees of either
party. Each party shall pay the compensation and expenses of the
arbitrator named by or for it, and both shall share equally the
compensation and expenses of the third arbitrator.
(ii) The three arbitrators shall meet and hear the parties with respect
to matters relevant to which proposed Firm Service Fee will compensate
Seller for the value of providing and maintaining long term gas
supplies, on terms and conditions consistent with a "swing service",
which shall include but not be limited to executed long term sales
agreements between other Sellers serving the same or similar markets and
their customers. The jurisdiction of the arbitrators shall be limited
to the selection, based on all relevant evidence presented, of either
the Final Offer or the Final Counter Offer proposed either by Seller or
by Buyer pursuant to the provisions of this subsection (e). No other
Service Fee will be selected by the arbitrators. The decision by the
arbitrators shall be in writing, signed by the arbitrators or a majority
of them, rendered within seventy (70) days of the appointment of the
third arbitrator, and final, binding and non-appealable, except as set
forth in the Uniform Arbitration Act of Delaware [Footnote 4]
as to the parties
hereto. The provisions adopted by the arbitrators shall be effective as
of the first day of the applicable year, regardless of the actual date
of decision of the arbitrators. During any period prior to a decision by
the arbitrators but after commencement of the Contract Year for which
the Service Fee is being renegotiated, Buyer shall continue to pay the
Service Fee that was in effect during the previous Contract Year. Such
Service Fee shall be adjusted retroactively, as necessary, to conform to
the arbitrators decision.
4. Other Conditions
Upon request by Buyer, Seller shall make available to Buyer in Seller's
Houston office the necessary information for Buyer to evaluate Seller's
gas supply portfolio. Such evaluation shall include an examination of
the adequacy of the natural gas reserves committed and/or available to
Seller to satisfy Seller's obligations to furnish natural gas merchant
services. Seller also agrees to cooperate and make available the
necessary personnel to provide assistance to Buyer in reviewing the gas
supply data. Such evaluation shall not be required more frequently than
annually, and shall be subject to disclosure safeguards designed to
protect commercially sensitive or confidential information. In no event
shall Buyer's review of information concerning Seller's gas supply
portfolio, or Buyer's attendance at meetings with Seller or Seller's
agent concerning Seller's gas supply portfolio, be cited as or construed
to be evidence of Buyer's endorsement of, agreement with or acquiescence
in Seller's gas supply portfolio management activities and practices.
[Footnote 4] Del. Code Ann. tit. 10, Section 5703 (1974)
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
EXHIBIT "B"
REDELIVERY POINTS
1. Station 54*
2. Athens Meter Station, located at mile post 1106.56 on Seller's main
transmission line on the southwesterly side of Linton Springs Road and
.13 mile southeasterly of Linton Springs Road bridge in Clarke County,
Georgia.
3. Atlanta Meter Station, located at mile post 1039.59 on Seller's main
transmission line near Jonesboro, Clayton County, Georgia.
4. Bogart Meter Station, located at mile post 1098.81 on Seller's main
transmission line, adjacent to the intersection of Seller's main line
and U.S. Highway 29, approximately 0.5 mile southeasterly from the City
of Bogart, Clark County, Georgia.
5. Franklin Meter Station, located approximately 1.5 miles
northwesterly of Franklin, Georgia, at mile post 994.36 on Seller's main
transmission line.
6. Stockbridge Meter Station, located at mile post 1050.23 on Seller's
main transmission line approximately 1.5 miles downstream from Seller's
Compressor Station No. 120 near Stockbridge, Georgia.
7. Peachtree City Meter Station, located at mile post 1027.15 on
Seller's main transmission line approximately 0.5 mile south of Tyrone,
Georgia near Georgia State Highway No. 74 in Fayette County, Georgia.
8. Conyers Meter Station, located at mile post 1064.52 on Seller's main
transmission line adjacent to Georgia State Highway No. 12,
approximately 1.6 miles southeasterly from the City of Conyers, Rockdale
County, Georgia.
9. Lithonia Meter Station, located at mile post 1058.88 on Seller's
main transmission line adjacent to Georgia State Highway No. 212 near
the city of Lithonia, Rockdale County, Georgia.
10. Danielsville Meter Station, located at mile post 1120.40 on
Seller's main transmission line, of the northeasterly side of Georgia
State Highway No. 98A, approximately on mile southeasterly of the City
of Danielsville, Madison County, Georgia.
* Delivery to Seller's Washington Storage Field for injection into
storage is subject to the terms, conditions, and limitations of Seller's
WSS Rate Schedule.
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
11. Ball Ground Meter Station, located at mile post 54.388 on Seller's
Georgia extension in Cherokee County, Georgia.
12. Cumming Meter Station, located at mile post 36.76 on Seller's
Georgia extension in Forsyth County, Georgia.
13. Suwanee Meter Station, located at mile post 26.96 on Seller's
Georgia extension in Gwinnett County, Georgia.
14. East Athens Meter Station, located at approximately mile post
1108.83 on Seller's main transmission line, of the west side of Nowhere
Road, Clarke County, Georgia.
15. Seller's Eminence Storage Field, Covington County, Mississippi.
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
SERVICE AGREEMENT
RATE SCHEDULE FS
(Continued)
EXHIBIT "C"
DAMAGES
1. (a) In the event that Seller is unable on any day to deliver the
quantities of gas requested by Buyer pursuant to the terms of this
Service Agreement, up to Buyer's Daily Sales Entitlement, and if Buyer
is able to replace such volumes with volumes from other natural gas
(excluding liquefied natural gas and synthetic natural gas) sources
("Replacement Volumes"), then Seller shall pay to Buyer, as Buyer's sole
and exclusive remedy for such failure to deliver (except for the
adjustments specified in Section 3 of Article III of this Service
Agreement) liquidated damages in an amount equal to (i) the difference
between (a) the price per dekatherm that Buyer would have paid if the
gas had been delivered under this Service Agreement (including the Firm
Service Fee) and (b) the cost per dekatherm reasonably incurred by Buyer
for the Replacement Volumes, adjusted if necessary for pricing point
comparability, multiplied by (ii) the difference, up to one hundred
percent (100%) of the Replacement Volumes delivered to Buyer's city gate
on the applicable day, between (a) Buyer's Daily Sales Entitlement and
(b) the volumes actually delivered hereunder.
(b) In the event that Seller is unable on any day to deliver the
quantities of gas requested by Buyer pursuant to the terms of this
Service Agreement up to Buyer's Daily Sales Entitlement, and if Buyer is
unable to replace such volumes from other natural gas (excluding
liquefied natural gas and synthetic natural gas) sources, Buyer hereby
expressly reserves any and all claims and/or causes of action Buyer has
or may have against Seller for breach of Seller's obligations hereunder.
Additionally, Seller hereby expressly reserves any defenses it may have
with regard to such claims and/or causes of action.
(c) Notwithstanding subsection 1(a) and 1(b) above, if Seller's failure
to deliver is due to a force majeure condition or an adverse
governmental action as described in subsections 1(a), 1(b) or 1(c) of
Article V of this Service Agreement, Seller shall not be required to pay
any damages (except for the adjustment specified in Section 3 of Article
III of this Service Agreement).
<PAGE>
[LETTERHEAD OF TRANSCO GAS MARKETING COMPANY APPEARS HERE]
December 13, 1994
Mr. Stephen Gunther, Vice President
Gas Supply & Federal Regulation
Atlanta Gas Light Company
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3249
RE: FS Commodity Agreement
April 1, 1995 - March 31, 1996
Dear Mr. Gunther:
When executed by you in the space provided below, this letter will
evidence the agreement between Atlanta Gas Light Company ("Buyer") and
Transco Gas Marketing Company, as Agent for Transcontinental Gas Pipe
Line Corporation ("Seller"), regarding the negotiation of the Delivered
Gas Price for swing service provided to Buyer under Seller's FS Rate
Schedule under the following terms and conditions:
1) This Letter Agreement applies to the two FS Agreements between the
parties dated August 1, 1991, for Daily Sales Entitlement of Mcf/day
and Mcf/day, respectively.
2) The Gas Commodity Charge will be equal to the arithmetic average of
the following:
<PAGE>
Page Two
Atlanta Gas Light Company
December 13, 1994
5)
6) This Letter Agreement is effective April 1, 1995 until .
If the foregoing correctly reflects our agreement, please execute in the
space provided below and return to the undersigned.
Sincerely,
/s/ Phillip E. Fuller
Phillip E. Fuller
Director, Natural Gas Marketing
Agreed and accepted to this 29 day of December , 1994.
ATLANTA GAS LIGHT COMPANY
/s/ Stephen J. Gunther
<PAGE>
AMENDMENT TO FS SERVICE AGREEMENTS
WHEREAS, Transcontinental Gas Pipe Line Corporation ("Seller") and Atlanta
Gas Light Company, ("Buyer"), are parties to two FS Service Agreements dated
August 1, 1991 under which Buyer's Daily Sales Entitlements equal _____ Mcf/day
and _____ Mcf/day, respectively, ("FS Agreements");
WHEREAS, Buyer requested renegotiation of the Firm Service Fee under
Section 3 d) of Exhibit "A" of the two FS Agreements and the parties have agreed
on a new Firm Service Fee; and
WHEREAS, Buyer and Seller desire to amend the FS Agreements ("Amendment")
previously entered into:
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, Seller and Buyer hereby agree to amend the FS
Agreements as follows:
This Amendment shall apply to the FS Agreements between the parties dated
August 1, 1991, for Daily Sales Entitlement of _____ and _____ Mcf/day,
respectively.
1. From April 1, 1996 until renegotiated, pursuant to Section 3 d) of
Exhibit "A" of the FS Agreements, the Firm Service Fee shall be $_____
per Mcf for each month, exclusive of the Non-Gas Demand Fee.
<PAGE>
2. In the event of a conflict between the provisions of the FS Agreement
and this Amendment, the provisions of this Amendment shall control.
3. This Amendment shall be effective for the period April 1,1996 through
the later of _____, or such time when the Firm Service Fee is
renegotiated pursuant to Section 3 d) of Exhibit "A" of the FS
Agreement.
4. Except as herein amended, the FS Agreements previously entered into
shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
this _____ day of _____, 199__, by their respective representatives.
WILLIAMS ENERGY SERVICES COMPANY
As Agent for
TRANSCONTINENTAL GAS PIPE LINE
CORPORATION
/s/ Michael J. Strauss
By Michael J. Strauss
Title Director Southern Region Marketing
Date February 21, 1996
ATLANTA GAS LIGHT COMPANY
/s/ Stephen J. Gunther
By Stephen J. Gunther
Title VP, Gas Supply and Federal Regulation
Date March 15, 1996
Page 2
SERVICE PACKAGE NO. 4235
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
THIS AGREEMENT is made and entered into as of the 1st day of November, 1993, by
and between EAST TENNESSEE NATURAL GAS COMPANY, a Tennessee Corporation,
hereinafter referred to as "Transporter" and ATLANTA GAS LIGHT CO., a Georgia
Corporation, hereinafter referred to as "Shipper." Transporter and Shipper shall
be referred to herein individually as the "Party" and collectively as "Parties."
ARTICLE I - DEFINITIONS
The definitions found in Section 1 of Transporter's General Terms and Conditions
are incorporated herein by reference.
ARTICLE II - SCOPE OF AGREEMENT
Transporter agrees to accept and receive daily, on a firm basis, at the Receipt
Point(s) listed on Exhibit A attached hereto, from Shipper such quantity of gas
as Shipper makes available up to the applicable Transportation Quantity stated
on Exhibit A attached hereto and deliver for Shipper to the Delivery Point(s)
listed on Exhibit A attached hereto an Equivalent Quantity of gas. The Rate
Schedule applicable to this Agreement shall be stated on Exhibit A.
ARTICLE III - RECEIPT AND DELIVERY PRESSURES
Shipper shall deliver, or cause to be delivered, to Transporter the gas to be
transported hereunder at pressures sufficient to deliver such gas into
Transporter's system at the Receipt Point(s). Transporter shall deliver the gas
to be transported hereunder to or for the account of Shipper at the pressures
existing in Transporter's system at the Delivery Point(s) unless otherwise
specified on Exhibit A.
ARTICLE IV - QUALITY SPECIFICATIONS AND STANDARDS FOR
MEASUREMENTS
For all gas received, transported, and delivered hereunder, the Parties agree to
the quality specifications and standards for measurement as provided for in
Transporter's General Terms and Conditions. Transporter shall be responsible for
the operation of measurement facilities at the Delivery Point(s) and Receipt
Point(s). In the event that measurement facilities are not operated by
Transporter, the responsibility for operations shall be deemed to be Shipper's.
ARTICLE V - FACILITIES
The facilities necessary to receive, transport, and deliver gas as described
herein are in place and no new facilities are anticipated to be required.
1
<PAGE>
SERVICE PACKAGE NO. 4235
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
ARTICLE VI
RATES AND CHARGES FOR GAS TRANSPORTATION
6.1 Rates and Charges - Commencing on the date of implementation of this
Agreement under Section 10.1, the compensation to be paid by Shipper
to Transporter shall be in accordance with Transporter's effective
Rate Schedule FT-A or FT-GS, as specified on Exhibit A. Where
applicable, Shipper shall also pay the Gas Research Institute
surcharge and Annual Charge Adjustment surcharge as such rates may
change from time to time.
6.2 Changes in Rates and Charges - Shipper agrees that Transporter shall
have the unilateral right to file with the appropriate regulatory
authority and make changes effective in (a) the rates and charges
stated in this Article, (b) the rates and charges applicable to
service pursuant to the Rate Schedule under which this service is
rendered and (c) any provisions of Transporter's General Terms and
Conditions as they may be revised or replaced from time to time.
Without prejudice to Shipper's right to contest such changes Shipper
agrees to pay the effective rates and charges for service rendered
pursuant to this Agreement. Transporter agrees that Shipper may
protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities for
adjustment of Transporter's existing FERC Gas Tariff as may be found
necessary to assure Transporter just and reasonable rates.
ARTICLE VII - RESPONSIBILITY DURING TRANSPORTATION
As between the Parties hereto, it is agreed that from the time gas is delivered
by Shipper to Transporter at the Receipt Point(s) and prior to delivery of such
gas to or for the account of Shipper at the Delivery Point(s), Transporter shall
be responsible for such gas and shall have the unqualified right to commingle
such gas with other gas in its system and shall have the unqualified right to
handle and treat such gas as its own. Prior to receipt of gas at Shipper's
Receipt Point(s) and after delivery of gas at Shipper's Delivery Point(s),
Shipper shall have sole responsibility for such gas.
ARTICLE VIII - BILLINGS AND PAYMENTS
Billings and payments under this Agreement shall be in accordance with Section
16 of Transporter's General Terms and Conditions as they may be revised or
replaced from time to time.
2
<PAGE>
SERVICE PACKAGE NO. 4235
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
ARTICLE IX - RATE SCHEDULES AND
GENERAL TERMS AND CONDITIONS
This Agreement is subject to the effective provisions of Transporter's FT-A or
FT-GS Rate Schedule, as specified in Exhibit A, or any succeeding rate schedule
and Transporter's General Terms and Conditions on file with the FERC, or other
duly constituted authorities having jurisdiction, as the same may be changed or
superseded from time to time in accordance with the rules and regulations of the
FERC, which Rate Schedule and General Terms and Conditions are incorporated by
reference and made a part hereof for all purposes.
ARTICLE X - TERM OF CONTRACT
10.1 This Agreement shall be effective as of the 1st day of November,
1993, and shall remain in force and effect until the 1st day of
November, 2000, ("Primary Term"), provided, however, that if the
Primary Term is one year or more, then the contract shall remain in
force and effect and the contract term will automatically roll-over
for additional five year increments ("Secondary Term") unless
Shipper, one year prior to the expiration of the Primary Term or a
Secondary Term, provides written notice to Transporter of either (1)
its intent to terminate the contract upon expiration of the then
current term or (2) its desire to exercise its right-of-first-refusal
in accord with Section 7.3 of Transporter's General Terms and
Conditions. Provided further, if the FERC or other governmental body
having jurisdiction over the service rendered pursuant to this
Agreement authorizes abandonment of such service, this Agreement
shall terminate on the abandonment date permitted by the FERC or such
other governmental body.
10.2 In addition to any other remedy Transporter may have, Transporter
shall have the right to terminate this Agreement in the event Shipper
fails to pay all of the amount of any bill for services rendered by
Transporter hereunder when that amount is due, provided Transporter
shall give Shipper and the FERC thirty days notice prior to any
termination of service. Service may continue hereunder if within the
thirty day notice period satisfactory assurance of payment is made in
accord with Section 16 of Transporter's General Terms and Conditions.
3
<PAGE>
SERVICE PACKAGE NO. 4235
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
ARTICLE XI - REGULATION
11.1 This Agreement shall be subject to all applicable governmental
statutes, orders, rules, and regulations and is contingent upon the
receipt and continuation of all necessary regulatory approvals or
authorizations upon terms acceptable to Transporter and Shipper. This
Agreement shall be void and of no force and effect if any necessary
regulatory approval or authorization is not so obtain or continued.
All Parties hereto shall cooperate to obtain or continue all
necessary approvals or authorizations, but no Party shall be liable
to any other Party for failure to obtain or continue such approvals
or authorizations.
11.2 Promptly following the execution of this Agreement, the Parties will
file, or cause to be filed, and diligently prosecute, any necessary
applications or notices with all necessary regulatory bodies for
approval of the service provided for herein.
11.3 In the event the Parties are unable to obtain all necessary and
satisfactory regulatory approvals for service prior to the expiration
of two (2) years from the effective date hereof, then, prior to
receipt of such regulatory approvals, either Party may terminate this
Agreement by giving the other Party at least thirty (30) days prior
written notice, and the respective obligations hereunder, except for
the reimbursement of filing fees herein, shall be of no force and
effect from and after the effective date of such termination.
11.4 The transportation service described herein shall be provided subject
to the provisions of the FERC Regulations shown by Shipper on Exhibit
A hereto.
ARTICLE XII - ASSIGNMENT
12.1 Either Party may assign or pledge this Agreement and all rights and
obligations hereunder under the provisions of any mortgage, deed of
trust, indenture or other instrument that it has executed or may
execute hereafter as security for indebtedness; otherwise, Shipper
shall not assign this Agreement or any of its rights and obligations
hereunder, except as set forth in Section 17 of Transporter's General
Terms and Conditions.
12.2 Any person or entity that shall succeed by purchase, transfer,
merger, or consolidation to the properties, substantially or as an
entirety, of either Party hereto shall be entitled to the rights and
shall be subject tothe obligations of its predecessor in interest
under this Agreement.
4
<PAGE>
SERVICE PACKAGE NO. 4235
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
ARTICLE XIII - WARRANTIES
In addition to the warranties set forth in Section 22 of Transporter's General
Terms and Conditions, Shipper warrants the following:
13.1 Shipper warrants that all upstream and downstream transportation
arrangements are in place, or will be in place, as of the requested
effective date of service, and that it has advised the upstream and
downstream transporters of the receipt and delivery points under this
Agreement and any quantity limitations for each point as specified on
Exhibit A attached hereto. Shipper agrees to indemnify and hold
Transporter harmless for refusal to transport gas hereunder in the
event any upstream or downstream transporter fails to receive or
deliver gas as contemplated by this Agreement.
13.2 Shipper agrees to indemnify and hold Transporter harmless from all
suit actions, debts, accounts, damages, costs, losses, and expenses
(including reasonable attorneys fees) arising from or out of breach
of any warranty, by the Shipper herein.
