----

|   X | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---------------|--------------------------------------------------------------------------------------|

|   | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM |
|--------|-------------------------------------------------------------------------------------------------------------------------|

| Delaware                                                       | 75-0571592                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

| 5444 Westheimer Road                     | 77056-5306 |
|------------------------------------------|------------|
| Houston, Texas                           | (Zip Code) |
| (Address of principal executive offices) |       |

| Title of each class                  | Name of each exchange on which registered |
|--------------------------------------|-------------------------------------------|
| Common Stock, par value $1 per share | New York Stock Exchange                   |
| 7.55% Depositary Shares              | New York Stock Exchange                   |
|                                 |                                      |

----

|                                            |                                                                                                                    | Page    |
|-------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|---------|
|  Glossary.                                 | PART I                                                                                                                  |  1 |
| ITEM 1.                                         | Business.                                                                                                               | 2       |
| ITEM 1A.                                        | Risk Factors.                                                                                                           | 16      |
| ITEM 1B.                                        | Unresolved Staff Comments.                                                                                              | 28      |
| ITEM 2.                                         | Properties.                                                                                                             | 28      |
| ITEM 3.                                         | Legal Proceedings.                                                                                                      | 29      |
| ITEM 4.                                         | Reserved.                                                                                                               | 29      |
|                                            |  PART II                                                                                                      |    |
| ITEM 5.                                         | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. | 29      |
| ITEM 6.                                         | Selected Financial Data.                                                                                                | 32      |
| ITEM 7.                                         | Management's Discussion and Analysis of Financial Condition and Results of Operations.                                  | 33      |
| ITEM 7A.                                        | Quantitative and Qualitative Disclosures About Market Risk.                                                             | 60      |
| ITEM 8.                                         | Financial Statements and Supplementary Data.                                                                            | 63      |
| ITEM 9.                                         | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.                                   | 63      |
| ITEM 9A.                                        | Controls and Procedures.                                                                                                | 63      |
| ITEM 9B.                                        | Other Information.                                                                                                      | 64      |
|                                            | PART III                                                                                                                |    |
| ITEM 10.                                        | Directors, Executive Officers and Corporate Governance.                                                                 | 65      |
| ITEM 11.                                        | Executive Compensation.                                                                                                 | 65      |
| ITEM 12.                                        | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.                         | 65      |
| ITEM 13.                                        | Certain Relationships and Related Transactions, and Director Independence.                                              | 65      |
| ITEM 14.                                        | Principal Accounting Fees and Services.                                                                                 | 65      |
|                                            | PART IV                                                                                                                 |    |
| ITEM 15.                                        | Exhibits, Financial Statement Schedules.                                                                                | 66      |
| Signatures.                                     | 71                                                                                                                      |
| Index to the Consolidated Financial Statements. | F-1                                                                                                                     |

----

----

Business.

| ·   | The Transportation and Storage segment is primarily engaged in the interstate transportation and storage of natural gas and also provides LNG terminalling and regasification services.  Its operations are conducted through Panhandle and its 50 percent equity ownership interest in Florida Gas through Citrus. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Gathering and Processing segment is primarily engaged in the gathering, treating, processing and redelivery of natural gas and NGL in Texas and New Mexico.  Its operations are conducted through SUGS. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Distribution segment is primarily engaged in the local distribution of natural gas in Missouri and Massachusetts.  Its operations are conducted through the Company’s operating divisions Missouri Gas Energy and New England Gas Company. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                         |   | Years Ended December 31, |   |
|------------------------------|--------|--------------------------|--------|
|                         |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
|                         |   |                     |   |   |   |   |   |   |   |
| Panhandle:                   |   |                     |   |   |   |   |   |   |   |
| PEPL transportation          |   |                     | 676    |   |   |   | 702 |   |   |   | 662 |   |
| Trunkline transportation     |   |                     | 683    |   |   |   | 643 |   |   |   | 648 |   |
| Sea Robin transportation     |   |                     | 132    |   |   |   | 126 |   |   |   | 144 |   |
| Trunkline LNG terminal usage |   |                     | 33     |   |   |   | 9 |   |   |   | 261 |   |
|                         |   |                     |   |   |   |   |   |   |   |   |   |   |
| Citrus:  (1)       |   |                     |   |   |   |   |   |   |   |   |   |   |
| Florida Gas                  |   |                     | 821    |   |   |   | 786 |   |   |   | 751 |   |
|                         |   |                     |   |   |   |   |   |   |   |   |   |   |

| (1)   | Represents 100 percent of Florida Gas versus the Company's effective equity ownership interest of 50 percent. |
|-----------------|---------------------------------------------------------------------------------------------------------------|

|                                                                      |   | December 31, 2009 |   |
|---------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                      |   |              |   |
| Panhandle:                                                                |   |              |   |
| Approximate Miles of Pipelines                                            |   |              |   |
| PEPL                                                                      |   |              | 6,000  |   |
| Trunkline                                                                 |   |              | 3,500  |   |
| Sea Robin                                                                 |   |              | 400    |   |
| Peak Day Delivery Capacity (Bcf/d)                                        |   |              |   |   |
| PEPL                                                                      |   |              | 2.8    |   |
| Trunkline                                                                 |   |              | 1.7    |   |
| Sea Robin                                                                 |   |              | 1.0    |   |
| Trunkline LNG                                                             |   |              | 2.1    |   |
| Trunkline LNG Sustainable Send Out Capacity (Bcf/d)                       |   |              | 1.8    |   |
| Underground Storage Capacity-Owned (Bcf)                                  |   |              | 68.1   |   |
| Underground Storage Capacity-Leased (Bcf)                                 |   |              | 32.3   |   |
| Trunkline LNG Terminal Storage Capacity (Bcf)                             |   |              | 9.0    |   |
| Approximate Average Number of Transportation Customers                    |   |              | 500    |   |
| Weighted Average Remaining Life in Years of Firm Transportation Contracts |   |              |   |   |
| PEPL                                                                      |   |              | 6.9    |   |
| Trunkline                                                                 |   |              | 8.1    |   |
| Sea Robin  (1)                                                  |   |              | N/A    |   |
| Weighted Average Remaining Life in Years of Firm Storage Contracts        |   |              |   |   |
| PEPL                                                                      |   |              | 11.2   |   |
| Trunkline                                                                 |   |              | 2.2    |   |
|                                                                      |   |              |   |   |
| Florida Gas:  (2)                                               |   |              |   |   |
| Approximate Miles of Pipelines                                            |   |              | 5,000  |   |
| Peak Day Delivery Capacity (Bcf/d)                                        |   |              | 2.3    |   |
| Approximate Average Number of Transportation Customers                    |   |              | 125    |   |
| Weighted Average Remaining Life in Years of Firm Transportation Contracts |   |              | 12.0   |   |

----

|                   |   | Percent of Segment Revenues                     |    | Weighted Average Life             |
|------------------------|--------|-------------------------------------------------|---------|-----------------------------------|
| Company                |   | For Year Ended December 31, 2009  (1) |    | of Contracts at December 31, 2009 |
|                   |   |                                            |    |                              |   |
| BG LNG Services        |   | 22                                              |  % |                              | 14 years (LNG, transportation) |
| ProLiance              |   | 13                                              |    |                              | 11.7 years (transportation), 16.3 years (storage) |
| Other top 10 customers |   | 26                                              |    |                              | N/A |
| Remaining customers    |   | 39                                              |    |                              | N/A |
| Total percentage       |   | 100                                             |  % |                              |   |

| (1)   | Panhandle has no single customer, or group of customers under common control, that accounted for ten percent or more of the Company’s total consolidated operating revenues. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                       |   | Percent of Florida Gas'          |    | Weighted Average Life |
|----------------------------|--------|----------------------------------|---------|-----------------------|
|                       |   | Total Operating Revenues         |    | of Contracts at       |
| Company                    |   | For Year Ended December 31, 2009 |    | December 31, 2009     |
|                       |   |                             |    |                  |   |
| Florida Power & Light  |   | 39                               |  % |                  | 14.8 Years |
| Tampa Electric/Peoples Gas |   | 15                               |    |                  | 10.5 Years |
| Other top 10 customers     |   | 30                               |    |                  | N/A |
| Remaining customers        |   | 16                               |    |                  | N/A |
| Total percentage           |   | 100                              |  % |                  |   |

|                  |   | Date of Last |   |                                                 |
|-----------------------|--------|--------------|--------|------------------------------------------------------|
| Company               |   | Rate Filing  |   | Rate Proceedings Status                              |
|                  |   |         |   |                                                 |
| PEPL                  |   | May 1992     |   | Settlement effective April 1997                      |
| Trunkline             |   | January 1996 |   | Settlement effective May 2001                        |
| Sea Robin             |   | June 2007    |   | Settlement effective December 2008  (1)    |
| Trunkline LNG         |   | June 2001    |   | Settlement effective January 2002  (2)     |
| Southwest Gas Storage |   | August 2007  |   | Settlement effective February 2008                   |
| Florida Gas           |   | October 2009 |   | New rates effective April 1, 2010, subject to refund |

| (1)   | Settlement requires another rate case to be filed by January 2014. |
|-----------------|--------------------------------------------------------------------|

| (2)   | Settlement provides for a rate moratorium through 2015. |
|-----------------|---------------------------------------------------------|

----

----

| ·   | field gathering and compression of natural gas for delivery to its plants; |
|--------------------|----------------------------------------------------------------------------|

| ·   | treating, dehydration, sulfur recovery and other conditioning; and |
|--------------------|--------------------------------------------------------------------|

| ·   | natural gas processing and marketing of natural gas and NGL. |
|--------------------|--------------------------------------------------------------|

|                              |   | Percent of Segment               |    | Weighted Average Life |
|-----------------------------------|--------|----------------------------------|---------|-----------------------|
|                              |   |  Revenues For Year Ended    |    | of Contracts at       |
| Company                           |   | December 31, 2009  (1) |    | December 31, 2009     |
|                              |   |                             |    |                  |   |
| Louis Dreyfus Energy Services, LP | 12     |  %                          |    | 4.8 years (2)         |
| Conoco Phillips Company           |   | 7                                |    |                  | Month-to-month (natural gas), 5 years (NGL)  (3) |
| Other top 10 customers            |   | 48                               |    |                  | N/A |
| Remaining customers               |   | 33                               |    |                  | N/A |
| Total percentage                  |   | 100                              |  % |                  |   |

| (1)   | SUGS has no single customer or group of customers under common control that accounted for ten percent or more of the Company’s total consolidated operating revenues. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The weighted average contract life excludes evergreen arrangements. |
|-----------------|---------------------------------------------------------------------|

|  (3)   |  NGL contract is effective January 1, 2010.  See below discussion in NGL Sales Contract for additional related information. |
|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Fee-Based.  Under fee-based arrangements, SUGS receives a fee or fees for one or more of the following services:  gathering, compressing, dehydrating, treating or processing natural gas.  The fee or fees are usually based on the volume or level ofservice provided to gather, compress, dehydrate, treat or process natural gas.  While fee-based arrangements are generally not subject to commodity risk, certain operating conditions as well as certain provisions of these arrangements, including fuel recovery mechanisms, may subject SUGS to a limited amount of commodity risk. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Percent-of-Proceeds, Percent-of-Value or Percent-of-Liquids.  Under percent-of-proceeds arrangements, SUGS generally gathers, treats and processes natural gas for producers for an agreed percentage of the proceeds from the sales of the resulting residue natural gasand NGL.  The percent-of-value and percent-of-liquids arrangements are variations on the percent-of-proceeds structure.  These types of arrangements expose SUGS to significant commodity price risk as the revenues derived from the contracts are directly related to the price of natural gas and NGL. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Conditioning Fee.  Conditioning fee arrangements provide a guaranteed minimum margin or fee on natural gas that must be processed for NGL extraction in order to meet the quality specifications of the transmission pipelines.  In addition to the minimum marginor fee, SUGS keeps a significant percentage of the processing spread, if any.  While the revenue earned is directly related to the processing spread, SUGS is kept whole with a minimum value or fee in low processing spread environments. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Keep-Whole and Wellhead.  A keep-whole arrangement allows SUGS to keep 100 percent of the NGL produced, but requires the return of the Btu or dollar value of the underlying natural gas to the producer or owner.  Since some of the natural gas is converted toNGL during processing, SUGS must compensate the producer or owner for the Btu shrinkage entailed in processing by replacing the Btu shrinkage in-kind or by paying an agreed value for the Btu shrinkage.  These arrangements have the highest commodity price exposure for SUGS because the costs are dependent on the price of natural gas and the revenues are based on the price of NGL.  As a result, SUGS benefits from these types of arrangements when the value of the NGL is high relative to the valueof the natural gas and is disadvantaged when the value of the natural gas is high relative to the value of NGL.  Rather than incurring the negative margins during an unfavorable processing environment, SUGS has the ability to reduce its exposure to negative processing spreads by treating, dehydrating and blending the wellhead natural gas with leaner natural gas in order to meet downstream transmission pipeline specifications rather than processing the natural gas.  In situations where thenegative processing spread is eliminated, such contracts are referred to as wellhead contracts. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | contract fees charged; |
|--------------------|------------------------|

| ·   | capacity and pressures maintained on the gathering systems; |
|--------------------|-------------------------------------------------------------|

| ·   | location of the gathering systems relative to competitors and producer drilling activity; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | capacity and type of processing and treating available to SUGS and its competitors; |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | efficiency and reliability of the operations; |
|--------------------|-----------------------------------------------|

| ·   | availability and cost of third-party NGL transportation and fractionation capacity; |
|--------------------|-------------------------------------------------------------------------------------|

| ·   | delivery capabilities in each system and plant location; |
|--------------------|----------------------------------------------------------|

| ·   | natural gas and NGL pricing available to SUGS; and |
|--------------------|----------------------------------------------------|

| ·   | ability to secure rights-of-way and various facility sites. |
|--------------------|-------------------------------------------------------------|

----

----

|                                              |   | Years Ended December 31, |    |
|---------------------------------------------------|--------|--------------------------|---------|
|                                              |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                              |   |                     |    |   |   |   |   |   |   |
| Average number of customers:                      |   |                     |    |   |   |   |   |   |   |
| Residential                                       |   |                     | 485,136 |   |   |   | 485,971 |   |   |   | 483,753 |   |
| Commercial                                        |   |                     | 64,584  |   |   |   | 65,479 |   |   |   | 66,631 |   |
| Industrial                                        |   |                     | 95      |   |   |   | 122 |   |   |   | 122 |   |
|                                              |   |                     | 549,815 |   |   |   | 551,572 |   |   |   | 550,506 |   |
| Transportation customers                          |   |                     | 1,698   |   |   |   | 1,579 |   |   |   | 1,517 |   |
|                                              |   |                     | 551,513 |   |   |   | 553,151 |   |   |   | 552,023 |   |
|                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Natural gas sales (MMcf):                         |   |                     |    |   |   |   |   |   |   |   |   |   |
| Residential                                       |   |                     | 39,649  |   |   |   | 43,018 |   |   |   | 37,916 |   |
| Commercial                                        |   |                     | 16,249  |   |   |   | 17,977 |   |   |   | 15,988 |   |
| Industrial                                        |   |                     | 486     |   |   |   | 427 |   |   |   | 504 |   |
| Natural gas sales billed                          |   |                     | 56,384  |   |   |   | 61,422 |   |   |   | 54,408 |   |
| Net change in unbilled natural gas sales          |   |                     | 395     |   |   |   | 47 |   |   |   | 1,788 |   |
| Total natural gas sales                           |   |                     | 56,779  |   |   |   | 61,469 |   |   |   | 56,196 |   |
| Natural gas transported                           |   |                     | 26,212  |   |   |   | 28,214 |   |   |   | 26,911 |   |
| Total natural gas sales and gas transported       |   |                     | 82,991  |   |   |   | 89,683 |   |   |   | 83,107 |   |
|                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Natural gas sales revenues ($ in thousands):      |   |                     |    |   |   |   |   |   |   |   |   |   |
| Residential                                       |   | $                        | 488,112 |   |   | $ | 559,293 |   |   | $ | 495,464 |   |
| Commercial                                        |   |                     | 183,593 |   |   |   | 223,141 |   |   |   | 186,987 |   |
| Industrial                                        |   |                     | 9,109   |   |   |   | 9,352 |   |   |   | 10,900 |   |
| Natural gas revenues billed                       |   |                     | 680,814 |   |   |   | 791,786 |   |   |   | 693,351 |   |
| Net change in unbilled natural gas sales revenues |   |                     | (13,056 | ) |   |   | 3,632 |   |   |   | 9,491 |   |
| Total natural gas sales revenues                  |   |                     | 667,758 |   |   |   | 795,418 |   |   |   | 702,842 |   |
| Natural gas transportation revenues               |   |                     | 14,133  |   |   |   | 14,135 |   |   |   | 12,669 |   |
| Other revenues                                    |   |                     | 11,013  |   |   |   | 12,120 |   |   |   | 16,598 |   |
| Total operating revenues                          |   | $                        | 692,904 |   |   | $ | 821,673 |   |   | $ | 732,109 |   |
|                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Weather:                                          |   |                     |    |   |   |   |   |   |   |   |   |   |
| Missouri Utility Operations:                      |   |                     |    |   |   |   |   |   |   |   |   |   |
| Degree days  (1)                        |   |                     | 4,985   |   |   |   | 5,499 |   |   |   | 4,776 |   |
| Percent of 10-year measure  (2)         |   |                     | 96      | % |   |   | 106 | % |   |   | 92 | % |
| Percent of 30-year measure  (2)         |   |                     | 96      | % |   |   | 106 | % |   |   | 92 | % |
|                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Massachusetts Utility Operations:                 |   |                     |    |   |   |   |   |   |   |   |   |   |
| Degree days  (1)                        |   |                     | 5,633   |   |   |   | 5,348 |   |   |   | 5,371 |   |
| Percent of 10-year measure  (2)         |   |                     | 92      | % |   |   | 83 | % |   |   | 86 | % |
| Percent of 30-year measure  (2)         |   |                     | 91      | % |   |   | 88 | % |   |   | 89 | % |

