Redrawing the World’s Energy Map: The Gas Revolution and Energy Self-

Reliance in North America

The Natural Gas Industry Future Directions

Kevin McCrackinVice President

Utility Marketing

Corporate Overview

Largest Natural Gas Utility Company7 Local Distribution Utilities in 7 states4.5 million customers

Tropical Shipping

North American Gas Markets: Abundant Low Cost Resourceof over 100 years per EIA and Potential Gas Committee

© Wood Mackenzie

Montney Horn River

Utica (Can.)

Marcellus

Haynesville

Other Mid-Con shales

Rockies shales

Floyd -Conasauga

Fayetteville

Barnett-Woodford

Barnett

Bakken

Eagle Ford Gas

Arkoma Woodford

Bossier

Marcellus NE

Marcellus SW

HaynesvilleArkoma

WoodfordCollingwood

Barnett-Woodford

FayettevilleBarnett

Montney

Horn River

Utica (Can.)

Duvernay

WolfcampMississipian

MontereyBone

SpringBakken EF

oil

Avalon

Ohio Utica

Eagle Ford gas

Anadarko Woodford

BarnettFayetteville

Barnett-Woodford

Collingwood/Utica

Arkoma WoodfordHaynesville

Marcellus SW

Marcellus NE

Bossier

Duvernay

Utica (Can.)

Horn River

Montney

Eagle Ford oil

BakkenNiobrara

Bone Spring

Monterey

Anadarko Woodford

Eagle Ford gas

Shale gas and tight oil plays

Sources: Wood Mackenzie (North America Gas Service, Unconventional Gas Service)

$2

$3

$4

$5

$6

$7

$8

2000 2005 2010 2015 2020 2025 2030Year production >250 mmcfde

$/m

mbt

u

US shalesCanadian shalesTight oilLiquid-rich shales

10 tcfe

100 tcfe

50 tcfe

2010 2011 2012Marcellus becomes the leading US gas play

Jan-2002 Jan-2003 Jan-2004 Jan-2005 Jan-2006 Jan-2007 Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012$0

$2

$4

$6

$8

$10

$12

$14

$16

Changing Economics: Natural Gas Prices Exceptionally Low

Source: U.S. Department of Energy, Energy Information Administration

Between June 2008 and

December 2012, Henry Hub natural

gas prices have decreased 78%

Hurricanes Katrina and Rita

2008 Oil Shock

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200

2

4

6

8

10

12

14

16

18

20

0

20

40

60

80

100

120

CAPP deliv. Southeast PRB deliv. MidwestHenry Hub WTI

2012

$/m

mbt

u

2012

$/bb

l

© Wood Mackenzie

Price outlook

Source: Wood Mackenzie (North America Gas Service, Coal Market Service, Macro Oils Service)

Where are fuel prices headed in North America markets?

Oil/gas ratio

Source: Wood Mackenzie (North America Gas Service)

Who Is Using Natural Gas in the United States?

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Residential Commercial Industrial Power Generation

Source: U.S. Department of Energy, Energy Information Administration

% o

f nat

ural

gas

thro

ughp

ut

Natural gas use for power generation has increased 87% in the past 25 years

Industrial customer usage has decreased by 21% in that same period

© Wood Mackenzie

…But, an Industrial Renaissance is underway due to abundant supplies and low natural gas prices

2011 2013 2015 2017 2019 2021

Coal retire-ments

LNG

Industrial

Res/com conv.

Oil sands

GTL

Sabine Pass

Freeport BCCameron

Mercury & Air Toxics

Stds.

1 bcfd Spectra NY-NJ pipe

Nucor DRI

Methanex migration

Various fertilizer, petchem

Source: Wood Mackenzie North America Gas Service

2015 20200

5

10

15

20

25

bcfd

OtherNGV

s

Source: Wood Mackenzie North America Gas Service

Annual gas demand growth (US & Canada) Demand growth (vs. 2010)

Looming Natural Gas Demand: Coal retirements will accelerate in mid-decade with Mercury & Air Toxics Standards (MATS)

© Wood Mackenzie

Source: Wood Mackenzie North America Power Service

2012

2014

2016

2018

2020

0

10

20

30

40

50

60

70

Southeast MidwestNortheast WestWSC

GW

US coal retirements

New Markets for Natural Gas

Power Generation

Combined Heat & Power

Compressed Natural Gas Liquefied Natural Gas

Source: U.S. Department of Energy, Energy Information Administration

Power Generation Mix

1/1/2007 1/1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/20120

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

Mill

ion

meg

awat

ts

Coal Natural Gas Other Nuclear Petroleum Products

Projected Natural Gas Consumption

11

Source: ICF International

The Largest Natural Gas Market Growth Opportunity is Power Generation – Are Central Bulk Power Plants the most efficient way to grow?