13.3 Shipper warrants that it will have title or the right to acquire
title to the gas delivered to Transporter under this Agreement.
13.4 Transporter shall not be obligated to provide or continue service
hereunder in the event of any breach of warranty; provided,
Transporter shall give Shipper and the FERC thirty days notice prior
to any termination of service. Service will continue if, within the
thirty day notice period, Shipper cures the breach of warranty.
ARTICLE XIV - MISCELLANEOUS
14.1 Except for changes specifically authorized pursuant to this
Agreement, no modification of or supplement to the terms and
conditions hereof shall be or become effective until Shipper has
submitted a request for change through the TENN-SPEED 2 system and
Shipper has been notified through the TENN-SPEED 2 system of
Transporter's agreement to such change.
14.2 No waiver by any Party of any one or more defaults by the other in
the performance of any provision of this Agreement shall operate or
be construed as a waiver of any future default or default, whether of
a like or of a different character.
14.3 Except when notice is required through the TENN-SPEED 2
system, pursuant to Transporter's FT-A or FT-GS Rate
5
<PAGE>
SERVICE PACKAGE NO. 4235
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
Schedule, as applicable, or pursuant to Transporter's General Terms
and Conditions, any notice, request, demand, statement or bill
provided for in this Agreement or any notice that either Party may
desire to give to the other shall be in writing and mailed by
registered mail to the post office address of the Party intended to
receive the same, as the case may be, to the Party's address shown on
Exhibit A hereto or to such other address as either Party shall
designate by formal written notice to the other. Routine
communications, including monthly statements and payments, may be
mailed by either registered or ordinary mail. Notice shall be deemed
given when sent.
14.4 THE INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT SHALL BE IN
ACCORDANCE WITH AND CONTROLLED BY THE LAWS OF THE STATE OF TENNESSEE,
WITHOUT REGARD TO CHOICE OF LAW DOCTRINE THAT REFERS TO THE LAWS OF
ANOTHER JURISDICTION.
14.5 The Exhibit(s) attached hereto is/are incorporated herein by
reference and made a part of this Agreement for all purposes.
14.6 If any provision of this Agreement is declared null and void, or
voidable, by a court of competent jurisdiction, then that provision
will be considered severable at Transporter's options; and if the
severability option is exercised, the remaining provisions of the
Agreement shall remain in full force and effect.
14.7 This Agreement supersedes and cancels the Gas Sales and
Transportation Agreement(s) between Shipper and Transporter dated
(not applicable) and (not applicable) respectively.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed as of the date first hereinabove written.
EAST TENNESSEE NATURAL GAS COMPANY
BY: /s/ J.P. Dickerson
Agent and Attorney-in-Fact
DATE: October 16, 1997
ATLANTA GAS LIGHT CO.
BY: /s/ Thomas H. Benson
TITLE: President
DATE: October 14, 1997
6
<PAGE>
SERVICE PACKAGE NO. 4235
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
<TABLE>
EXHIBIT A TO THE
FIRM TRANSPORTATION AGREEMENT
DATED NOVEMBER 1, 1993
AMENDMENT NO. 0
Shipper: ATLANTA GAS LIGHT CO.
Rate Schedule: FT-A
Transportation Quantity: 63,860 Dth
Proposed Commencement Date: NOVEMBER 1, 1993
Termination Date: NOVEMBER 1, 2000
Transportation Service will be provided under Part 284, Subpart G of FERC
Regulations.
Primary Receipt Point(s):
<CAPTION>
Meter Max. D. Location
Name No. Qt. Inter. Party CO., ST
<S> <C> <C> <C> <C>
Lobelville 753201 56,440 Tennessee Gas Pipeline Perry, TN
Roanoke Columbia 759136 670 East Tenn. Natural Gas Roanoke, VA
Dickenson Co. Rec. 759315 6,750 Equitable Res. Energy Dickenson,VA
Primary Delivery Point(s):
<CAPTION>
Meter Max. D. Location
Name No. Qt. Inter. Party CO., ST
<S> <C> <C> <C> <C>
Atlanta 759014 63,860 Atlanta Gas Light Hamilton, TN
<FN>
* Transporter shall not be obligated to deliver more cubic feet of gas to any
Shipper than the quantity calculated using 1.03 dth per million cubic feet.
</FN>
</TABLE>
Notices not made through the TENN-SPEED 2 system shall be made to:
Shipper Invoices
Atlanta Gas Light Co. Atlanta Gas Light Co.
303 Peachtree Street N.E. 303 Peachtree Street N.E.
P.O. Box 4569 P.O. Box 4569
Atlanta, GA 30302 Atlanta, GA 30302
New Facilities Required: N/A
New Facilities Charge: N/A
7
<PAGE>
(This Exhibit A supersedes and cancels Exhibit A dated (N/A) to the Firm
Transportation Agreement dated (N/A).
EAST TENNESSEE NATURAL GAS CO. ATLANTA GAS LIGHT CO.
BY: /s/ J.P. Dickerson BY: /s/ Thomas H. Benson
TITLE: Agent & Attorney-in-Fact TITLE: President
DATE: October 16, 1997 DATE: October 14, 1997
------------------- --------------------
Service Package No. 4235
8
SERVICE PACKAGE NO. 4236
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
THIS AGREEMENT is made and entered into as of the 1st day of November, 1993, by
and between EAST TENNESSEE NATURAL GAS COMPANY, a Tennessee Corporation,
hereinafter referred to as "Transporter" and CHATTANOOGA GAS CO., a Tennessee
Corporation, hereinafter referred to as "Shipper." Transporter and Shipper shall
be referred to herein individually as the "Party" and collectively as "Parties."
ARTICLE I - DEFINITIONS
The definitions found in Section 1 of Transporter's General Terms and Conditions
are incorporated herein by reference.
ARTICLE II - SCOPE OF AGREEMENT
Transporter agrees to accept and receive daily, on a firm basis, at the Receipt
Point(s) listed on Exhibit A attached hereto, from Shipper such quantity of gas
as Shipper makes available up to the applicable Transportation Quantity stated
on Exhibit A attached hereto and deliver for Shipper to the Delivery Point(s)
listed on Exhibit A attached hereto an Equivalent Quantity of gas. The Rate
Schedule applicable to this Agreement shall be stated on Exhibit A.
ARTICLE III - RECEIPT AND DELIVERY PRESSURES
Shipper shall deliver, or cause to be delivered, to Transporter the gas to be
transported hereunder at pressures sufficient to deliver such gas into
Transporter's system at the Receipt Point(s). Transporter shall deliver the gas
to be transported hereunder to or for the account of Shipper at the pressures
existing in Transporter's system at the Delivery Point(s) unless otherwise
specified on Exhibit A.
ARTICLE IV - QUALITY SPECIFICATIONS AND STANDARDS FOR
MEASUREMENTS
For all gas received, transported, and delivered hereunder, the Parties agree to
the quality specifications and standards for measurement as provided for in
Transporter's General Terms and Conditions. Transporter shall be responsible for
the operation of measurement facilities at the Delivery Point(s) and Receipt
Point(s). In the event that measurement facilities are not operated by
Transporter, the responsibility for operations shall be deemed to be Shipper's.
ARTICLE V - FACILITIES
The facilities necessary to receive, transport, and deliver gas as described
herein are in place and no new facilities are anticipated to be required.
1
<PAGE>
SERVICE PACKAGE NO. 4236
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
ARTICLE VI
RATES AND CHARGES FOR GAS TRANSPORTATION
6.1 Rates and Charges - Commencing on the date of implementation of this
Agreement under Section 10.1, the compensation to be paid by Shipper
to Transporter shall be in accordance with Transporter's effective
Rate Schedule FT-A or FT-GS, as specified on Exhibit A. Where
applicable, Shipper shall also pay the Gas Research Institute
surcharge and Annual Charge Adjustment surcharge as such rates may
change from time to time.
6.2 Changes in Rates and Charges - Shipper agrees that Transporter shall
have the unilateral right to file with the appropriate regulatory
authority and make changes effective in (a) the rates and charges
stated in this Article, (b) the rates and charges applicable to
service pursuant to the Rate Schedule under which this service is
rendered and (c) any provisions of Transporter's General Terms and
Conditions as they may be revised or replaced from time to time.
Without prejudice to Shipper's right to contest such changes, Shipper
agrees to pay the effective rates and charges for service rendered
pursuant to this Agreement. Transporter agrees that Shipper may
protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities for
adjustment of Transporter's existing FERC Gas Tariff as may be found
necessary to assure Transporter just and reasonable rates.
ARTICLE VII - RESPONSIBILITY DURING TRANSPORTATION
As between the Parties hereto, it is agreed that from the time gas is delivered
by Shipper to Transporter at the Receipt Point(s) and prior to delivery of such
gas to or for the account of Shipper at the Delivery Point(s), Transporter shall
be responsible for such gas and shall have the unqualified right to commingle
such gas with other gas in its system and shall have the unqualified right to
handle and treat such gas as its own. Prior to receipt of gas at Shipper's
Receipt Point(s) and after delivery of gas at Shipper's Delivery Point(s),
Shipper shall have sole responsibility for such gas.
ARTICLE VIII - BILLINGS AND PAYMENTS
Billings and payments under this Agreement shall be in accordance with Section
16 of Transporter's General Terms and Conditions as they may be revised or
replaced from time to time.
2
<PAGE>
SERVICE PACKAGE NO. 4236
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
ARTICLE IX - RATE SCHEDULES AND
GENERAL TERMS AND CONDITIONS
This Agreement is subject to the effective provisions of Transporter's FT-A or
FT-GS Rate Schedule, as specified in Exhibit A, or any succeeding rate schedule
and Transporter's General Terms and Conditions on file with the FERC, or other
duly constituted authorities having jurisdiction, as the same may be changed or
superseded from time to time in accordance with the rules and regulations of the
FERC, which Rate Schedule and General Terms and Conditions are incorporated by
reference and made a part hereof for all purposes.
ARTICLE X - TERM OF CONTRACT
10.1 This Agreement shall be effective as of the 1st day of November,
1993, and shall remain in force and effect until the 1st day of
November, 2000, ("Primary Term"), provided, however, that if the
Primary Term is one year or more, then the contract shall remain in
force and effect and the contract term will automatically roll-over
for additional five year increments ("Secondary Term") unless
Shipper, one year prior to the expiration of the Primary Term or a
Secondary Term, provides written notice to Transporter of either (1)
its intent to terminate the contract upon expiration of the then
current term or (2) its desire to exercise its right-of-first-refusal
in accord with Section 7.3 of Transporter's General Terms and
Conditions. Provided further, if the FERC or other governmental body
having jurisdiction over the service rendered pursuant to this
Agreement authorizes abandonment of such service, this Agreement
shall terminate on the abandonment date permitted by the FERC or such
other governmental body.
10.2 In addition to any other remedy Transporter may have, Transporter
shall have the right to terminate this Agreement in the event Shipper
fails to pay all of the amount of any bill for services rendered by
Transporter hereunder when that amount is due, provided Transporter
shall give Shipper and the FERC thirty days notice prior to any
termination of service. Service may continue hereunder if within the
thirty day notice period satisfactory assurance of payment is made in
accord with Section 16 of Transporter's General Terms and Conditions.
3
<PAGE>
SERVICE PACKAGE NO. 4236
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
ARTICLE XI - REGULATION
11.1 This Agreement shall be subject to all applicable governmental
statutes, orders, rules, and regulations and is contingent upon the
receipt and continuation of all necessary regulatory approvals or
authorizations upon terms acceptable to Transporter and Shipper. This
Agreement shall be void and of no force and effect if any necessary
regulatory approval or authorization is not so obtain or continued.
All Parties hereto shall cooperate to obtain or continue all
necessary approvals or authorizations, but no Party shall be liable
to any other Party for failure to obtain or continue such approvals
or authorizations.
11.2 Promptly following the execution of this Agreement, the Parties will
file, or cause to be filed, and diligently prosecute, any necessary
applications or notices with all necessary regulatory bodies for
approval of the service provided for herein.
11.3 In the event the Parties are unable to obtain all necessary and
satisfactory regulatory approvals for service prior to the expiration
of two (2) years from the effective date hereof, then, prior to
receipt of such regulatory approvals, either Party may terminate this
Agreement by giving the other Party at least thirty (30) days prior
written notice, and the respective obligations hereunder, except for
the reimbursement of filing fees herein, shall be of no force and
effect from and after the effective date of such termination.
11.4 The transportation service described herein shall be provided subject
to the provisions of the FERC Regulations shown by Shipper on Exhibit
A hereto.
ARTICLE XII - ASSIGNMENTS
12.1 Either Party may assign or pledge this Agreement and all rights and
obligations hereunder under the provisions of any mortgage, deed of
trust, indenture or other instrument that it has executed or may
execute hereafter as security for indebtedness; otherwise, Shipper
shall not assign this Agreement or any of its rights and obligations
hereunder, except as set forth in Section 17 of Transporter's General
Terms and Conditions.
12.2 Any person or entity that shall succeed by purchase, transfer,
merger, or consolidation to the properties, substantially or as an
entirety, of either Party hereto shall be entitled to the rights and
shall be subject to the obligations of its predecessor in interest
under this Agreement.
4
<PAGE>
SERVICE PACKAGE NO. 4236
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
ARTICLE XIII - WARRANTIES
In addition to the warranties set forth in Section 22 of Transporter's General
Terms and Conditions, Shipper warrants the following:
13.1 Shipper warrants that all upstream and downstream transportation
arrangements are in place, or will be in place, as of the requested
effective date of service, and that is has advised the upstream and
downstream transporters of the receipt and delivery points under this
Agreement and any quantity limitations for each point as specified on
Exhibit A attached hereto. Shipper agrees to indemnify and hold
Transporter harmless for refusal to transport gas hereunder in the
event any upstream or downstream transporter fails to receive or
deliver gas as contemplated by this Agreement.
13.2 Shipper agrees to indemnify and hold Transporter harmless from all
suit actions, debts, accounts, damages, costs, losses, and expenses
(including reasonable attorneys fees) arising from or out of breach
of any warranty, by the Shipper herein.
13.3 Shipper warrants that it will have title or the right to acquire
title to the gas delivered to Transporter under this Agreement.
13.4 Transporter shall not be obligated to provide or continue service
hereunder in the event of any breach of warranty; provided,
Transporter shall give Shipper and the FERC thirty days notice prior
to any termination of service. Service will continue if, within the
thirty day notice period, Shipper cures the breach of warranty.
ARTICLE XIV - MISCELLANEOUS
14.1 Except for changes specifically authorized pursuant to this
Agreement, no modification of or supplement to the terms and
conditions hereof shall be or become effective until Shipper has
submitted a request for change through the TENN-SPEED 2 system and
Shipper has been notified through the TENN-SPEED 2 system of
Transporter's agreement to such change.
14.2 No waiver by any Party of any one or more defaults by the other in
the performance of any provision of this Agreement shall operate or
be construed as a waiver of any future default or default, whether of
a like or of a different character.
14.3 Except when notice is required through the TENN-SPEED 2
5
<PAGE>
SERVICE PACKAGE NO. 4236
AMENDMENT NO. 0
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
system, pursuant to Transporter's FT-A or FT-GS Rate Schedule, as
applicable, or pursuant to Transporter's General Terms and
Conditions, any notice, request, demand, statement or bill provided
for in this Agreement or any notice that either Party may desire to
give to the other shall be in writing and mailed by registered mail
to the post office address of the Party intended to receive the same,
as the case may be, to the Party's address shown on Exhibit A hereto
or to such other address as either Party shall designate by formal
written notice to the other. Routine communications, including
monthly statements and payments, may be mailed by either registered
or ordinary mail. Notice shall be deemed given when sent.
14.4 THE INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT SHALL BE IN
ACCORDANCE WITH AND CONTROLLED BY THE LAWS OF THE STATE OF TENNESSEE,
WITHOUT REGARD TO CHOICE OF LAW DOCTRINE THAT REFERS TO THE LAWS OF
ANOTHER JURISDICTION.
14.5 The Exhibit (s) attached hereto is/are incorporated herein by
reference and made a part of this Agreement for all purposes.
14.6 If any provision of this Agreement is declared null and void, or
voidable, by a court of competent jurisdiction, then that provision
will be considered severable at Transporter's options; and if the
severability option is exercised, the remaining provisions of the
Agreement shall remain in full force and effect.
14.7 This Agreement supersedes and cancels the Gas Sales and
Transportation Agreement(s) between Shipper and Transporter dated
(not applicable) and (not applicable) respectively.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed as of the date first hereinabove written.
EAST TENNESSEE NATURAL GAS COMPANY
BY: /s/ J.P. Dickerson
Agent and Attorney-in-Fact
DATE: October 16, 1997
CHATTANOOGA GAS CO.
BY: /s/ C. C. Moore
TITLE: V. P. & Treasurer
DATE: October 14, 1997
6
<PAGE>
SERVICE PACKAGE NO. 4236
AMENDMENT NO. 0
<TABLE>
GAS TRANSPORTATION AGREEMENT
(For Use Under Rate Schedules FT-A and FT-GS)
EXHIBIT A TO THE
FIRM TRANSPORTATION AGREEMENT
DATED NOVEMBER 1, 1993
AMENDMENT NO. 0
Shipper: CHATTANOOGA GAS CO.
Rate Schedule: FT-A
Transportation Quantity: 46,350 Dth
Proposed Commencement Date: NOVEMBER 1, 1993
Termination Date: NOVEMBER 1, 2000
Transportation Service will be provided under Part 284, Subpart G of FERC
Regulations.
Primary Receipt Point(s):
<CAPTION>
Meter Max. D. Location
Name No. Qt. Inter. Party CO., ST
<S> <C> <C> <C> <C>
Ridgetop 753101 18,540 Tennessee Gas Pipeline Robertson, TN
Lobelville 753201 22,424 Tennessee Gas Pipeline Perry, TN
Roanoke Columbia 759136 487 East Tenn. Natural Gas Roanoke, VA
Dickenson Co. Rec. 759315 4,899 Equitable Res. Energy Dickenson,VA
Primary Delivery Point(s):
<CAPTION>
Meter Max. D. Location
Name No. Qt. Inter. Party CO., ST
<S> <C> <C> <C> <C>
Chat. East 759001 8,240 Chattanooga Gas Co. Hamilton, TN
Chat. North 759007 10,300 Chattanooga Gas Co. Hamilton, TN
Chat. Ooltewah 759016 2,060 Chattanooga Gas Co. Hamilton, TN
Chat. Signal Mtn 759017 3,090 Chattanooga Gas Co. Hamilton, TN
Chat. Cleveland 759024 16,480 Chattanooga Gas Co. Bradley, TN
Chat. Access Rd. 759093 2,575 Chattanooga Gas Co. Hamilton, TN
Chat. Hunter Rd. 759106 515 Chattanooga Gas Co. Hamilton, TN
Chat. Vol. Ord. 759108 1,030 Chattanooga Gas Co. Hamilton, TN
Chat. E. Brainerd 759142 2,060 Chattanooga Gas Co. Hamilton, TN
</TABLE>
* Transporter shall not be obligated to deliver more cubic feet of gas to any
Shipper than the quantity calculated using 1.03 dth per million cubic feet.
7
<PAGE>
Notices not made through the TENN-SPEED 2 system shall be made to:
Shipper Invoices
Chattanooga Gas Co. Chattanooga Gas Co.