----

----

| Company       |   |  Date of Last Rate Filing |   | Rate Proceedings Status  (1)      |
|---------------|--------|--------------------------------|--------|---------------------------------------------|
|          |   |                           |   |                                        |
| Missouri      |   | April 2009                     |   | MPSC rate order effective February 28, 2010 |
|          |   |                           |   |                                        |
| Massachusetts |   | July 2008                      |   | MDPU rate order effective February 2, 2009  |

| (1) |  For more information related to these rate filings, see Item 8.  Financial Statements and Supplementary Data, Note 18 – Regulation and Rates. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                     |   | Number of employees   |   |                           |
|--------------------------|--------|-----------------------|--------|--------------------------------|
|                     |   | Represented by Unions |   | Expiration of Current Contract |
|                     |   |                  |   |                           |
| PEPL:                    |   |                  |   |                           |
| USW Local 348            |   |                  | 222    |                           | May 28, 2012 |
|                     |   |                  |   |                           |   |
| Missouri Gas Energy:     |   |                  |   |                           |   |
| Gas Workers 781          |   |                  | 211    |                           | April 30, 2014 |
| IBEW Local 53            |   |                  | 98     |                           | April 30, 2014 |
| USW Local 11-267         |   |                  | 28     |                           | April 30, 2014 |
| USW Local 12561, 14228   |   |                  | 149    |                           | April 30, 2014 |
|                     |   |                  |   |                           |   |
| New England Gas Company: |   |                  |   |                           |   |
| UWUA Local 369           |   |                  | 71     |                           | April 30, 2010 |

----

Risk Factors.

----

----

| ·   | examine and potentially acquire regulated or unregulated businesses, including transportation and storage assets and gathering and processing businesses within the natural gas industry; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | enter into joint venture agreements and/or other transactions with other industry participants or financial investors; |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | selectively divest parts of its business, including parts of its core operations; and |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | continue expanding its existing operations. |
|--------------------|---------------------------------------------|

| ·   | its success in valuing and bidding for the opportunities; |
|--------------------|-----------------------------------------------------------|

| ·   | its ability to assess the risks of the opportunities; |
|--------------------|-------------------------------------------------------|

| ·   | its ability to obtain regulatory approvals on favorable terms; and |
|--------------------|--------------------------------------------------------------------|

| ·   | its access to financing on acceptable terms. |
|--------------------|----------------------------------------------|

| ·   | the risk of diverting management's attention from day-to-day operations; |
|--------------------|--------------------------------------------------------------------------|

| ·   | the risk that the acquired businesses will require substantial capital and financial investments; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | the risk that the investments will fail to perform in accordance with expectations; and |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | the risk of substantial difficulties in the transition and integration process. |
|--------------------|---------------------------------------------------------------------------------|

----

----

| ·   | the Company’s ability to obtain necessary approvals and permits from FERC and other regulatory agencies on a timely basis and on terms that are acceptable to it; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the ability to access sufficient capital at reasonable rates to fund expansion projects, especially in periods of prolonged economic decline; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the availability of skilled labor, equipment, and materials to complete expansion projects; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | adverse weather conditions; |
|--------------------|-----------------------------|

| ·   | potential changes in federal, state and local statutes, regulations, and orders, including environmental requirements that prevent a project from proceeding or increase the anticipated cost of the project; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | impediments on the Company’s ability to acquire rights-of-way or land rights on a timely basis or on terms that are acceptable to it; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the Company’s ability to construct projects within anticipated costs, including the risk that the Company may incur cost overruns, which may be material, resulting from inflation or increased costs of equipment, materials, labor, contractor productivity or other factors beyond its control, that the Company may not be able to recover from itscustomers; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the lack of future growth in natural gas supply and/or demand; and |
|--------------------|--------------------------------------------------------------------|

| ·   | the lack of transportation, storage or throughput commitments or gathering and processing commitments. |
|--------------------|--------------------------------------------------------------------------------------------------------|

----

----

----

----

----

| ·      | the impact of seasonality and weather; |
|---------------------------------|----------------------------------------|

| ·      | general economic conditions; |
|---------------------------------|------------------------------|

| ·      | the level of domestic crude oil and natural gas production and consumption; |
|---------------------------------|-----------------------------------------------------------------------------|

| ·      | the level of worldwide crude oil and NGL production and consumption; |
|---------------------------------|----------------------------------------------------------------------|

| ·      | the availability and level of natural gas and NGL storage; |
|---------------------------------|------------------------------------------------------------|

| ·      | the availability of imported natural gas, LNG, NGL and crude oil; |
|---------------------------------|-------------------------------------------------------------------|

| ·      | actions taken by foreign oil and natural gas producing nations; |
|---------------------------------|-----------------------------------------------------------------|

| ·      | the availability of local, intrastate and interstate transportation systems; |
|---------------------------------|------------------------------------------------------------------------------|

| ·      | the availability of NGL transportation and fractionation capacity; |
|---------------------------------|--------------------------------------------------------------------|

| ·      | the availability and marketing of competitive fuels; |
|---------------------------------|------------------------------------------------------|

| ·      | the impact of energy conservation efforts; |
|---------------------------------|--------------------------------------------|

| ·      | the extent of governmental regulation and taxation; and |
|---------------------------------|---------------------------------------------------------|

| ·      | the availability and effective liquidity of natural gas and NGL derivative counterparties. |
|---------------------------------|--------------------------------------------------------------------------------------------|

----

----

| ·   | changes in demand for natural gas or NGL and related services by the Company’s customers, in the composition of the Company’s customer base and in the sources of natural gas available to the Company; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the effects of inflation and the timing and extent of changes in the prices and overall demand for and availability of natural gas or NGL as well as electricity, oil, coal and other bulk materials and chemicals; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | adverse weather conditions, such as warmer than normal weather in the Company’s service territories, and the operational impact of natural disasters; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes in laws or regulations, third-party relations and approvals, decisions of courts, regulators and governmental bodies affecting or involving Southern Union, including deregulation initiatives and the impact of rate and tariff proceedings before FERC and various state regulatory commissions; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the speed and degree to which additional competition is introduced to Southern Union’s business and the resulting effect on revenues; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | the outcome of pending and future litigation; |
|--------------------|-----------------------------------------------|

| ·   | the Company’s ability to comply with or to challenge successfully existing or new environmental regulations; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | unanticipated environmental liabilities; |
|--------------------|------------------------------------------|

| ·   | the Company’s exposure to highly competitive commodity businesses through its Gathering and Processing segment; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | the Company’s ability to acquire new businesses and assets and integrate those operations into its existing operations, as well as its ability to expand its existing businesses and facilities; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the Company’s ability to control costs successfully and achieve operating efficiencies, including the purchase and implementation of new technologies for achieving such efficiencies; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the impact of factors affecting operations such as maintenance or repairs, environmental incidents, natural gas pipeline system constraints and relations with labor unions representing bargaining-unit employees; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | exposure to customer concentration with a significant portion of revenues realized from a relatively small number of customers and any credit risks associated with the financial position of those customers; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | changes in the ratings of the debt securities of Southern Union or any of its subsidiaries; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | changes in interest rates and other general capital markets conditions, and in the Company’s ability to continue to access the capital markets; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | acts of nature, sabotage, terrorism or other acts causing damage greater than the Company’s insurance coverage limits; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------|

| ·   | market risks beyond the Company’s control affecting its risk management activities including market liquidity, commodity price volatility and counterparty creditworthiness; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | other risks and unforeseen events. |
|--------------------|------------------------------------|

Unresolved Staff Comments.

----

|               |   | Dollars per share |   |
|--------------------|--------|-------------------|--------|
|               |   | High              |   |   | Low |   |   | Dividends |   |
|               |   |              |   |   |   |   |   |   |   |
| December 31, 2009  |   | $                 | 23.17  |   |   | $ | 19.24 |   |   | $ |   0.15 |   |
| September 30, 2009 |   |              | 21.46  |   |   |   | 16.72 |   |   |   | 0.15 |   |
| June 30, 2009      |   |              | 18.83  |   |   |   | 14.69 |   |   |   | 0.15 |   |
| March 31, 2009     |   |              | 16.22  |   |   |   | 11.59 |   |   |   | 0.15 |   |
|               |   |              |   |   |   |   |   |   |   |   |   |   |
| December 31, 2008  |   | $                 | 20.69  |   |   | $ | 10.60 |   |   | $ |   0.15 |   |
| September 30, 2008 |   |              | 27.24  |   |   |   | 19.70 |   |   |   | 0.15 |   |
| June 30, 2008      |   |              | 27.73  |   |   |   | 23.26 |   |   |   | 0.15 |   |
| March 31, 2008     |   |              | 29.77  |   |   |   | 21.56 |   |   |   | 0.15 |   |

----

|                          |   | 2004   |   |   | 2005   |   |   | 2006   |   |   | 2007 |   |   | 2008   |   |   | 2009   |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|--------|--------|--------|--------|--------|--------|
| Southern Union                |   |   | 100    |   |   |   | 103    |   |   |   | 124  |   |   |   | 132    |   |   |   | 61 |   |   |   | 109 |   |
| S&P 500 Index             |   |   | 100    |   |   |   | 105    |   |   |   | 121  |   |   |   | 128    |   |   |   | 81 |   |   |   | 102 |   |
| Bloomberg U.S. Pipeline Index |   |   | 100    |   |   |   | 132    |   |   |   | 154  |   |   |   | 182    |   |   |   | 111 |   |   |   | 158 |   |

----

|                                 | Number of Securities                                                                                        |              |                                                          |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------|-------------------|---------------------------------------------------------------|
|                                 | to Be Issued Upon                                                                                           | Weighted Average  | Number of Securities                                          |
|                                 | Exercise of                                                                                                 | Exercise Price of | Remaining Available for                                       |
|                                 | Outstanding                                                                                                 | Outstanding       |       Future Issuance Under          |
|                                 | Options/SARs                                                                                                | Options/SARs      |       Equity Compensation Plans |
|  Plans approved by stockholders |              3,384,618  (1), (2) |  $19.38      |  4,695,399                                               |

| (1)   | Excludes 378,974 shares of restricted stock that were outstanding at December 31, 2009. |
|-----------------|-----------------------------------------------------------------------------------------|

| (2)   | Assumes the number of securities issued from the exercise of SARs outstanding equals the appreciation from the award’s grant date to the exercise date. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          |   | Total Number of Shares Purchased (1) |   |   | Average Price Paid per Share |   |
|-------------------------------|--------|--------------------------------------|--------|--------|------------------------------|--------|
|                          |   |                                 |   |   |                         |   |
| Month Ended October 31, 2009  |   |                                 | 4,942  |   |                         | $      | 20.95 |   |
| Month Ended November 30, 2009 |   |                                 | 39     |   |                         |   | 20.12 |   |
| Month Ended December 31, 2009 |   |                                 | 3,812  |   |                         |   | 22.52 |   |
| Total                         |   |                                 | 8,793  |   |                         | $      | 21.63 |   |

| (1)   | Shares of common stock purchased in open-market transactions and held in various Company employee benefit plan trusts by the trustees using cash amounts deferred by the participants in such plans (and quarterly cash dividends issued by the Company on shares held in such plans). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                     |   | Years Ended December 31,                            |      |
|----------------------------------------------------------|--------|-----------------------------------------------------|-----------|
|                                                     |   | 2009                                                |      |   | 2008 |   |   | 2007 |   |   | 2006 (1)(2) |   |   | 2005 |   |
|                                                     |   | (In thousands of dollars, except per share amounts) |      |
|                                                     |   |                                                |      |   |   |   |   |   |   |   |   |   |   |   |   |
| Total operating revenues                                 |   | $                                                   | 2,179,018 |   |   | $ | 3,070,154 |   |   | $ | 2,616,665 |   |   | $ | 2,340,144 |   |   | $ | 1,266,882 |   |
| Earnings from unconsolidated                             |   |                                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     investments                           |   |                                                | 80,790    |   |   |   | 75,030 |   |   |   | 100,914 |   |   |   | 141,370 |   |   |   | 70,742 |   |
| Net earnings (loss):                                     |   |                                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing operations  (3)                     |   |                                                | 170,897   |   |   |   | 279,412 |   |   |   | 211,346 |   |   |   | 199,718 |   |   |   | 135,731 |   |
| Discontinued operations  (4)                   |   |                                                | -         |   |   |   | - |   |   |   | - |   |   |   | (152,952 | ) |   |   | (132,413 | ) |
| Available for common stockholders                        |   |                                                | 170,897   |   |   |   | 279,412 |   |   |   | 211,346 |   |   |   | 46,766 |   |   |   | 3,318 |   |
| Net earnings (loss) per diluted                          |   |                                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     common share:  (5)          |   |                                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                    |   |                                                | 1.37      |   |   |   | 2.26 |   |   |   | 1.75 |   |   |   | 1.70 |   |   |   | 1.20 |   |
| Discontinued operations                                  |   |                                                | -         |   |   |   | - |   |   |   | - |   |   |   | (1.30 | ) |   |   | (1.17 | ) |
| Available for common stockholders                        |   |                                                | 1.37      |   |   |   | 2.26 |   |   |   | 1.75 |   |   |   | 0.40 |   |   |   | 0.03 |   |
| Total assets                                             |   |                                                | 8,075,074 |   |   |   | 7,997,907 |   |   |   | 7,397,913 |   |   |   | 6,782,790 |   |   |   | 5,836,819 |   |
| Stockholders’ equity                               |   |                                                | 2,469,946 |   |   |   | 2,367,952 |   |   |   | 2,205,806 |   |   |   | 2,050,408 |   |   |   | 1,854,069 |   |
| Current portion of long-term debt and                    |   |                                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     capital lease obligation              |   |                                                | 140,500   |   |   |   | 60,623 |   |   |   | 434,680 |   |   |   | 461,011 |   |   |   | 126,648 |   |
| Long-term debt and capital lease                         |   |                                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     obligation, excluding current portion |   |                                                | 3,421,236 |   |   |   | 3,257,434 |   |   |   | 2,960,326 |   |   |   | 2,689,656 |   |   |   | 2,049,141 |   |
| Cash dividends declared on common                        |   |                                                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     stock  (6)                  |   |                                                | 74,481    |   |   |   | 74,384 |   |   |   | 53,968 |   |   |   | 46,289 |   |   |   | - |   |

| (1)   | Includes the impact of the March 1, 2006 acquisition of Sid Richardson Energy Services, Ltd. and related entites, and the August 24, 2006 dispositions of PG Energy and the Rhode Island operations of New England Gas Company.   See note 4 below for additional related information regarding the asset dispositions. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The Company’s investment in CCE Holdings was accounted for using the equity method until it became a wholly-owned subsidiary on December 1, 2006. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Net earnings from continuing operations are net of dividends on preferred stock of $8.7 million, $12.2 million, $17.4 million, $17.4 million and $17.4 million for the years ended December 31, 2009, 2008, 2007, 2006 and 2005, respectively.  Additionally, net earnings from continuing operationsare net of the $3.5 million Loss on extinguishment of preferred stock applicable to the year ended December 31, 2008.  For additional related information, see Item 8. Financial Statements and Supplementary Data, Note16 – Preferred Securities. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | On August 24, 2006, the Company completed the sales of the assets of its PG Energy natural gas distribution division to UGI Corporation and the Rhode Island operations of its New England Gas Company natural gas distribution division to National Grid USA.  These dispositions were accounted for as discontinued operations in the Consolidated Statementof Operations. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Earnings per share for all periods presented were computed based on the weighted average number of shares of common stock and common stock equivalents out­standing during the period, adjusted for the five percent stock dividend distributed on September 1, 2005. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | No cash dividends on common stock were paid during the reporting period prior to 2006.  See Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities and Item 8.  FinancialStatements and Supplementary Data, Note 15 – Stockholders’ Equity – Dividends. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Expanding through development of the Company’s existing businesses.  The Company will continue to pursue growth opportunities through the expansion of its existing asset base, while maintaining its focus on providing safe and reliable service to its customers.  In each ofits business segments, the Company identifies opportunities for organic growth through incremental volumes and system enhancements to generate operating efficiencies.  In its transportation and distribution businesses, the Company seeks rate increases and/or improved rate design as appropriate to achieve a fair return on its investment.  See Item 7.  Management’s Discussion and Analysis of Financial Condition and Results ofOperations – Liquidity and Capital Resources – Investing Activities for information related to the Company’s principal capital expenditure projects.  See Item 8.  Financial Statements and Supplementary Data, Note 18 – Regulation and Rates for information related to ratemaking activities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | New initiatives.  The Company regularly assesses strategies to enhance stockholder value, including diversification of earning sources through strategic acquisitions or joint ventures in the diversified natural gas industry. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Disciplined capital expenditures and cost containment programs.  The Company will continue to focus on system optimization and cost savings while making prudent capital expenditures across its base of energy infrastructure assets. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | items that do not impact net earnings, such as extraordinary items, discontinued operations and the impact of changes in accounting principles; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | income taxes; |
|--------------------|---------------|

