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It will establish a growth platform superior to what either company could achieve alone. As the largest natural gas-only company in the country – serving about 4.5 million customers – the increased scale and scope of the combined company is expected to create long-term benefits for customers and opportunities for employees.
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It represents a logical combination of highly complementary unregulated businesses – retail, wholesale and non-utility storage – where we will leverage our collective experiences to make investments in businesses we understand. The combined company will have expertise in salt dome, reservoir, aquifer and market-area LNG storage, and both companies have effectively run asset optimization businesses.
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It extends the geographic reach of both companies. Corporate headquarters will remain in Atlanta, and a Distribution Headquarters will be established in Naperville, Illinois.
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Another perspective on the combined company is the mix of businesses that will comprise it.
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We are not departing from our core businesses. The mix of businesses in the combined company closely resembles what Nicor and AGL Resources each looks like today.
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The strategic mix of our business segments allows us to touch many parts of the natural business, and provides a full complement of gas products and services to our customers.
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As is clearly evident on this chart, Gas Distribution is our foundation. The Retail segment provides for delivery of the commodity in deregulated jurisdictions and provides other services (warranty and protection) not typically offered by regulated utilities. Our Wholesale and Storage segments provide for optimization of our assets for the benefit of our customers, and Shipping is a unique component which is well run on its own and has a home here.
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This mix of businesses maximizes our expertise from a customer perspective – safe, reliable, and efficient delivery. This complement also allows us to meet shareholder expectations of targeted capital deployment in utility and to return a safe dividend.
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There is also scalability to be leveraged by being:
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The largest natural gas distributor in the country;
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A top 10 wholesale gas marketer;
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One of the largest operators of natural gas storage and peaking facilities in the U.S.
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On the Regulatory front: In late April, the Department of Justice, the Federal Trade Commission and the Securities and Exchange Commission all gave clearance for the proposed merger. The latter allowed the companies to issue proxy statements to shareholders and for both companies to hold their respective shareholder votes. The former indicated the proposed merger presented no antitrust concerns for these federal regulatory bodies. Finally, hearings were held before the ICC in July. We have successfully resolved many of the open items and continue to work through the regulatory process with the goal of obtaining the ICC’s approval for the
proposed merger.
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From a Corporate perspective: As you know, Nicor shareholders approved the proposed merger at their annual meeting in June, and in a special meeting that same month, AGL Resources shareholders approved merger-related proposals required to execute the transaction (proposals were related to the issuance of AGL Resources shares as contemplated by the merger agreement and an increase in the number of directors on the AGL Resources board). You may also recall the video message from CEOs John Somerhalder and Russ Strobel in June, where they talked a fair amount about the change the organization could expect in the coming months.
(employees are welcome to revisit the video on the Intranet if desired)
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With regard to the Integration Planning Process: Progress continues to be made on the effort to plan for a successful integration of the two companies. The intensive data-gathering in Phase I that allowed us to better understand the current state of each organization concluded in late May, and in early June, the planning teams were expanded to support the task of developing detailed designs of the post-merger operating model for the combined company. The planning teams have recently transitioned to Phase III, which we’ll talk more about in a moment.
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You may be wondering when the merger will close, and are maybe even hearing different dates. The significant remaining approval needed to close is that of the Illinois Commerce Commission. In January, a schedule for the proceedings was established and it guides us through the process. As we approach the statutory deadline for the ICC to make a ruling in our case (December 16th), the remaining schedule includes the issuance of a proposed order from the Administrative Law Judge (anticipated 9/29) followed by another round of briefs for active parties to comment on the proposed order
(10/13). After those briefs are filed, the ALJ (Administrative Law Judge) submits an order to the ICC for consideration. The ICC can accept, reject or modify the ALJ’s recommended order. Though we requested an expedited decision by October 1st, the deadline for the ICC to rule is December 16th, and it is important to understand that this process is a dynamic one. Given the limited issues remaining to be resolved, however, it is possible the established schedule could accelerate.
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As we work toward gaining ICC approval, the Integration Planning Process is vital to ensure operational readiness at the close of the merger. Just as important, however, is creating a future-state operating framework that will allow the combined company to ensure continuation of safe and reliable service for our customers and deliver on the promise of a more efficient and scalable platform. The integration planning teams recently transitioned into Phase III. In this phase of planning, the teams are focused on developing implementation plans that support the operating model detailed designs they recommended at the conclusion of Phase II and ensure operational
readiness at close. Existing policies and procedures of both companies are being reviewed and integrated where possible, on everything from taking customer calls to hiring practices. These implementation plans will ensure business continuity is not affected during the transition period that is expected to follow the close of the merger. In Phase III, the detailed designs will also be reviewed and finalized by the Transition Committee. As you can see, however, we cannot transition from the process of planning for the combined company to the work of implementing the plans developed until the ICC grants its approval of the proposed merger.
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So are we a combined company when the ICC grants approval? Almost, but not quite. As you can see at the bottom of the chart, there are some final steps required to close the transaction. These are primarily financial and legal in nature, and the time needed to complete them is unclear until we get closer to them. However, approval from the ICC gives much greater certainty to our ability to close the merger, and you can expect provisional announcements regarding the leadership and structure of the combined company shortly after it is granted.