6125 Preservation Drive 6125 Preservation Drive
Chattanooga, TN 37416 Chattanooga, TN 37416
New Facilities Required: N/A
New Facilities Charge: N/A
(This Exhibit A supersedes and cancels Exhibit A dated (N/A) to the Firm
Transportation Agreement dated (N/A).
EAST TENNESSEE NATURAL GAS CO. CHATTANOOGA GAS CO.
BY: /s/ J.P. Dickerson BY: /s/ C.C. Moore
-----------------------
TITLE: Agent & Attorney-in-Fact TITLE: V. P.& Treasurer
------------------
DATE: October 16, 1997 DATE: October 14, 1997
-------------------------- ------------------
Service Package No. 4236
8
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Following shareholder and regulatory approval on March 6, 1996, AGL Resources
Inc. (AGL Resources), a Georgia corporation, became the holding company of
Atlanta Gas Light Company (AGL), a natural gas distribution utility, and its
subsidiaries. Unless noted specifically or otherwise required by the context,
references to AGL Resources include AGL, AGL's wholly owned natural gas
distribution utility subsidiary, Chattanooga Gas Company (Chattanooga), and AGL
Resources' nonregulated subsidiaries: AGL Energy Services, Inc. (AGL Energy
Services); AGL Investments, Inc. (AGL Investments); AGL Resources Service
Company; and The Energy Spring, Inc. AGL Energy Services has one nonregulated
subsidiary, Georgia Gas Company. AGL Investments has six nonregulated
subsidiaries: AGL Propane, Inc., formerly known as Georgia Gas Service Company
(AGL Propane); AGL Consumer Services, Inc.; AGL Gas Marketing, Inc.; AGL Power
Services, Inc.; AGL Energy Wise Services, Inc.; and Trustees Investments, Inc.
Unless specifically noted or otherwise required by the context, references to
AGL or the utility include the operations and activities of AGL and Chattanooga.
Graph reflects consolidated operating revenues, operating expenses and operating
expenses as a percentage of operating revenues for the fiscal years ended
September 30, 1995 through 1997, inclusive. Data presented is as follows:
In millions of dollars 1995(a) 1996 1997
- ----------------------------------------------------
Operating Revenues 1,069 1,229 1,288
Operating Expenses 975 1,065 1,116
% Operating Expenses to
Operating Revenues 91% 87% 87%
- ----------------------------------------------------
(a) Operating expenses include restructuring costs of $70.3 million.
Graph reflects common stock market value, book value and % market to book value
for the fiscal years ended September 30, 1995, through 1997, inclusive. Data
presented is as follows:
In dollars per share 1995 1996 1997
- ----------------------------------------------------
Market value per share $19.31 $19.13 $18.94
Book value per share 10.15 10.56 10.99
% market value to book
value 190% 181% 172%
- ----------------------------------------------------
The following discussion and analysis reflect the results of operations
and financial condition of AGL Resources for the three years ended September 30,
1997, and factors expected to impact its future operations.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides for the use of
cautionary statements accompanying forward-looking statements. Disclosures
provided contain forward-looking statements concerning, among other things,
deregulation and restructuring costs and environmental remediation.
Important factors that could cause actual results to differ materially
from those in the forward-looking statements include, but are not limited to,
the following: changes in price and demand for natural gas and related products;
uncertainty as to state and federal legislative and regulatory issues; the
effects of competition, particularly in markets where prices and providers
historically have been regulated; and uncertainty with regard to environmental
issues and competitive issues in general.
Results of Operations
Fiscal 1997 Compared with Fiscal 1996
Operating Revenues - Operating revenues increased 4.8% in 1997 compared with
1996 primarily due to (1) increased operating revenues attributable to a
nonregulated retail energy marketing company formed in June 1996, (2) increased
operating revenues from a nonregulated gas supply services company formed in
July 1996, and (3) increased utility base revenues attributable to an increase
of approximately 32,000 in the number of customers served. The increase in
operating revenues was offset partly by (1) decreased volumes of natural gas
sold to utility customers due to weather that was 24.7% warmer in 1997 than in
1996 and (2) a shift by certain interruptible customers from interruptible sales
to transportation service. Operating revenues are less when gas is transported
for a customer than when it is sold to that customer. AGL's transportation rate
generates the same operating income as the applicable sales rate schedule for
interruptible sales of gas; therefore, earnings are not affected.
<PAGE>
Cost of Gas - Cost of gas increased 5.7% in 1997 compared with 1996 primarily
due to (1) increased cost of gas attributable to a nonregulated retail energy
marketing company formed in June 1996, (2) increased cost of gas from a
nonregulated gas supply services company formed in July 1996, and (3) an
increase in the cost of the gas supply recovered from customers under the
purchased gas provisions of the utility's rate schedules. The increase in the
cost of gas was offset partly by (1) decreased volumes of natural gas sold to
utility customers due to weather that was 24.7% warmer in 1997 than in 1996 and
(2) a shift by certain interruptible customers from interruptible sales to
transportation service.
The utility's cost of natural gas per therm was 39.4 cents in 1997 and
32.2 cents in 1996. Variations in the cost of purchased gas are passed through
to customers under the purchased gas provisions of the utility's rate schedules.
Over-recoveries or under-recoveries of purchased gas costs are charged or
credited to the cost of gas and are included in current assets or liabilities,
thereby eliminating the effect that recovery of gas costs otherwise would have
on net income.
Operating Margin - Operating margin increased 3.6% in 1997 compared with 1996
primarily due to (1) higher utility base revenues resulting from approximately
32,000 additional customers, (2) an increase in operating margin attributable to
a nonregulated gas supply services company formed in July 1996, and (3) an
increase in operating margin resulting from propane operations acquired during
February and June 1997.
Other Operating Expenses - Operation and maintenance expenses increased 2.3% in
1997 compared with 1996 primarily due to (1) increased uncollectible accounts
expenses, (2) increased expenses attributable to propane operations acquired
during February and June 1997, and (3) increased maintenance of general plant.
Depreciation expense increased 5.2% in 1997 compared with 1996 primarily
due to an increase in depreciable plant in service. The composite
straight-line depreciation rate was approximately 3.2% for depreciable property
other than transportation equipment during 1997 and 1996.
Taxes other than income taxes increased $1 million in 1997 compared
with 1996 primarily due to (1) increased gross receipts taxes and (2) increased
ad valorem taxes.
Graph reflects throughput (utility operations) of therms sold and transported by
class of customer for the year ended September 30, 1997. Data presented is as
follows:
Throughput
(utility Percentage
Customer operations) of Total
- ----------------------------------------------
Industrial 1.3 billion 47%
Commercial .51 billion 18%
Residential .99 billion 35%
- ----------------------------------------------
Graph reflects margin (utility operations) by class of customer for the year
ended September 30, 1997. Data presented is as follows:
Margin
(utility
Customer operations)
- -------------------------------
Industrial 12%
Commercial 23%
Residential 65%
- -------------------------------
Other Income - Other income decreased $2.8 million in 1997 compared with 1996
primarily due to (1) decreased income from a gas marketing joint venture, (2)
decreased recoveries of environmental response costs from insurance carriers and
third parties, and (3) increased carrying costs on portions of recoveries of
environmental response costs from insurance carriers and third parties. The
decrease in other income was offset partly by the recovery from utility
customers of increased carrying costs not included in base rates related to
storage gas inventories.
Interest Expense - Total interest expense increased $3.1 million in 1997
compared with 1996 primarily due to increased amounts of long-term and
short-term debt outstanding during the period.
Dividends on Preferred Stock of Subsidiaries - Dividends on preferred stock of
subsidiaries increased $1.8 million in 1997 compared with 1996 primarily due to
dividend requirements on $75 million in principal amount of Capital Securities
issued in June 1997 by a business trust wholly owned by AGL Resources. (See Note
6 in Notes to Consolidated Financial Statements.)
<PAGE>
Income Taxes - Income taxes decreased $0.7 million in 1997 compared with 1996
primarily due to a decrease in the effective tax accrual rate as a result of
payment of tax deductible interest on subordinated debt to fund dividends on
Capital Securities issued in June 1997.
Net Income and Dividends - Net income for 1997 was $76.6 million, compared with
$75.6 million in 1996. Earnings per share of common stock were $1.37 in 1997 and
1996. Dividends per share of common stock were $1.08 in 1997, compared with
$1.06 in 1996. The increase in net income was primarily due to (1) an increase
in operating margin as a result of an increase of approximately 32,000 in the
number of utility customers served and (2) increased operating margins from
nonregulated businesses formed during 1996. The increase in net income was
offset partly by (1) increased operating expenses, (2) increased financing
costs, and (3) decreased other income. Earnings per share of common stock were
unchanged for 1997 compared with 1996 due to an increase in the number of shares
outstanding.
Fiscal 1996 Compared with Fiscal 1995
Operating Revenues - Operating revenues increased 15% in 1996 compared with 1995
primarily due to (1) an increase in the cost of the gas supply recovered from
customers under the purchased gas provisions of the utility's rate schedules,
(2) increased volumes of gas sold to firm service customers as a result of
weather that was 50% colder in 1996 than in 1995, and (3) an increase of
approximately 41,000 in the number of utility customers served.
Cost of Gas - Cost of gas increased 26.4% in 1996 compared with 1995 primarily
due to (1) an increase in the cost of the gas supply recovered from customers
under the purchased gas provisions of the utility's rate schedules and (2)
increased volumes of gas sold to firm service customers as a result of weather
that was 50% colder in 1996 than in 1995.
The utility's cost of natural gas per therm was 32.2 cents in 1996 and
29.7 cents in 1995. Variations in the cost of purchased gas are passed through
to customers under the purchased gas provisions of the utility's rate schedules.
Over-recoveries or under-recoveries of purchased gas costs are charged or
credited to cost of gas and are included in current assets or liabilities,
thereby eliminating the effect that recovery of gas costs otherwise would have
on net income.
Operating Margin - Operating margin increased 1.8% in 1996 compared with 1995
primarily due to (1) recovery of increased expenses related to an Integrated
Resource Plan (IRP), which are recovered through an IRP Cost Recovery Rider
approved by the Georgia Public Service Commission (Georgia Commission), (2) a
revenue increase granted by the Tennessee Regulatory Authority (TRA), effective
November 1, 1995, and (3) an increase of approximately 41,000 in the number of
utility customers served.
Restructuring Costs - In November 1994 AGL Resources announced a corporate
restructuring plan in response to increased competition and changes in the
federal and state regulatory environments in which AGL operates. Restructuring
costs of $61.4 million related to early retirement and severance programs and
$8.9 million related to office closings and costs to exit AGL's appliance
merchandising and real estate investment operations were recorded during 1995.
There were no restructuring costs recorded in 1996.
During the fourth quarter of fiscal 1996, AGL Resources reviewed its
remaining liabilities with respect to its corporate restructuring plan. As a
result, AGL Resources adjusted its restructuring accruals and reduced operating
expenses by $2.7 million, before income taxes. The remaining balance of
restructuring liabilities as of September 30, 1996, was $1 million.
Other Operating Expenses - Operation and maintenance expenses increased 2.2% in
1996 compared with 1995 primarily due to (1) an increase of $3.6 million in
expenses related to IRP and (2) an increase of $1.2 million in franchise
expenses. IRP and franchise expenses are recovered from customers through rate
recovery riders approved by the Georgia Commission. As a result, IRP program
costs and franchise expenses do not affect net income. Operation and maintenance
expenses, excluding IRP and franchise expenses, increased slightly primarily due
to (1) increased uncollectible accounts expenses and (2) expenses associated
with the formation of AGL Resources. The increase in operation and maintenance
expenses, excluding IRP and franchise expenses, was offset partly by decreased
labor-related expenses.
Depreciation expense increased 7.3% in 1996 compared with 1995 primarily
due to increased depreciable plant in service. The composite
straight-line depreciation rate was approximately 3.2% for depreciable property
other than transportation equipment during 1996 and 1995.
<PAGE>
Taxes other than income taxes decreased $0.7 million primarily
due to decreased ad valorem taxes.
Other Income - Other income increased $11.6 million in 1996 compared with 1995
primarily due to (1) income in 1996 from a gas marketing joint venture, (2)
income from carrying costs on increased deferred purchased gas undercollections,
and (3) recoveries of environmental response costs from insurance carriers and
third parties.
Interest Expense - Total interest expense increased $1.6 million in 1996
compared with 1995 primarily due to increased amounts of short-term debt
outstanding. The increase was offset partly by decreased amounts of long-term
debt outstanding.
Income Taxes - Income taxes increased $30.8 million in 1996 compared with 1995
primarily due to increased taxable income.
Net Income and Dividends - Net income for 1996 was $75.6 million, compared with
$26.4 million in 1995. Earnings per share of common stock were $1.37 in 1996,
compared with $0.50 in 1995. Dividends per share of common stock were $1.06 in
1996, compared with $1.04 in 1995. The increases in net income and earnings per
share were primarily due to (1) corporate restructuring costs of $43.1 million,
after income taxes, recorded in 1995, (2) increased other income, and (3)
increased operating margin as a result of an increase of approximately 41,000 in
the number of utility customers served. The increases in net income and earnings
per share were offset partly by increased depreciation expense. The increase in
earnings per share also was offset partly by an increase in the number of common
shares outstanding.
Financial Condition
Financing
Preferred Securities - In June 1997 AGL Resources formed AGL Capital Trust, a
Delaware business trust (the Trust), of which AGL Resources owns all of the
common voting securities. The Trust issued and sold to certain initial investors
$75 million principal amount of 8.17% Capital Securities (liquidation amount
$1,000 per Capital Security), the proceeds of which were used to purchase 8.17%
Junior Subordinated Deferrable Interest Debentures, due June 1, 2037, from AGL
Resources. The Capital Securities are subject to mandatory redemption upon
repayment of the Junior Subordinated Debentures on the stated maturity date of
June 1, 2037, upon the earlier occurrence of certain events, or upon the
optional prepayment by AGL Resources on or after June 1, 2007. AGL Resources
has fully and unconditionally guaranteed all of the Trust's obligations with
respect to the Capital Securities. Net proceeds to AGL Resources from the
sale of the Junior Subordinated Debentures of $74.3 million were used to repay
short-term debt, to redeem certain of AGL's outstanding issues of preferred
stock, and for other corporate purposes.
On August 15, 1997, AGL redeemed its 4.5% Cumulative Preferred Stock,
4.72% Cumulative Preferred Stock, 5% Cumulative Preferred Stock, 7.84%
Cumulative Preferred Stock, and 8.32% Cumulative Preferred Stock at the call
price in effect for each issue for an aggregate principal amount of $14.7
million. Those issues of preferred stock have been retired in full.
On December 1, 1997, AGL redeemed its 7.70% depositary preferred shares
at the redemption price of $100 per share. Accordingly, a current liability
associated with that redemption of $44.5 million is recorded in the financial
statements. (See Note 6 in Notes to Consolidated Financial Statements for
additional information regarding preferred stock.)
Common Stock - On June 16, 1995, approximately 3 million shares of common stock
were issued and sold at $16.81 per share, resulting in net proceeds of $48.6
million. Proceeds from that sale of common stock were used to finance capital
expenditures and for other corporate purposes. AGL Resources issued 753,866;
792,919; and 1,107,324 shares of common stock during fiscal 1997, 1996, and
1995, respectively, pursuant to ResourcesDirect, a stock purchase and dividend
reinvestment plan; Retirement Savings Plus Plan; Long-Term Stock Incentive Plan;
Nonqualified Savings Plan; and the Non-Employee Directors Equity Compensation
Plan, which increased common equity by approximately $14 million, $14 million,
and $18 million, respectively.
Long-Term Debt - During fiscal 1997, AGL issued $105.5 million in principal
amount of medium-term notes, Series C, with maturity dates ranging from 20 to 30
years and with interest rates ranging from 6.55% to 7.3%. The notes were issued
under an Indenture dated December 1, 1989, and are unsecured and rank on a
parity with all other unsecured
<PAGE>
indebtedness. Net proceeds from the notes were used to fund capital
expenditures, to repay short-term debt, and for other corporate purposes.
Short-Term Debt - Because AGL Resources' primary business is highly seasonal,
short-term debt is used to meet seasonal working capital requirements. In
addition, capital expenditures are funded temporarily with short-term debt.
Lines of credit with various banks provide for direct borrowings and are subject
to annual renewal. The current lines of credit vary from $156.3 million in the
summer months to $305 million for peak winter financing. Short-term debt
decreased $122.5 million from the amount outstanding as of September 30, 1996,
to $29.5 million as of September 30, 1997, primarily as a result of repayment
from the proceeds of the issuance of Capital Securities and long-term debt. (See
Note 8 in Notes to Consolidated Financial Statements for additional information
concerning short-term debt.)
Capital Requirements - Capital expenditures for construction of distribution
facilities, purchase of equipment, and other general improvements were $147.7
million during 1997. Capital requirements are estimated to be approximately $340
million for the three years ending September 30, 2000. Funding for those
expenditures will be provided through a combination of internal sources and the
issuance of short-term and long-term debt and equity securities.
The cost of natural gas stored underground increased $7.8 million to
$151.8 million as of September 30, 1997, primarily due to an increase in the
cost of the gas that was injected into storage.
Ratios and Coverages - On September 30, 1997, AGL Resources' capitalization
ratios consisted of 47.1% long-term debt, 8.5% preferred securities, and 44.4%
common equity. The times interest earned and ratio of earnings to combined fixed
charges and preferred stock dividends decreased in 1997 compared with 1996
primarily due to the issuance of long-term debt and preferred securities in
1997. The times interest earned and ratio of earnings to combined fixed charges
and preferred stock dividends increased in 1996 compared with 1995 primarily due
to increased earnings.
The weighted average cost of long-term debt decreased from 7.6% on
September 30, 1995, to 7.5% on September 30, 1997. The decrease was due to the
redemption of $15 million in principal amount of 8.85% medium-term notes in
January 1995, and lower interest rates for long-term debt issued in 1997. The
weighted average cost of preferred stock was 7.5% on September 30, 1995, and
1996, and 8% on September 30, 1997. The return on average common equity was 4.9%
for 1995, 13.2% for 1996, and 12.7% for 1997. Net income in 1995 included a
charge for restructuring of $43.1 million, after income taxes.
Regulatory Activity
Gas Cost Recovery Filing - Pursuant to legislation enacted by the Georgia
General Assembly, each investor-owned local gas distribution company is required
to file on or before August 1 of each year a proposed gas supply plan for the
subsequent year, as well as a proposed cost recovery factor.
As part of the 1997 Gas Supply Plan, AGL continued limited gas supply
hedging activities. On August 1, 1997, AGL filed its Gas Supply Plan for fiscal
1998, which consists of gas supply, transportation, and storage options designed
to provide reliable service to firm customers at the best cost. On September 12,
1997, the Georgia Commission approved the entire supply portfolio contained in
the Gas Supply Plan for fiscal 1998.
As part of the Gas Supply Plan for fiscal 1998, AGL is authorized to
enter into an expanded program to hedge up to one-half of its estimated monthly
winter wellhead purchases and to establish a price for those purchases at an
amount other than the beginning of the month index price to create an additional
element of diversification and price stability. The financial results of all
hedging activities are passed through to firm service customers under the
purchased gas provisions of AGL's rate schedules. Accordingly, there is no
earnings impact as a result of the hedging program.