| ·   | interest; |
|--------------------|-----------|

| ·   | dividends on preferred stock; and |
|--------------------|-----------------------------------|

| ·   | loss on extinguishment of preferred stock. |
|--------------------|--------------------------------------------|

|                                           |   | Years Ended December 31, |    |
|------------------------------------------------|--------|--------------------------|---------|
|                                           |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                           |   | (In thousands)           |    |
| EBIT:                                          |   |                     |    |   |   |   |   |   |   |
| Transportation and storage segment             |   | $                        | 411,935 |   |   | $ | 404,834 |   |   | $ | 407,459 |   |
| Gathering and processing segment               |   |                     | (40,470 | ) |   |   | 145,363 |   |   |   | 65,368 |   |
| Distribution segment                           |   |                     | 67,302  |   |   |   | 61,418 |   |   |   | 62,195 |   |
| Corporate and other activities                 |   |                     | 9,513   |   |   |   | (4,281 | ) |   |   | (7,906 | ) |
| Total EBIT                                     |   |                     | 448,280 |   |   |   | 607,334 |   |   |   | 527,116 |   |
| Interest expense                               |   |                     | 196,800 |   |   |   | 207,408 |   |   |   | 203,146 |   |
| Earnings before income taxes                   |   |                     | 251,480 |   |   |   | 399,926 |   |   |   | 323,970 |   |
| Federal and state income taxes                 |   |                     | 71,900  |   |   |   | 104,775 |   |   |   | 95,259 |   |
| Net earnings                                   |   |                     | 179,580 |   |   |   | 295,151 |   |   |   | 228,711 |   |
|                                           |   |                     |    |   |   |   |   |   |   |   |   |   |
| Preferred stock dividends                      |   |                     | 8,683   |   |   |   | 12,212 |   |   |   | 17,365 |   |
| Loss on extinguishment of preferred stock      |   |                     | -       |   |   |   | 3,527 |   |   |   | - |   |
|                                           |   |                     |    |   |   |   |   |   |   |   |   |   |
| Net earnings available for common stockholders |   | $                        | 170,897 |   |   | $ | 279,412 |   |   | $ | 211,346 |   |

----

| ·   | Higher EBIT contribution of $7.1 million from the Transportation and Storage segment primarily due to higher operating revenues of $27.5 million largely attributable to higher interruptible parking revenues of $17.1 million due to customer demand, market conditions and the availability of system capacity and higher transportation reservation revenuesof $13.3 million primarily due to higher average rates realized on PEPL, partially offset by higher net operating, maintenance and general expenses of $7.8 million and higher depreciation and amortization expense of $9.8 million primarily resulting from increases in property, plant and equipment placed in service; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher  EBIT contribution of $5.9 million from the Distribution segment primarily due to the impact of $8.1 million of income in 2009 resulting from settlements with insurance companies related to certain environmental matters; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher EBIT contribution of $13.8 million from Corporate and other activities primarily due to the impact of $10.8 million of income in 2009 resulting from settlements with insurance companies related to certain environmental matters and higher legal fees of $5.9 million in the 2008 period; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower interest expense of $10.6 million primarily attributable to lower interest expense of $10.1 million due to lower LIBOR interest rates associated with the Company’s variable rate debt and the impact of a $6.8 million increase in interest costs capitalized attributable to higher average capital project balances outstanding in 2009 comparedto 2008, partially offset by higher net interest expense of $7.1 million attributable to higher net debt balances outstanding on the Company’s fixed-rate debt obligations; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Impact of a $3.5 million loss recorded in the 2008 period related to the Company’s purchase of 459,999 shares of its Preferred Stock and the reduction in related dividends of $3.5 million; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower federal and state income tax expense of $32.9 million primarily due to lower pre-tax earnings of $148.4 million, partially offset by the impact of a 29 percent EITR in the 2009 period versus a 26 percent EITR in 2008. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher EBIT contribution of $80 million from the Gathering and Processing segment primarily due to higher market-driven realized average natural gas and NGL prices and the impact of $50.1 million of higher net hedging gains in the 2008 period versus the 2007 period, partially offset by a reduction in gross margin of approximately $10.6 million resultingfrom the impact of Hurricane Ike on the Company’s third-party NGL fractionator, the establishment of a $3 million bad debt reserve for a customer that filed for bankruptcy protection, and higher depreciation expense of $3.2 million. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher interest expense of $4.3 million primarily attributable to higher interest expense of $21.1 million in 2008 associated with new debt issued during the 2008 and 2007 periods primarily to fund capital expenditures for enhancement projects in the Transportation and Storage segment and retire maturing debt, partially offset by lower interest expenseof $13.1 million on the $465 million 2012 Term Loan agreement in 2008 primarily due to lower LIBOR interest rates, and higher capitalized interest of $4.3 million resulting from higher average capital project balances outstanding in the 2008 period versus the 2007 period; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower EBIT contribution of $2.6 million from the Transportation and Storage segment primarily due to lower equity earnings attributable to Citrus of $24 million primarily resulting from $18.7 million of nonrecurring gains in the 2007 period related to the settlement of litigation and the sale of bankruptcy-related receivables, partially offset by higherEBIT contributions of $21.4 million in 2008 from Panhandle primarily attributable to higher transportation reservation revenues, partially offset by higher operating expenses; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher income taxes of $9.5 million primarily due to higher pre-tax income in 2008, partially offset by a lower EITR in the 2008 period versus the 2007 period primarily attributable to a $22.1 million tax benefit resulting from a reduction in the Company’s deferred income tax liability in the fourth quarter of 2008 associated with the dividendsreceived deduction for anticipated dividends from the Company’s unconsolidated investment in Citrus. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                              |   | Years Ended December 31, |    |
|-------------------------------------------------------------------|--------|--------------------------|---------|
|                                                              |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                                              |   | (In thousands)           |    |
|                                                              |   |                     |    |   |   |   |   |   |   |
| Operating revenues                                                |   | $                        | 749,161 |   |   | $ | 721,640 |   |   | $ | 658,446 |   |
|                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Operating, maintenance and general                                |   |                     | 265,901 |   |   |   | 258,062 |   |   |   | 236,473 |   |
| Depreciation and amortization                                     |   |                     | 113,648 |   |   |   | 103,807 |   |   |   | 85,641 |   |
| Taxes other than on income and revenues                           |   |                     | 34,539  |   |   |   | 32,061 |   |   |   | 29,699 |   |
| Total operating income                                            |   |                     | 335,073 |   |   |   | 327,710 |   |   |   | 306,633 |   |
| Earnings from unconsolidated investments                          |   |                     | 75,205  |   |   |   | 75,173 |   |   |   | 99,222 |   |
| Other income, net                                                 |   |                     | 1,657   |   |   |   | 1,951 |   |   |   | 1,604 |   |
| EBIT                                                              |   | $                        | 411,935 |   |   | $ | 404,834 |   |   | $ | 407,459 |   |
|                                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Operating information:                                            |   |                     |    |   |   |   |   |   |   |   |   |   |
| Panhandle natural gas volumes transported (TBtu)                  |   |                     | 1,491   |   |   |   | 1,471 |   |   |   | 1,454 |   |
| Florida Gas natural gas volumes transported (TBtu)  (1) |   |                     | 821     |   |   |   | 786 |   |   |   | 751 |   |

| (1)   | Represents 100 percent of Florida Gas natural gas volumes transported versus the Company’s effective equity ownership interest of 50 percent. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Higher operating revenues of $27.5 million primarily as the result of: |
|--------|------------------------------------------------------------------------|

| o   | Higher interruptible parking revenues of $17.1 million resulting from customer demand for parking services, market conditions and the availability of system capacity; |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Higher transportation reservation revenues of $13.3 million primarily due to higher average rates realized on PEPL and contributions from various expansion projects primarily consisting of the Trunkline Field Zone Expansion and PEPL East End Enhancement projects, partially offset by lower average rates realized on Trunkline and $1.2 million of additionalrevenues in the 2008 period attributable to the extra day in the 2008 leap year; |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | A $5.1 million increase in LNG terminalling revenue primarily due to higher reservation revenues attributable to a one-time annual rate increase associated with certain capacity effective January 1, 2009; and |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Lower transportation usage revenues of $7.4 million primarily due to reduced volumes flowing on Sea Robin after Hurricane Ike. |
|---------------|--------------------------------------------------------------------------------------------------------------------------------|

| · | Higher operating, maintenance and general expenses of $7.8 million in 2009 versus 2008 primarily attributable to: |
|--------|-------------------------------------------------------------------------------------------------------------------|

| o   | A $5.6 million increase in benefits primarily due to higher medical costs; |
|---------------|----------------------------------------------------------------------------|

| o   | A $5.5 million increase in third-party transportation and storage expense primarily due to additional capacity contracted; |
|---------------|----------------------------------------------------------------------------------------------------------------------------|

| o   | A $4.8 million increase in fuel tracker costs primarily due to a net over-recovery in 2008 versus a net under-recovery in 2009; and |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------|

| o   | A $6.4 million decrease in expense due to a provision reversal in 2009 related to past take-or-pay settlement contractual indemnities for which performance by the Company has not been required; |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Increased depreciation and amortization expense of $9.8 million in 2009 versus 2008 due to a $136 million increase in property, plant and equipment placed in service after December 31, 2008.  Depreciation and amortization expense is expected to continue to increase primarily due to significant capital additions, including capital spending associatedwith the LNG terminal infrastructure enhancement construction project; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher taxes, other than on income and revenues, of $2.5 million primarily due to higher property tax assessments resulting from property additions and higher operating income.  Property tax expense is expected to continue to increase primarily due to significant property additions, which has been partially mitigated by certain temporary propertytax abatements. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Higher other income of $23.5 million largely driven by higher equity AFUDC resulting from Florida Gas’ Phase VIII Expansion project.  Due to the increasing levels of capitalized project costs, AFUDC is expected to continue to trend higher until completion of the Phase VIII Expansion project; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher operating revenues of $1.8 million primarily due to higher reservation revenues of $2.4 million resulting from increased capacity from prior expansions, partially offset by the impact of additionalrevenues in the 2008 period attributable to the extra day in the 2008 leap year; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher debt interest cost of $19 million primarily due to interest on a $500 million construction and term loan agreement funded in October 2008 and on the $600 million 7.90% Senior Notes issued in May 2009, partially offset by higher debt AFUDC, lower average outstanding revolver debt balances and lower LIBOR interest rates; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher income tax of $2.5 million primarily due to higher pretax earnings; |
|--------------------|----------------------------------------------------------------------------|

| ·   | Higher depreciation expense of $2.3 million primarily due to increased property, plant and equipment placed in service after December 31, 2008; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher operating expenses of $1 million primarily due to higher overall costs experienced in 2009 applicable to employee labor, outside service costs and other operating costs. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A $15.1 million nonrecurring gain recorded in the 2007 period related to the settlement of litigation; |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | A $3.6 million nonrecurring gain recorded in the 2007 period related to the sale of bankruptcy-related receivables; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | Higher operating expenses of $6 million primarily due to increased property taxes and higher overall costs experienced in 2008 applicable to employee labor and benefits, outside contract services costs and other operating costs; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher depreciation expense of $2.6 million primarily due to increased plant placed in service; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Higher interest expense of $4.5 million due to higher debt balances, including the $500 million Construction Loan Agreement related to the Phase VIII Expansion project, which was funded on October 1, 2008; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher operating revenues of $4.7 million primarily due to higher reservation revenues of $4.5 million attributable to increased capacity from prior expansions and the extra day in 2008 for the leap year; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Lower income taxes of $9.4 million primarily due to lower pre-tax earnings. |
|--------------------|-----------------------------------------------------------------------------|

| ·   | Higher transportation reservation revenues of $49.1 million primarily due to the phased completion of the Trunkline Field Zone Expansion project during the period from December 2007 to February 2008 and reduced discounting resulting in higher average rates realized on contracts driven by higher customer demand, and approximately $1.2 million of additionalrevenues attributable to the extra day in the 2008 leap year; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher transportation commodity revenues of $7.1 million primarily due to a rate increase on Sea Robin, net of related customer liability refund provisions and the impact of approximately $4.1 million of lower revenues attributable to reduced volumes flowing after Hurricane Ike; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher interruptible parking revenues of $8.2 million resulting from customer demand for parking services and market conditions; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher storage revenues of $6.7 million primarily due to increased leased storage capacity; and |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | A $6.5 million decrease in LNG terminalling revenue due to lower volumes from decreased LNG cargoes during 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------|

| ·   | Higher operating, maintenance and general expenses of $21.6 million primarily attributable to: |
|--------------------|------------------------------------------------------------------------------------------------|

| o   | Expense of $13.5 million related to damage to the Company’s facilities resulting from Hurricanes Gustav and Ike; |
|---------------|------------------------------------------------------------------------------------------------------------------------|

| o |   A $10.2 million increase in contract storage costs resulting from an increase in leased storage capacity; |
|---|------------------------------------------------------------------------------------------------------------------|

| o   | A $4 million increase in insurance costs primarily due to higher property premiums; |
|---------------|-------------------------------------------------------------------------------------|

| o   | A $3.5 million net increase in labor primarily due to merit increases; |
|---------------|------------------------------------------------------------------------|

| o   | A $5.7 million decrease in fuel tracker costs primarily due to a net over-recovery in 2008 versus a net under-recovery in 2007; and |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------|

| o   | A $5.5 million decrease in LNG power costs resulting from a reduced number of LNG cargoes during 2008; |
|---------------|--------------------------------------------------------------------------------------------------------|

| ·   | Increased depreciation and amortization expense of $18.2 million due to a $387.8 million increase in property, plant and equipment placed in service after December 31, 2007; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased taxes, other than on income, of $2.4 million primarily due to higher property taxes attributable to higher property tax assessments resulting from increased operating income, partially offset by lower compressor fuel tax on a reduced number of LNG cargoes. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                |   | Years Ended December 31, |        |
|-----------------------------------------------------|--------|--------------------------|-------------|
|                                                |   | 2009                     |        |   | 2008 |   |   | 2007 |   |
|                                                |   | (In thousands)           |        |
|                                                |   |                     |        |   |   |   |   |   |   |
| Operating revenues, excluding impact of             |   |                     |        |   |   |   |   |   |   |
| commodity derivative instruments                    |   | $                        | 776,835     |   |   | $ | 1,463,966 |   |   | $ | 1,214,806 |   |
| Realized and unrealized commodity derivatives       |   |                     | (44,584     | ) |   |   | 57,075 |   |   |   | 6,941 |   |
| Operating revenues                                  |   |                     | 732,251     |   |   |   | 1,521,041 |   |   |   | 1,221,747 |   |
| Cost of natural gas and other energy  (1) |   |                     | (624,772    | ) |   |   | (1,216,953 | ) |   |   | (1,010,967 | ) |
| Gross margin  (2)                         |   |                     | 107,479     |   |   |   | 304,088 |   |   |   | 210,780 |   |
| Operating, maintenance and general                  |   |                     | 80,243      |   |   |   | 90,657 |   |   |   | 84,550 |   |
| Depreciation and amortization                       |   |                     | 66,690      |   |   |   | 62,716 |   |   |   | 59,560 |   |
| Taxes other than on income and revenues             |   |                     | 5,342       |   |   |   | 4,466 |   |   |   | 2,742 |   |
| Total operating income                              |   |                     | (44,796     | ) |   |   | 146,249 |   |   |   | 63,928 |   |
| Earnings (loss) from unconsolidated investments     |   |                     | 4,410       |   |   |   | (990 | ) |   |   | 1,300 |   |
| Other income, net                                   |   |                     | (84         | ) |   |   | 104 |   |   |   | 140 |   |
| EBIT                                                |   | $                        | (40,470     | ) |   | $ | 145,363 |   |   | $ | 65,368 |   |
|                                                |   |                     |        |   |   |   |   |   |   |   |   |   |
| Operating Statistics:                               |   |                     |        |   |   |   |   |   |   |   |   |   |
| Volumes                                             |   |                     |        |   |   |   |   |   |   |   |   |   |
| Avg natural gas processed (MMBtu/d)                 |   |                     | 401,715     |   |   |   | 410,511 |   |   |   | 426,097 |   |
| Avg NGL produced (gallons/d)                        |   |                     | 1,325,052   |   |   |   | 1,321,325 |   |   |   | 1,337,450 |   |
| Avg natural gas wellhead volumes (MMBtu/d)          |   |                     | 566,472     |   |   |   | 596,150 |   |   |   | 637,794 |   |
| Natural gas sales (MMBtu)  (3)            |   |                     | 89,690,706  |   |   |   | 92,376,383 |   |   |   | 105,677,108 |   |
| NGL sales (gallons)  (3)                  |   |                     | 589,020,090 |   |   |   | 542,311,822 |   |   |   | 469,907,600 |   |
|                                                |   |                     |        |   |   |   |   |   |   |   |   |   |
| Average Pricing                                     |   |                     |        |   |   |   |   |   |   |   |   |   |
| Realized natural gas ($/MMBtu)  (4)       |   | $                        | 3.43        |   |   | $ | 7.67 |   |   | $ | 6.26 |   |
| Realized NGL ($/gallon)  (4)              |   |                     | 0.78        |   |   |   | 1.37 |   |   |   | 1.13 |   |
| Natural Gas Daily WAHA ($/MMBtu)                    |   |                     | 3.47        |   |   |   | 7.57 |   |   |   | 6.35 |   |
| Natural Gas Daily El Paso ($/MMBtu)                 |   |                     | 3.41        |   |   |   | 7.44 |   |   |   | 6.20 |   |
| Estimated plant processing spread ($/gallon)        |   |                     | 0.47        |   |   |   | 0.64 |   |   |   | 0.55 |   |