Implications to the Florida Generation Market

FP&L Generation Plans: New combined cycle power plants planned or under construction at Rivera Beach, Martin and Port of Everglades Old peaking units requiring upgrades due to heat rates above 17,000 Btu/kWh Achieving the improved environmental standards could require replacement of existing natural gas turbine peakers Evaluation is looking at new natural gas combustion turbines

Other Possible Gas-Fired Plants: Closure of Crystal River Polk Power Station Expansion

FPL Analyst Presentation – March 12, 2013

FPL Analyst Presentation – March 12, 2013

Between now and 2035, North America requires construction of over 1,400 miles/year of natural gas pipelines, with 17% of the new pipeline being constructed in the Southeast.

$205 Billion invested in North America through 2035 Southeast U.S. natural gas demand doubles; 10 Bcf/d to 20 Bcf/d Southeast U.S. infrastructure investment of over $35 Billion

568 pipeline laterals to attach new gas-fired power generation. 33% of these laterals projected to be constructed in the Southeast.

Natural Gas Infrastructure Requirements

Source: ICF International study for INGAA Foundation, “ North American Midstream Infrastructure through 2035”

$Billions

FPL Analyst Presentation – March 12, 2013

NATURAL GAS vs . EL ECT RI CThe Big Picture – Direct Use is Most Efficient…….so, distributed generation at the home makes sense.

Combined Heat and Power (CHP) is more Efficient

17http://www.aga.org/our-issues/playbook/Documents/AGA_Playbook2012_HI_RES.pdf

18

Executive Order – August 30

“Coordinate and strongly encourage efforts to achieve a national goal of deploying 40 gigawatts of new, cost effective industrial CHP in the United States by the end of 2020.”

”Convene stakeholders, through a series of public workshops, to develop and encourage the use of best practice State policies and investment models that address the multiple barriers to investment in industrial energy efficiency and CHP.”

”Utilize their respective relevant authorities and resources to encourage investment in industrial energy efficiency and CHP.”

Federal Support for CHP

19

Incentives• 10% Investment Tax Credit (ITC) for CHP through December, 2016; 50 MW or less• 10% ITC for micro turbines capped at $200/kW of capacity; 2 MW or less • 30% ITC for fuel cells or $3,000/kW ($1,000/ kW residential), whichever is smaller • Modified Accelerated Cost-Recovery System – for 2013 bonus depreciation is 50% of the

eligible basis • Renewable Energy Production Tax Credit (ARRA portion expires end of 2013) – renewable fuels

only

Support• EPA recognizes CHP as an efficiency measure under developing greenhouse gas emissions

standards • EPA includes output-based options that recognize CHP benefits in ICI Boiler MACT and Utility

MACT (MATS) • DOE increases technology deployment support for CHP and announces goal of

40 GW of new CHP capacity by 2020 • Clean Energy Standard Act of 2012

– Includes nuclear, clean coal, and natural gas – Recognizes the additional energy efficiency and greenhouse gas benefits of CHP

• Proposals to encourage rate-basing of utility investments in behind the meter energy efficiency and CHP

Florida - Renewable energy tax credit of 1¢/kWh annually (CHP is eligible), Solar and CHP sales tax exemption. Net metering excess generation credited at the utility retail rate.

U.S. CHP Generation Capacity Vision

20Source: Combined Heat and Power: Effective Energy Solutions for a Sustainable Future Sponsored by the U.S. Department of Energy

The U.S. is the world’s largest natural gas producer, but lags behind other nations in natural gas transportation

There are more than 12.7 million natural gas vehicles on the road worldwide – but less than 125,000 are in the United States.

Source: NGV Global

Fuel price is the driver, and it is expected to stay this time….

PRICING CHARACTERISTICS

20%

13%

27%

40%

Natural Gas

Distribution & Compression

Marketing & Profit

Taxes

CNG (July 2012)Retail Price: $1.85/gge

The natural gas commodity cost component is about one quarter the crude oil cost component in the make-up of the overall price of the delivered fuel, giving CNG a price dampener against price volatility.