Additionally, the approved plan contains a gas supply incentive
mechanism for off-system and capacity release sales that is consistent with the
incentive mechanism in the Natural Gas Competition and Deregulation Act signed
into law on April 14, 1997, whereby AGL and its firm customers share in any
benefits produced from the incremental use of gas supply assets.
Competition - AGL competes to supply natural gas to interruptible customers who
are capable of switching to alternative fuels, including propane, fuel and waste
oils, electricity
<PAGE>
and, in some cases, combustible wood by-products. AGL also competes to supply
gas to interruptible customers who might seek to bypass its distribution system.
AGL can price distribution services to interruptible customers four
ways. First, multiple rates are established under the rate schedules of AGL's
tariff approved by the Georgia Commission. If an existing tariff rate does not
produce a price competitive with a customer's relevant competitive alternative,
three alternate pricing mechanisms exist: Negotiated Contracts, Interruptible
Transportation and Sales Maintenance (ITSM) discounts, and Special Contracts.
On February 17, 1995, the Georgia Commission approved a settlement that
permits AGL to negotiate contracts with customers who have the option of
bypassing AGL's facilities (Bypass Customers) to receive natural gas from other
suppliers. The bypass avoidance contracts (Negotiated Contracts) can be
renewable, provided the initial term does not exceed five years, unless a longer
term specifically is authorized by the Georgia Commission. The rate provided by
the Negotiated Contract may be lower than AGL's filed rate, but not less than
AGL's marginal cost of service to the potential Bypass Customer. Service
pursuant to a Negotiated Contract may commence without Georgia Commission
action, after a copy of the contract is filed with the Georgia Commission.
Negotiated Contracts may be rejected by the Georgia Commission within 90 days of
filing; absent such action, however, the Negotiated Contracts remain in effect.
All of the Negotiated Contracts filed to date with the Georgia Commission are in
effect.
The settlement also provides for a bypass loss recovery mechanism to
operate until the earlier of September 30, 1998, or the effective date of new
rates for AGL resulting from a general rate case. Under the recovery mechanism,
AGL is allowed to recover from other customers 75% of the difference between (a)
the nongas cost revenue that was received from the potential Bypass Customer
during the most recent twelve-month period and (b) the nongas cost revenue that
is calculated to be received from the lower Negotiated Contract rate applied to
the same volumetric level. Concerning the remaining 25% of the difference, AGL
is allowed to retain a 44% share of capacity release revenues in excess of $5
million until AGL is made whole for discounts from Negotiated Contracts.
<TABLE>
1998 Gas Supply Plan
<CAPTION>
10 therms = 1 dekatherm Firm Production Supplemental Total
Transportation Wellhead Underground Underground Liquefied Peak-Day
Capacity Gas Supply Storage Storage Natural Gas Supply
Atlanta Gas Light Company (dekatherms) (dekatherms) (dekatherms) (dekatherms) (dekatherms) (dekatherms)
<S> <C> <C> <C> <C> <C> <C>
Southern 775,995 414,753 168,500
Transco 137,989 104,416 280,241
Tennessee / East Tennessee 63,860 33,976
Southern / South Georgia 12,115 6,906 708
Total 989,959 520,655 560,051 449,449 665,000 2,106,450
Chattanooga Gas Company
East Tennessee 46,350 23,871
Southern 27,567 14,346
Total 73,917 34,696 38,217 0 90,000 158,812
</TABLE>
In addition to Negotiated Contracts, which are designed to serve
existing and potential Bypass Customers, AGL's ITSM Rider continues to permit
discounts for short-term transactions to compete with alternative fuels. Revenue
shortfalls, if any, from interruptible customers, as measured by the test-year
interruptible revenues determined by the Georgia Commission in AGL's 1993 rate
case, will continue to be recovered under the ITSM Rider.
The settlement approved by the Georgia Commission also provides that AGL
may file contracts (Special Contracts) for Georgia Commission approval if the
service cannot be provided through the ITSM Rider, existing rate schedules, or
Negotiated Contract procedures. A Special Contract, for example, could involve
AGL providing a long-term service contract to compete with alternative fuels
where physical bypass is not the relevant competition.
Pursuant to the approved settlement, AGL has filed and is providing
service pursuant to more than 50 Negotiated Contracts. Additionally, the Georgia
Commission has approved Special Contracts between AGL and seven interruptible
customers.
On November 27, 1996, the TRA approved an experimental rule allowing
Chattanooga to negotiate contracts with large commercial and industrial
customers who have long-term competitive options, including bypass. The
experimental
<PAGE>
rule provides that before any such customer is allowed a discounted rate, both
the large customer and Chattanooga must petition the TRA for prior approval of
the rates set forth in the contract. On October 7, 1997, the TRA denied the
petitions filed by Chattanooga and four large customers for discounted
rates pursuant to the experimental rule upon a finding that customer bypass was
not imminent.
Regulatory Reform Initiatives - The 1997 session of the Georgia General Assembly
enacted legislation that provides a legal framework for comprehensive
deregulation of many aspects of the natural gas business in Georgia. The Natural
Gas Competition and Deregulation Act was signed into law by Governor Zell Miller
on April 14, 1997.
On November 26, 1997, AGL filed with the Georgia Commission a notice of
its election to be subject to this new law and to establish separate rates for
unbundled services. AGL filed contemporaneously an application with the Georgia
Commission to have its distribution rates, charges, classifications, and
services regulated pursuant to performance-based regulation. The filing requests
an increase in revenues of $18.6 million annually. The requested increase
includes the costs to support changes in AGL's business systems to ensure
reliable service to customers and that the systems are in place to serve new gas
suppliers in the competitive marketplace.
Within seven months from the date of such filing, the Georgia Commission
must issue an order approving the plan as filed or with modification. Retail
marketing companies, including AGL affiliates, may now file with the Georgia
Commission separate certificate of authority applications to sell natural gas to
firm customers connected to AGL's delivery system. It is currently anticipated
that marketers who become certificated by the Georgia Commission may begin
offering natural gas sales services to customers of AGL by November 1998.
The Natural Gas Competition and Deregulation Act provides a transition
period leading to a condition of effective competition in all natural gas
markets. AGL, as an electing distribution company, will unbundle all services to
its natural gas customers, allocate firm delivery capacity to certificated
marketers selling the gas commodity, and create a secondary market for
interruptible transportation capacity. Certificated marketers, including
nonregulated affiliates of AGL, will compete to sell natural gas to all
customers at market-based prices. AGL will continue to provide intrastate
delivery of gas to end users through its existing system, subject to continued
rate regulation by the Georgia Commission. As a result of the Natural Gas
Competition and Deregulation Act, it is expected that the purchased gas
adjustment provisions included in AGL's rate schedules will be discontinued
during fiscal 1999. The November 26, 1997, filing contains a provision to
true-up any over-recovery or under-recovery that may exist at the time such
purchased gas adjustment provisions are discontinued. Accordingly, AGL will no
longer defer any over-recoveries or under-recoveries of gas costs when the
purchased gas adjustment provisions are discontinued. In addition, the Georgia
Commission will continue to regulate safety, access, and quality of service
pursuant to an alternative form of regulation.
The Natural Gas Competition and Deregulation Act provides marketing
standards and rules of business practice to ensure the benefits of a competitive
natural gas market are available to all customers on AGL's system. The act
imposes on marketers an obligation to serve, with a corresponding universal
service fund that provides a funding mechanism for uncollectible accounts and
enables AGL to expand its facilities and serve in the public interest.
Additionally, the Natural Gas Competition and Deregulation Act requires
that the Georgia Commission issue rules and regulations by December 31, 1997,
for certification of marketers and assignment of firm customers to marketers
(for customers who ultimately do not select a marketer after competition is
fully developed). Notices of proposed rulemakings on those two subjects were
issued by the Georgia Commission on September 23, 1997.
AGL supported the regulatory initiatives provided for by the Natural Gas
Competition and Deregulation Act for several reasons. AGL currently makes no
profit on the purchase and sale of gas because actual gas procurement costs are
passed through to customers under the purchased gas provisions of AGL's rate
schedules. Earnings are provided through revenues received for intrastate
transportation of the commodity. Consequently, allowing AGL to cease its sales
service function and the associated sales obligation would not affect AGL's
ability to earn a return on its distribution system investment. Allowing gas to
be sold to all customers by numerous retail marketing companies, including
nonregulated subsidiaries of AGL Resources, would provide new business
opportunities.
On May 21, 1996, the Georgia Commission adopted a Policy Statement
concerning changes in state regulatory guidelines to respond to trends toward
increased competition
<PAGE>
in natural gas markets. Consistent with the specific goals expressed in the
Policy Statement, AGL filed on June 10, 1996, the Natural Gas Service Provider
Selection Plan (the Plan), a comprehensive plan for serving interruptible
markets. The Plan proposed further unbundling of services to provide large
customers more service options and the ability to purchase only those services
they required. As a result of various procedural delays, a decision on the
proposed Plan had not been reached by the Georgia Commission prior to AGL's
election to be subject to the Natural Gas Competition and Deregulation Act.
Since implementation of the Plan would be unlikely to occur significantly in
advance of implementation of AGL's election under the Natural Gas Competition
and Deregulation Act, the Plan could not serve as a meaningful opportunity for
AGL, marketers, and end-use customers to gain experience with pooling and
aggregation of loads. Consequently, simultaneous with the filing of the notice
of election under the Natural Gas Competition and Deregulation Act on November
26, 1997, AGL filed with the Georgia Commission a notice of withdrawal of the
Plan.
Chattanooga Rate Filing - On May 1, 1997, Chattanooga filed a rate proceeding
with the TRA seeking an increase in revenues of $4.4 million annually. Revenues
from the rate increase would be used to improve and expand Chattanooga's natural
gas distribution system; to recover increased operation, maintenance, and tax
expenses; and, to provide a reasonable return to investors. Under the TRA's
rules and regulations, the effective date of the requested new rates was
suspended until November 1, 1997. Hearings in the rate proceeding were scheduled
to begin on October 13, 1997. On October 3, 1997, all parties to the proceeding
filed a motion with the TRA requesting that the hearings be continued and that
the suspended effective date for new rates be extended to afford an opportunity
to pursue settlement discussions. On October 7, 1997, the TRA granted the
motion. The TRA has rescheduled the hearings in this case to begin on February
9, 1998. AGL cannot predict the outcome of the proceedings.
Order 636 - During the past decade, the Federal Energy Regulatory Commission
(FERC) has dramatically transformed the natural gas industry through a series of
generic orders promoting competition in the industry. As part of that
transformation, the interstate pipelines that serve AGL have been required to
unbundle their transportation and gas supply services and to provide
transportation service on a nondiscriminatory basis for gas supplied by numerous
gas producers or other third parties. FERC is considering further changes to its
regulatory structure, including, but not limited to, potential revisions to its
policies governing secondary market transactions and revisions to permit
pipelines and their customers to establish individually negotiated terms and
conditions of service that depart from pipeline tariff rules. AGL cannot predict
the likelihood that such initiatives will be adopted or the effect of those
potential changes upon AGL.
Based on filings with FERC by its pipeline suppliers, AGL currently
estimates that its total portion of transition costs from all of its pipeline
suppliers would be approximately $105.8 million. Approximately $92.2 million of
such costs has been incurred by AGL as of September 30, 1997, and is being
recovered from its customers under the purchased gas provisions of AGL's rate
schedules. Transition costs have not affected the total cost of gas to AGL's
customers significantly because (1) AGL purchases its wellhead gas supplies
based on market prices that are below the cost of gas previously embedded in the
bundled pipelines' sales service rates and (2) many elements of transition costs
previously were embedded in the rates for the pipelines' bundled sales service.
(See Note 9 in Notes to Consolidated Financial Statements for further discussion
of recovery of gas costs.)
Weather Normalization - The Georgia Commission and the TRA have authorized
weather normalization adjustment riders (WNARs), which are designed to offset
the impact that unusually cold or warm weather has on customer billings and
operating margin. Fiscal 1997 and 1995 were warmer than normal, and the WNARs
increased net income and net cash flow from operating activities to normal
levels for those periods. Because fiscal 1996 was colder than normal, the WNARs
reduced net income and net cash flow from operating activities to normal levels.
The WNARs increased net income by $16.2 million in 1997, decreased net income by
$4.4 million in 1996, and increased net income by $27.3 million in 1995. As a
result of the Natural Gas Competition and Deregulation Act, it is expected that
the WNAR authorized by the Georgia Commission will be discontinued.
Environmental Matters
AGL has identified nine sites in Georgia where it currently
<PAGE>
owns all or part of a manufactured gas plant (MGP) site. In addition, AGL has
identified three other sites in Georgia that AGL does not own, but that may
have been associated with the operation of MGPs by AGL or its predecessors.
Those sites are potentially subject to a variety of regulatory programs.
AGL's response to MGP sites in Georgia is proceeding under two state
regulatory programs: the Georgia Hazardous Waste Management Act (HWMA) and the
Hazardous Site Response Act (HSRA). Some degree of response action, under one
or both of those programs, is likely to be required at most of the Georgia
sites.
AGL also has identified three sites in Florida that may have been
associated with AGL or its predecessors. AGL does not own any of the former MGP
sites in Florida. However, AGL has been contacted by the current owners of two
of those sites. In addition, AGL has received a "Special Notice Letter" from the
U.S. Environmental Protection Agency (EPA) with respect to one of the two sites.
AGL expects that some degree of response action is likely to be required at
those two sites. AGL currently is negotiating with both regulatory authorities
and other potentially responsible parties to determine the extent of its
responsibility for the two sites.
AGL has estimated the investigation and remediation expenses likely to
be associated with the former MGP sites. AGL currently estimates that the future
cost to AGL of investigating and remediating the former MGP sites could be as
low as $37.3 million or as high as $76.5 million. That range does not include
other expenses, such as unasserted property damage claims, for which AGL may be
held liable, but for which neither the existence nor the amount of such
liabilities can be reasonably forecast. Within the stated range of $37.3 million
to $76.5 million, no amount within the range can be reliably identified as a
better estimate than any other estimate. Therefore, a liability at the low end
of that range has been recorded in the financial statements. (See Note 11 in
Notes to Consolidated Financial Statements for additional information concerning
environmental response costs.)
AGL has two means of recovering the expenses associated with the former
MGP sites. First, the Georgia Commission has approved the recovery by AGL of
Environmental Response Costs, as defined, pursuant to an Environmental Response
Cost Recovery Rider (ERCRR). For purposes of the ERCRR, Environmental Response
Costs include investigation, testing, remediation, and litigation costs and
expenses, or other liabilities relating to or arising from MGP sites. A
regulatory asset in the amount of $55 million has been recorded in the financial
statements to reflect the recovery of those costs through the ERCRR.
In connection with the ERCRR, the staff of the Georgia Commission has
undertaken a financial and management process audit related to the MGP sites,
cleanup activities at the sites, and environmental response costs that have been
incurred for purposes of the ERCRR. On October 10, 1996, the Georgia Commission
issued an order to prohibit funds collected through the ERCRR from being used
for payment of any damage award, including punitive damages, as a result of any
litigation associated with the MGP sites in which AGL is involved. On October
22, 1997, the Georgia Commission issued an order rescinding its 1996 order and
has scheduled a hearing for February 16, 1998, to consider three issues relating
to the ERCRR. Specifically, the Georgia Commission is to consider whether the
term "Environmental Response Costs" should include punitive damages, whether
AGL should be required to provide an annual accounting for revenue recovered
from customers through the ERCRR, and whether a schedule should be established
for site remediation.
Second, AGL intends to seek recovery of appropriate costs from its
insurers and other potentially responsible parties. During fiscal 1997 AGL
recovered $5.7 million from its insurance carriers and other potentially
responsible parties. In accordance with provisions of the ERCRR, AGL recognized
other income of $1.4 million and established regulatory liabilities for the
remainder of the recoveries.
On February 10, 1995, a class action lawsuit captioned Trinity Christian
Methodist Episcopal Church, et al. v. Atlanta Gas Light Company, No. 95-RCCV-93,
was filed in the Superior Court of Richmond County, Georgia, seeking to recover
for damage to property owned by persons adjacent to and nearby the former
manufactured gas plant site in Augusta, Georgia. On December 13, 1996, the
parties reached a preliminary settlement, which was approved by the Court on
April 15, 1997. Pursuant to the settlement, there is a claims process before an
umpire to determine either the full fair market value of properties tendered to
AGL or the diminution in fair market value of properties not tendered to AGL.
Settlements have been paid to 188 property owners in the class totaling
approximately $2.9 million, including legal fees and expenses of the plaintiffs.
There are seven settlements yet to be paid. One settlement of approximately
$64,000,
<PAGE>
including attorney's fees, is pending reconsideration, and AGL has filed motions
to vacate six settlements totaling approximately $4.3 million. An order was
entered on July 8, 1997, denying the motion to vacate. AGL has filed a notice of
appeal with the Georgia Court of Appeals seeking to reverse the denial of the
motion to vacate.
Accounting Developments
During its July 1997 meeting, the Emerging Issues Task Force concluded that once
legislation is passed to deregulate a segment of a utility and that legislation
includes sufficient detail for the enterprise to determine how the transition
plan will affect that segment, Statement of Financial Accounting Standards No.
71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71),
should be discontinued for that segment. The state of Georgia has enacted
legislation (the Natural Gas Competition and Deregulation Act) that allows for
the deregulation of the merchant function and unbundling of certain ancillary
services of local gas distribution companies. AGL has filed its election to
become an electing distribution company. The rates to transport natural gas
through the intrastate pipe system of the local gas distribution company will be
regulated by the Georgia Commission. Since AGL's regulatory assets and
liabilities associated with its gas distribution activities continue to be
regulated, AGL has determined that the continued application of SFAS 71 related
to those distribution activities remains appropriate. (See Notes 1 and 14 in
Notes to Consolidated Financial Statements for additional information.)
In February 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
128), which establishes standards for computing and presenting earnings per
share. AGL Resources will adopt SFAS 128 in the first quarter of fiscal 1998.
Management does not expect that new pronouncement to significantly impact the
presentation of AGL Resources' consolidated financial statements.
In June 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130) and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 130
establishes standards for the reporting and displaying of comprehensive income
and its components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. SFAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. AGL Resources will adopt SFAS 130 and SFAS 131 in fiscal 1999.
Management does not expect those new pronouncements to significantly impact the
presentation of AGL Resources' consolidated financial statements.
Impact of Inflation
Inflation impacts the prices AGL Resources must pay for labor and other goods
and services required for operation, maintenance, and capital improvements. The
utility's rate schedules include purchased gas adjustment provisions that permit
the increases in gas costs to be passed on to its customers. Increases in costs
not recovered through the purchased gas adjustment provisions and other similar
rate riders must be recovered through timely filings for rate relief.
Year 2000
AGL Resources uses several application programs written over many years using
two-digit year fields to define the applicable year, rather than four-digit year
fields. Programs that are time-sensitive may recognize a date using "00" as the
year 1900 rather than the year 2000. That misinterpretation of the year could
result in incorrect computations or computer shutdown.
AGL Resources has identified the systems that could be affected by the
year 2000 issue and is developing an implementation plan to resolve the issue.
That plan contemplates, among other things, the replacement or modification of
existing data processing systems as necessary. In addition, management is in the
process of developing cost estimates associated with the implementation of the
plan. Those costs are not expected to significantly impact AGL Resources'
consolidated financial statements.
Management believes that with the appropriate modifications, AGL
Resources will be able to operate its time-sensitive business systems through
the turn of the century.
