UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 28, 2005
AGL RESOURCES INC.
(Exact name of registrant as specified in its charter)
Georgia	1-14174	58-2210952
(State or other jurisdiction of incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)
Ten Peachtree Place NE, Atlanta, Georgia 30309
(Address and zip code of principal executive offices)
404-584-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

·	Revenue growth

·	Operating income growth

·	Cash flows from operations

·	Operating expense growth

·	Capital expenditures

·	Our business strategies and goals

·	Our potential for growth and profitability

·	Our ability to integrate our recent and future acquisitions

·	Trends in our business and industries, and

·	Developments in accounting standards

·

We increased net income 20 percent to $153 million and diluted earnings per share 13 percent to $2.28 from prior year amounts. In addition to improvements in our base distribution business, we were able to capture additional incremental net income in the wholesale natural gas market through our Sequent asset management, producer services and storage arbitrage activities.

·	We strengthened our position as a leading operator of natural gas utility assets in the eastern United States by acquiring NUI.

·

We acquired Jefferson Island, a high-deliverability salt-dome gas storage facility in Louisiana, which allows us to migrate into the wholesale market and capitalize on the growing market of utility and large industrial customers, producers, financial intermediaries and marketers who compete to hold firm capacity rights to store natural gas.

·

We announced our plan to acquire 250 miles of intrastate pipeline in our Georgia service area from Southern Natural Gas, a subsidiary of El Paso Corporation, which should close in the second quarter of 2005. We expect this acquisition to allow us to, over time, undertake economical reconfiguration of our Georgia transmission grid, integrating gas flows from the Gulf Coast, imported liquefied natural gas (LNG) and our own market area LNG.

·	We began construction of a propane-air facility in Virginia that will provide needed peak-day demand protection for the customers of our Virginia Natural Gas, Inc, (Virginia Natural Gas) utility.

·	We continued to support a strong balance sheet by issuing 11.04 million shares of AGL Resources common stock in November 2004, raising net proceeds of $332 million primarily to fund the NUI and Jefferson Island acquisitions.

·	We increased our dividend 4 percent, for the second consecutive year, to $1.15 per share in 2004. If the current amount per quarter of $0.29 per share would have been in effect for all of 2004, our indicated annual rate would have been $1.16 per share.

·	an internal control deficiency, which exists when the design or the operation of a control does not allow management or employees, in the normal course of performing their functions, to prevent or detect misstatements on a timely basis;

·

a significant deficiency, which exists when an internal controls deficiency or a combination of internal control deficiencies adversely affects our ability to initiate, authorize, record, process or report financial data in accordance with accounting principles generally accepted in the United States of America (GAAP) such that there is a more than remote likelihood that a misstatement of the annual or interim financial statements that is more than inconsequential will not be prevented or detected;

·	a material weakness, which exists when a significant deficiency or a combination of significant deficiencies results in a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

·	we could conclude that our internal controls over financial reporting were designed and were operating effectively, or

·

we could conclude that our internal controls over financial reporting were not properly designed or did not operate effectively. A material weakness that exists at the reporting date would require our assessment to be that our internal controls over financial reporting are not effective, and we would be required to disclose such material weaknesses.

·	General ledger cash account balances were not being reconciled to the bank statements

·	General ledger account analyses were not being consistently performed

·	A listing of debt covenants was not being maintained

·	Comprehensive and formalized accounting and financial reporting policies and procedures did not exist

·	Instances were noted where management lacked certain technical accounting and tax expertise that resulted in accounting errors

·	The flow of accounting information between business units and corporate accounting was not timely or formalized

·	Accounts payable invoice processing procedures needed to be improved

·	A formal plan and implementation timetable needed to be developed to address compliance with the certification requirements of SOX 404

·	The contract review process was not formally documented, and appropriate procedures had not been developed to ensure timely review of contracts for accounting implications

·	There was a lack of adherence to policies and procedures for travel and entertainment expense reimbursements and procurement card expenditures

·	The payroll timekeeping and tracking process was manual in nature and prone to errors

·	Information technology had a number of areas where formal, documented policies and procedures had not been developed