|   (1)  |     Cost of  natural gas and other energy consists of natural gas and NGL purchase costs and producer and other fees. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Gross margin consists of Operating revenues less Cost of natural gas and other energy.  The Company believes that this measurement is more  meaningful for understanding and analyzing the Gathering and Processing segment’soperating results for the periods presented because commodity costs are a significant factor in the determination of the segment’s revenues. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   |  Volumes processed by SUGS include volumes sold under various buy-sell arrangements.  For the years ended December 31, 2009,  2008 and 2007, the Company’s operating revenues and related volumes  attributable to its buy-sell arrangements for natural gas totaled $41.4 million, $95.7 million and $91.6 million, and11.7 million MMBtus, 12.2 million MMBtus and 13.6 million MMBtus, respectively.  The Company’s operating revenues and related volumes attributable to its buy-sell arrangements for NGL totaled $69.2 million and $117.9 million and 91.2 million gallons and 83 million gallons, for the years ended December 31, 2009 and 2008, respectively, and was insignificant for the 2007 period. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Excludes impact of realized and unrealized commodity derivative gains and losses detailed in the above EBIT presentation. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Lower gross margin of $196.6 million primarily as the result of: |
|--------------------|------------------------------------------------------------------|

| o   | Lower operating revenues of $687.1 million largely attributable to lower market-driven realized average natural gas and NGL prices (unadjusted for the impact of realized and unrealized commodity derivative gains and losses) of $3.43 per MMBtu and $0.78 per gallon in the 2009 period versus $7.67 per MMBtu and $1.37 per gallon in the 2008 period, respectively; |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Lower market-driven natural gas and NGL purchase costs of $593 million in the 2009 period versus the 2008 period; |
|---------------|-------------------------------------------------------------------------------------------------------------------|

| o   | A $101.7 million reduction in revenues from hedging activities primarily due to a net loss of $44.6 million in the 2009 period versus a net gain of $57.1 million in the 2008 period (which includes the impact of $44.8 million of unrealized losses recorded in 2009); |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | A reduction of approximately $10.6 million in gross margin in 2008 resulting from damage by Hurricane Ike to the Company’s third-party NGL fractionator; and |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | A reduction of approximately $4.9 million in gross margin attributable to a fire on July 17, 2009 at the Keystone processing plant resulting in a production outage until August 1, 2009 and additional reduced production flow; |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher depreciation and amortization expense of $4 million primarily attributable to a $68.2 million increase in property, plant and equipment placed in service after December 31, 2008; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower operating, maintenance and general expenses of $10.4 million primarily due to: |
|--------------------|--------------------------------------------------------------------------------------|

| o   | A $5.8 million decrease in maintenance, contract services and other plant operating costs largely attributable to a 2009 cost reduction initiative primarily related to the Company’s variable and discretionary costs; |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | A $2.3 million loss in 2008 related to the settlement of the GP II Energy litigation; |
|---------------|---------------------------------------------------------------------------------------|

| o   | Higher bad debt expense of $2.2 million recorded in 2008 versus 2009 associated with a company that filed for bankruptcy protection in 2008; |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| o   | A $1.8 million decrease in chemical and lubricants costs, which generally track the price of oil; |
|---------------|---------------------------------------------------------------------------------------------------|

| o   | A $1.5 million decrease in utility costs primarily due to lower compressor fuel costs attributable to the declining costs of natural gas in 2009 versus 2008; and |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | A $4.6 million net loss in 2009 versus 2008 primarily resulting from the write-off of property and equipment damaged by the fire at the Keystone natural gas processing plant in 2009; and |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher equity earnings of $5.4 million from the Company’s unconsolidated investment in Grey Ranch primarily due to higher volumes in 2009 versus the 2008 period resulting from an increase in capacity from 90 MMcf/d to 200 MMcf/d effective December 31, 2008 and due to a plant outage at the processing plant during the third quarter of 2008 resultingfrom a fire at the facility in June 2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher gross margin of $93.3 million primarily as the result of: |
|--------------------|------------------------------------------------------------------|

| o   | A $50.1 million increase in hedging gains in the 2008 period versus the 2007 period (which includes the impact of $59.7 million of unrealized gains recorded in 2008); |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Higher market-driven realized average natural gas and NGL prices (unadjusted for the impact of realized and unrealized commodity derivative gains and losses) of $7.67 per MMBtu and $1.37 per gallon in the 2008 period versus $6.26 per MMBtu and $1.13 per gallon in the 2007 period; |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Favorable gross margin impact of lower levels of fuel, flare, and unaccounted for natural gas losses in the 2008 period versus the unusually high levels experienced in the first and second quarters of 2007; and unfavorable gross margin impact of approximately $10.6 million resulting from damage by Hurricane Ike on the Company’s third-party NGLfractionator.  Commencing September 11, 2008, the Company was forced to shut in its natural gas processing plants and attendant production for approximately a week and operated at reduced production levels for the remainder of the month. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Operating, maintenance and general expenses were higher by $6.1 million primarily due to: |
|--------------------|-------------------------------------------------------------------------------------------|

| o   | A $3 million bad debt reserve for receivables associated with a customer that filed for bankruptcy protection in 2008; |
|---------------|------------------------------------------------------------------------------------------------------------------------|

| o   | A $2.3 million increase in chemical and lubricants costs, which generally track with the price of oil; and |
|---------------|------------------------------------------------------------------------------------------------------------|

| o   | A $2.1 million increase in utility costs primarily due to higher compressor fuel costs resulting from rising overall average cost of natural gas in 2008 versus 2007. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher depreciation expense of $3.2 million primarily attributable to a $50.3 million increase in property, plant and equipment placed in service after 2007; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower equity earnings of $2.3 million from the Company’s unconsolidated investment in Grey Ranch, which was out of service for approximately five months during 2008 because of a fire at the Grey Ranch processing plant. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                              |   | Years Ended December 31, |    |
|---------------------------------------------------|--------|--------------------------|---------|
|                                              |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                              |   | (In thousands)           |    |
|                                              |   |                     |    |   |   |   |   |   |   |
| Net operating revenues   (1)       |   | $                        | 221,387 |   |   | $ | 221,111 |   |   | $ | 222,097 |   |
|                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Operating, maintenance and general                |   |                     | 118,338 |   |   |   | 116,288 |   |   |   | 117,161 |   |
| Depreciation and amortization                     |   |                     | 31,269  |   |   |   | 30,530 |   |   |   | 30,251 |   |
| Taxes other than on income                        |   |                     |    |   |   |   |   |   |   |   |   |   |
| and revenues                                      |   |                     | 11,925  |   |   |   | 11,045 |   |   |   | 10,588 |   |
| Total operating income                            |   |                     | 59,855  |   |   |   | 63,248 |   |   |   | 64,097 |   |
| Other income (expenses), net                      |   |                     | 7,447   |   |   |   | (1,830 | ) |   |   | (1,902 | ) |
| EBIT                                              |   | $                        | 67,302  |   |   | $ | 61,418 |   |   | $ | 62,195 |   |
|                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Operating Information:                            |   |                     |    |   |   |   |   |   |   |   |   |   |
| Natural gas sales volumes (MMcf)                  |   |                     | 56,779  |   |   |   | 61,469 |   |   |   | 56,196 |   |
| Natural gas transported volumes (MMcf)            |   |                     | 26,212  |   |   |   | 28,214 |   |   |   | 26,911 |   |
|                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Weather – Degree Days:   (2) |   |                     |    |   |   |   |   |   |   |   |   |   |
| Missouri Gas Energy service territories           |   |                     | 4,985   |   |   |   | 5,499 |   |   |   | 4,776 |   |
| New England Gas Company service territories       |   |                     | 5,633   |   |   |   | 5,348 |   |   |   | 5,371 |   |

|     (1) Operating revenues for the Distribution segment are reported net of Cost of natural gasand other energy and Revenue-relatedtaxes, which are pass-through costs.(2) "Degree days" are a measure of the coldness of the weather experienced.  A degree day is equivalent to each degree that the daily mean temperature for a day falls below 65      degrees Fahrenheit.  |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |

| ·   | Higher other income, net, of $9.3 million primarily due to settlements of $8.1 million in 2009 with insurance companies related to certain environmental matters; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher net operating revenues of $300,000 primarily due to $5.6 million of higher net operating revenues at New England Gas Company largely attributable to new rates associated with the $3.7 million annual rate increase effective February 3, 2009 and colder weather in the 2009 period, partially offset by a lower contribution of $5.3 million from MissouriGas Energy primarily due to the impact of warmer weather in the 2009 period and lower market-driven pipeline capacity release and off system sales of $2.8 million in 2009 versus 2008; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Higher operating, maintenance and general expenses of $2.1 million primarily due to higher pension costs of $1.9 million, which are recovered in current rates, and higher labor costs of $1.7 million largely due to salaries previously capitalized in the 2008 period, new positions filled in the 2009 period, and merit and incentive increases in 2009 versus2008, partially offset by $2 million of lower environmental remediation costs primarily attributable to the establishment of reserves in 2008 related to completed site investigation evaluations; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher taxes other than on income and revenues of $900,000 largely attributable to increased property value assessments in 2009 applicable to Missouri Gas Energy; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher depreciation expense of $700,000 primarily attributable to a $39.1 million increase in property, plant and equipment placed in service after December 31, 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower net operating revenues of $1 million primarily due to lower market-driven pipeline capacity release and off-system sales at Missouri Gas Energy in the 2008 period versus the 2007 period; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher taxes other than on income of $500,000 primarily attributable to higher property taxes resulting from increased property appraisals; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower operating, maintenance and general expenses of $900,000 primarily attributable to: |
|--------------------|------------------------------------------------------------------------------------------|

| o   | Lower injuries and damage claims of $1.2 million primarily due to an insurance reimbursement of $900,000 in 2008 related to prior year expenditures; |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Lower provisions for uncollectible customer accounts of approximately $2.1 million primarily resulting from the impact of governmental assistance provided to Missouri Gas Energy’s low income customers, which has reduced the Company’s customer allowance reserve; and |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | Higher environmental remediation costs of $2 million primarily attributable to site investigation evaluations completed during 2008.  The MPSC has denied Missouri Gas Energy’s request during the third quarter of 2008 to defer certain environmental costs for recovery consideration in a future rate proceeding. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Settlements of $10.8 million in 2009 with insurance companies related to certain environmental matters; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | Higher legal fees of $5.9 million in the 2008 period primarily attributable to litigation. |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Impact of a $6.9 million impairment in 2007 related to the Company’s former corporate office building; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | Higher non-allocable corporate legal expenses of $6 million incurred in the 2008 period versus the 2007 period; |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

| ·   | Higher contribution of $1 million from PEI Power Corporation primarily due to higher revenues resulting from increased electricity production and higher electricity prices in 2008; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Impact of an $800,000 charge in 2007 to reserve for an other-than-temporary impairment of the Company’s investment in a technology company; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Higher interest income of $700,000 in the 2008 period versus the 2007 period associated with short-term investments held by the Company. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower interest expense of $10.1 million primarily due to the effect of lower LIBOR interest rates on the $360.4 million variable rate Trunkline LNG term loan agreement; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower interest expense of $6.8 million primarily due to the impact of the higher level of capitalized interest costs attributable to higher average capital project balances outstanding in 2009 compared to 2008.  Capitalized interest is expected to reduce in 2010 primarily due to a lower level of projected capital expenditures in 2010 versus2009; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower interest expense of $3.5 million associated with borrowings under the Company’s revolving credit agreements primarily due to lower average interest rates and lower average outstanding balances in 2009 compared to 2008; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher net interest expense of $7.1 million primarily due to higher outstanding debt balances from the $400 million 7.00% Senior Notes issued in June 2008, the $150 million 8.125% Senior Notes issued in June 2009 and the $150 million term loan issued in August 2009, partially offset by lower interest expense resulting from the repayment of the $300 million4.80% Senior Notes in August 2008, the $125 million 6.15% Senior Notes in August 2008 and the $60.6 million 6.50% Senior Notes in July 2009; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher other interest costs of $2.7 million primarily attributable to lower net debt premium amortization in 2009 resulting from debt retirements. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher interest expense of $21.1 million primarily due to higher outstanding debt balances from the $300 million 6.20% Senior Notes, the $400 million 7.00% Senior Notes, and the $455 million 2012 Term Loan issued in October 2007, June 2008, and March 2007, respectively, partially offset by lower interest expense from the repayment in August 2008 of the$300 million 4.80% Senior Notes and the $125 million 6.15% Senior Notes and the repayment in March 2007 of the $200 million 2.75% Senior Notes and the LNG Holdings $255.6 million Term Loan; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher net interest expense of $1.5 million associated with the remarketing of the $100 million 4.375% Senior Notes in February 2008, which were replaced with the higher interest rate $100 million 6.089% Senior Notes; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower interest expense of $13.1 million primarily due to the effect of lower LIBOR interest rates on the $465 million 2012 Term Loan agreement; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower interest expense of $4.3 million primarily due to the impact of the higher level of interest costs capitalized attributable to higher average capital project balances outstanding in 2008 compared to 2007; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower interest expense of $2.4 million associated with borrowings under the Company’s revolving credit agreements primarily due to lower average interest rates, partially offset by higher average outstanding balances in 2008 compared to 2007 and higher interest expense resulting from the issuance of the $150 million short-term 364 day credit agreementin October 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|               |   | Years Ended December 31, |   |
|--------------------|--------|--------------------------|--------|
|               |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
|               |   | (In thousands)           |
|               |   |                     |   |   |   |   |   |   |   |
| Income tax expense |   | $                        | 71,900 |   |   | $ | 104,775 |   |   | $ | 95,259 |   |
| Effective tax rate |   |                     | 29     | % |   |   | 26 | % |   |   | 29 | % |

----

|                                             |   | Years ended December 31, |     |
|--------------------------------------------------|--------|--------------------------|----------|
|                                             |   | 2009                     |     |   | 2008 |   |   | 2007 |   |
|                                             |   |                     |     |   | (In thousands) |   |   |   |   |
|                                             |   |                     |     |   |   |   |   |   |   |
| Cash flows provided by (used in):                |   |                     |     |   |   |   |   |   |   |
| Operating activities                             |   | $                        | 579,213  |   |   | $ | 486,827 |   |   | $ | 470,408 |   |
| Investing activities                             |   |                     | (419,424 | ) |   |   | (568,952 | ) |   |   | (666,604 | ) |
| Financing activities                             |   |                     | (153,562 | ) |   |   | 80,753 |   |   |   | 196,135 |   |
| Increase (decrease) in cash and cash equivalents |   | $                        | 6,227    |   |   | $ | (1,372 | ) |   | $ | (61 | ) |

| ·   | Decreased inventory of $110.2 million in the Distribution segment largely attributable to lower natural gas prices in the 2009 period; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Decrease in tax payment obligations of $69.4 million primarily due to lower pre-tax earnings in 2009 versus 2008; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------|

| ·   | Higher cash settlements of $55.7 million of commodity derivative instruments in the Gathering and Processing segment in the 2009 period versus the 2008 period. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased cash requirements of $77.1 million for Distribution segment inventories due to higher market-driven natural gas prices during 2008; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Higher inventory of $12.3 million in the Gathering and Processing segment primarily due to a build up of NGL inventory when its third party NGL fractionator was unavailable to provide fractionation services for approximately four weeks during the fourth quarter of 2008 due to a scheduled maintenance outage; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A reduction of $79.1 million in receivables primarily in the Gathering and Processing segment due to lower commodity prices at 2008 year end compared to 2007; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | A decrease in cash distributions from Citrus to $77.2 million in the 2008 period compared to $103.6 million in the 2007 period.  Given significant capital expenditure requirements associated with Florida Gas’ Phase VIII Expansion project, the Company does not anticipate receiving cash distributions from Citrus until after the PhaseVIII Expansion project is placed into service.  See Item 1. Business – Our Business – Business Segments – Transportation and Storage Segment – Recent System Enhancements Completed or Under Construction for additional information related to the Phase VIII Expansion project. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A $49.3 million in working capital adjustment payments made in the 2007 period related to the 2006 sales of PG Energy and the Rhode Island Operations of New England Gas Company; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower capital expenditures of $47.7 million in the Transportation and Storage segment in the 2008 period.  |
|--------------------|-----------------------------------------------------------------------------------------------------------------|