PRICE STABILITY OF CNG

Natural Gas at $2.88/McfNatural Gas (divide by 7.2) $0.40Transport Costs & Fees $0.20 Electricity Costs per GGE $0.10Maintenance per GGE $0.20Federal and State Taxes $0.25Fuel Card Fees per GGE $0.05Retailer Profit Margin $0.70CNG at the Pump $1.90

Natural Gas at $5.76/McfNatural Gas (divide by 7.2) $0.80Transport Costs & Fees $0.20 Electricity Costs per GGE $0.10Maintenance per GGE $0.20Federal and State Taxes $0.25Fuel Card Fees per GGE $0.05Retailer Profit Margin $0.70CNG at the Pump $2.30

The natural gas fuel commodity makes up a smaller portion of theoverall price of the delivered fuel when compared to gasoline or diesel.

THE ECONOMICS OF VEHICLE CLASSES

Type of Vehicle

Incremental Cost *

Annual Use (Gals.)

Annual Savings **

Simple Payback

Honda Civic (consumer) $7,500 500 $750 10 yrs.

Sedan (fleet application) $10,000 1,200 $1,800 6 yrs.

Pickup Truck (fleet app.) $11,000 2,000 $3,000 4 yrs.

Cargo Van $14,000 2,500 $3,750 4 yrs.

Step Van/Box Truck $24,000 4,000 $6,000 4 yrs.

School Bus $28,000 2,600 $3,750 7 yrs.

Garbage Truck $35,000 8,000 $12,000 3 yrs.

Class 8 Truck $65,000 15,000 $22,500 3 yrs.

* Cost assumes no grant money, rebates, tax credits, etc. available* * Savings calculated based on savings of $1.50/GGE at retail CNG station

THE LIGHT DUTY MARKET CHALLENGE

$500,000+ for Centralized Fueling Stations• 500 down, 160,000 to go - $50+ billion? in investment to match gasoline stations• The economics work for fleets, so there will continue to be growth• $100,000?+ to make a private station public accessible

$8,000+ Vehicle Conversion/Replacement Premium• Takes 7 years+ to recover the premium• Limited vehicle selection from OEM’s, especially vehicles desired by target customers• Efforts around conversion, and specifically tank technologies, is ongoing

$5,000 Home Refueling Appliance (HRA) product and Installation Cost• An additional 4+ years to recover the HRA cost• Limited fill capability, maintenance unknown (historically not good)

Result: $8,000 + $5,000 = $13,000 per vehicle premium, or 11+ years payback

MUST REDUCE VEHICLE CONVERSION COSTS & DEVELOP A LESS EXPENSIVE HRA

Expect 12% of New vehicle salesto be NGV’s by 2020

NGV Engine Costs are expected to be competitive by 2020

THE HOME REFUELING APPLIANCE (HRA)

BRC Fuelmaker Phill is the only commercially available HRA• Expensive price with installation, approximately $6,000• Limited fill capability, less than a half gallon per hour• Historically has had compressor performance and maintenance issues• AGL is a distributor, and installs and maintains Phill units

AGL Resources is actively engaged with a team of industry leaders in the development of a less costly HRA

U.S. Department of Energy - Advanced Research Projects Agency-ENERGY (ARPA-E) – Methane Opportunities for Vehicular Energy (MOVE)

• 13 projects awarded with $30 million in funding – including 4 HRA designs• Engineer Light-Weight Affordable Natural Gas Tanks• Develop Natural Gas Compressors that can efficiently fuel a NGV at home• GTI and GE have projects within this program, and AGL is actively involved

Florida Legislation is headed in the right direction

Repeals the “Decal” program for Alternative Fuels effective January 1, 2014 Exempts natural gas fuel from taxes for 5 years Survey of Florida residents shows 72% support for legislation encouraging NGV adoption 96% of the residents think Energy Independence is important

Florida Natural Gas Vehicle Coalition In an August 2012 study, the transistioning of Florida Commercial Fleets to Natural Gas results in following benefits over 20 years:

• 10,000 new jobs• $330 million in new wages• $1 billion in economic output

An update based upon February 2013 SB560 and HB579 legislation improves these results as follows over 5 years:

• 20,000 new jobs• $715 million in new wages• $2.5 billion in economic output

LNG in HHP Applications

End Use Billions of Gallons

On Highway 35.6

Residential 4.0

Commercial 3.1Agriculture 3.9Railroad 2.6Off Highway 2.6

Industrial 2.5Marine 1.7Oil/Gas 1.4Power Gen 0.5Military 0.3 Total High Horsepower 15.2 billion gallons

Key Takeaways

Natural gas is more relevant than ever to our energy future.

New market opportunities for natural gas will potentially reshape entire industries. Florida’s growth is aligned with the growth in natural gas as a fuel and will make Florida a significant market participant. AGL Resources is uniquely positioned to deliver on the promise of natural gas.