·	Inappropriate and inaccurate treatment of intercompany payable and receivable balances

·	Inappropriate use of a common cash pool

·	Lack of a formal cash management agreement

·	Weaknesses in internal controls for accounts payable and receivable

·	Lack of formal or appropriate policies and procedures in certain accounting functions, and

·	The need to audit procedures for fixed asset and continuing property records functions

·

Provided comprehensive in-house training in early fiscal 2004 covering the financial reporting process and internal accounting controls, including NUI’s written accounting policies and procedures and a policy on disclosure controls, to individuals who participate in the preparation of the company’s financial statements and required disclosures

·	Conducted meetings in which NUI’s President and CEO, Vice President and CFO, General Counsel and Secretary reviewed and discussed accounting and operational issues to ensure completeness and accuracy of disclosures in NUI’s SEC filings

·	Requested that NUI’s in-house counsel and key financial and operational personnel provide information regarding any known commitments and contingencies that may have financial statement and/ or disclosure implications

·	Obtained internal certifications from key accounting and operational personnel indicating that they reviewed drafts of their SEC filings for completeness and accuracy

·	Conducted formal meetings, led by NUI’s Corporate Controller with participation of key accounting personnel (prior to closing the books of account and filing required reports), to identify and resolve accounting and disclosure issues

·	Prepared and distributed to participants involved in the preparation and review of NUI’s SEC filings a detailed time schedule outlining key dates and responsibilities for the preparation of financial information and required disclosures

·	Completed an audit disclosure checklist to ensure all disclosures required by GAAP and applicable securities laws and regulations were properly addressed

·	Assembled supporting documentation for disclosures made in its SEC filings

·	Retained external counsel to review drafts of its SEC filings to assist management in ensuring compliance with SEC rules and regulations

·	Created documentation, including flowcharts and formal written policies and procedures of NUI’s financial reporting process, to assist management with its responsibility to ensure key internal accounting controls are identified and addressed

·	Distributed a business ethics policy to all employees requesting their acknowledgement that they received, read and complied with the ethics policy

·	Conducted internal audits to evaluate internal accounting controls of key business functions

UNAUDITED
In millions		2004			2003			2002
Operating revenues		$	1,832		$	983		$	877
Cost of gas			994			339			268
Operating margin			838			644			609
Operating expenses
Operation and maintenance			377			283			274
Depreciation and amortization			99			91			89
Taxes other than income taxes			30			28			29
Total operating expenses			506			402			392
Gain on sale of Caroline Street campus			-			16			-
Operating income			332			258			217
Other income			-			40			30
Minority interest			(18	)		-			-
EBIT			314			298			247
Interest expense			71			75			86
Earnings before income taxes			243			223			161
Income taxes			90			87			58
Income before cumulative effect of change in accounting principle			153			136			103
Cumulative effect of change in accounting principle			-			(8	)		-
Net income		$	153		$	128		$	103
Basic earnings per common share
Income before cumulative effect of change in accounting principle		$	2.30		$	2.15		$	1.84
Cumulative effect of change in accounting principle			-			(0.12	)		-
Basic earnings per common share		$	2.30		$	2.03		$	1.84
Diluted earnings per common share
Income before cumulative effect of change in accounting principle		$	2.28		$	2.13		$	1.82
Cumulative effect of change in accounting principle			-			(0.12	)		-
Diluted earnings per common share		$	2.28		$	2.01		$	1.82
Weighted average number of common shares outstanding
Basic			66.3			63.1			56.1
Diluted			67.0			63.7			56.6

UNAUDITED
In millions		Increase (Decrease) to 2004 operating income (before taxes)
Accelerated recognition of margins associated with Sequent storage positions that originally were anticipated to be liquidated in first quarter 2005.		$	5
Asset sales in the second quarter of 2004 for a residential and retail property in Savannah which resulted in a $2 million contribution to EBIT and the sale of our remaining investment units in U.S. Propane			3
Change in Atlanta Gas Light’s property taxes as a result of revised estimates and intangible property tax assessment			3
Contribution to the AGL Resources Private Foundation Inc., and for energy assistance by our subsidiary SouthStar			(3	)

UNAUDITED
Dollars in millions		2004			2003			2004 vs. 2003
Total interest expense		$	71		$	75			($4	)
Average debt outstanding (1)			1,274			1,255			19
Average rate			5.6	%		6.0	%		(0.4	%)

(1)	Daily average of all outstanding debt

·	higher projected short-term interest rates based upon higher 2005 LIBOR rates

·	higher debt balances and higher interest rates from 2004 and 2005 on debt issued for the acquisitions of NUI and Jefferson Island.