----

|                                               |   | Years ended December 31, |    |
|----------------------------------------------------|--------|--------------------------|---------|
|                                               |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                               |   | (In thousands)           |    |
|                                               |   |                     |    |   |   |   |   |   |   |
| Transportation and Storage Segment:                |   |                     |    |   |   |   |   |   |   |
| LNG Terminal Expansions/Enhancements               |   | $                        | 82,033  |   |   | $ | 157,325 |   |   | $ | 133,469 |   |
| Trunkline Field Zone Expansion                     |   |                     | 1,733   |   |   |   | 72,276 |   |   |   | 185,180 |   |
| East End Enhancement                               |   |                     | -       |   |   |   | 35,062 |   |   |   | 80,249 |   |
| Compression Modernization                          |   |                     | 7,146   |   |   |   | 56,288 |   |   |   | 81,687 |   |
| Other, primarily pipeline integrity, system        |   |                     |    |   |   |   |   |   |   |   |   |   |
| reliability, information technology, air           |   |                     |    |   |   |   |   |   |   |   |   |   |
| emission compliance and net hurricane expenditures |   |                     | 156,185 |   |   |   | 113,053 |   |   |   | 110,568 |   |
| Total                                              |   |                     | 247,097 |   |   |   | 434,004 |   |   |   | 591,153 |   |
|                                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Gathering and Processing Segment                   |   |                     | 70,221  |   |   |   | 67,317 |   |   |   | 48,633 |   |
|                                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Distribution Segment:                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Missouri Safety Program                            |   |                     | 14,397  |   |   |   | 14,124 |   |   |   | 11,405 |   |
| Other, primarily system replacement                |   |                     |    |   |   |   |   |   |   |   |   |   |
| and expansion                                      |   |                     | 31,693  |   |   |   | 27,001 |   |   |   | 33,364 |   |
|                                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Total                                              |   |                     | 46,090  |   |   |   | 41,125 |   |   |   | 44,769 |   |
|                                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Corporate and other activities                     |   |                     | 30,141  |   |   |   | 9,345 |   |   |   | 4,173 |   |
|                                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Total  (1)                               |   | $                        | 393,549 |   |   | $ | 551,791 |   |   | $ | 688,728 |   |

|   |  (1)  Includes net period changes in capital accruals totaling $(22) million, $(21.9) million and $71.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·   | Payments of $321.5 million under the Company’s revolving credit facilities and retirement of short-term debt obligations in 2009 compared to $278.5 million in borrowings in 2008; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Impact of $100 million of cash received by the Company from the issuance of common stock in the 2008 period; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | Lower net issuances of long-term debt of $316.4 million in the 2009 period versus the 2008 period; and |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | Impact of $115.2 million in the 2008 period related to the purchase of 459,999 shares of the Company’s Preferred Stock. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | Impact of $115.2 million in the 2008 period related to the purchase of 459,999 shares of the Company’s Preferred Stock; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | Lower net debt issuances of $317.9 million in 2008 compared to 2007; |
|--------------------|----------------------------------------------------------------------|

| ·   | Impact of $100 million of cash received by the Company from the issuance of common stock in 2008; and |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | Higher borrowings of $255.5 million under the Company’s revolving credit facilities in 2008 compared to 2007. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

----

----

----

|                                           |   | Contractual Obligations |      |
|------------------------------------------------|--------|-------------------------|-----------|
|                                           |   |                    |      |   |   |   |   |   |   |   |   |   |   |   | 2015 and |   |
|                                           |   | Total                   |      | 2010 |   | 2011 |   | 2012 |   | 2013 |   | 2014 |   |   | thereafter |   |
|                                           |   | (In thousands)          |      |
|                                           |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt  (1)(2)               |   | $                       | 3,559,186 |   | $ | 140,500 |   | $ | 151,998 |   | $ | 816,355 |   | $ | 250,933 |   | $ | 905 |   |   | $ | 2,198,495 |   |
| Short-term borrowing,                          |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| including credit facilities  (1)     |   |                    | 80,000    |   |   | 80,000 |   |   | - |   |   | - |   |   | - |   |   | - |   |   |   | - |   |
| Natural gas purchases  (3)           |   |                    | 237,123   |   |   | 203,941 |   |   | 4,163 |   |   | 3,001 |   |   | 2,904 |   |   | 2,817 |   |   |   | 20,297 |   |
| Missouri Gas Energy                            |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Safety Program                                 |   |                    | 115,087   |   |   | 11,228 |   |   | 11,086 |   |   | 11,197 |   |   | 11,309 |   |   | 11,422 |   |   |   | 58,845 |   |
| Transportation contracts                       |   |                    | 358,599   |   |   | 78,329 |   |   | 76,996 |   |   | 72,815 |   |   | 48,571 |   |   | 12,410 |   |   |   | 69,478 |   |
| Natural gas storage                            |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| contracts  (4)                       |   |                    | 218,907   |   |   | 37,402 |   |   | 35,465 |   |   | 30,198 |   |   | 26,313 |   |   | 21,842 |   |   |   | 67,687 |   |
| Operating lease payments                       |   |                    | 155,249   |   |   | 17,532 |   |   | 17,438 |   |   | 14,941 |   |   | 14,993 |   |   | 14,237 |   |   |   | 76,108 |   |
| Interest payments on debt   (5) |   |                    | 4,110,315 |   |   | 214,441 |   |   | 206,737 |   |   | 181,957 |   |   | 175,453 |   |   | 160,329 |   |   |   | 3,171,398 |   |
| Fractionation contract                         |   |                    | 169,082   |   |   | 15,901 |   |   | 16,351 |   |   | 16,530 |   |   | 16,656 |   |   | 16,819 |   |   |   | 86,825 |   |
| Other  (6)                           |   |                    | 132,410   |   |   | 74,548 |   |   | 23,751 |   |   | 13,241 |   |   | 8,048 |   |   | 7,863 |   |   |   | 4,959 |   |
| Total contractual                              |   |                    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| cash obligations                               |   | $                       | 9,135,958 |   | $ | 873,822 |   | $ | 543,985 |   | $ | 1,160,235 |   | $ | 555,180 |   | $ | 248,644 |   |   | $ | 5,754,092 |   |

| (1)   | The Company is party to debt agreements containing certain covenants that, if not satisfied, would give rise to an event of default that would cause such debt to become immediately due and payable.  Such covenants require the Company to maintain a certain level of net worth, to meet certain debt to total capitalization ratios, and to meet certainratios of earnings before depreciation, interest and taxes to cash interest expense.  At December 31, 2009, the Company was in compliance with all of its covenants.  See Item 8.  Financial Statements and Supplementary Data, Note 7 – Debt Obligations. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The long-term debt principal payment obligations exclude $2.6 million of unamortized debt premium as of December 31, 2009. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------|

| (3)   | The Company has purchase natural gas tariffs in effect for all its utility service areas that provide for recovery of its purchased natural gas costs under defined methodologies. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Represents charges for third party natural gas storage capacity. |
|-----------------|------------------------------------------------------------------|

| (5)   | Interest payments on debt are based upon the applicable stated or variable interest rates as of December 31, 2009.  Includes approximately $2.5 billion of interest payments associated with the $600 million Junior Subordinated Notes due November 1, 2066. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (6) | Includes unrecognized tax benefits and various other contractual obligations. |
|-----------|-------------------------------------------------------------------------------|

----

| ·   | the economic lives of plant, property and equipment; |
|--------------------|------------------------------------------------------|

| ·   | the fair values used to allocate purchase price and to determine possible asset impairment charges; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | reserves for environmental claims, legal fees and other litigation or contingent liabilities; |
|--------------------|-----------------------------------------------------------------------------------------------|

| ·   | provisions for income taxes and establishment of tax valuation reserves, including the interpretation of complex tax laws; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | provisions for uncollectible receivables; |
|--------------------|-------------------------------------------|

----

| ·   | exposures under contractual indemnification; |
|--------------------|----------------------------------------------|

| ·   | pension and other postretirement benefit plan liabilities; |
|--------------------|------------------------------------------------------------|

| ·   | the fair values associated with derivative financial instruments; and |
|--------------------|-----------------------------------------------------------------------|

| ·   | unbilled revenues. |
|--------------------|--------------------|

| ·   | Future demand for services provided by the Company; |
|--------------------|-----------------------------------------------------|

| ·   | Impact of future market conditions on customer and vendor pricing; |
|--------------------|--------------------------------------------------------------------|

| ·   | Regulatory developments; |
|--------------------|--------------------------|

| ·   | Inflationary trends; |
|--------------------|----------------------|

| ·   | Estimated useful lives of assets and ongoing capital requirements; |
|--------------------|--------------------------------------------------------------------|

| ·   | Discount rates used; and |
|--------------------|--------------------------|

| ·   | Terminal asset values using EBITDA-based market multiples. |
|--------------------|------------------------------------------------------------|

----

----

----

| ·   | Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 – Observable inputs such as: (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active and do not require significant adjustment based on unobservable inputs; or (iii) valuations based on pricing models, discounted cash flow methodologiesor similar techniques where significant inputs (e.g., interest rates, yield curves, etc.) are derived principally from observable market data, or can be corroborated by observable market data, for substantially the full term of the assets or liabilities; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 – Unobservable inputs, including valuations based on pricing models, discounted cash flow methodologies or similar techniques where at least one significant model assumption or input is unobservable.  Unobservable inputs are used to the extent that observable inputs are not available and reflect the Company’s own assumptionsabout the assumptions market participants would use in pricing the assets or liabilities.  Unobservable inputs are based on the best information available in the circumstances, which might include the Company’s own data. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·    | Processing plant outages; |
|---------------------|---------------------------|

| ·   | Higher than anticipated fuel, flare and unaccounted-for natural gas levels; |
|--------------------|-----------------------------------------------------------------------------|

| ·   | Impact of commodity prices in general; |
|--------------------|----------------------------------------|

| ·   | Decline in drilling and/or connections of new supply; |
|--------------------|-------------------------------------------------------|

| ·   | Reduction in available NGL take-away capacity; |
|--------------------|------------------------------------------------|

| ·   | Reduction in NGL available from wellhead supply; |
|--------------------|--------------------------------------------------|

| ·   | Lower than expected recovery of NGL from the inlet natural gas stream; and |
|--------------------|----------------------------------------------------------------------------|

| ·   | Lower than expected receipt of natural gas volumes to be processed. |
|--------------------|---------------------------------------------------------------------|

----

|                                                |                                      |   |        |   |   |          |   |   |       |   |   |                                                 |   |
|-----------------------------------------------------|-------------------------------------------|--------|-------------|--------|--------|---------------|--------|--------|------------|--------|--------|------------------------------------------------------|--------|
|                                                |                                      |   | Average     |   |   | Volumes       |   |   | Fair Value |   |
|                                                |                                      |   | Fixed Price |   |   | (MMBtu/d) (3) |   |   | of Assets  |   |
| Instrument Type                                     | Index                                     |   | (per MMBtu) |   |   | 2010          |   |   | 2011       |   |   |      (Liabilities) (4) |   |
|                                                |                                      |   |        |   |   |          |   |   |       |   |   | (In thousands)                                       |   |
|                                                |                                      |   |        |   |   |          |   |   |       |   |   |                                                 |   |
| Natural Gas - Cash Flow Hedges:  (1)      |                                      |   |        |   |   |          |   |   |       |   |   |                                                 |
| Receive-fixed swap                                  | Gas Daily - Waha                          |   | $           | 5.33   |   |          |   | 24,862 |       |   |   | -                                                    |   |   | $ | (2,359 | ) |
| Receive-fixed swap                                  | Gas Daily - Waha                          |   | $           | 6.14   |   |          |   | -      |       |   |   | 11,050                                               |   |   |   | 253 |   |
| Receive-fixed swap                                  | Gas Daily - El Paso Permian               |   | $           | 5.33   |   |          |   | 20,138 |       |   |   | -                                                    |   |   |   | (1,911 | ) |
| Receive-fixed swap                                  | Gas Daily - El Paso Permian               |   | $           | 6.14   |   |          |   | -      |       |   |   | 8,950                                                |   |   |   | 205 |   |
|                                                |                                      |   | Total       |   |   |          | 45,000 |   |       |   | 20,000 |                                                 |   | $ | (3,812 | ) |
|                                                |                                      |   |        |   |   |          |   |   |       |   |   |                                                 |   |   |   |   |   |
| Processing Spread - Economic Hedges:  (2) |                                      |   |        |   |   |          |   |   |       |   |   |                                                 |   |   |   |   |
| Receive-fixed swap                                  | Gas Daily - Waha (natural gas)            |   |        |   |   |          |   |   |       |   |   |                                                 |   |   |   |   |   |
|                                                | OPIS - Mt. Belvieu (NGL)                  |   | $           | 5.11   |   |          |   | 22,100 |       |   |   | -                                                    |   |   | $ | (19,048 | ) |
| Receive-fixed swap                                  | Gas Daily - Waha (natural gas)            |   |        |   |   |          |   |   |       |   |   |                                                 |   |   |   |   |   |
|                                                | OPIS - Mt. Belvieu (NGL)                  |   | $           | 5.23   |   |          |   | -      |       |   |   | 11,050                                               |   |   |   | (5,752 | ) |
| Receive-fixed swap                                  | Gas Daily - El Paso Permian (natural gas) |   |        |   |   |          |   |   |       |   |   |                                                 |   |   |   |   |   |
|                                                | OPIS - Mt. Belvieu (NGL)                  |   | $           | 5.11   |   |          |   | 17,900 |       |   |   | -                                                    |   |   |   | (15,428 | ) |
| Receive-fixed swap                                  | Gas Daily - El Paso Permian (natural gas) |   |        |   |   |          |   |   |       |   |   |                                                 |   |   |   |   |   |
|                                                | OPIS - Mt. Belvieu (NGL)                  |   | $           | 5.23   |   |          |   | -      |       |   |   | 8,950                                                |   |   |   | (4,659 | ) |
|                                                |                                      |   | Total       |   |   |          | 40,000 |   |       |   | 20,000 |                                                 |   | $ | (44,887 | ) |

| (1)   | The Company’s natural gas swap arrangements have been designated as cash flow hedges.  The effective portion of changes in the fair value of the cash flow hedges is recorded in Accumulated other comprehensive loss until the related hedged items impact earnings.  Any ineffectiveportion of a cash flow hedge is reported in current-period earnings. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The Company’s processing spread swap arrangements, which hedge the pricing differential between NGL volumes and natural gas volumes, are treated as economic hedges.  The ratio of NGL product sold per MMBtu is approximately: 34 percent ethane, 32 percent propane, 5 percent isobutane, 14 percent normal butane and 15 percent natural gasoline.  Thechange in fair value is reported in current-period earnings. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | All volumes are applicable to the period January 1, 2010 to December 31, 2010 and January 1, 2011 to December 31, 2011, as applicable. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | See Item 8.  Financial Statements and Supplementary Data,Note 10 – Derivative Instruments and Hedging Activities – Commodity Contracts – Gathering and Processing Segment for additional related information. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·   | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| (a)(1) and (2) | Financial Statements and Financial Statement Schedules. |
|----------------|---------------------------------------------------------|