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Two very important things to remember:
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ICC approval is not a given. And while it is prudent to plan for it through our Integration Planning Process, it is presumptuous for us to assume we will receive it. As a result, no final organizational or leadership decisions regarding the results of the work done in the integration planning process will be communicated in advance of receiving approval from the ICC.
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Two top goals of integration planning are to ensure that we do not compromise the health of our existing businesses and that we do not sacrifice the continued safe and reliable service our customers both expect and enjoy.
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In anticipating the transition to a combined company, it helps to keep in mind what we expect to become:
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A New Energy Leader (Largest natural gas distributor in the U.S., top 10 wholesale gas marketer; one of the largest operators of natural gas storage and peaking facilities in the U.S.) This one pushes us to consider how we do things today in each company, and consider if there isn’t a better, more effective, more efficient way of doing it to capitalize on the platform we are creating.
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A Fortune 500 Company delivering natural gas to more than four and a half million customers. This one pushes us to respect our role as not only an industry leader, but a business leader. In every initiative we undertake, there is a higher standard to which we aspire as a combined company, and we look at it through this new lens.
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A company with a National Footprint, extending beyond the primarily state and regional boundaries in which we currently operate. This one is likely to impact people most directly. As we do our jobs, we’ll want to consider the impact of doing something one way in one locality versus the benefit of doing it differently in a different locale? And particularly for those people in roles providing a service to the business, for many of them their responsibilities will include a new geographic region to consider – for Nicor employees, thinking beyond the state of Illinois, and for AGL Resources employees, understanding what it means to include Illinois.
Additionally, this aspect has the most direct impact on some parts of our workforce – in both companies. Some employees could find themselves in a remote work environment, whether that means reporting to a manager in a different city or working with colleagues located elsewhere.
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As we’ve acknowledged before, in order to successfully combine the two companies, it is inevitable that people and positions could be affected. And as the integration planning teams work to develop detailed operating model designs, it’s understandable that you may have questions about how the integration will affect your job. You may wonder, for example:
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It’s helpful to understand the driving force behind the changes in the organization. We are bringing together two very good natural gas distribution companies to create an excellent one. And instead of defaulting to either the ‘AGL Resources way’ or the ‘Nicor way’ of doing things, we more often than not are seeking a transformational way to go about running the business; a way that really does blend the best of both companies. Taking this approach now not only helps us blend the two cultures most effectively, but it means we establish a more solid framework to support our current customers even more reliably and enable similar growth in the future.
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It is also important to recognize that the degree of change will not be universal throughout the organization. One thing the integration planning process is NOT contemplating is changing the fundamentals of our business. Which means we still need people to visit customer locations, take customer calls, and maintain company assets. And it means for a significant part of the organization, the work you do today should not substantially change in the combined company.
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Some of you, however, could see your landscape shift – you may support teams in multiple jurisdictions instead of a single one, or you may receive support from colleagues in another location than yours. And yes, as a result, some roles will require more travel than they do today, yet others could very well require less. And if relocation is required, we anticipate it would apply to only a very small portion of employees.
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Your perception of changes that affect you will also be influenced by your personal circumstances. For example, if you report to someone new, that may be a much bigger deal to you than it would be for someone else. Just like supporting new teams in different locations might challenge someone else, while you see it as an opportunity to meet and work with new people. Flexibility and adaptability are exceptionally valuable assets in responding to change.
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While some employees or departments may be affected more directly, no employee or department is immune from the changes that accompany the transition to a combined company. And though change has the potential to be disruptive, the implementation plans the integration planning teams are developing will help guide the company through the transition.
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Undoubtedly the top two things you’re wondering are: (1) WHEN will I know what kind of change will affect me or our department? and (2) HOW will decisions be made about possible changes to reporting relationships? First, regarding “when” you will know.… Not before the ICC gives approval to combine the two companies. It would be irresponsible to make organizational announcements for a combined company in advance of the ruling body granting approval to proceed with the combination. In the meantime, the integration planning process continues, as does the process of finalizing the operational framework of the organization.
Second, regarding “how” decisions will be made.… Decision-making in the combined company will be very similar to how it happens today. Guided by the detailed designs, departmental leaders will play a key role in helping determine the organization they will lead.
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Reiterate the importance of employees’ focusing on what they can control in the midst of the ambiguity that planning for the merger and the ensuing transition can bring.
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Ensure employees are aware of the avenues available to get their questions addressed (in addition to their management team)
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The most important thing you can do in supporting the proposed merger is to remain focused on your day-to-day responsibilities, whether that involves working on the integration planning teams or making vital contributions to ensuring our businesses continue to run smoothly.
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Be responsive to any integration planning team requests. As implementation plans are developed, it is possible you may receive additional inquiries.
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While this information today has addressed some of your questions, it’s possible you have more. In addition to the support I can provide, remember the other resources available to you: the merger mailbox and the merger communications section on Planet/Pipeline.
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I would ask that you keep in mind, however, that many details of the integration are still in a planning stage and it is simply premature to share them before they are finalized. As mentioned earlier – while it is prudent for our companies to plan for integration, it is presumptuous to assume approval by the ICC or behave in a manner that does so.
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The company remains committed to answering your questions as quickly and completely as possible, and to keeping you informed of important developments.
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