UNAUDITED
In millions		Distribution Operations			Corporate			Consolidated
Gain (loss) on sale of Caroline Street campus		$	21		$	(5	)	$	16
Donation to private foundation			(8	)		-			(8	)
EBIT		$	$ 13			(5	)		8
Income taxes									(3	)
Net income								$	5

UNAUDITED
Dollars in millions		2003			2002			2003 vs. 2002
Total interest expense		$	75		$	86			($11	)
Average debt outstanding (1)			1,255			1,412			(157	)
Average rate			6.0	%		6.1	%		(0.1	%)

(1)	Daily average of all outstanding debt

AGL Resources Inc. and Subsidiaries
Pro-forma condensed consolidated balance sheet
December 31, 2003
UNAUDITED
In millions		As reported			SouthStar			Eliminations			(Unaudited) Pro-forma
Current assets		$	742		$	174			($11	)	$	905
Property, plant and equipment			2,352			2			-			2,354
Deferred debits and other assets (1)			878			-			(71	)		807
Total assets		$	3,972		$	176			($82	)	$	4,066

Current liabilities		$	1,048		$	75			($11	)	$	1,112
Accumulated deferred income taxes			376			-			-			376
Long-term liabilities			569			-			-			569
Deferred credits			77			-			-			77
Minority interest (2)			-			-			30			30
Capitalization			1,902			101			(101	)		1,902
Total liabilities and capitalization		$	3,972		$	176			($82	)	$	4,066

(1)	Our investment in SouthStar was $71 million.

(2)	Minority interest adjusts our balance sheet to reflect Piedmont’s portion of SouthStar’s contributed capital

AGL Resources Inc. and Subsidiaries
Pro-forma condensed consolidated statement of income
for the year ended December 31, 2003
UNAUDITED
In millions		As reported			SouthStar (1)			Eliminations			(Unaudited) Pro-forma
Operating revenues		$	983		$	746			($169	)	$	1,560
Operating expenses
Cost of gas			339			622			(169	)		792
Operation and maintenance expenses			283			60			-			343
Depreciation and amortization			91			1			-			92
Taxes other than income			28			-			-			28
Total operating expenses			741			683			(169	)		1,255
Gain on sale of Caroline Street campus			16			-			-			16
Operating income			258			63			-			321
Equity earnings from SouthStar			46			-			(46	)		-
Donation to private foundation			(8	)		-			-			(8	)
Other income			2			-			-			2
Interest expense			(75	)		-			-			(75	)
Minority interest in income of consolidated subsidiary (2)			-			-			(17	)		(17	)
Earnings before income taxes			223			63			(63	)		223
Income taxes			(87	)		-			-			(87	)
Income before cumulative effect of change in accounting principle		$	136		$	63			($63	)	$	136

(1)	Includes 100% of SouthStar’s revenues and expenses for comparisons of SouthStar’s consolidation in 2004.

(2)	Minority interest adjusts our earnings to reflect our 80% share of SouthStar’s earnings (less Dynegy Inc.’s 20% share of SouthStar’s income prior to February 18, 2003).

AGL Resources Inc. and Subsidiaries
Pro-forma condensed consolidated statement of income
for the year ended December 31, 2002
UNAUDITED
In millions		As reported			SouthStar (1)			Eliminations			(Unaudited) Pro-forma
Operating revenues		$	877		$	630			($171	)	$	1,336
Operating expenses
Cost of gas			268			515			(171	)		612
Operation and maintenance expenses			274			72			-			346
Depreciation and amortization			89			2			-			91
Taxes other than income			29			-			-			29
Total operating expenses			660			589			(171	)		1,079
Operating income			217			41			-			258
Equity earnings from SouthStar			27			-			(27	)		-
Other income			3			1			-			4
Interest expense			(86	)		-			-			(86	)
Minority interest in income of consolidated subsidiary (2)			-			-			(15	)		(15	)
Earnings before income taxes			161			42			(42	)		161
Income taxes			(58	)		-			-			(58	)
Net income		$	103		$	42			($42	)	$	103

(1)	Includes 100% of SouthStar’s revenues and expenses for comparisons of SouthStar’s consolidation in 2004.