<PAGE>
<TABLE>
Statements of Consolidated Income
<CAPTION>
For the years ended September 30,
In millions, except per share amounts 1997 1996 1995
<S> <C> <C> <C>
--------------------------------
Operating Revenues $1,287.6 $1,228.6 $1,068.5
Cost of Gas 766.5 725.5 574.1
--------------------------------
Operating Margin 521.1 503.1 494.4
--------------------------------
Other Operating Expenses
Operation 226.2 221.8 215.5
Restructuring costs 70.3
Maintenance 30.8 29.5 30.4
Depreciation 66.6 63.3 59.0
Taxes other than income taxes 26.0 25.0 25.7
--------------------------------
Total other operating expenses 349.6 339.6 400.9
--------------------------------
Operating Income 171.5 163.5 93.5
--------------------------------
Other Income 10.3 13.1 1.5
--------------------------------
Income Before Interest, Preferred Stock
Dividends, and Income Taxes 181.8 176.6 95.0
--------------------------------
Interest Expense and Preferred
Stock Dividends
Interest on long-term debt 45.1 42.2 42.7
Other interest 7.1 6.9 4.8
Dividends on preferred stock of subsidiaries 6.2 4.4 4.4
--------------------------------
Total interest expense and
preferred stock dividends 58.4 53.5 51.9
--------------------------------
Income Before Income Taxes 123.4 123.1 43.1
--------------------------------
Income Taxes 46.8 47.5 16.7
--------------------------------
Net Income $ 76.6 $ 75.6 $ 26.4
--------------------------------
Earnings Per Share of Common Stock $ 1.37 $ 1.37 $ 0.50
--------------------------------
Weighted Average Number of Common
Shares Outstanding 56.1 55.3 52.4
- ---------------------------------------------------------------------------------------
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Statements of Consolidated Cash Flows
<CAPTION>
For the years ended September 30,
In millions 1997 1996 1995
------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 76.6 $ 75.6 $ 26.4
Adjustments to reconcile net income to
net cash flow from operating activities
Depreciation and amortization 70.3 67.5 62.5
Noncash restructuring costs 52.9
Deferred income taxes 18.5 25.7 (1.2)
Other 0.3 0.4 3.8
------------------------------
165.7 169.2 144.4
Changes in assets and liabilities
Receivables 4.0 (29.6) 14.6
Inventories (10.3) (35.8) 43.3
Deferred purchased gas adjustment (3.8) (11.0) (13.8)
Accounts payable (9.9) 1.4 14.7
Other - net 5.7 (12.3) 2.4
------------------------------
Net cash flow from operating activities 151.4 81.9 205.6
------------------------------
Cash Flows from Financing Activities
Sale of common stock, net of expenses 1.7 1.8 50.4
Short-term borrowings, net (124.0) 101.0 (44.4)
Redemptions and purchase fund
requirements of preferred stock (14.7)
Redemptions of long-term debt (15.0)
Sale of preferred securities, net of expenses 74.3
Sale of long-term debt 105.5
Dividends paid on common stock (50.7) (49.1) (44.3)
------------------------------
Net cash flow (used in) from financing
activities (7.9) 53.7 (53.3)
------------------------------
Cash Flows from Investing Activities
Utility plant expenditures (123.5) (132.0) (120.8)
Nonutility property expenditures (23.3) 0.3 (0.4)
Cash received from joint venture 2.0 3.1
Investment in joint ventures (1.0) (1.0) (32.6)
Other (1.6) (1.0) 1.9
------------------------------
Net cash flow used in investing activities (147.4) (130.6) (151.9)
------------------------------
Net (decrease) increase in cash and
cash equivalents (3.9) 5.0 0.4
Cash and cash equivalents at
beginning of year 8.7 3.7 3.3
------------------------------
Cash and cash equivalents at end of year $ 4.8 $ 8.7 $ 3.7
------------------------------
Cash Paid During the Year for
Interest $ 48.8 $ 49.2 $ 48.4
Income taxes $ 28.2 $ 19.3 $ 28.6
- ------------------------------------------------------------------------------------------
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
Assets
<CAPTION>
For the years ended September 30,
In millions 1997 1996
-----------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 4.8 $ 8.7
Receivables
Gas (less allowance for uncollectible accounts
of $2.4 in 1997 and $2.2 in 1996) 56.1 62.4
Merchandise (less allowance for uncollectible
accounts of $.1 in 1997 and $.4 in 1996) 0.4 2.5
Integrated resource plan loans (less allowance
for uncollectible accounts of $.1 in 1997 and 3.2 3.4
$.2 in 1996)
Other 12.2 4.8
Unbilled revenues 22.0 20.5
Inventories
Natural gas stored underground 151.8 144.0
Liquefied natural gas 17.5 16.8
Materials and supplies 8.2 8.1
Other 6.0 3.0
Deferred purchased gas adjustment 8.5 4.7
Other 2.0 10.3
-----------------------
Total current assets 292.7 289.2
-----------------------
Property, Plant, and Equipment
Utility plant 2,069.1 1,969.0
Less accumulated depreciation 648.8 607.8
-----------------------
Utility plant - net 1,420.3 1,361.2
-----------------------
Nonutility property 105.8 80.4
Less accumulated depreciation 29.5 26.3
-----------------------
Nonutility property - net 76.3 54.1
-----------------------
Total property, plant, and equipment - net 1,496.6 1,415.3
-----------------------
Deferred Debits and Other Assets
Unrecovered environmental response costs 55.0 38.0
Investment in joint ventures 32.7 34.0
Unrecovered integrated resource plan costs 2.0 10.0
Unrecovered postretirement benefits costs 10.0 9.7
Unamortized cost to repurchase long-term debt 2.2 3.5
Prepaid pension costs 3.2
Other 30.6 23.4
-----------------------
Total deferred debits and other assets 135.7 118.6
-----------------------
Total Assets $1,925.0 $1,823.1
- -------------------------------------------------------------------------------------------------
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Liabilities and
Capitalization
<CAPTION>
For the years ended September 30,
In millions 1997 1996
---------------------
<S> <C> <C>
Current Liabilities
Accounts payable - trade $ 65.1 $ 73.7
Short-term debt 29.5 152.0
Customer deposits 29.2 27.8
Interest 29.6 25.7
Other accrued liabilities 26.4 22.3
Redemption requirements on preferred stock 44.5 0.3
Other 19.1 20.5
---------------------
Total current liabilities 243.4 322.3
---------------------
Accumulated Deferred Income Taxes 191.7 167.1
---------------------
Long-Term Liabilities
Accrued environmental response costs 37.3 30.4
Accrued pension costs 4.9
Accrued postretirement benefits costs 34.3 36.2
---------------------
Total long-term liabilities 71.6 71.5
---------------------
Deferred Credits
Unamortized investment tax credit 27.3 28.8
Regulatory tax liability 18.3 19.3
Other 16.3 12.8
---------------------
Total deferred credits 61.9 60.9
---------------------
Commitments and Contingencies (Notes 9 and 11)
Capitalization
Long-term debt 660.0 554.5
Preferred stock
Subsidiary obligated mandatorily redeemable
preferred securities 74.3
Cumulative preferred stock of subsidiary 58.5
Common stockholders' equity (See accompanying
statements of consolidated common stock equity.) 622.1 588.3
---------------------
Total capitalization 1,356.4 1,201.3
---------------------
Total Liabilities and Capitalization $1,925.0 $1,823.1
---------------------
</TABLE>
<PAGE>
<TABLE>
Statements of Consolidated Common Stock Equity
<CAPTION>
For the years ended September 30,
In millions, except per share amounts 1997 1996 1995
--------------------------------
<S> <C> <C> <C>
Common Stock
$5 par value; authorized 100.0 shares;
outstanding, 56.6 in 1997, 55.7 in 1996,
and 54.9 in 1995
Beginning of year $ 278.4 $ 137.3 $ 127.1
Issuance of common stock
Public sale 7.5
Acquisition of nonregulated operation 1.0
Benefit, stock compensation,
dividend reinvestment, and stock
purchase plans 3.7 3.6 2.7
Stock dividend 137.5
--------------------------------
End of year 283.1 278.4 137.3
--------------------------------
Premium on Capital Stock
Beginning of year 170.6 297.7 241.3
Issuance of common stock
Public sale 41.1
Acquisition of nonregulated operation 2.9
Benefit, stock compensation,
dividend reinvestment, and stock
purchase plans 10.1 10.4 15.3
Stock dividend (137.5)
--------------------------------
End of year 183.6 170.6 297.7
--------------------------------
Earnings Reinvested
Beginning of year 139.3 122.3 150.1
Net income 76.6 75.6 26.4
Common stock dividends ($1.08 a share
in 1997, $1.06 a share in 1996, and
$1.04 a share in 1995) (60.5) (58.6) (54.2)
--------------------------------
End of year 155.4 139.3 122.3
--------------------------------
Total common stock equity $ 622.1 $ 588.3 $ 557.3
- -----------------------------------------------------------------------------------------------------
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation - AGL Resources Inc. (AGL Resources), a Georgia
corporation, became the holding company for Atlanta Gas Light Company (AGL),
AGL's wholly owned natural gas utility subsidiary, Chattanooga Gas Company
(Chattanooga), and AGL's nonregulated subsidiaries upon receipt of shareholder
and regulatory approval on March 6, 1996. At that time each share of AGL common
stock was converted into one share of AGL Resources common stock, and AGL became
the primary subsidiary of AGL Resources. AGL comprises substantially all of AGL
Resources' assets, revenues, and earnings. The consolidated financial statements
of AGL Resources include the financial statements of AGL, Chattanooga, and the
nonregulated subsidiaries as though AGL Resources had existed in all periods
shown and had owned all of AGL's outstanding common stock prior to March 6,
1996. Intercompany balances and transactions have been eliminated.
Subsidiaries - AGL Resources engages in natural gas distribution through AGL and
AGL's wholly owned subsidiary, Chattanooga. AGL is a public utility that
distributes and transports natural gas in Georgia and Tennessee and is subject
to regulation by the Georgia Public Service Commission (Georgia Commission) and
the Tennessee Regulatory Authority (TRA), with respect to its rates for service,
maintenance of its accounting records, and various other matters. The
consolidated financial statements are prepared in accordance with generally
accepted accounting principles, which give appropriate recognition to the
rate-making and accounting practices and policies of the Georgia Commission and
the TRA.
AGL Resources engages in nonregulated business activities through its
wholly owned subsidiaries, AGL Energy Services, Inc. (AGL Energy Services), a
gas supply services company; AGL Investments, Inc. (AGL Investments), a
subsidiary established to develop and manage certain nonregulated businesses;
The Energy Spring, Inc., a retail energy marketing company; and AGL Resources
Service Company (Service Company). AGL Energy Services has one nonregulated
subsidiary, Georgia Gas Company. AGL Investments has six nonregulated
subsidiaries: AGL Propane, Inc., formerly known as Georgia Gas Service Company;
AGL Consumer Services, Inc.; AGL Gas Marketing, Inc. (AGL Gas Marketing); AGL
Power Services, Inc. (AGL Power Services); AGL Energy Wise Services, Inc. and
Trustees Investments, Inc.
Regulation - The consolidated financial statements reflect regulatory actions by
the Georgia Commission and the TRA that result in the recognition of certain
revenues and expenses in time periods that are different from enterprises that
are not rate regulated. In accordance with Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation"
(SFAS 71), AGL has recorded regulatory assets and liabilities that represent
regulator-approved deferrals resulting from the rate-making process.
During its July 1997 meeting, the Emerging Issues Task Force concluded
that once legislation is passed to deregulate a segment of a utility and that
legislation includes sufficient detail for the enterprise to determine how the
transition plan will affect that segment, SFAS 71 should be discontinued for
that segment. The state of Georgia has enacted legislation (the Natural Gas
Competition and Deregulation Act) that allows for the deregulation of the
merchant function and unbundling of certain ancillary services of local gas
distribution companies. The rates to transport natural gas through the
intrastate pipe system of the local gas distribution company will be regulated
by the Georgia Commission. Since AGL's regulatory assets and liabilities
associated with its gas distribution activities continue to be regulated, AGL
has determined that the continued application of SFAS 71 related to these
distribution activities remains appropriate. (See Note 14 for additional
information.) SFAS 71 assets and liabilities recorded on September 30 consist of
the following:
In millions 1997 1996
---------------------
Assets
Unrecovered environmental response costs $ 55.0 $ 38.0
Unrecovered integrated resource plan costs 2.0 10.0
Unrecovered postretirement benefits costs 10.0 9.7
Deferred purchased gas adjustment 8.5 4.7
Unamortized cost to repurchase
long-term debt 2.2 3.5
---------------------
Total $ 77.7 $ 65.9
=====================
Liabilities
Unamortized investment tax credit $ 27.3 $ 28.8
Regulatory tax liability 18.3 19.3
Environmental response cost recoveries
from third parties - customer portion 10.1 7.4
Environmental response cost recoveries
from third parties - deferred
company portion 6.1 4.5
Other 3.7 3.7
---------------------
Total $ 65.5 $ 63.7
=====================
<PAGE>
Utility Plant and Depreciation - Utility plant is stated at original cost.
Direct labor and material costs of plant construction and related indirect
construction costs, including administrative, engineering and general overhead,
taxes, and an allowance for funds used during construction (AFUDC), are added to
utility plant. The portion of AFUDC attributable to equity funds is included in
other income, and the portion attributable to borrowed funds is shown as a
reduction in interest charges in the statements of consolidated income. The
AFUDC rate of 9.32% in fiscal 1997, 1996, and 1995, was the cost of capital
approved by the Georgia Commission in a prior rate proceeding.
The original cost of utility property retired or otherwise disposed of,
plus the cost of dismantling, less salvage, is charged to accumulated
depreciation. Maintenance, repairs and minor additions, renewals, and
betterments to property are charged to operations.
The composite straight-line depreciation rate was approximately 3.2%
for depreciable property other than transportation equipment during 1997, 1996,
and 1995. Transportation equipment is depreciated on a straight-line basis over
a period of five to 10 years.
Deferred Purchased Gas Adjustment - The utility's rate schedules include
purchased gas adjustment provisions that permit the recovery of purchased gas
costs. The purchased gas adjustment factor is revised periodically to reflect
changes in the cost of purchased gas without formal rate proceedings. Any
over-recoveries or under-recoveries of gas costs are charged or credited to cost
of gas and are included in current assets or liabilities. As a result of the
Natural Gas Competition and Deregulation Act, it is expected that the purchased
gas adjustment provisions included in AGL's rate schedules will be discontinued
during fiscal 1999. The November 26, 1997, filing contains a provision to
true-up any over-recovery or under-recovery that may exist at the time such
purchased gas adjustment provisions are discontinued. Accordingly, AGL will no
longer defer any over-recoveries or under-recoveries of gas costs when the
purchased gas adjustment provisions are discontinued.
As part of the 1997 Gas Supply Plan, AGL continued limited gas supply
hedging activities. Accounting for hedging activities is provided in accordance
with Statement of Financial Accounting Standards No. 80, "Accounting for Futures
Contracts." The financial results of all hedging activities are passed through
to firm service customers under the purchased gas provisions of AGL's rate
schedules. Accordingly, there is no earnings impact as a result of the hedging
program. Contracts outstanding as of September 30, 1997, and 1996, and during
the years then ended, were not significant.
Operating Revenues - Revenues from AGL Resources' utility business are based on
rates approved by the Georgia Commission and the TRA. Customers' base rates may
not be changed without formal approval of the Georgia Commission or the TRA.
Revenues are recognized on the accrual basis, which includes estimated amounts
for gas delivered but not yet billed.
The Georgia Commission and the TRA have authorized weather normalization
adjustment riders. Such riders are designed to offset the impact that unusually
cold or warm weather has on operating margin.
Certain interruptible customers purchase gas directly from gas
producers and marketers. The Georgia Commission and the TRA have approved
programs whereby transportation charges are billed on those purchases.
Income Taxes - Deferred income taxes result from temporary differences between
book and taxable income and principally relate to depreciation.
Investment tax credits have been deferred and are being amortized by
credits to income in accordance with regulatory treatment over the estimated
lives of the related properties.
Statements of Cash Flows - For purposes of reporting cash flows, AGL Resources
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents.
Noncash investing and financing transactions include (1) the issuance of
common stock for dividend reinvestments pursuant to ResourcesDirect, a stock
purchase and dividend reinvestment plan; Retirement Savings Plus Plan; Long-Term
Stock Incentive Plan; Nonqualified Savings Plan; and the Non-Employee Directors
Equity Compensation Plan of $12.5 million in 1997, $12.3 million in 1996, and
$16.2 million in 1995 and (2) the issuance of 200,000 shares of common stock in
the amount of $3.9 million related to the acquisition of a propane company in
June 1997.
Use of Estimates - Preparing financial statements in conformity with generally
accepted accounting principles requires
<PAGE>
management to make estimates and assumptions. Those estimates and assumptions
affect the reported amounts of assets and liabilities, disclosure on contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other - Gas inventories are stated at cost on a principally first-in, first-out
method. Materials and supplies inventories are stated at lower of average cost
or market.
Consistent with the rate treatment prescribed by the Georgia Commission
and the TRA, vacation pay and short-term disability benefits for AGL are
expensed when those benefits are paid.
The computation of earnings per share of common stock is based on the
weighted average number of common shares outstanding during each year.
Certain reclassifications have been made in 1996 and 1995 to conform
with the 1997 financial statement presentation.
Recently Issued Accounting Pronouncements - In February 1997 the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" (SFAS 128), which establishes standards for
computing and presenting earnings per share. AGL Resources will adopt SFAS 128
in the first quarter of fiscal 1998.
In June 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130), and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131). SFAS 130 establishes standards for the reporting and displaying of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. SFAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. AGL Resources will adopt SFAS 130 and
SFAS 131 in fiscal 1999.
Management does not expect those new pronouncements to have a
significant impact on the presentation of AGL Resources' consolidated financial
statements.
Note 2. Income Tax Expense
Deferred tax balances are measured at the tax rates that will apply during the
period the taxes become payable and are adjusted whenever new rates are enacted.
Because of the regulated nature of the utility's business, a regulatory
liability has been recorded in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The regulatory liability is
being amortized over approximately 30 years.