| (a)(3) | Exhibits. |
|--------|-----------|

|   | 2(a) | Purchase and Sale Agreement between Southern Union Company and UGI Corporation, dated as of January 26, 2006. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on January 30, 2006 and incorporated herein by reference.) |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2(b) | First Amendment to the Purchase and Sale Agreement between Southern Union Company and UGI Corporation, dated as of August 24, 2006. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on August 30, 2006 and incorporated herein by reference.) |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2(c) | Purchase and Sale Agreement between Southern Union Company and National Grid USA, dated as of February 15, 2006. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on February 17, 2006 and incorporated herein by reference.) |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2(d) | Limited Settlement Agreement between Southern Union Company, Narragansett Electric Company d/b/a National Grid, the Department of the Attorney General for the State of Rhode Island and the Rhode Island Department of Environmental Management, dated as of August 24, 2006. (Filed as Exhibit 10.2 to Southern Union’s Current Report on Form 8-K filed on August 30, 2006 and incorporated herein by reference.) |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2(e) | First Amendment to the Purchase and Sale Agreement between Southern Union Company and National Grid USA, dated as of August 24, 2006. (Filed as Exhibit 10.3 to Southern Union’s Current Report on Form 8-K filed on August 30, 2006 and incorporated herein by reference.) |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3(a) | Amended and Restated Certificate of Incorporation of Southern Union Company. (Filed as Exhibit 3(a) to Southern Union’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference.) |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3(b) | By-Laws of Southern Union Company, as amended.  (Filed as Exhibit 3(b) hereto.) |
|--------|------|-------------------------------------------------------------------------------------------|

|   | 3(c) | Certificate of Designations, Preferences and Rights re: Southern Union Company’s 7.55% Noncumulative Preferred Stock, Series A. (Filed as Exhibit 4.1 to Southern Union’s Form 8-A/A dated October 17, 2003 and incorporated herein by reference.) |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4(a) | Specimen Common Stock Certificate.  (Filed as Exhibit 4(a) to Southern Union's Annual Report on Form 10-K for the year ended December 31, 1989 and incorporated herein by reference.) |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4(b) | Senior Debt Securities Indenture between Southern Union and The Chase Manhattan Bank (National Association), which changed its name to JP Morgan Chase Bank and then to JP Morgan Chase Bank, N.A., which was then succeeded to by The Bank of New York Trust Company, N.A., which changed its name to The Bank of New York Mellon Trust Company N.A., as Trustee (Filed as Exhibit 4.1 to Southern Union’s Current Reporton Form 8-K dated February 15, 1994 and incorporated here-in by reference.) |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4(c) | Officers' Certificate dated January 31, 1994 setting forth the terms of the 7.60% Senior Debt Securities due 2024.  (Filed as Exhibit 4.2 to Southern Union's Current Report on Form 8-K dated February 15, 1994 and incorporated herein by reference.) |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 4(d) | Officer's Certificate of Southern Union Company dated November 3, 1999 with respect to 8.25% Senior Notes due 2029.  (Filed as Exhibit 99.1 to Southern Union's Current Report on Form 8-K filed on November 19, 1999 and incorporated herein by reference.) |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4(e) | Form of Supplemental Indenture No. 1, dated June 11, 2003, between Southern Union Company and JP Morgan Chase Bank, which changed its name to JP Morgan Chase Bank, N.A., the predecessor to The Bank of New York Trust Company, N.A., which changed its name to The Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.5 to Southern Union’s Form 8-A/A dated June 20, 2003 and incorporated herein by reference.) |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4(f) | Supplemental Indenture No. 2, dated February 11, 2005, between Southern Union Company and JP Morgan Chase Bank, N.A., the predecessor to The Bank of New York Trust Company, N.A., which changed its name to The Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.4 to Southern Union’s Form 8-A/A dated February 22, 2005 and incorporated herein by reference.) |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  4(g) | Subordinated Debt Securities Indenture between Southern Union and The Chase Manhattan Bank (National Association), which changed its name to JP Morgan Chase Bank and then to JP Morgan Chase Bank, N.A., which was then succeeded to by The Bank of New York Trust Company, N.A., which changed its name to The Bank of New York Mellon Trust Company, N.A., as Trustee (Filed as Exhibit 4-G to Southern Union’s RegistrationStatement on Form S-3 (No. 33-58297) and incorporated herein by reference.) |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |      4(h) | Second Supplemental Indenture, dated October 23, 2006, between Southern Union Company and The Bank of New York Trust Company, N.A., now known as The Bank of New York Mellon Trust Company, N.A. (Filed as Exhibit 4.1 to Southern Union’s Form 8-K/A dated October 24, 2006 and incorporated herein by reference.) |
|--------|--------|-------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4(i) | 2006 Series A Junior Subordinated Notes Due November 1, 2066 dated October 23, 2006. (Filed as Exhibit 4.2 to Southern Unions Current Report on Form 8-K/A filed on October 24, 2006 and incorporated herein by reference.) |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4(j) | Replacement Capital Covenant, dated as of October 23, 2006 by Southern Union Company, a Delaware corporation with its successors and assigns, in favor of and for the benefit of each Covered Debtor (as defined in the Covenant). (Filed as Exhibit 4.3 to Southern Union’s Current Report on Form 8-K/A filed on October 24, 2006 and incorporated herein by reference.) |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4(k)         Southern Union is a party to other debt instruments, none of which authorizes the issuance of debt securities in an amount which exceeds 10% of the total assets of                 Southern Union.  Southern Union hereby agrees to furnish a copy of any of these instruments to the Commission upon request. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(a) | Sixth Amended and Restated Revolving Credit Agreement, dated as of February 26, 2010, among the Company, as borrower, and the lenders party thereto. (Filed as Exhibit 10(a) hereto.) |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(b) | First Amendment to Construction and Term Loan Agreement between Citrus Corp., as borrower, and Pipeline Funding Company, LLC, as lender and administrative agent, dated as of August 6, 2008. (Filed as Exhibit 10(a) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference.) |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(c) | Construction and Term Loan Agreement between Citrus Corp., as borrower, and Pipeline Funding Company, LLC, as lender and administrative agent, dated as of February 5, 2008. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on February 8, 2008 and incorporated herein by reference.) |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(d) | Amendment Number 1 to the Amended and Restated Credit Agreement between Trunkline LNG Holdings, LLC, as borrower, Panhandle Eastern Pipe Line Company, LP and CrossCountry Citrus, LLC, as guarantors, the financial institutions listed therein and Bayerische Hypo-Und Vereinsbank AG, New York Branch, as administrative agent, dated as of June 13, 2008. (Filed as Exhibit 10(d) to Southern Union Company’s QuarterlyReport on Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference.) |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 10(e) | Amended and Restated Credit Agreement between Trunkline LNG Holdings, LLC, as borrower, Panhandle Eastern Pipeline Company, LP and CrossCountry Citrus, LLC, as guarantors, the financial institutions listed therein and Bayerische Hypo-Und Vereinsbank AG, New York Branch, as administrative agent, dated as of June 29, 2007. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on July 6,2007 and incorporated herein by reference.) |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(f) | Credit Agreement between Trunkline LNG Holdings, LLC, as borrower, Panhandle Eastern Pipeline Company, LP and Trunkline LNG Company, LLC, as guarantors, the financial institutions listed therein and Hypo-Und Vereinsbank AG, New York Branch, as administrative agent, dated as of March 15, 2007. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on March 21, 2007 and incorporated hereinby reference.) |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |         10(g) | Form of Indemnification Agreement between Southern Union Company and each of the Directors of Southern Union Company and certain senior executive officers. (Filed as Exhibit 10(g) to Southern Union’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference.) |
|--------|--------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |         10(h) | Southern Union Company 1992 Long-Term Stock Incentive Plan, As Amended. (Filed as Exhibit 10(l) to Southern Union’s Annual Report on Form 10-K for the year ended June 30, 1998 and incorporated herein by reference.) * |
|--------|--------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(i) | Southern Union Company Director's Deferred Compensation Plan.  (Filed as Exhibit 10(g) to Southern Union's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.) |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(j) | First Amendment to Southern Union Company Director’s Deferred Compensation Plan, effective April 1, 2007. (Filed as Exhibit 10(h) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference.) |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(k) | Southern Union Company Amended Supplemental Deferred Compensation Plan with Amendments.  (Filed as Exhibit 4 to Southern Union’s Form S-8 filed May 27, 1999 and incorporated herein by reference.) * |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(l) | Second Amended and Restated Southern Union Company 2003 Stock and Incentive Plan. (Filed as Exhibit 4 to Form S-8, SEC File No. 333-138524, filed on November 8, 2006 and incorporated herein by reference.) * |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           10(m) | Third Amended and Restated Southern Union Company 2003 Stock and Incentive Plan. (Filed as Appendix I to Southern Union’s proxy statement on Schedule 14A filed on April 16, 2009 and incorporated herein by reference).* |
|---------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |         10(n) | Form of Long Term Incentive Award Agreement, dated December 28, 2006, between Southern Union Company and the undersigned. (Filed as Exhibit 99.1 to Southern Union’s Form 8-K dated January 3, 2007) and incorporated herein by reference.) * |
|--------|--------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(o) | Employment Agreement between Southern Union Company and George L. Lindemann, dated as of August 28, 2008.  (Filed as Exhibit 10(f) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) * |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(p) | Employment Agreement between Southern Union Company and Eric D. Herschmann, dated as of August 28, 2008.  (Filed as Exhibit 10(g) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) * |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 10(q) | Employment Agreement between Southern Union Company and Robert O. Bond, dated as of August 28, 2008.  (Filed as Exhibit 10(h) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) * |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(r) | Employment Agreement between Southern Union Company and Monica M. Gaudiosi, dated as of August 28, 2008.  (Filed as Exhibit 10(i) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) * |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(s) | Employment Agreement between Southern Union Company and Richard N. Marshall, dated as of August 28, 2008.  (Filed as Exhibit 10(j) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) * |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10(t) | Form of Change in Control Severance Agreement, between Southern Union Company and certain Executives (filed as Exhibit 10.2 to Southern Union’s Current Report on Form 8-K filed on August 28, 2008 and incorporated herein by reference.) * |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           10(u)   | Capital Stock Agreement dated June 30, 1986, as amended April 3, 2000 ("Agreement"), among El Paso Energy Corporation (as successor in interest to Sonat, Inc.); CrossCountry Energy, LLC (assignee of Enron Corp., which is the successor in interest to InterNorth, Inc. by virtue of a name change and successor in interest to Houston Natural Gas Corporation by virtue of a merger) and Citrus Corp. (Filed as Exhibit 10(t)to Southern Union’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference.) |
|--------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           10(v)    | Certificate of Incorporation of Citrus Corp.  (Filed as Exhibit 10(q) to Southern Union’s Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein by reference.) |
|--------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           10(w)    | By-Laws of Citrus Corp., filed herewith.  (Filed as Exhibit 10(r) to Southern Union’s Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein by reference.) |
|--------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 12 | Ratio of earnings to fixed charges. |
|--------|----|-------------------------------------|

|   |        14 | Code of Ethics and Business Conduct. (Filed as Exhibit 14 to Southern Union’s Annual Report on Form 10-K filed on March 16, 2006 and incorporated herein by reference.) |
|--------|----------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   |        21 |   | Subsidiaries of the Registrant. |
|--------|-----------------------------------------|--------|---------------------------------|

|   |      23.1 | Consent of Independent Registered Public Accounting Firm for Southern Union Company. |
|--------|-------------------------------|--------------------------------------------------------------------------------------|

|   |   23.2        Consent of Independent Registered Public Accounting Firm for Citrus Corp. |
|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   |       24 | Power of Attorney. |
|--------|----------------------------------------|--------------------|

|   |  31.1 | Certificate by Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  31.2 | Certificate by Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  32.1 | Certificate by Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) promulgated under the Securities Exchange Act of 1934 and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 32.2 | Certificate by Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) promulgated under the Securities Exchange Act of 1934 and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ____________ |
|--------|--------------|

|   | * Management contract or compensation plan or arrangement |
|--------|-----------------------------------------------------------|

----

|   | SOUTHERN UNION COMPANY                                        |
|--------|---------------------------------------------------------------|
|   |                                                          |
|   | By: /s/   George L. Lindemann                  |
|   |       George L. Lindemann       |
|   |       Chairman of the Board and |
|   |       Chief Executive Officer   |

| Signature/Name                                                                                          | Title                                                                                               |
|---------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------|
|  /s/ George L. Lindemann*George L. Lindemann                                                       |  Chairman of the Board andChief Executive Officer(Principal Executive Officer)                 |
|  /s/ Eric D. Herschmann*Eric D. Herschmann                                                         |  Vice Chairman of the Board, President and Chief Operating Officer                             |
|                                                                                                    |                                                                                                |
|  /s/ Richard N. MarshallRichard N. Marshall                                                        |  Senior Vice President and Chief Financial Officer(Principal Financial Officer)                |
|  /s/ George E. AldrichGeorge E. Aldrich                                                            |  Senior Vice President and Controller(Chief Accounting Officer)                                |
|                                                                                                    |                                                                                                |
|  /s/ Michal Barzuza*Michal Barzuza /s/ David Brodsky*David Brodsky                            |  Director  Director                                                        |
| /s/ Frank W. Denius*Frank W. Denius                                                                     | Director                                                                                            |
|  /s/ Kurt A. Gitter, M.D.*Kurt A. Gitter, M.D                                                      |  Director                                                                                      |
|  /s/ Herbert H. Jacobi*Herbert H. Jacobi                                                           |  Director                                                                                      |
|                                                                                                    |                                                                                                |
| /s/ Thomas N. McCarter, III*Thomas N. McCarter, III                                                     | Director                                                                                            |
|  /s/ George Rountree, III*George Rountree, III                                                     |  Director                                                                                      |
|  /s/ Allan D. Scherer*Allan Scherer                                                                |  Director                                                                                      |
|                                                                                                    |                                                                                                |
| *By:  /s/ RICHARD N. MARSHALL                                                                 | *By:  /s/ ROBERT M. KERRIGAN, III                                                         |
|          Richard N. Marshall                               |          Robert M. Kerrigan, III                       |
|          Senior Vice President and Chief Financial Officer |          Vice President, Assistant General Counsel and |
|          Attorney-in-fact                                  |          Secretary                                     |
|                                                                                                    |          Attorney-in-fact                              |

----

| Financial Statements and Supplementary Data:                                  | Page(s):  |
|-------------------------------------------------------------------------------|-----------|
| Consolidated Statement of Operations                                          | F-2       |
| Consolidated Balance Sheet                                                    | F-3 - F-4 |
| Consolidated Statement of Cash Flows                                          | F-5       |
| Consolidated Statement of Stockholders’ Equity and Comprehensive Income | F-6 - F-7 |
| Notes to Consolidated Financial Statements                                    | F-8       |
| Report of Independent Registered Public Accounting Firm                       | F-61      |

----

|                                               |   | Years Ended December 31,                 |      |
|----------------------------------------------------|--------|------------------------------------------|-----------|
|                                               |   | 2009                                     |      |   | 2008 |   |   | 2007 |   |
|                                               |   | (In thousands, except per share amounts) |      |
|                                               |   |                                     |      |   |   |   |   |   |   |
| Operating revenues (Note 17):                      |   |                                     |      |   |   |   |   |   |   |
| Natural gas gathering and processing               |   | $                                        | 732,251   |   |   | $ | 1,521,041 |   |   | $ | 1,221,747 |   |
| Natural gas distribution                           |   |                                     | 692,904   |   |   |   | 821,673 |   |   |   | 732,109 |   |
| Natural gas transportation and storage             |   |                                     | 749,161   |   |   |   | 721,640 |   |   |   | 658,446 |   |
| Other                                              |   |                                     | 4,702     |   |   |   | 5,800 |   |   |   | 4,363 |   |
| Total operating revenues                           |   |                                     | 2,179,018 |   |   |   | 3,070,154 |   |   |   | 2,616,665 |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Cost of natural gas and other energy               |   |                                     | 1,060,892 |   |   |   | 1,774,682 |   |   |   | 1,483,715 |   |
| Operating, maintenance and general                 |   |                                     | 468,721   |   |   |   | 473,614 |   |   |   | 444,408 |   |
| Depreciation and amortization                      |   |                                     | 213,827   |   |   |   | 199,249 |   |   |   | 177,999 |   |
| Revenue-related taxes                              |   |                                     | 36,375    |   |   |   | 44,259 |   |   |   | 38,584 |   |
| Taxes, other than on income and revenues           |   |                                     | 53,114    |   |   |   | 48,371 |   |   |   | 44,874 |   |
| Total operating expenses                           |   |                                     | 1,832,929 |   |   |   | 2,540,175 |   |   |   | 2,189,580 |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Operating income                                   |   |                                     | 346,089   |   |   |   | 529,979 |   |   |   | 427,085 |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Other income (expenses):                           |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Interest expense                                   |   |                                     | (196,800  | ) |   |   | (207,408 | ) |   |   | (203,146 | ) |
| Earnings from unconsolidated investments           |   |                                     | 80,790    |   |   |   | 75,030 |   |   |   | 100,914 |   |
| Other, net  (Note 22)                    |   |                                     | 21,401    |   |   |   | 2,325 |   |   |   | (883 | ) |
| Total other expenses, net                          |   |                                     | (94,609   | ) |   |   | (130,053 | ) |   |   | (103,115 | ) |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Earnings before income taxes                       |   |                                     | 251,480   |   |   |   | 399,926 |   |   |   | 323,970 |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Federal and state income tax expense (Note 9)      |   |                                     | 71,900    |   |   |   | 104,775 |   |   |   | 95,259 |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Net earnings                                       |   |                                     | 179,580   |   |   |   | 295,151 |   |   |   | 228,711 |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Preferred stock dividends                          |   |                                     | (8,683    | ) |   |   | (12,212 | ) |   |   | (17,365 | ) |
| Loss on extinguishment of preferred stock          |   |                                     | -         |   |   |   | (3,527 | ) |   |   | - |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Net earnings available for common stockholders     |   | $                                        | 170,897   |   |   | $ | 279,412 |   |   | $ | 211,346 |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Net earnings available for common stockholders per |   |                                     |      |   |   |   |   |   |   |   |   |   |
| share (Note 4):                                    |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Basic                                              |   | $                                        | 1.38      |   |   | $ | 2.26 |   |   | $ | 1.76 |   |
| Diluted                                            |   | $                                        | 1.37      |   |   | $ | 2.26 |   |   | $ | 1.75 |   |
| Cash dividends declared on common stock per share: |   | $                                        | 0.60      |   |   | $ | 0.60 |   |   | $ | 0.45 |   |
|                                               |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding (Note 4):      |   |                                     |      |   |   |   |   |   |   |   |   |   |
| Basic                                              |   |                                     | 124,076   |   |   |   | 123,446 |   |   |   | 119,930 |   |
| Diluted                                            |   |                                     | 124,409   |   |   |   | 123,644 |   |   |   | 120,674 |   |