(2)	Minority interest adjusts our earnings to reflect our 50% share of SouthStar’s earnings.

(1)	Represents an average for 2004 except Elizabethtown Gas and Florida Gas which are December 2004 amounts

(2)	In millions of dekatherms

·	changes in the availability or price of natural gas and other forms of energy

·	general economic conditions

·	energy conservation

·	legislation and regulations

·	the capability to convert from natural gas to alternative fuels

·

weather

·	Distributing natural gas for the Marketers

·	Constructing, operating and maintaining the gas system infrastructure, including responding to customer service calls and leaks

·	Performing meter reading and maintaining underlying customer premise information for the Marketers

·	calculation of the design (peak) day requirements for the next three years

·	purchase by Atlanta Gas Light of the above-described SNG facilities and the recovery of those costs through the pending rate case

·	construction of a pipeline from the Macon LNG facility to the purchased SNG facilities

·	extension of the Sequent peaking contract to March 2005

·	approval of Sequent’s current asset management contract for retained assets through March 1, 2006, and

·	other tariff provisions

·	a freeze of Elizabethtown Gas’ base rates for five years, with earnings over an 11% return of equity to be shared with ratepayers in the fourth and fifth years

·	Sequent to serve as asset manager for Elizabethtown Gas, beginning April 1, 2005, for a three year term for an annual fixed fee payment by Sequent to Elizabethtown Gas of $4 million

·	new performance standards with respect to customer satisfaction, safety and reliability, with negotiations with the various interested parties of the applicable standards beginning in February 2005

·	payment of the outstanding balances due on Elizabethtown Gas’ $28 million refund to its ratepayers and a related $2 million penalty to the NJBPU, and

·	a commitment to make $9 million available for the purpose of enhancing severance packages for certain employees located in New Jersey

UNAUDITED
In millions		2004			2003			2002			2004 vs. 2003			2003 vs. 2002
Operating revenues		$	1,111		$	936		$	852		$	175		$	84
Cost of gas			470			337			267			133			70
Operating margin			641			599			585			42			14
Operation and maintenance expenses			286			261			255			25			6
Depreciation and amortization			85			81			82			4			(1	)
Taxes other than income			24			24			25			-			(1	)
Total operating expenses			395			366			362			29			4
Gain on sale of Caroline Street campus			-			21			-			(21	)		21
Operating income			246			254			223			(8	)		31
Donation to private foundation			-			(8	)		-			8			(8	)
Other income			1			1			2			-			(1	)
Total other (loss) income			1			(7	)		2			8			(9	)
EBIT		$	247		$	247		$	225		$	-		$	22
Metrics
Average end-use customers (in thousands) (1)			1,880			1,838			1,824			2	%		1	%
Operation and maintenance expenses per customer		$	152		$	142		$	140			7			1
EBIT per customer (2)		$	131		$	127		$	123			3			3
Throughput (in millions of dekatherms) (1)
Firm			194			190			182			2	%		4	%
Interruptible			105			109			124			4			(12	)
Total			299			299			306			-			(2	)
Heating degree days (3):
Florida (1)			239			-			-	%					-	%
Georgia			2,589			2,654			2,812			(2	)		(6	)
Maryland (1)			860			-			-			-			-
New Jersey (1)			873			-			-			-			-
Tennessee			3,010			3,168			3,052			(5	)		4
Virginia			3,214			3,264			3,030			(2	)		8

(1)	Represents information only for December 2004 for the utilities acquired from NUI.

(2)	Excludes the gain on the sale of our Caroline Street campus in 2003.