Components of income tax expense shown in the consolidated income
statements are as follows:
In millions 1997 1996 1995
- --------------------------------------------------------
Included in expenses
Current income taxes
Federal $ 24.2 $ 20.3 $ 16.9
State 5.5 3.0 2.6
Deferred income taxes
Federal 16.7 21.6 (1.0)
State 1.8 4.1 (0.2)
Amortization of investment
tax credits (1.4) (1.5) (1.6)
- --------------------------------------------------------
Total $ 46.8 $ 47.5 $ 16.7
========================================================
A reconciliation between the statutory federal income tax rate and the
effective rate is as follows:
In millions 1997
- --------------------------------------------------------
% of
Pretax
Amount Income
- --------------------------------------------------------
Computed tax expense $ 43.2 35.0
State income tax, net of federal
income tax benefit 4.5 3.7
Amortization of investment tax credits (1.4) (1.1)
Other - net 0.5 0.4
- --------------------------------------------------------
Total income tax expense $ 46.8 38.0
========================================================
<PAGE>
In millions 1996
- --------------------------------------------------------
% of
Pretax
Amount Income
Computed tax expense $ 43.1 35.0
State income tax, net of federal
income tax benefit 4.3 3.5
Amortization of investment tax credits (1.5) (1.2)
Other - net 1.6 1.3
- --------------------------------------------------------
Total income tax expense $ 47.5 38.6
========================================================
In millions 1995
- --------------------------------------------------------
% of
Pretax
Amount Income
Computed tax expense $ 15.1 35.0
State income tax, net of federal
income tax benefit 1.3 3.0
Amortization of investment tax credits (1.6) (3.7)
Other - net 1.9 4.4
- --------------------------------------------------------
Total income tax expense $ 16.7 38.7
========================================================
Components that give rise to the net deferred income tax liability as of
September 30 are as follows:
In millions 1997 1996
- --------------------------------------------------------------
Deferred tax liabilities
Property - accelerated depreciation and
other property-related items $ 206.8 $ 204.4
Other 18.5 15.2
- --------------------------------------------------------------
Total deferred tax liabilities 225.3 219.6
- --------------------------------------------------------------
Deferred tax assets
Deferred investment tax credits 10.6 11.1
Alternative minimum tax 4.2 11.8
Other 18.8 29.6
- --------------------------------------------------------------
Total deferred tax assets 33.6 52.5
- --------------------------------------------------------------
Net deferred tax liability $ 191.7 $ 167.1
==============================================================
Note 3. Corporate Restructuring
In November 1994 AGL Resources announced a corporate restructuring plan and
began its implementation during fiscal 1995. As a result of the restructuring,
AGL combined offices, established centralized customer service centers, and
reduced the number of employees through voluntary retirement, severance
programs, and attrition. Restructuring costs of $43.1 million, after income
taxes, were recorded during 1995. The principal effect of the restructuring
charges was to increase obligations with respect to pension benefits and
postretirement benefits other than pensions.
During the fourth quarter of fiscal 1996, AGL Resources reviewed its
remaining liabilities with respect to its corporate restructuring plan. As a
result, AGL Resources adjusted its restructuring accruals and reduced operating
expenses by $2.7 million. The remaining balance of restructuring liabilities as
of September 30, 1997, and 1996, was $0.2 million and $1 million, respectively.
Note 4. Employee Benefit Plans and Stock Compensation Plans
Effective July 1, 1996, the Board of Directors authorized the transfer of the
sponsorship of all employee benefit plans from AGL to AGL Resources.
Substantially all employees of AGL Resources and its subsidiaries are eligible
to participate in the benefit plans.
AGL Resources has a noncontributory defined benefit retirement plan. The
plan's assets consist primarily of marketable securities, corporate obligations,
U.S. government obligations, insurance contracts, real estate investments, and
cash equivalents. The plan provides pension benefits that are based on years of
service and the employee's highest 36 consecutive months' compensation out of
the last 60 months worked. AGL Resources' funding policy is to make the annual
contribution required by applicable regulations and recommended by its actuary.
AGL Resources has an excess benefit plan that is unfunded and provides
supplemental benefits to certain officers after retirement. In September 1994
AGL Resources established a voluntary early retirement plan for certain officers
of AGL Resources that is unfunded and provides supplemental pension benefits to
participants who elected early retirement. The annual expense and accumulated
benefits of such plans are not significant.
Net periodic pension costs for the plans include service cost, interest
cost, return on pension assets, and straight-line amortization of unrecognized
initial net assets over approximately 16 years. Net periodic pension costs
include the following components:
<PAGE>
In millions 1997 1996 1995
- -------------------------------------------------------------
Service cost $ 4.0 $ 4.0 $ 4.5
Interest cost 16.2 15.8 14.9
Actual return on assets (30.6) (19.3) (17.0)
Net amortization and deferral 16.9 6.3 5.9
- -------------------------------------------------------------
Net periodic pension cost $ 6.5 $ 6.8 $ 8.3
- -------------------------------------------------------------
Actuarial assumptions used include:
Discount rate 7.5% 7.8% 8.3%
Rate of increase in
compensation levels 4.5% 4.5% 5.0%
Expected long-term rate
of return on assets 8.3% 8.3% 8.3%
=============================================================
The following schedule sets forth the plans' funded status as of June
30, 1997, and 1996, and amounts recognized in the consolidated balance sheets as
of September 30, 1997, and 1996:
In millions 1997 1996
- -------------------------------------------------------------
Actuarial present value
of benefit obligations
Vested benefit obligation $ 187.2 $ 180.5
- -------------------------------------------------------------
Accumulated benefit obligation $ 190.5 $ 183.2
- -------------------------------------------------------------
Projected benefit obligation $ (223.8) $ (212.9)
Plan assets at fair value 212.1 181.8
- -------------------------------------------------------------
Plan assets less than projected
benefit obligation (11.7) (31.1)
Unrecognized net loss 15.1 26.8
Remaining unrecognized net
assets at date of initial adoption (3.7) (4.5)
Unrecognized prior service cost 3.5 3.9
- -------------------------------------------------------------
Prepaid (accrued) pension costs $ 3.2 $ (4.9)
=============================================================
AGL Resources' Retirement Savings Plus Plan (RSP Plan), a 401(k) plan,
provides participants a mechanism for making contributions for retirement
savings. Each participant may contribute amounts up to 15% of eligible
compensation. AGL Resources makes a contribution equal to 65% of the
participant's contribution not to exceed 3.9% of the participant's compensation
for the plan year. The contribution was $3.3 million for 1997, $3.2 million for
1996, and $3.3 million for 1995.
AGL Resources' Nonqualified Savings Plan (NSP), an unfunded,
nonqualified plan similar to the RSP Plan, was established on July 1, 1995. The
NSP provides an opportunity for eligible employees to make contributions for
retirement savings. AGL Resources' contributions during 1997 and 1996 to the NSP
were not significant.
In January 1988, in connection with a Leveraged Employee Stock Ownership
Plan (LESOP), AGL Resources purchased 2 million shares of its common stock for
$11.75 per share, with the proceeds of a loan secured by such common stock. AGL
Resources has not guaranteed the repayment of the loan. The loan is repaid from
regular cash dividends on AGL Resources' common stock paid to LESOP and from
contributions to LESOP, as approved by AGL Resources' Board of Directors.
Contributions to LESOP were $0.9 million for 1997, $0.7 million for 1996, and
$0.8 million for 1995. The principal balance of the loan was $0.6 million as of
September 30, 1997, and $2.9 million as of September 30, 1996. The loan is
payable on December 31, 1997.
In addition to providing pension benefits, AGL Resources provides
certain health care and life insurance benefits for retired employees.
Substantially all employees become eligible for those benefits if they reach
retirement age while working for AGL Resources.
In 1993 the Georgia Commission approved a five-year phase-in of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106), that defers a portion
of SFAS 106 expense for future recovery. A regulatory asset has been recorded
for the deferred portion of SFAS 106 expense. In 1993 the TRA approved the
recovery of SFAS 106 expense that is funded through an external trust.
Net periodic postretirement benefits costs for fiscal 1997, 1996, and
1995 include the following components:
In millions 1997 1996 1995
- ------------------------------------------------------------
Service cost $ 0.8 $ 0.8 $ 0.9
Interest cost 8.0 8.8 7.6
Actual return on assets (1.0) (0.6) (0.3)
Amortization of transition
obligation and other 3.8 4.2 4.2
- ------------------------------------------------------------
Net postretirement
benefits costs $ 11.6 $ 13.2 $ 12.4
============================================================
<PAGE>
Approximately $11.3 million, $10.7 million, and $8.7 million of net
periodic postretirement benefits costs for fiscal 1997, 1996, and 1995,
respectively, were recovered from the utility's customers. The remaining $0.3
million, $2.5 million, and $3.7 million for 1997, 1996, and 1995, respectively,
were deferred for future recovery through amortization and recognized as
regulatory assets in the financial statements consistent with regulatory
decisions. AGL Resources has funded, through an external trust, SFAS 106 expense
recovered from its utility customers in excess of the pay-as-you-go amounts.
The following schedule sets forth the plan's funded status as of
September 30, 1997, and 1996:
In millions 1997 1996
- -----------------------------------------------------------------
Retirees $ 82.2 $ 85.8
Fully eligible active plan participants 6.4 6.4
Other active plan participants 14.8 13.3
- -----------------------------------------------------------------
Total accumulated postretirement
benefit obligation 103.4 105.5
Plan assets at fair value 17.9 10.4
- -----------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan assets 85.5 95.1
Unrecognized transition obligation (65.5) (69.5)
Unrecognized gain 14.3 10.6
- -----------------------------------------------------------------
Accrued postretirement benefits costs $ 34.3 $ 36.2
=================================================================
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation for pre-Medicare eligibility is
10.5% in 1997, decreasing 0.5% per year to 6% in the year 2006 and an additional
0.25% to 5.75% in 2007. The rate for post-Medicare eligibility is 9.0% in 1997,
decreasing 0.5% per year to 5.5% in the year 2004 and an additional 0.25% to
5.25% in 2005. Increasing the assumed health care cost trend rate by 1% would
increase the accumulated postretirement benefit obligation as of September 30,
1997, by approximately $5.1 million and the accrued postretirement benefits cost
by approximately $0.4 million for fiscal 1997. The assumed discount rate used in
determining the postretirement benefit obligation was 7.50% in 1997 and 7.75% in
1996.
The AGL Resources Long-Term Stock Incentive Plan (LTSIP) provides that
incentive and nonqualified stock options, restricted stock awards, and stock
appreciation rights may be granted to key employees of AGL Resources and its
subsidiaries. The exercise price of shares underlying each option must be at
least equal to the fair market value of the common stock on the date the option
is granted. Options become fully exercisable six months after the date of grant
and generally expire 10 years after the date of grant. The LTSIP currently
authorizes for issuance up to 3.2 million shares of AGL Resources common stock.
AGL Resources issued stock awards for 31,863; 7,249; and 2,000 shares to
key employees under the LTSIP during the years ended September 30, 1997, 1996,
and 1995, respectively. The 1997 stock awards are subject to certain vesting
restrictions. The weighted-average fair value at date of issuance for shares
awarded during the years ended September 30, 1997, 1996, and 1995, was $20.125,
$19.758, and $15.625 per share, respectively. AGL Resources is recognizing
compensation expense for these stock awards over the related vesting periods.
Option transactions during the three years ended September 30, 1997,
were as follows:
Weighted-Avg.
Shares Exercise Price
- -----------------------------------------------------------------
Outstanding - Sept. 30, 1994 619,338 $ 17.78
Granted 318,028 16.07
Exercised (46,264) 15.94
Forfeited (41,942) 18.91
- -----------------------------------------------------------------
Outstanding - Sept. 30, 1995 849,160 $ 17.18
=================================================================
Exercisable - Sept. 30, 1995 841,870 $ 17.17
=================================================================
Outstanding - Sept. 30, 1995 849,160 $ 17.18
Granted 299,340 19.40
Exercised (109,980) 17.24
Forfeited (27,176) 19.49
- -----------------------------------------------------------------
Outstanding - Sept. 30, 1996 1,011,344 $ 17.77
=================================================================
Exercisable - Sept. 30, 1996 1,006,166 $ 17.76
=================================================================
Outstanding - Sept. 30, 1996 1,011,344 $ 17.77
Granted 510,119 20.17
Exercised (104,520) 16.70
Forfeited (28,169) 19.76
- -----------------------------------------------------------------
Outstanding - Sept. 30, 1997 1,388,774 $ 18.69
=================================================================
Exercisable - Sept. 30, 1997 1,384,125 $ 18.69
=================================================================
<PAGE>
Exercise prices for the 1,388,774 options outstanding as of September
30, 1997, ranged from $13.75 to $21.625. The weighted-average remaining
contractual life of those options is 7.6 years.
In 1997 AGL Resources adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), and
determined it would continue to follow the requirements of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," in its
accounting for employee stock options. Because the exercise price of employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized. As of September 30, 1997, AGL
Resources adopted the disclosure-only provisions of SFAS 123. Had compensation
expense been reflected for the issuance of options granted in 1997 and 1996
based on the fair value method of SFAS 123, AGL Resources' net income and
earnings per share would have changed to the pro forma amounts indicated as
follows:
For the years ended September 30, 1997 1996
- ---------------------------------------------------------
Net income - as reported (millions) $ 76.6 $ 75.6
Net income - pro forma (millions) $ 75.6 $ 75.2
Earnings per share - as reported $ 1.37 $ 1.37
Earnings per share - pro forma $ 1.35 $ 1.36
- ---------------------------------------------------------
The weighted-average fair value at date of grant for stock options
granted during the years ended September 30, 1997, 1996, and 1995, was $2.93,
$2.34, and $2.03 per option, respectively. The fair value of options was
estimated using the Black-Scholes pricing model with the following
weighted-average assumptions:
For the years ended September 30, 1997 1996 1995
- -------------------------------------------------------------
Expected life (years) 7 7 7
Interest rate 6.3% 5.5% 7.4%
Volatility 17.1% 16.5% 16.4%
Dividend yield 5.3% 5.4% 6.5%
- -------------------------------------------------------------
AGL Resources maintains the AGL Resources Inc. 1996 Non-Employee
Directors Equity Compensation Plan (Directors Plan), in which all nonemployee
directors participate. The Directors Plan provides for an automatic grant to
each nonemployee director on the first day of each annual service term of (1) an
award of common stock equivalent in fair market value on such date to the
$16,000 annual retainer payable to each director and (2) a nonqualified stock
option to purchase the same number of shares of common stock as are awarded on
such date in payment of the retainer. The per share option exercise price is
equal to the fair market value of AGL Resources' common stock on the date of
grant of the option. Nonemployee directors were granted options to purchase an
aggregate of 7,960 shares and 9,306 shares for the years ended September 30,
1997, and 1996, respectively. The Directors Plan currently authorizes for
issuance up to 200,000 shares of common stock for stock awards and option
grants.
Note 5. Common Stock
AGL Resources has a Shareholder Rights Plan designed to protect the interests of
shareholders in the event of an unfavorable attempt to acquire AGL Resources and
to make it more difficult for a person to gain control of AGL Resources in a
manner or on terms not approved by the Board of Directors. The plan provides for
the issuance of one right for each outstanding share of common stock. The
purchase rights issued under the plan are redeemable at any time by AGL
Resources before their expiration on March 6, 2006, unless certain triggering
events have occurred. The purchase rights outstanding under the plan are
exercisable for one one-hundredth of a share of no par Class A Junior
Participating Preferred Stock at a purchase price of $60, with each share having
substantially the rights and preferences of 100 shares of common stock. As of
September 30, 1997, 1 million shares of Class A Junior Participating Preferred
Stock were reserved for issuance under this plan.
On November 3, 1995, the Board of Directors declared a two-for-one stock
split of the common stock effected in the form of a 100% stock dividend to
shareholders of record on November 17, 1995, and payable on December 1, 1995.
AGL Resources recorded a decrease to premium on capital stock and an increase to
common stock of $137.5 million to transfer the amount of the par value of the
stock dividend to common stock. All references to number of shares and to per
share amounts have been restated retroactively to reflect the stock dividend.
On June 16, 1995, approximately 3 million shares of common stock were
issued and sold at $16.81 per share, resulting in net proceeds of $48.6 million.
Proceeds from
<PAGE>
that sale of common stock were used to finance capital expenditures and
for other corporate purposes.
AGL Resources also issued 753,866; 792,919; and 1,107,324 shares of its
common stock during the years ended September 30, 1997, 1996, and 1995,
respectively, pursuant to ResourcesDirect, a direct stock purchase and dividend
reinvestment plan; the RSP Plan; LTSIP; NSP; and the Non-Employee Directors
Equity Compensation Plans.
As of September 30, 1997, 7,760,821 shares of common stock were reserved
for issuance pursuant to ResourcesDirect, the RSP Plan, LTSIP, NSP, and the
Non-Employee Directors Equity Compensation Plan.
Note 6. Preferred Stock
In June 1997 AGL Resources formed AGL Capital Trust, a Delaware business trust
(the Trust), of which AGL Resources owns all of the common voting securities.
The Trust issued and sold to certain initial investors $75 million in principal
amount of 8.17% Capital Securities (liquidation amount $1,000 per Capital
Security), the proceeds of which were used to purchase 8.17% Junior Subordinated
Deferrable Interest Debentures, due June 1, 2037, from AGL Resources. The
Capital Securities are subject to mandatory redemption upon repayment of the
Junior Subordinated Debentures on the stated maturity date of June 1, 2037, upon
the earlier occurrence of certain events, or upon the optional prepayment by AGL
Resources on or after June 1, 2007. AGL Resources has fully and unconditionally
guaranteed all of the Trust's obligations with respect to the Capital
Securities. Net proceeds to AGL Resources from the sale of the Junior
Subordinated Debentures of $74.3 million was used to repay short-term debt, to
redeem certain of AGL's outstanding issues of preferred stock, and for other
corporate purposes.
As of September 30, 1997, AGL Resources had 10 million shares of
authorized, but unissued, Class A Junior Participating Preferred Stock, no par
value, and 10 million shares of authorized, but unissued, preferred stock, no
par value. As of September 30, 1997, AGL had 10 million shares of authorized,
but unissued, preferred stock, no par value.
On July 1, 1997, AGL redeemed 60 shares of its 7.84% Cumulative
Preferred Stock at a price of $100 per share pursuant to purchase fund
provisions associated with that issue.
On August 15, 1997, AGL redeemed its 4.5% Cumulative Preferred Stock,
4.72% Cumulative Preferred Stock, 5% Cumulative Preferred Stock, 7.84%
Cumulative Preferred Stock, and 8.32% Cumulative Preferred Stock at the call
price in effect for each issue for a total repurchase of 142,724 shares for
$14.7 million. That preferred stock had a carrying value of $14 million, net of
current maturities, as of September 30, 1996. Those issues of preferred stock
have been retired in full.
In addition to the Capital Securities outstanding, AGL has 445,000
shares of 7.70% Series depositary preferred stock outstanding with a carrying
value of $44.5 million as of September 30, 1997, and 1996. AGL announced the
redemption in full of those shares, effective December 1, 1997, at the
redemption price of $100 per share.
Note 7. Long-Term Debt
Medium-term notes Series A, Series B, and Series C were issued under an
Indenture dated December 1, 1989. The notes are unsecured and rank on a parity
with all other unsecured indebtedness. During 1997 $105.5 million in principal
amount of such notes was issued, with maturity dates ranging from 20 to 30 years
and with interest rates ranging from 6.55% to 7.3%. Net proceeds from the
issuance of medium-term notes were used to fund capital expenditures, to repay
short-term debt, and for other corporate purposes. The annual maturities of
long-term debt for the five years ending September 30, 2002, are $50 million in
2000, $20 million in 2001, and $45 million in 2002.
The outstanding long-term debt, net of current maturities, as of
September 30 is as follows:
In millions 1997 1996
- -----------------------------------------
Medium-term notes
Series A (1) $ 60.0 $ 60.0
Series B (2) 300.0 300.0
Series C (3) 300.0 194.5
- -----------------------------------------
Total $ 660.0 $ 554.5
=========================================
(1) Interest rates from 8.90% to 9.10% with maturity dates from 2000 to 2021
(2) Interest rates from 7.15% to 8.70% with maturity dates from 2000 to 2023.
(3) Interest rates from 5.90% to 7.30% with maturity dates from 2004 to 2027.
<PAGE>
Note 8. Short-Term Debt
Lines of credit with various banks provide for direct borrowings and are subject
to annual renewal. The current lines of credit vary throughout the year from
$156.3 million in the summer months to $305 million for peak winter financing.