----

|                                                 |   | December 31,   |       |
|------------------------------------------------------|--------|----------------|------------|
|                                                 |   | 2009           |       |   | 2008 |   |
|                                                 |   | (In thousands) |       |
|                                                 |   |           |       |   |   |   |
| Current assets:                                      |   |           |       |   |   |   |
| Cash and cash equivalents                            |   | $              | 10,545     |   |   | $ | 4,318 |   |
| Accounts receivable                                  |   |           |       |   |   |   |   |   |
| net of allowances of $1,874 and $6,003, respectively |   |           | 277,661    |   |   |   | 327,358 |   |
| Accounts receivable – affiliates               |   |           | 10,387     |   |   |   | 14,743 |   |
| Inventories                                          |   |           | 290,031    |   |   |   | 337,858 |   |
| Deferred natural gas purchases                       |   |           | 88,421     |   |   |   | 64,330 |   |
| Natural gas imbalances - receivable                  |   |           | 127,284    |   |   |   | 174,100 |   |
| Derivative instruments (Notes 10 and 11)             |   |           | 137        |   |   |   | 91,423 |   |
| Prepayments and other assets                         |   |           | 56,887     |   |   |   | 18,226 |   |
| Total current assets                                 |   |           | 861,353    |   |   |   | 1,032,356 |   |
|                                                 |   |           |       |   |   |   |   |   |
| Property, plant and equipment (Note 12):             |   |           |       |   |   |   |   |   |
| Plant in service                                     |   |           | 6,260,188  |   |   |   | 5,980,297 |   |
| Construction work in progress                        |   |           | 531,710    |   |   |   | 451,359 |   |
|                                                 |   |           | 6,791,898  |   |   |   | 6,431,656 |   |
| Less accumulated depreciation and amortization       |   |           | (1,162,685 | ) |   |   | (974,651 | ) |
| Net property, plant and equipment                    |   |           | 5,629,213  |   |   |   | 5,457,005 |   |
|                                                 |   |           |       |   |   |   |   |   |
| Deferred charges:                                    |   |           |       |   |   |   |   |   |
| Regulatory assets (Note 3)                           |   |           | 72,304     |   |   |   | 69,554 |   |
| Deferred charges                                     |   |           | 60,995     |   |   |   | 59,958 |   |
| Total deferred charges                               |   |           | 133,299    |   |   |   | 129,512 |   |
|                                                 |   |           |       |   |   |   |   |   |
| Unconsolidated investments  (Note 5)       |   |           | 1,340,048  |   |   |   | 1,259,270 |   |
|                                                 |   |           |       |   |   |   |   |   |
| Goodwill  (Note 19)                        |   |           | 89,227     |   |   |   | 89,227 |   |
|                                                 |   |           |       |   |   |   |   |   |
| Other                                                |   |           | 21,934     |   |   |   | 30,537 |   |
|                                                 |   |           |       |   |   |   |   |   |
|                                                 |   |           |       |   |   |   |   |   |
| Total assets                                         |   | $              | 8,075,074  |   |   | $ | 7,997,907 |   |

----

|                                                                       |   | December 31,   |      |
|----------------------------------------------------------------------------|--------|----------------|-----------|
|                                                                       |   | 2009           |      |   | 2008 |   |
|                                                                       |   | (In thousands) |      |
|                                                                       |   |           |      |   |   |   |
| Stockholders’ equity (Note 15):                                      |   |           |      |   |   |   |
| Common stock, $1 par value; 200,000 shares authorized;                     |   |           |      |   |   |   |
| 125,569 and 125,122  shares issued at December 31, 2009 and 2008 |   | $              | 125,569   |   |   | $ | 125,122 |   |
| Preferred stock, no par value; 6,000 shares authorized;                    |   |           |      |   |   |   |   |   |
| 460 and 460 shares issued at December 31, 2009 and 2008 (Note 16)          |   |           | 115,000   |   |   |   | 115,000 |   |
| Premium on capital stock                                                   |   |           | 1,905,293 |   |   |   | 1,893,975 |   |
| Less treasury stock: 1,171 and 1,120 shares, respectively, at cost         |   |           | (29,109   | ) |   |   | (28,004 | ) |
| Less common stock held in trust: 659 and 663 shares, respectively          |   |           | (11,769   | ) |   |   | (11,908 | ) |
| Deferred compensation plans                                                |   |           | 11,769    |   |   |   | 11,908 |   |
| Accumulated other comprehensive loss                                       |   |           | (56,505   | ) |   |   | (51,423 | ) |
| Retained earnings                                                          |   |           | 409,698   |   |   |   | 313,282 |   |
| Total stockholders' equity                                                 |   |           | 2,469,946 |   |   |   | 2,367,952 |   |
|                                                                       |   |           |      |   |   |   |   |   |
| Long-term debt obligations  (Note 7)                             |   |           | 3,421,236 |   |   |   | 3,257,434 |   |
|                                                                       |   |           |      |   |   |   |   |   |
| Total capitalization                                                       |   |           | 5,891,182 |   |   |   | 5,625,386 |   |
|                                                                       |   |           |      |   |   |   |   |   |
| Current liabilities:                                                       |   |           |      |   |   |   |   |   |
| Long-term debt due within one year  (Note 7)                     |   |           | 140,500   |   |   |   | 60,623 |   |
| Notes payable (Note 7)                                                     |   |           | 80,000    |   |   |   | 401,459 |   |
| Accounts payable and accrued liabilities                                   |   |           | 246,394   |   |   |   | 246,884 |   |
| Federal, state and local taxes payable                                     |   |           | 4,293     |   |   |   | 54,027 |   |
| Accrued interest                                                           |   |           | 40,061    |   |   |   | 41,141 |   |
| Natural gas imbalances - payable                                           |   |           | 322,200   |   |   |   | 341,987 |   |
| Derivative instruments (Notes 10 and 11)                                   |   |           | 97,008    |   |   |   | 77,554 |   |
| Other                                                                      |   |           | 123,899   |   |   |   | 128,190 |   |
| Total current liabilities                                                  |   |           | 1,054,355 |   |   |   | 1,351,865 |   |
|                                                                       |   |           |      |   |   |   |   |   |
| Deferred credits                                                           |   |           | 223,950   |   |   |   | 298,106 |   |
|                                                                       |   |           |      |   |   |   |   |   |
| Accumulated deferred income taxes  (Note 9)                      |   |           | 905,587   |   |   |   | 722,550 |   |
|                                                                       |   |           |      |   |   |   |   |   |
| Commitments and contingencies  (Note 14)                         |   |           |      |   |   |   |   |   |
|                                                                       |   |           |      |   |   |   |   |   |
| Total stockholders' equity and liabilities                                 |   | $              | 8,075,074 |   |   | $ | 7,997,907 |   |

----

|                                                          |   | Years Ended December 31, |     |
|---------------------------------------------------------------|--------|--------------------------|----------|
|                                                          |   | 2009                     |     |   | 2008 |   |   | 2007 |   |
|                                                          |   | (In thousands)           |     |
|                                                          |   |                     |     |   |   |   |   |   |   |
| Cash flows provided by (used in) operating activities:        |   |                     |     |   |   |   |   |   |   |
| Net earnings                                                  |   | $                        | 179,580  |   |   | $ | 295,151 |   |   | $ | 228,711 |   |
| Adjustments to reconcile net earnings to net cash flows       |   |                     |     |   |   |   |   |   |   |   |   |   |
| provided by (used in) operating activities:                   |   |                     |     |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                 |   |                     | 213,827  |   |   |   | 199,249 |   |   |   | 177,999 |   |
| Deferred income taxes                                         |   |                     | 121,210  |   |   |   | 83,066 |   |   |   | 71,147 |   |
| Provision for bad debts                                       |   |                     | 8,601    |   |   |   | 12,338 |   |   |   | 11,391 |   |
| Unrealized (gain) loss on commodity derivatives               |   |                     | 44,778   |   |   |   | (57,821 | ) |   |   | 9 |   |
| Loss (gain) on asset sales or dispositions                    |   |                     | 5,563    |   |   |   | (581 | ) |   |   | 915 |   |
| Share-based compensatione expense                             |   |                     | 7,510    |   |   |   | 6,468 |   |   |   | 3,345 |   |
| Earnings from unconsolidated investments,                     |   |                     |     |   |   |   |   |   |   |   |   |   |
| adjusted for cash distributions                               |   |                     | (80,790  | ) |   |   | 2,120 |   |   |   | 2,636 |   |
| Changes in operating assets and liabilities:                  |   |                     |     |   |   |   |   |   |   |   |   |   |
| Accounts receivable, billed and unbilled                      |   |                     | 45,452   |   |   |   | 6,168 |   |   |   | (76,778 | ) |
| Accounts payable and accrued liabilities                      |   |                     | 12,838   |   |   |   | (44,950 | ) |   |   | (22,788 | ) |
| Deferred natural gas purchase costs                           |   |                     | (73,174  | ) |   |   | 9,501 |   |   |   | (19,047 | ) |
| Inventories                                                   |   |                     | 76,098   |   |   |   | (65,384 | ) |   |   | 48,453 |   |
| Prepaids and other assets                                     |   |                     | 60,748   |   |   |   | 21,070 |   |   |   | 54,824 |   |
| Taxes and other liabilities                                   |   |                     | (57,962  | ) |   |   | 37,587 |   |   |   | (13,642 | ) |
| Deferred charges                                              |   |                     | (266     | ) |   |   | (4,786 | ) |   |   | 8,860 |   |
| Deferred credits                                              |   |                     | 15,200   |   |   |   | (12,369 | ) |   |   | (5,627 | ) |
| Net cash flows provided by operating activities               |   |                     | 579,213  |   |   |   | 486,827 |   |   |   | 470,408 |   |
| Cash flows (used in) provided by investing activities:        |   |                     |     |   |   |   |   |   |   |   |   |   |
| Additions to property, plant and equipment                    |   |                     | (405,381 | ) |   |   | (588,611 | ) |   |   | (616,883 | ) |
| Payments from sale of subsidiaries                            |   |                     | -        |   |   |   | - |   |   |   | (49,304 | ) |
| Plant retirements and other                                   |   |                     | (14,043  | ) |   |   | 19,659 |   |   |   | (417 | ) |
| Net cash flows used in investing activities                   |   |                     | (419,424 | ) |   |   | (568,952 | ) |   |   | (666,604 | ) |
| Cash flows provided by (used in) financing activities:        |   |                     |     |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in book overdraft                         |   |                     | 8,583    |   |   |   | (19,932 | ) |   |   | (7,738 | ) |
| Issuance of long-term debt                                    |   |                     | 303,905  |   |   |   | 403,820 |   |   |   | 755,000 |   |
| Issuance costs of debt and equity                             |   |                     | (4,011   | ) |   |   | (4,073 | ) |   |   | (5,794 | ) |
| Issuance of common stock                                      |   |                     | -        |   |   |   | 100,000 |   |   |   | - |   |
| Dividends paid on common stock                                |   |                     | (74,424  | ) |   |   | (73,782 | ) |   |   | (47,930 | ) |
| Dividends paid on preferred stock                             |   |                     | (8,683   | ) |   |   | (14,382 | ) |   |   | (17,365 | ) |
| Extinguishment of preferred stock                             |   |                     | -        |   |   |   | (115,232 | ) |   |   | - |   |
| Repayment of long-term debt obligation                        |   |                     | (60,623  | ) |   |   | (476,829 | ) |   |   | (508,406 | ) |
| Net change in revolving credit facilities and short-term debt |   |                     | (321,459 | ) |   |   | 278,459 |   |   |   | 23,000 |   |
| Proceeds from exercise of stock options                       |   |                     | 4,616    |   |   |   | 4,009 |   |   |   | 3,718 |   |
| Other                                                         |   |                     | (1,466   | ) |   |   | (1,305 | ) |   |   | 1,650 |   |
| Net cash flows provided by (used in) financing activities     |   |                     | (153,562 | ) |   |   | 80,753 |   |   |   | 196,135 |   |
| Change in cash and cash equivalents                           |   |                     | 6,227    |   |   |   | (1,372 | ) |   |   | (61 | ) |
| Cash and cash equivalents at beginning of period              |   |                     | 4,318    |   |   |   | 5,690 |   |   |   | 5,751 |   |
| Cash and cash equivalents at end of period                    |   | $                        | 10,545   |   |   | $ | 4,318 |   |   | $ | 5,690 |   |
|                                                          |   |                     |     |   |   |   |   |   |   |   |   |   |
|                                                          |   |                     |     |   |   |   |   |   |   |   |   |   |
| Cash paid for interest, net of amounts capitalized            |   | $                        | 217,437  |   |   | $ | 221,152 |   |   | $ | 213,656 |   |
| Cash paid for income taxes, net of refunds                    |   |                     | 486      |   |   |   | (4,001 | ) |   |   | 13,979 |   |