(3)

We measure effects of weather on our businesses using “degree days.” The measure of degree days for a given day is the difference between average daily actual temperature and baseline temperature of 65 degrees Fahrenheit. Heating degree days result when the average daily actual temperature is less than the 65-degree baseline. Generally, increased heating degree days result in greater demand for gas on our distribution systems.

·

In November 2000, the Virginia Commission approved an asset management agreement that provides for a sharing of profits between Sequent and Virginia Natural Gas’ customers. This agreement expires in October 2005, unless Sequent, Virginia Natural Gas and the Virginia Commission agree to extend the contract. In December 2004, we contributed approximately $3 million to Virginia Natural Gas’ customers for the contract year November 2003 through October 2004. This contribution is being reflected as a reduction to customers’ gas cost in 2005. We commenced discussions as to the mutually acceptable terms under which this agreement could be extended.

·

Various Georgia statutes require Sequent, as asset manager for Atlanta Gas Light, to share 90% of its earnings from capacity release transactions with Georgia’s Universal Service Fund (USF). A December 2002 GPSC order requires net margin earned by Sequent, for transactions involving Atlanta Gas Light assets other than capacity release, to be shared equally with the USF. In 2004, we contributed approximately $4 million to the USF based upon profits earned in the last six months of 2003 and for the first six months of 2004.

·

In June 2003, Chattanooga Gas’ tariff was amended effective January 1, 2003 to require all net margin earned by Sequent for transactions involving Chattanooga Gas assets to be shared equally with Chattanooga Gas ratepayers. This agreement expires in April 2006 and is subject to automatic extensions unless specifically terminated by either party. In 2004, Sequent contributed approximately $1 million to Chattanooga Gas’ customers based upon profits earned in 2003. This contribution was reflected as reduction to customers’ gas costs in 2004.

UNAUDITED In millions		Contract from NUI acquisition			Other			Total
2005		$	5		$	8		$	13
2006			5			2			7
2007 and thereafter			107			9			116

·	Contracts that do not meet the definition of a derivative under SFAS 133 are not marked to fair market value.

·	Revenues are shown in the income statement net of costs associated with trading activities, whether or not the trades are physically settled.

·	We recorded an adjustment to the carrying value of our non-derivative trading instruments (principally our storage capacity contracts) to zero, and we now account for them using the accrual method of accounting.

·

We recorded an adjustment to the value of our natural gas inventories used in wholesale services to the lower of average cost or market; we previously recorded them at fair value. This resulted in the cumulative effect of a change in accounting principle in our statement of consolidated income for the three months ended March 31, 2003 of $13 million ($8 million net of taxes), which resulted in a decrease of $13 million to our energy marketing and risk management assets and a decrease in accumulated deferred income taxes of $5 million in our accompanying consolidated balance sheet.

·

We reclassified our trading activity on a net basis (revenues net of costs) effective July 1, 2002 as a result of the first consensus of EITF 02-03. This reclassification had no impact on our previously reported net income or shareholders’ equity. Revenues for all periods are shown net of costs associated with trading activities.

UNAUDITED
In millions		2004			2003			2002
Net fair value of contracts outstanding at beginning of period			($5	)	$	7		$	3
Cumulative effect of change in accounting principle			-			(13	)		-
Net fair value of contracts outstanding at beginning of period, as adjusted			(5	)		(6	)		3
Contracts realized or otherwise settled during period			11			2			(5	)
Change in net fair value of contract gains (losses)			11			(1	)		9
Net fair value of new contracts entered into during period			-			-			-
Net fair value of contracts outstanding at end of period		$	17			($5	)	$	7

In millions		Maturity Less than 1 Year			Maturity 1-3 Years			Maturity 4-5 Years			Maturity in Excess of 5 Years			Total Net Fair Value
Prices actively quoted (1)		$	6		$	1		$	-		$	-		$	7
Prices provided by other external sources		$	10		$	-		$	-		$	-		$	10

(1)

The “prices actively quoted” category represents Sequent’s positions in natural gas, which are valued exclusively using NYMEX futures prices. “Prices provided by other external sources” are basis transactions that represent the cost to transport the commodity from a NYMEX delivery point to the contract delivery point. Our basis spreads are primarily based on quotes obtained either directly from brokers or through electronic trading platforms.