Certain of the lines are on a commitment-fee basis. As of September 30, 1997,
$152 million was available on lines of credit.
Short-term borrowings consisted of the following:
In millions 1997 1996 1995
- ---------------------------------------------------------------------
Short-term debt outstanding
at end of year $ 29.5 $ 152.0 $ 51.0
Maximum amounts of
short-term debt outstanding
at any month end during
the year 189.0 156.3 155.0
Average amounts of
short-term debt outstanding
during the year (a) 98.0 87.5 51.5
- ---------------------------------------------------------------------
Weighted Average
Interest Rates 1997 1996 1995
- ---------------------------------------------------------------------
Short-term debt outstanding
at end of year 5.9% 5.7% 5.9%
Average amounts of
short-term debt outstanding
during the year (a) 5.7% 5.8% 5.7%
- ---------------------------------------------------------------------
(a) Average amount outstanding during the year calculated based on daily
outstanding balances. Weighted average interest rate during the year calculated
based on interest expense and average amount outstanding during the year.
Note 9. Commitments and Contingencies
In connection with its utility business, AGL Resources has agreements for firm
pipeline and storage capacity that expire at various dates through 2014. The
aggregate amount of required payments under such agreements totals approximately
$1.4 billion, with annual required payments of $221 million in 1998, $218
million in 1999, $216 million in 2000, $196 million in 2001, and $184 million in
2002. Total payments of fixed charges under all agreements were $215 million in
1997, $225 million in 1996, and $230 million in 1995. The purchased gas
adjustment provisions of the utility's rate schedules permit the recovery of gas
costs from customers. As a result of the Natural Gas Competition and
Deregulation Act, those purchase commitments will be assigned to certificated
marketers.
During the past decade the Federal Energy Regulatory Commission (FERC)
has dramatically transformed the natural gas industry through a series of
generic orders promoting competition in the industry. As part of this
transformation, the interstate pipelines that serve AGL have been required to
unbundle their transportation and gas supply services and to provide
transportation service on a nondiscriminatory basis for gas supplied by numerous
gas producers or other third parties. FERC is considering further changes to its
regulatory structure, including, but not limited to, potential revisions to its
policies governing secondary market transactions and revisions to permit
pipelines and their customers to establish individually negotiated terms and
conditions of service that depart from pipeline tariff rules. AGL cannot predict
the likelihood that such initiatives will be adopted or the effect of those
potential changes upon AGL.
Based on filings with FERC by its pipeline suppliers, AGL currently
estimates that its total portion of transition costs from all of its pipeline
suppliers would be approximately $105.8 million. Approximately $92.2 million of
such costs has been incurred by AGL as of September 30, 1997, and is being
recovered from its customers under the purchased gas provisions of AGL's rate
schedules. Transition costs have not affected the total cost of gas to AGL's
customers significantly because (1) AGL purchases its wellhead gas supplies
based on market prices that are below the cost of gas previously embedded in the
bundled pipelines' sales service rates and (2) many elements of transition costs
previously were embedded in the rates for the pipelines' bundled sales service.
In conjunction with the regulatory changes mandated by FERC, AGL has
been required to pay transition costs associated with the unbundling of its
interstate pipeline suppliers, including substantial gas supply realignment
costs billed to AGL by Southern Natural Gas Company (Southern) and Tennessee Gas
Pipeline Company (Tennessee). AGL and other parties have entered into
restructuring settlements with Southern and Tennessee that resolve all
transition cost issues for those pipelines. Pursuant to the Southern settlement,
AGL's share of Southern's transition costs is estimated to be $87.6 million,
$79.4 million of which has been incurred by AGL as of September 30, 1997. The
Southern settlement has been approved by FERC, but is subject to judicial
review;
<PAGE>
thus, AGL's ultimate liability for Southern's transition costs is not finally
established. Pursuant to the Tennessee settlement, AGL's share of
Tennessee's transition costs is estimated to be $14.7 million, $9.6 million of
which has been incurred by AGL as of September 30, 1997. The Tennessee
settlement is final, as it has been approved by FERC and is no longer subject to
judicial review.
On September 30, 1997, AGL Resources and its subsidiaries had 3,035
employees. Approximately 724 employees working for AGL and 50 employees working
for Service Company are covered by provisions of collective bargaining
agreements. Those agreements provide for a $500 lump sum payment to each
bargaining unit employee in 1997 and 1998. Based on current pay levels, it is
anticipated that the majority of bargaining unit employees will not receive any
base rate increases until 1999. The collective bargaining agreements expire in
2000 and 2001.
Total rental expense for property and equipment was $6.5 million in
1997, $7 million in 1996, and $6.3 million in 1995. Minimum annual rentals under
noncancelable operating leases are as follows: 1998 - $6.2 million; 1999 - $5.4
million; 2000 - $4.9 million; 2001 - $3.6 million; 2002 - $3.5 million; and
thereafter - $3 million.
AGL Resources and its subsidiaries are involved in litigation arising in
the normal course of business. (See Note 11 regarding Environmental Matters.)
Management believes that the ultimate resolution of such litigation will not
have a material adverse effect on the consolidated financial statements.
Note 10. Customers' and Suppliers' Refunds
Pursuant to orders of FERC, the utility has received refunds from its interstate
natural gas suppliers. Those refunds are a result of FERC orders adjusting the
price of various pipeline services purchased by the utility from its suppliers
in prior periods. The utility passes the refunds on to its customers under
purchased gas provisions of rate schedules approved by the Georgia Commission
and the TRA.
On August 23, 1995, the Georgia Commission approved a $38.5 million plus
interest refund of deferred purchased gas costs. The refund resulted from the
over-recovery of gas costs through the purchased gas provisions of the utility's
rate schedules. The refund was credited to customers' bills in September 1995.
Note 11. Environmental Matters
AGL has identified nine sites in Georgia where it currently owns all or part of
a manufactured gas plant (MGP) site. In addition, AGL has identified three
other sites in Georgia that AGL does not own, but that may have been associated
with the operation of MGPs by AGL or its predecessors.
Those sites are potentially subject to a variety of regulatory programs.
AGL's response to MGP sites in Georgia is proceeding under two state
regulatory programs: the Georgia Hazardous Waste Management Act (HWMA) and the
Hazardous Site Response Act (HSRA). Some degree of response action, under one or
both of those programs, is likely to be required at most of the Georgia sites.
AGL also has identified three sites in Florida that may have been
associated with AGL or its predecessors. AGL does not own any of the former MGP
sites in Florida. However, AGL has been contacted by the current owners of two
of those sites. In addition, AGL has received a "Special Notice Letter" from the
U.S. Environmental Protection Agency (EPA) with respect to one of the two sites.
AGL expects that some degree of response action is likely to be required at
those two sites. AGL currently is negotiating with both regulatory authorities
and other potentially responsible parties to determine the extent of its
responsibility for the two sites.
AGL has estimated the investigation and remediation expenses likely to
be associated with the former MGP sites. AGL currently estimates that the future
cost to AGL of investigating and remediating the former MGP sites could be as
low as $37.3 million or as high as $76.5 million. That range does not include
other expenses, such as unasserted property damage claims, for which AGL may be
held liable, but for which neither the existence nor the amount of such
liabilities can be reasonably forecast. Within the stated range of $37.3 million
to $76.5 million, no amount within the range can be reliably identified as a
better estimate than any other estimate. Therefore, a liability at the low end
of that range has been recorded in the financial statements.
AGL has two means of recovering the expenses associated with the former
MGP sites. First, the Georgia Commission has approved the recovery by AGL of
Environmental Response Costs, as defined, pursuant to an Environmental Response
Cost Recovery Rider (ERCRR). For purposes of the
<PAGE>
ERCRR, Environmental Response Costs include investigation, testing, remediation,
and litigation costs and expenses, or other liabilities relating to or arising
from MGP sites. A regulatory asset in the amount of $55 million has been
recorded in the financial statements to reflect the recovery of those costs
through the ERCRR.
In connection with the ERCRR, the staff of the Georgia Commission has
undertaken a financial and management process audit related to the MGP sites,
cleanup activities at the sites, and environmental response costs that have been
incurred for purposes of the ERCRR. On October 10, 1996, the Georgia Commission
issued an order to prohibit funds collected through the ERCRR from being used
for payment of any damage award, including punitive damages, as a result of any
litigation associated with the MGP sites in which AGL is involved. On October
22, 1997, the Georgia Commission issued an order rescinding its 1996 order and
has scheduled a hearing for February 16, 1998, to consider three issues relating
to the ERCRR. Specifically, the Georgia Commission is to consider whether the
term "Environmental Response Costs" should include punitive damages, whether
AGL should be required to provide an annual accounting for revenue recovered
from customers through the ERCRR, and whether a schedule should be established
for site remediation.
Second, AGL intends to seek recovery of appropriate costs from its
insurers and other potentially responsible parties. During fiscal 1997 and
fiscal 1996, AGL recovered $5.7 million and $14.7 million, respectively, from
its insurance carriers and other potentially responsible parties. In accordance
with provisions of the ERCRR, AGL recognized other income of $1.4 million during
fiscal 1997 and $2.9 million during fiscal 1996 and established regulatory
liabilities for the remainder of the recoveries.
On February 10, 1995, a class action lawsuit captioned Trinity Christian
Methodist Episcopal Church, et al. v. Atlanta Gas Light Company, No. 95-RCCV-93,
was filed in the Superior Court of Richmond County, Georgia, seeking to recover
for damage to property owned by persons adjacent to and nearby the former
manufactured gas plant site in Augusta, Georgia. On December 13, 1996 the
parties reached a preliminary settlement, which was approved by the Court on
April 15, 1997. Pursuant to the settlement, there is a claims process before an
umpire to determine either the full fair market value of properties tendered to
AGL or the diminution in fair market value of properties not tendered to AGL.
Settlements have been paid to 188 property owners in the class totaling
approximately $2.9 million, including legal fees and expenses of the plaintiffs.
There are seven settlements yet to be paid. One settlement of approximately
$64,000, including attorney's fees, is pending reconsideration, and AGL has
filed motions to vacate six settlements totaling approximately $4.3 million. An
order was entered on July 8, 1997, denying the motion to vacate. AGL has filed a
notice of appeal with the Georgia Court of Appeals seeking to reverse the denial
of the motion to vacate.
Note 12. Fair Value of Financial Instruments
AGL Resources has estimated the fair value of its financial instruments, the
carrying value of which differed from fair value, using available market
information and appropriate valuation methodologies. Considerable judgment is
required in developing the estimates of fair value presented herein and,
therefore, the values are not necessarily indicative of the amounts that could
be realized in a current market exchange.
The carrying amount and the estimated fair value of such financial
instruments as of September 30, 1997, and 1996, consist of the following:
Carrying Estimated
In millions Amount Fair Value
- ----------------------------------------------------------
1997
Long-term debt, including
current portion $ 660.0 $ 687.0
Capital Securities 74.3 76.3
- ----------------------------------------------------------
1996
Long-term debt, including
current portion $ 554.5 $ 566.6
Redeemable cumulative preferred
stock of AGL, including
current portion 55.8 56.9
- ----------------------------------------------------------
The estimated fair values are determined based on the following:
Long-Term Debt - interest rates that currently are available for issuance of
debt with similar terms and remaining maturities.
Capital Securities - quoted market price and dividend rates for preferred stock
with similar terms.
<PAGE>
The fair value estimates presented herein are based on information
available to management as of September 30, 1997, and 1996. Management is not
aware of any subsequent factors that would affect the estimated fair value
amounts significantly.
Note 13. Joint Ventures and Nonregulated Acquisitions
During November 1997 AGL Resources and Southern Natural Gas Company, a
subsidiary of Sonat Inc., (Sonat), entered into a letter of intent to jointly
construct, own, and operate a new liquefied natural gas peaking facility, Etowah
LNG (Etowah) in Polk County, Georgia. Under the letter of intent, which is
subject to regulatory approval and the execution of definitive documents, AGL
Resources and Southern Natural Gas each will own 50% of Etowah, which will be
regulated by FERC.
The proposed plant will connect directly into AGL's and Southern Natural
Gas' pipeline. Etowah will provide natural gas storage and peaking services to
AGL and other southeastern customers. The new facility will cost approximately
$90 million, with 3 billion-cubic-feet of natural gas storage capacity and 450
million-cubic-feet per day of vaporization capacity. Affiliates of AGL Resources
will manage the construction of the facility and operate it. Southern Natural
Gas will provide administrative services.
During December 1996 AGL Resources signed a letter of intent with
Transcontinental Gas Pipe Line Corporation (Transco) to form a joint venture,
which would be known as Cumberland Pipeline Company (Cumberland), to provide
interstate pipeline services to customers in Georgia and Tennessee. The
transaction is subject to various corporate and regulatory approvals. Initially,
the 135-mile Cumberland pipeline will include existing pipeline infrastructure
owned by the two companies, extending from Walton County, Georgia, to Catoosa
County, Georgia. Projected to enter service by November 1, 2000, Cumberland will
be positioned to serve AGL, Chattanooga, and other markets throughout the
eastern Tennessee Valley, northwest Georgia, and northeast Alabama. Affiliates
of Transco and AGL Resources each will own 50% of Cumberland, and an affiliate
of Transco will serve as operator. It currently is anticipated that the project
will be submitted to FERC for approval during fiscal 1998.
AGL Power Services, a wholly owned subsidiary of AGL Investments, holds
a 35% interest in Sonat Power Marketing L.P., which provides power marketing and
all related services in key market areas throughout the United States. During
fiscal 1996 AGL Power Services invested approximately $1 million in exchange for
a 35% ownership interest in the partnership.
During August 1995 AGL signed an agreement with Sonat to form a joint
venture to acquire the business of Sonat Marketing Company, a wholly owned
subsidiary of Sonat. The joint venture, Sonat Marketing Company L.P. (Sonat
Marketing), offers natural gas sales, transportation, risk management, and
storage services to natural gas users and producers in key natural gas producing
and consuming areas of the United States.
AGL invested $32.6 million for a 35% ownership interest in Sonat
Marketing, which was transferred to AGL Gas Marketing, a wholly owned subsidiary
of AGL Investments, during the third quarter of fiscal 1996. AGL Gas Marketing's
35% investment is being accounted for under the equity method. The excess of the
purchase price over the estimated fair value of the net tangible assets of
approximately $23 million has been allocated to intangible assets consisting of
customer lists and goodwill; those assets are being amortized over 10 and 35
years, respectively.
AGL Investments has certain rights through August 2000 to sell its
interest in Sonat Marketing to Sonat at a predetermined fixed price, as defined,
or for fair market value at any time.
During fiscal 1997 and 1996, AGL Resources purchased gas totaling $287.9
million and $247.5 million, respectively, from Sonat Marketing and its
affiliates. As of September 30, 1997, and September 30, 1996, AGL Resources had
outstanding obligations payable to Sonat Marketing of $32.6 million and $18.8
million, respectively.
During fiscal 1997 AGL Investments acquired regional propane operations
located in northern Alabama, northern Georgia, and eastern Tennessee for a total
cost of approximately $17.7 million. Those acquisitions are accounted for
pursuant to the purchase method of accounting.
<PAGE>
Note 14. Subsequent Event
On November 26, 1997, AGL filed with the Georgia Commission a notice of its
election to become an electing distribution company pursuant to Georgia's
Natural Gas Competition and Deregulation Act. That election will allow AGL to
unbundle its services and eventually exit from the sale of gas. Unbundling
services involves separating AGL's transportation business from ancillary
services, such as peaking services, meter reading, billing services, collection
services, payment processing services, and billing inquiry services. Rates
requested in connection with that filing will be calculated using a
performance-based measurement.
Note 15. Quarterly Financial Data (Unaudited)
Quarterly financial data for fiscal 1997 and 1996 are summarized as follows:
Operating Operating
In millions Revenues Income
- ------------------------------------------------
Quarter Ended
1997
December 31, 1996 $ 379.6 $ 60.2
March 31, 1997 496.7 89.0
June 30, 1997 216.7 15.1
September 30, 1997 194.6 7.2
- ------------------------------------------------
1996
December 31, 1995 $ 330.7 $ 59.5
March 31, 1996 482.0 79.8
June 30, 1996 241.6 17.4
September 30, 1996 174.3 6.8
- ------------------------------------------------
Net Earnings (Loss)
Income Per Share of
(Loss) Common Stock
In millions except per share data (a) (a)
- ----------------------------------------------------------------
Quarter Ended
1997
December 31, 1996 $ 29.6 $ 0.53
March 31, 1997 49.0 0.88
June 30, 1997 1.4 0.03
September 30, 1997 (3.4) (0.06)
- ----------------------------------------------------------------
1996
December 31, 1995 $ 29.1 $ 0.53
March 31, 1996 45.0 0.81
June 30, 1996 3.6 0.06
September 30, 1996 (b) (2.1) (0.04)
- ----------------------------------------------------------------
(a) The wide variance in quarterly earnings results from the highly seasonal
nature of AGL Resources' primary business.
Earnings per share are calculated based on the weighted average number
of shares outstanding during the quarter. That total differs from the earnings
per share, as shown on the statements of consolidated income, which is based on
the weighted average number of shares outstanding for the entire year.
(b) During the fourth quarter of fiscal 1996, AGL Resources increased net income
and earnings per share by $1.6 million and $.03, respectively, as a result of a
review of remaining liabilities in connection with a corporate restructuring
plan. (See Note 3.)
In addition, net income and earnings per share were increased during the
fourth quarter of fiscal 1996 by $1.6 million and $.03, respectively, in
connection with recoveries from insurers in accordance with provisions of an
environmental response cost recovery rider. (See Note 11.)
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Directors
of AGL Resources Inc.:
We have audited the accompanying consolidated balance sheets of AGL Resources
Inc. and subsidiaries as of September 30, 1997, and 1996, and the related
statements of consolidated income, common stock equity, and cash flows for each
of the three years in the period ended September 30, 1997. These financial
statements are the responsibility of AGL Resources' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of AGL Resources Inc. and
subsidiaries as of September 30, 1997, and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1997, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
November 7, 1997
(November 26, 1997 as to Note 14)
Management's Responsibility for Financial Reporting
The consolidated financial statements and related information are the
responsibility of management. The financial statements have been prepared in
conformity with generally accepted accounting principles appropriate in the
circumstances. The financial information contained elsewhere in this Annual
Report is consistent with that in the financial statements.
AGL Resources maintains a system of internal accounting controls
designed to provide reasonable assurance that assets are safeguarded from loss
and that transactions are executed and recorded in accordance with established
procedures. The concept of reasonable assurance is based on the recognition that
the cost of maintaining a system of internal accounting controls should not
exceed related benefits. The system of internal accounting controls is supported
by written policies and guidelines.
The financial statements have been audited by Deloitte & Touche LLP,
independent auditors. Their audits were made in accordance with generally
accepted auditing standards, as indicated in the Independent Auditors' Report,
and included a review of the system of internal accounting controls and tests of
transactions to the extent they considered necessary to carry out their
responsibilities.
The Board of Directors pursues its responsibility for reported financial
information through its Audit Committee. The Audit Committee meets periodically
with management and the independent auditors to assure that they are carrying
out their responsibilities and to discuss internal accounting controls, auditing
and financial reporting matters.