(1)	Open futures NYMEX contracts (short) long

(2)	Physical salt dome withdrawal schedule

(3)	Physical reservoir withdrawal schedule

(4)	Expected gross margin, in millions, after regulatory sharing for withdrawal activity

UNAUDITED
In millions		Jan. 2005			Feb. 2005			Mar. 2005			Apr. 2005			May 2005			June 2005			July 2005			Total
Park and (loan) volumes			(15	)		12			6			-			15			(12	)		(6	)		-
Expected gross margin from park and (loans)			($0.3	)	$	0.3		$	0.1			-			-			-			-		$	0.1

UNAUDITED
In millions		2004			2003			2002			2004 vs. 2003			2003 vs. 2002
Operating revenues		$	54		$	41		$	23		$	13		$	18
Cost of sales			1			1			-			-			1
Operating margin			53			40			23			13			17
Operation and maintenance expenses			27			20			13			7			7
Depreciation and amortization			1			-			-			1			-
Taxes other than income			1			-			1			1			(1)
Total operating expenses			29			20			14			9			6
Operating income			24			20			9			4			11
Other loss						-			-						-
EBIT		$	24		$	20		$	9		$	4		$	11
Metrics
Physical sales volumes (Bcf/day)			2.10			1.75			1.39			20	%		26	%

UNAUDITED
In millions		2004			Pro-forma 2003			Pro-forma 2002			2004 vs. 2003			2003 vs. 2002
Operating revenues		$	852		$	752		$	632		$	100		$	120
Cost of sales			707			622			515			85			107
Operating margin			145			130			117			15			13
Operation and maintenance expenses			65			69			80			(4	)		(11	)
Depreciation and amortization			4			2			2			2			-
Taxes other than income			1			1			-			-			1
Total operating expenses			70			72			82			(2	)		(10	)
Operating income			75			58			35			17			23
Other income			2			2			4			-			(2	)
Minority interest			(18	)		(17	)		(15	)		(1	)		(2	)
EBIT		$	59		$	43		$	24		$	16		$	19
Metrics
SouthStar
Average customers (in thousands)			533			558			564			(4	%)		(1	%)
Market share in Georgia			36	%		38	%		38	%		(5	%)		-

UNAUDITED
In millions		2004			2003			2002			2004 vs. 2003			2003 vs. 2002
Total operating expenses		$	12		$	6		$	8			($6	)	$	2
Asset disposal on sale of Caroline Street campus			-			5			-			5			(5	)
Operating loss			(12	)		(11	)		(8	)		(1	)		(3	)
Other losses			(4	)		(1	)		(2	)		(3	)		1
EBIT			($16	)		($12	)		($10	)		($4	)		($2	)

·	the seasonal nature of the natural gas business and our resulting short-term borrowing requirements, which typically peak during colder months

·	increased gas supplies required to meet our customers’ needs during cold weather

·	changes in wholesale prices and customer demand for our products and services

·	regulatory changes and changes in rate-making policies of regulatory commissions

·	contractual cash obligations and other commercial commitments

·	interest rate changes

·	pension and postretirement benefit funding requirements

·	changes in income tax laws

·	margin requirements resulting from significant increases or decreases in our commodity prices

·	operational risks

UNAUDITED
In millions		Dec. 31, 2004			Dec. 31, 2003
Unused availability under the Credit Facility		$	750		$	500
Cash and cash equivalents			49			17
Total cash and available liquidity under the Credit Facility		$	799		$	517

UNAUDITED		Estimated			Actual
In millions		2005			2004			2003			2002			2004 vs. 2003			2003 vs. 2002
Construction of distribution facilities		$	87		$	64		$	60		$	62		$	4			($2	)
Pipeline replacement program			85			95			45			48			50			(3	)
Pivotal propane plant			2			29			-			-			29			-
Telecommunications			5			5			8			28			(3	)		(20	)
Other			97			71			45			49			26			(4	)
Total PP&E expenditures		$	276		$	264		$	158		$	187		$	106			($29	)

·	compliance with certain financial covenants

·	the continued accuracy of representations and warranties contained in the agreement

·	our total debt-to-capital ratio

·	the costs incurred to date that have not yet been recovered through rate riders

·	the future expected costs to be recovered through rate riders

·	reservoir storage, where supplies are generally injected and withdrawn on a seasonal basis

·	salt dome high-deliverability storage, where supplies may be periodically injected and withdrawn on relatively short notice

·	our inability to integrate operations, systems and procedures

·	the assumption of unknown risks and liabilities

·	diversion of management’s attention and resources

·	difficulty retaining and training acquired key personnel

·	adverse economic conditions

·	adverse general capital market conditions

·	poor performance and health of the utility industry in general

·	bankruptcy or financial distress of unrelated energy companies or Marketers in Georgia

·	decreases in the market price of and demand for natural gas

·	adverse regulatory actions that affect our local gas distribution companies

·	terrorist attacks on our facilities or our suppliers

·	increasing the cost of future debt financing

·	limiting our ability to obtain additional financing, if we need it, for working capital, acquisitions, debt service requirements or other purposes

·	making it more difficult for us to satisfy our existing financial obligations

·	requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce funds available to us for operations, future business opportunities or other purposes

·	prohibiting the payment of dividends on our common stock or adversely impacting our ability to pay such dividends at the current rate

·	increasing our vulnerability to adverse economic and industry conditions

·	limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete

UNAUDITED		Asset
		Average 12-Month Values						Value at:
In millions		2004			2003			Dec. 31, 2004			Dec. 31, 2003
Natural gas contracts		$	28		$	14		$	36		$	13

UNAUDITED		Liability
		Average 12-Month Values						Value at:
In millions		2004			2003			Dec. 31, 2004			Dec. 31, 2003
Natural gas contracts		$	21		$	14		$	19		$	18

(1)	$0.0 values represent amounts less than $0.1 million.

UNAUDITED	Market Value of Interest Rate Swap Derivatives
Dollars in millions				Market Value as of:
Notional Amount	Fixed-Rate	Effective variable rate (1)	Maturity	Dec.31, 2004	Dec. 31, 2003
$75	8.0%	3.6%	May 15, 2041	$3	$3
$100	7.1%	5.2%	January 14, 2011	(2)	(2)
$100	4.5%	-	April 15, 2013	-	(5)

(1)	As of December 31, 2004

UNAUDITED
Gross receivables		As of:
In millions		Dec. 31, 2004			Dec. 31, 2003			Change
Receivables with netting agreements in place:
Counterparty is investment grade		$	378		$	288		$	90
Counterparty is non-investment grade			36			13			23
Counterparty has no external rating			78			9			69
Receivables without netting agreements in place:
Counterparty is investment grade			16			15			1
Counterparty is non-investment grade			6			-			6
Counterparty has no external rating			-			-			-
Amount recorded on balance sheet		$	514		$	325		$	189

UNAUDITED
Gross payables		As of:
In millions		Dec. 31, 2004			Dec. 31, 2003			Change
Payables with netting agreements in place:
Counterparty is investment grade		$	291		$	206		$	85
Counterparty is non-investment grade			45			31			14
Counterparty has no external rating			139			45			94
Payables without netting agreements in place:
Counterparty is investment grade			40			29			11
Counterparty is non-investment grade			6			3			3
Counterparty has no external rating			-			15			(15	)
Amount recorded on balance sheet		$	521		$	329		$	192

·	SouthStar scores firm residential and small commercial customers using a national reporting agency and enrolls, without security, only those customers that meet or exceed SouthStar’s credit threshold.

·	SouthStar investigates potential interruptible and large commercial customers through reference checks, review of publicly available financial statements and review of commercially available credit reports.

·	SouthStar assigns physical wholesale counterparties an internal credit rating and credit limit prior to entering into a physical transaction based on their Moody’s, S&P and Fitch rating, commercially available credit reports and audited financial statements.

(c)

Exhibits

Exhibit No.	Description
99.1	AGL Resources’ Press Release announcing its financial results and other information.

	AGL RESOURCES INC.
	(Registrant)
Date: January 28, 2005	/s/ Richard T. O’Brien
	Executive Vice President and Chief Financial Officer