David R. Jones J. Michael Riley
President and Vice President and
Chief Executive Officer Chief Financial Officer
<PAGE>
<TABLE>
Selected Financial Data
<CAPTION>
For the years ended September 30,
In millions, except per share amounts 1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data
Operating revenues $ 1,287.6 $ 1,228.6 $ 1,068.5 $ 1,199.9 $ 1,130.3 $ 994.6
Cost of gas 766.5 725.5 574.1 736.8 701.0 590.5
- ------------------------------------------------------------------------------------------------------------------------------------
Operating margin 521.1 503.1 494.4 463.1 429.3 404.1
- ------------------------------------------------------------------------------------------------------------------------------------
Other operating expenses
Operation 226.2 221.8 215.5 207.0 187.6 170.7
Restructuring costs 70.3
Maintenance 30.8 29.5 30.4 32.8 30.9 29.5
Depreciation 66.6 63.3 59.0 55.4 58.8 54.9
Taxes other than income taxes 26.0 25.0 25.7 26.0 23.9 23.2
- ------------------------------------------------------------------------------------------------------------------------------------
Total other operating expenses 349.6 339.6 400.9 321.2 301.2 278.3
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 171.5 163.5 93.5 141.9 128.1 125.8
- ------------------------------------------------------------------------------------------------------------------------------------
Other income 10.3 13.1 1.5 5.2 6.6 2.8
- ------------------------------------------------------------------------------------------------------------------------------------
Income before interest
and income taxes 181.8 176.6 95.0 147.1 134.7 128.6
- ------------------------------------------------------------------------------------------------------------------------------------
Interest expense
and preferred stock dividends 58.4 53.5 51.9 52.1 51.0 48.4
- ------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 123.4 123.1 43.1 95.0 83.7 80.2
- ------------------------------------------------------------------------------------------------------------------------------------
Income taxes 46.8 47.5 16.7 36.3 30.5 25.8
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 76.6 75.6 26.4 58.7 53.2 54.4
Common dividends paid 60.5 58.6 54.2 52.2 51.1 49.6
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings reinvested $ 16.1 $ 17.0 $ (27.8) $ 6.5 $ 2.1 $ 4.8
====================================================================================================================================
Common Stock Data (1)
Weighted average shares
outstanding 56.1 55.3 52.4 50.2 49.2 48.2
Earnings per share $ 1.37 $ 1.37 $ 0.50 $ 1.17 $ 1.08 $ 1.13
Dividends paid per share $ 1.08 $ 1.06 $ 1.04 $ 1.04 $ 1.04 $ 1.03
Dividend payout ratio 78.8% 77.4% 208.0% 88.9% 96.3% 91.2%
Book value per share (2) $ 10.99 $ 10.56 $ 10.15 $ 10.20 $ 9.90 $ 9.70
Market value per share (2) $ 18.94 $ 19.13 $ 19.31 $ 15.31 $ 18.81 $ 18.81
====================================================================================================================================
Balance Sheet Data (2)
Total assets $ 1,925.0 $ 1,823.1 $ 1,674.6 $ 1,642.9 $ 1,533.0 $ 1,428.6
Long-term liabilities
Take-or-pay charges payable $ 5.0
Accrued environmental
response costs $ 37.3 $ 30.4 $ 28.6 $ 24.3 $ 19.6 $ 25.0
Accrued pension costs $ 4.9 $ 10.3
Accrued postretirement
benefits costs $ 34.3 $ 36.2 $ 30.1 $ 3.6
Deferred credits $ 61.9 $ 60.9 $ 65.6 $ 66.6 $ 42.3 $ 43.8
- ------------------------------------------------------------------------------------------------------------------------------------
Capitalization
Long-term debt
(including current portion) $ 660.0 $ 554.5 $ 554.5 $ 569.5 $ 500.7 $ 476.5
Preferred stock (including current portion)
Preferred stock of
subsidiary 44.5 58.8 58.8 58.8 59.0 14.5
Subsidiary obligated
mandatorily redeemable
preferred securities 74.3
Common equity 622.1 588.3 557.3 518.5 492.0 472.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,400.9 $ 1,201.6 $ 1,170.6 $ 1,146.8 $ 1,051.7 $ 963.1
====================================================================================================================================
Financial Ratios (2)
Capitalization
Long-term debt
(including current portion) 47.1% 46.1% 47.4% 49.6% 47.6% 49.5%
Preferred stock (including current portion)
Preferred stock of subsidiary 3.2 4.9 5.0 5.2 5.6 1.5
Subsidiary obligated
mandatorily redeemable
preferred securities 5.3
Common equity 44.4 49.0 47.6 45.2 46.8 49.0
- ------------------------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
====================================================================================================================================
Return on average common
equity 12.7% 13.2% 4.9% 11.6% 11.0% 11.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Times charges earned before income taxes (3)
Total interest 3.46 3.58 1.99 3.08 2.86 2.66
Total interest and preferred
dividends 3.10 3.28 1.83 2.82 2.63 2.60
Fixed (4) 2.90 3.08 1.75 2.66 2.49 2.54
====================================================================================================================================
<FN>
(1) Adjusted for two-for-one stock split paid in the form of 100% stock dividends on December 1, 1995. (2) Year-end.
(3) Interest charges exclude the debt portion of allowance for funds used during construction. (4) Fixed charges consist of
interest on short- and long-term debt, other interest, preferred dividends, and the estimated interest component of rentals.
</FN>
</TABLE>
<PAGE>
<TABLE>
Gas Sales and Statistics
<CAPTION>
For the years ended September 30,
In millions 1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Sales of gas
Residential $ 728.5 $ 708.8 $ 610.6 $ 700.7 $ 658.2 $ 575.7
Commercial 290.9 288.8 243.2 285.8 268.1 231.5
Industrial 148.0 178.8 169.4 172.1 154.2 140.9
Transportation revenues 28.5 21.5 23.9 22.6 33.8 36.6
Miscellaneous revenues 20.2 19.7 15.9 18.7 16.0 9.9
- ------------------------------------------------------------------------------------------------------------------------------------
Total utility operating
revenues 1,216.1 1,217.6 1,063.0 1,199.9 1,130.3 994.6
- ------------------------------------------------------------------------------------------------------------------------------------
Other operating revenues 71.5 11.0 5.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total operating revenues $ 1,287.6 $ 1,228.6 $ 1,068.5 $ 1,199.9 $ 1,130.3 $ 994.6
====================================================================================================================================
Utility Throughput
Therms sold (Millions)
Residential 986.1 1,165.4 916.8 1,003.1 1,001.4 915.4
Commercial 455.5 538.2 454.0 478.9 478.5 433.9
Industrial 344.9 449.6 526.0 424.8 388.7 445.0
Therms transported 1,014.5 738.7 722.8 697.4 795.6 901.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total utility throughput 2,801.0 2,891.9 2,619.6 2,604.2 2,664.2 2,696.1
====================================================================================================================================
Average Utility Customers (Thousands)
Residential 1,319.0 1,289.4 1,250.4 1,215.2 1,182.7 1,152.2
Commercial 104.5 102.5 100.0 98.0 95.7 93.7
Industrial 2.7 2.6 2.6 2.5 2.5 2.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total 1,426.2 1,394.5 1,353.0 1,315.7 1,280.9 1,248.4
====================================================================================================================================
Sales, Per Average Residential Customer
Gas sold (Therms) 748 904 733 825 847 794
Revenue (Dollars) 552 550 488 577 557 500
Revenue per therm (Cents) 73.9 60.8 66.6 69.9 65.7 62.9
Degree Days - Atlanta Area
30-year normal 2,991 2,991 2,991 2,991 3,021 3,021
Actual 2,402 3,191 2,121 2,565 2,852 2,552
Percentage of actual to
30-year normal 80.3 106.7 70.9 85.8 94.4 84.5
Gas Account (Millions of Therms)
Natural gas purchased 1,323.4 1,632.9 1,406.9 1,453.6 1,629.9 1,555.4
Natural gas withdrawn
from storage 472.4 596.0 520.7 500.3 276.4 263.3
Natural gas transported 1,014.5 738.7 722.8 697.4 795.6 901.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total send-out 2,810.3 2,967.6 2,650.4 2,651.3 2,701.9 2,720.5
Less
Unaccounted for 1.3 60.4 20.4 37.2 29.0 16.2
Company use 8.0 15.3 10.4 9.9 8.7 8.2
- ------------------------------------------------------------------------------------------------------------------------------------
Sold and transported
to utility customers 2,801.0 2,891.9 2,619.6 2,604.2 2,664.2 2,696.1
====================================================================================================================================
Cost of Gas (Millions of Dollars)
Natural gas purchased $ 532.5 $ 547.1 $ 389.4 $ 550.1 $ 595.7 $ 487.9
Natural gas withdrawn
from storage 175.7 171.6 182.4 186.7 105.3 102.6
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of gas - utility operations 708.2 718.7 571.8 736.8 701.0 590.5
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of gas - other 58.3 6.8 2.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total cost of gas $ 766.5 $ 725.5 $ 574.1 $ 736.8 $ 701.0 $ 590.5
====================================================================================================================================
Utility Plant - End of Year (Millions of Dollars)
Gross plant $ 2,069.1 $ 1,969.0 $ 1,919.9 $ 1,833.2 $ 1,740.6 $ 1,634.8
Net plant $ 1,420.3 $ 1,361.2 $ 1,336.6 $ 1,279.6 $ 1,217.9 $ 1,157.4
Gross plant investment per utility customer
(Thousands of Dollars) $ 1.5 $ 1.4 $ 1.4 $ 1.4 $ 1.4 $ 1.3
Capital Expenditures
(Millions of Dollars) $ 147.7 $ 132.5 $ 121.7 $ 122.5 $ 122.2 $ 132.9
Gas Mains - Miles of 3" Equivalent 30,261 29,045 28,520 27,972 27,390 26,936
Employees - Average 2,986 2,942 3,249 3,764 3,764 3,794
Average Btu Content of Natural Gas 1,024 1,024 1,027 1,032 1,027 1,024
====================================================================================================================================
</TABLE>
<PAGE>
Officers of AGL Resources Inc. and Subsidiaries
Executive Officers of AGL Resources Inc.
David R. Jones (37) President and Chief Executive Officer
Charles W. Bass (27) Executive Vice President and Chief Operating Officer
Thomas H. Benson (27) Executive Vice President;
President and Chief Operating Officer of Atlanta Gas
Light Company
Robert L. Goocher (25) Executive Vice President;
President and Chief Operating Officer of AGL
Resources Service Company
General Officers of AGL Resources Inc.
Stephen J. Gunther (12) Vice President;
President of AGL Energy Services, Inc.
Clayton H. Preble (27) Vice President;
President of The Energy Spring, Inc.
Richard H. Woodward (27) Vice President;
President of AGL Investments, Inc.
Peter L. Banks (15) Vice President, External Affairs
Mark D. Caudill (5) Vice President, Regulatory Affairs
H. Edwin Overcast (8) Vice President, Strategic Planning and Rates
Melanie M. Platt (2) Vice President and Corporate Secretary
J. Michael Riley (24) Vice President and Chief Financial Officer
James S. Thomas, Jr. (11) Vice President, Legal
Atlanta Gas Light Company
Isaac Blythers (24) Vice President, Metro Region
Jerry B. Brown (22) Vice President, Georgia Region
Michael D. Hutchins (24) Vice President, Operations and Engineering
Charlie J. Lail (33) Senior Vice President, Operations Improvement
Catherine Land-Waters (15) Vice President, Customer Service
Henry P. Linginfelter (16) Vice President, Market Services and Development
AGL Resources Service Company
Verlene P. Cobb (34) Vice President, Corporate Communications
James W. Connally (27) Vice President, Human Resources
Gerald A. Hinesley (18) Vice President and Controller
John H. Mobley, Jr. (2) Vice President, Information Systems
Charles C. Moore, Jr. (29) Vice President and Treasurer
Marvin M. Wyatt, Jr. (27) Vice President, Operations Support
Chattanooga Gas Company
Harrison F. Thompson (27) President
Number in parentheses denotes full years of service as of September 30, 1997.
<PAGE>
Board of Directors
Frank Barron, Jr. 1,4
Vice President
Rome Coca-Cola Bottling Company
Rome, Georgia
Director since 1983
W. Waldo Bradley 2,3
Chairman of the Board
Bradley Plywood Corporation
Savannah, Georgia
Director since 1991
Otis A. Brumby, Jr. 2,3
Chairman of the Board and Chief Executive Officer
The Marietta Daily Journal and Neighbor Newspapers, Inc.
Marietta, Georgia
Director since 1990
L.L. Gellerstedt, III 2,4
Chairman and Chief Executive Officer
Beers Construction Company
Atlanta, Georgia
Director since 1996
David R. Jones 1,4
President and Chief Executive Officer
AGL Resources Inc.
Atlanta, Georgia
Director since 1985
Albert G. Norman, Jr. 1,3
Attorney
Long Aldridge & Norman LLP
Atlanta, Georgia
Director since 1976
D. Raymond Riddle 1,2
Retired Chairman and Chief Executive Officer
National Service Industries, Inc.
Atlanta, Georgia
Director since 1978
Dr. Betty L. Siegel 2,4
President
Kennesaw State University
Kennesaw, Georgia
Director since 1986
Ben J. Tarbutton, Jr. 1,3
Vice President
Sandersville Railroad Co.
Sandersville, Georgia
Director since 1983
Charles McKenzie Taylor 3,4
Chairman
Taylor & Mathis, Inc.
Atlanta, Georgia
Director since 1984
Felker W. Ward, Jr. 1,4
Chairman
Pinnacle Investment Advisors, Inc.
Atlanta, Georgia
Director since 1988
1 Member of Executive Committee
2 Member of Audit Committee
3 Member of Nominating and Compensation Committee
4 Member of Corporate Responsibility Committee
<PAGE>
Stock Listing - AGL Resources Inc.'s common stock is traded on the New York
Stock Exchange (NYSE) under the symbol ATG. It appears in newspaper financial
section stock listings as AGL Res.
Ownership - Approximately 56.6 million outstanding shares of AGL Resources'
common stock are owned by 17,840 shareholders of record in 50 states, the
District of Columbia, and 15 foreign countries.
Market Prices and Dividends - The following table reflects the quarterly high
and low closing sales prices, as reported in the listing of the NYSE composite
transactions for shares of common stock for fiscal 1997 and 1996, and the
quarterly dividends paid per share.
Dividends
Paid
Quarter Ended High Low Per Share
1997
September 30, 1997 $ 20.94 $ 18.88 $ .27
June 30, 1997 20.75 18.75 .27
March 31, 1997 21.50 18.63 .27
December 31, 1996 21.75 19.50 .27
1996
September 30, 1996 $ 20.88 $ 17.38 $ .265
June 30, 1996 19.00 17.13 .265
March 31, 1996 20.25 17.63 .265
December 31, 1995 19.88 18.88 .265
Annual Meeting - The 1998 Annual Meeting of Shareholders will be held February
6, 1998, at AGL Resources' offices, 303 Peachtree Street, N.E., Atlanta,
Georgia. Proxies for the meeting of shareholders are being solicited by the
Board of Directors. A formal notice of the meeting, proxy statement, and proxy
card have been mailed with the 1997 Annual Report.
Shareholder Reports, Form 10-K and Inquiries - Additional copies of this report
and the Form 10-K Annual Report to the Securities and Exchange Commission
(excluding exhibits) can be obtained by writing to or calling the Corporate
Secretary's Office, AGL Resources Inc., Post Office Box 4569, Atlanta, GA
30302-4569, (404) 584-3794.
Shareholder inquiries also may be directed to the Corporate Secretary's office
or to AGL Resources' toll-free shareholder service number: (800) 633-4236.
ResourcesDirect - ResourcesDirect provides potential investors and existing
shareholders with an economical and convenient method for purchasing initial or
additional shares of common stock directly from AGL Resources without paying any
brokerage fees or service charges. Dividends reinvested through the plan are
used to purchase shares of common stock directly from AGL Resources. Call
1-800-866-1543, or visit our web site at www.aglr.com for a plan prospectus and
enrollment application.
Transfer Agent, Registrar and Dividend Disbursing Agent - AGL Resources'
transfer agent is Wachovia Bank of North Carolina, N.A.
Correspondence and requests for transfer should be directed to
Wachovia Shareholder Services
Post Office Box 8217
Boston, MA 02266-8217
(800) 633-4236
Direct deposit of cash dividends and automated stock purchase services are
available from the transfer agent above.
Financial Inquiries - Financial analysts and professional investment managers
are invited to contact
J. Michael Riley
Vice President and Chief Financial Officer
AGL Resources Inc.
Post Office Box 4569
Atlanta, GA 30302-4569
(404) 584-3954
Please visit our web site at http://www.aglr.com for additional financial
information.
EXHIBIT 21
AGL RESOURCES INC.
FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1997
Subsidiaries of the Registrant
AGL Resources has five active wholly owned subsidiaries and ten active
second tier subsidiaries. AGL Resources' wholly owned subsidiaries are: Atlanta
Gas Light Company; AGL Resources Service Company; AGL Energy Services, Inc.; AGL
Investments, Inc.; and The Energy Spring, Inc.
Each of AGL Resources, its five active wholly owned subsidiaries and
the ten active second tier subsidiaries are Georgia corporations with the
exception of Chattanooga Gas Company which is a Tennessee corporation. Following
is a listing of the first tier subsidiaries and their related second tier
subsidiaries:
Atlanta Gas Light Company:
Chattanooga Gas Company
AGL Energy Services, Inc.
Georgia Gas Company
AGL Investments, Inc.
AGL Consumer Services, Inc.
AGL Energy Wise Services, Inc.
AGL Gas Marketing, Inc.
AGL Power Services, Inc.
AGL Propane, Inc.
Georgia Energy Company
Trustees Investments, Inc.
The Energy Spring, Inc.
TES, Inc.
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-31674, 33-50301, 33-62155, 333-01519, 333-02353, 333-26961 and 333-26963 on
Form S-8 and Registration Statement No. 333-22867 on Form S-3 of our reports
dated November 7, 1997 (November 26, 1997 as to Note 14), appearing and
incorporated by reference in this Annual Report on Form 10-K of AGL Resources
Inc. for the year ended September 30, 1997.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Atlanta, Georgia
December 17, 1997
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0001004155
<NAME> AGL RESOURCES INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,420
<OTHER-PROPERTY-AND-INVEST> 76
<TOTAL-CURRENT-ASSETS> 293
<TOTAL-DEFERRED-CHARGES> 123
<OTHER-ASSETS> 13
<TOTAL-ASSETS> 1,925
<COMMON> 283
<CAPITAL-SURPLUS-PAID-IN> 184
<RETAINED-EARNINGS> 155
<TOTAL-COMMON-STOCKHOLDERS-EQ> 622
75
0
<LONG-TERM-DEBT-NET> 660
<SHORT-TERM-NOTES> 30
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
45
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 493
<TOT-CAPITALIZATION-AND-LIAB> 1,925
<GROSS-OPERATING-REVENUE> 1,288
<INCOME-TAX-EXPENSE> 47
<OTHER-OPERATING-EXPENSES> 350
<TOTAL-OPERATING-EXPENSES> 1,116
<OPERATING-INCOME-LOSS> 172
<OTHER-INCOME-NET> 10
<INCOME-BEFORE-INTEREST-EXPEN> 135
<TOTAL-INTEREST-EXPENSE> 52
<NET-INCOME> 83
6
<EARNINGS-AVAILABLE-FOR-COMM> 77
<COMMON-STOCK-DIVIDENDS> 61
<TOTAL-INTEREST-ON-BONDS> 45
<CASH-FLOW-OPERATIONS> 151
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.37
</TABLE>