----

|                                                                                               |   | Common         |    | Preferred |   | Premium  |   |     |      | Common   |   | Deferred |   | Accumulated   |    |   |   |      |   |   | Total    |   |
|----------------------------------------------------------------------------------------------------|--------|----------------|---------|-----------|--------|----------|--------|----------|-----------|----------|--------|----------|--------|---------------|---------|--------|--------|-----------|--------|--------|----------|--------|
|                                                                                               |   | Stock,         |    | Stock,    |   | on       |   | Treasury |      | Stock    |   | Compen-  |   | Other         |    |   |   | Retained  |   |   | Stock-   |   |
|                                                                                               |   | $1 Par         |    | No Par    |   | Capital  |   | Stock,   |      | Held     |   | sation   |   | Comprehensive |    |   |   | Earnings  |   |   | holders' |   |
|                                                                                               |   | Value          |    | Value     |   | Stock    |   | at cost  |      | In Trust |   | Plans    |   | Income (Loss) |    |   |   | (Deficit) |   |   | Equity   |   |
|                                                                                               |   | (In thousands) |    |
|                                                                                               |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |
| Balance December 31, 2006                                                                          |   | $              | 120,718 |      | $      | 230,000  |   | $        | 1,775,763 |     | $      | (27,708  | )      | $             | (14,628 | )      | $      | 14,691    |   | $      | (901     | )      |   |   | $ | (47,527 | ) |   | $ | 2,050,408 |   |
| Comprehensive income (loss):                                                                       |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |   |   |   |   |   |   |   |   |   |
|    Net earnings                                                                     |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | 228,711 |   |   |   | 228,711 |   |
|    Net change in other                                                              |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |   |   |   |   |   |   |   |   |   |
|       comprehensive loss (Note 6),                                   |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | (10,693  | )      |   |   |   | - |   |   |   | (10,693 | ) |
|    Comprehensive income                                                             |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | 218,018 |   |
|    Preferred stock dividends                                                        |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | (17,365 | ) |   |   | (17,365 | ) |
|    Common stock dividends     declared                          |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | (53,968 | ) |   |   | (53,968 | ) |
|    Share-based compensation                                                         |   |           | -       |      |   | -        |   |     | 3,345     |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | 3,345 |   |
|    Restricted stock issuances                                                       |   |           | 111     |      |   | -        |   |     | (111      | )        |   | (131     | )      |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | (131 | ) |
|    Exercise of stock options                                                        |   |           | 273     |      |   | -        |   |     | 5,226     |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | 5,499 |   |
|    Contributions to Trust                                                           |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | (769    | )      |   | 769       |   |   | -        |   |   |   |   | - |   |   |   | - |   |
|    Disbursements from Trust                                                         |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | 312     |   |   | (312      | )      |   | -        |   |   |   |   | - |   |   |   | - |   |
| Balance December 31, 2007                                                                          |   | $              | 121,102 |      | $      | 230,000  |   | $        | 1,784,223 |     | $      | (27,839  | )      | $             | (15,085 | )      | $      | 15,148    |   | $      | (11,594  | )      |   |   | $ | 109,851 |   |   | $ | 2,205,806 |   |
| Comprehensive income (loss):                                                                       |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |   |   |   |   |   |   |   |   |   |
|    Net earnings                                                                     |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | 295,151 |   |   |   | 295,151 |   |
|    Net change in other                                                              |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |   |   |   |   |   |   |   |   |   |
|      comprehensive loss (Note 6),                                         |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | (40,920  | )      |   |   |   | - |   |   |   | (40,920 | ) |
|    Comprehensive income                                                             |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | 254,231 |   |
|    Effect of changing plan meas-                                                    |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |   |   |   |   |   |   |   |   |   |
|       urement date (Note 8)                                          |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | 1,091    |   |   |   |   | (1,597 | ) |   |   | (506 | ) |
|    Preferred stock dividends                                                        |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | (12,212 | ) |   |   | (12,212 | ) |
|    Common stock dividends          declared |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | (74,384 | ) |   |   | (74,384 | ) |
|    Issuance of common stock -                                                       |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |   |   |   |   |   |   |   |   |   |
|      remarketing obligation                                               |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |   |   |   |   |   |   |   |   |   |
|      (Note 7)                                                             |   |           | 3,693   |      |   | -        |   |     | 96,307    |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | 100,000 |   |
|   Share-based compensation                                                               |   |           | -       |      |   | -        |   |     | 6,468     |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | 6,468 |   |
|   Restricted stock issuances                                                             |   |           | 90      |      |   | -        |   |     | (90       | )        |   | (165     | )      |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | (165 | ) |
|   Exercise of stock options                                                              |   |           | 237     |      |   | -        |   |     | 3,772     |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | - |   |   |   | 4,009 |   |
|   Extinguishment of preferred                                                            |   |           |    |      |   |     |   |     |      |     |   |     |   |          |    |   |   |      |   |   |     |   |   |   |   |   |   |   |   |   |   |
|      stock (Note 16)                                                      |   |           | -       |      |   | (115,000 | )      |     | 3,295     |     |   | -        |   |          | -       |   |   | -         |   |   | -        |   |   |   |   | (3,527 | ) |   |   | (115,232 | ) |
|   Contributions to Trust                                                                 |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | (1,096  | )      |   | 1,096     |   |   | -        |   |   |   |   | - |   |   |   | - |   |
|   Disbursements from Trust                                                               |   |           | -       |      |   | -        |   |     | -         |     |   | -        |   |          | 4,273   |   |   | (4,336    | )      |   | -        |   |   |   |   | - |   |   |   | (63 | ) |
| Balance December 31, 2008                                                                          |   | $              | 125,122 |      | $      | 115,000  |   | $        | 1,893,975 |     | $      | (28,004  | )      | $             | (11,908 | )      | $      | 11,908    |   | $      | (51,423  | )      |   |   | $ | 313,282 |   |   | $ | 2,367,952 |   |

----

|                                                      |   | Common         |    | Preferred |   | Premium |   |     |      | Common   |   | Deferred |   | Accumulated   |    |     |   | Total    |   |
|-----------------------------------------------------------|--------|----------------|---------|-----------|--------|---------|--------|----------|-----------|----------|--------|----------|--------|---------------|---------|----------|--------|----------|--------|
|                                                      |   | Stock,         |    | Stock,    |   | on      |   | Treasury |      | Stock    |   | Compen-  |   | Other         |    |     |   | Stock-   |   |
|                                                      |   | $1 Par         |    | No Par    |   | Capital |   | Stock,   |      | Held     |   | sation   |   | Comprehensive |    | Retained |   | holders' |   |
|                                                      |   | Value          |    | Value     |   | Stock   |   | at cost  |      | In Trust |   | Plans    |   | Income (Loss) |    | Earnings |   | Equity   |   |
|                                                      |   | (In thousands) |    |
|                                                      |   |           |    |      |   |    |   |     |      |     |   |     |   |          |    |     |   |     |   |
| Balance December 31, 2008                                 |   | $              | 125,122 |      | $      | 115,000 |   | $        | 1,893,975 |     | $      | (28,004  | )      | $             | (11,908 | )        | $      | 11,908   |   | $ | (51,423 | ) | $ | 313,282 |   | $ | 2,367,952 |   |
| Comprehensive income (loss):                              |   |           |    |      |   |    |   |     |      |     |   |     |   |          |    |     |   |     |   |   |   |   |   |   |   |   |   |   |
|    Net earnings                            |   |           | -       |      |   | -       |   |     | -         |     |   | -        |   |          | -       |     |   | -        |   |   | - |   |   | 179,580 |   |   | 179,580 |   |
|    Net change in other                     |   |           |    |      |   |    |   |     |      |     |   |     |   |          |    |     |   |     |   |   |   |   |   |   |   |   |   |   |
|      comprehensive loss (Note 6) |   |           | -       |      |   | -       |   |     | -         |     |   | -        |   |          | -       |     |   | -        |   |   | (5,082 | ) |   | - |   |   | (5,082 | ) |
|    Comprehensive income                    |   |           | -       |      |   | -       |   |     | -         |     |   | -        |   |          | -       |     |   | -        |   |   | - |   |   | - |   |   | 174,498 |   |
|    Preferred stock dividends               |   |           | -       |      |   | -       |   |     | -         |     |   | -        |   |          | -       |     |   | -        |   |   | - |   |   | (8,683 | ) |   | (8,683 | ) |
|    Common stock dividends declared         |   |           | -       |      |   | -       |   |     | -         |     |   | -        |   |          | -       |     |   | -        |   |   | - |   |   | (74,481 | ) |   | (74,481 | ) |
|   Share-based compensation                      |   |           | -       |      |   | -       |   |     | 7,510     |     |   | -        |   |          | -       |     |   | -        |   |   | - |   |   | - |   |   | 7,510 |   |
|   Restricted stock issuances                    |   |           | 147     |      |   | -       |   |     | (633      | )        |   | (980     | )      |          | -       |     |   | -        |   |   | - |   |   | - |   |   | (1,466 | ) |
|   Exercise of stock options                     |   |           | 300     |      |   | -       |   |     | 4,441     |     |   | (125     | )      |          | -       |     |   | -        |   |   | - |   |   | - |   |   | 4,616 |   |
|   Contributions to Trust                        |   |           | -       |      |   | -       |   |     | -         |     |   | -        |   |          | (1,010  | )        |   | 1,010    |   |   | - |   |   | - |   |   | - |   |
|   Disbursements from Trust                      |   |           | -       |      |   | -       |   |     | -         |     |   | -        |   |          | 1,149   |     |   | (1,149   | )      |   | - |   |   | - |   |   | - |   |
| Balance December 31, 2009                                 |   | $              | 125,569 |      | $      | 115,000 |   | $        | 1,905,293 |     | $      | (29,109  | )      | $             | (11,769 | )        | $      | 11,769   |   | $ | (56,505 | ) | $ | 409,698 |   | $ | 2,469,946 |   |

----

----

----

|                                            |   | Years Ended December 31, |    |
|-------------------------------------------------|--------|--------------------------|---------|
|                                            |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                            |   | (In thousands)           |    |   |   |   |   |   |   |
|                                            |   |                     |    |   |   |   |   |   |   |
| Beginning balance                               |   | $                        | 6,003   |   |   | $ | 4,144 |   |   | $ | 4,830 |   |
| Additions: charged to cost and expenses         |   |                     | 8,601   |   |   |   | 12,338 |   |   |   | 11,391 |   |
| Deductions: write-off of uncollectible accounts |   |                     | (14,505 | ) |   |   | (10,560 | ) |   |   | (12,657 | ) |
| Other                                           |   |                     | 1,775   |   |   |   | 81 |   |   |   | 580 |   |
| Ending balance                                  |   | $                        | 1,874   |   |   | $ | 6,003 |   |   | $ | 4,144 |   |
|                                            |   |                     |    |   |   |   |   |   |   |   |   |   |

----

----

|                                              |   | Transportation & Storage |    | Gathering & Processing |   | Distribution |   | Total  |    |
|---------------------------------------------------|--------|------------------------------|---------|----------------------------|--------|--------------|--------|--------|---------|
|                                              |   |  (In thousands)         |    |
|                                              |   |                         |    |                       |   |         |   |   |    |
| At December 31, 2009                              |   |                         |    |                       |   |         |   |   |    |
| Current:                                          |   |                         |    |                       |   |         |   |   |    |
| Natural gas (1)                                   |   | $                            | 198,712 |                       | $      | -            |   | $      | -       |   | $ | 198,712 |   |
| Materials and Supplies                            |   |                         | 15,995  |                       |   | 9,307        |   |   | 3,926   |   |   | 29,228 |   |
| NGL  (2)                                |   |                         | -       |                       |   | 5,966        |   |   | -       |   |   | 5,966 |   |
| Natural gas in underground storage  (3) |   |                         | -       |                       |   | -            |   |   | 56,125  |   |   | 56,125 |   |
|    Total Current                   |   |                         | 214,707 |                       |   | 15,273       |   |   | 60,051  |   |   | 290,031 |   |
|                                              |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
| Non-Current:                                      |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
| Natural gas (1)                                   |   |                         | 8,831   |                       |   | -            |   |   | -       |   |   | 8,831 |   |
|                                              |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
|                                              |   | $                            | 223,538 |                       | $      | 15,273       |   | $      | 60,051  |   | $ | 298,862 |   |
|                                              |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
| At December 31, 2008                              |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
| Current:                                          |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
| Natural gas (1)                                   |   | $                            | 182,547 |                       | $      | -            |   | $      | -       |   | $ | 182,547 |   |
| Materials and Supplies                            |   |                         | 14,056  |                       |   | 9,278        |   |   | 4,488   |   |   | 27,822 |   |
| NGL  (2)                                |   |                         | -       |                       |   | 8,521        |   |   | -       |   |   | 8,521 |   |
| Natural gas in underground storage  (3) |   |                         | -       |                       |   | -            |   |   | 118,968 |   |   | 118,968 |   |
|    Total Current                   |   |                         | 196,603 |                       |   | 17,799       |   |   | 123,456 |   |   | 337,858 |   |
|                                              |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
| Non-Current:                                      |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
| Natural gas (1)                                   |   |                         | 17,687  |                       |   | -            |   |   | -       |   |   | 17,687 |   |
|                                              |   |                         |    |                       |   |         |   |   |    |   |   |   |   |
|                                              |   | $                            | 214,290 |                       | $      | 17,799       |   | $      | 123,456 |   | $ | 355,545 |   |

| (1)   | Natural gas volumes held for operations at December 31, 2009 and 2008 were 35,039,000 MMBtu and 31,751,000 MMBtu, respectively. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------|

| (2)   |   NGL at December 31, 2009 and December 31, 2008 was 6,680,000 gallons and 20,453,000 gallons, respectively. |
|-----------------|------------------------------------------------------------------------------------------------------------------------|

| (3)   |   Natural gas volumes in underground storage at December 31, 2009 and December 31, 2008 were 11,742,000 MMBtu and 12,702,000 MMBtu, respectively. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 – Observable inputs such as: (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active and do not require significant adjustment based on unobservable inputs; or (iii) valuations based on pricing models, discounted cash flow methodologiesor similar techniques where significant inputs (e.g., interest rates, yield curves, etc.) are derived principally from observable market data, or can be corroborated by observable market data, for substantially the full term of the assets or liabilities; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 – Unobservable inputs, including valuations based on pricing models, discounted cash flow methodologies or similar techniques where at least one significant model assumption or input is unobservable.  Unobservable inputs are used to the extent that observable inputs are not available and reflect the Company’s own assumptionsabout the assumptions market participants would use in pricing the assets or liabilities.  Unobservable inputs are based on the best information available in the circumstances, which might include the Company’s own data. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|                                |   | December 31,   |   |
|-------------------------------------|--------|----------------|--------|
|                                |   | 2009           |   |   | 2008 |   |
|                                |   | (In thousands) |   |
|                                |   |           |   |   |   |   |
| Pension and Postretirement Benefits |   | $              | 24,777 |   |   | $ | 27,496 |   |
| Environmental                       |   |           | 40,617 |   |   |   | 34,971 |   |
| Missouri Safety Program             |   |           | 2,228  |   |   |   | 3,309 |   |
| Other                               |   |           | 4,682  |   |   |   | 3,778 |   |
|                                |   | $              | 72,304 |   |   | $ | 69,554 |   |

----

|                                           |   | Years Ended December 31,                 |    |
|------------------------------------------------|--------|------------------------------------------|---------|
|                                           |   | 2009                                     |    |   | 2008 |   |   | 2007 |   |
|                                           |   | (In thousands, except per share amounts) |    |
|                                           |   |                                     |    |   |   |   |   |   |   |
| Net earnings                                   |   | $                                        | 179,580 |   |   | $ | 295,151 |   |   | $ | 228,711 |   |
| Preferred stock dividends                      |   |                                     | (8,683  | ) |   |   | (12,212 | ) |   |   | (17,365 | ) |
| Loss on extinguishment of preferred stock      |   |                                     | -       |   |   |   | (3,527 | ) |   |   | - |   |
| Net earnings available for common stockholders |   | $                                        | 170,897 |   |   | $ | 279,412 |   |   | $ | 211,346 |   |
|                                           |   |                                     |    |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding - Basic    |   |                                     | 124,076 |   |   |   | 123,446 |   |   |   | 119,930 |   |
| Weighted average shares outstanding - Diluted  |   |                                     | 124,409 |   |   |   | 123,644 |   |   |   | 120,674 |   |
|                                           |   |                                     |    |   |   |   |   |   |   |   |   |   |
| Net earnings available for common stockholders |   |                                     |    |   |   |   |   |   |   |   |   |   |
| per share:                                     |   |                                     |    |   |   |   |   |   |   |   |   |   |
| Basic                                          |   | $                                        | 1.38    |   |   | $ | 2.26 |   |   | $ | 1.76 |   |
| Diluted                                        |   | $                                        | 1.37    |   |   | $ | 2.26 |   |   | $ | 1.75 |   |

|                                          |   | Years Ended December 31, |    |
|-----------------------------------------------|--------|--------------------------|---------|
|                                          |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                          |   | (In thousands)           |    |
|                                          |   |                     |    |   |   |   |   |   |   |
| Weighted average shares outstanding - Basic   |   |                     | 124,076 |   |   |   | 123,446 |   |   |   | 119,930 |   |
| Add assumed vesting of restricted stock       |   |                     | 68      |   |   |   | 10 |   |   |   | 35 |   |
| Add assumed conversion of equity units        |   |                     | -       |   |   |   | - |   |   |   | 248 |   |
| Add assumed exercise of stock options         |   |                     |    |   |   |   |   |   |   |   |   |   |
|     and SARs                   |   |                     | 265     |   |   |   | 188 |   |   |   | 461 |   |
| Weighted average shares outstanding - Diluted |   |                     | 124,409 |   |   |   | 123,644 |   |   |   | 120,674 |   |
|                                          |   |                     |    |   |   |   |   |   |   |   |   |   |

----

|                                       |   | December 31,                             |            |
|--------------------------------------------|--------|------------------------------------------|-----------------|
|                                       |   | 2009                                     |            |   | 2008 |   |   | 2007 |   |
|                                       |   | (In thousands, except per share amounts) |            |
|                                       |   |                                     |            |   |   |   |   |   |   |
| Options excluded                           |   |                                     | 1,892           |   |   |   | 1,127 |   |   |   | - |   |
| Exercise price ranges of options excluded  |   |                                     | $21.64 - $28.48 |   |   |   | $23.62 - $28.48 |   |   |   | N/A |   |
| SARs excluded                              |   |                                     | 804             |   |   |   | 416 |   |   |   | - |   |
| Exercise price ranges of SARs excluded     |   |                                     | $21.64 - $28.48 |   |   |   | $28.07 - $28.48 |   |   |   | N/A |   |
| Year-to-date weighted-average market price |   |                                     | $17.70          |   |   |   | $22.85 |   |   |   | $30.58 |   |

|   |   | December 31,   |      |
|--------|--------|----------------|-----------|
|   |   | 2009           |      |   | 2008 |   |
|   |   | (In thousands) |      |
|   |   |           |      |   |   |   |
| Citrus |   | $              | 1,310,765 |   |   | $ | 1,238,198 |   |
| Other  |   |           | 29,283    |   |   |   | 21,072 |   |
|   |   | $              | 1,340,048 |   |   | $ | 1,259,270 |   |

----

|                    |   | December 31,   |      |
|-------------------------|--------|----------------|-----------|
|                    |   | 2009           |      |   | 2008 |   |
|                    |   |           |      |   | Other Equity |   |   |   |   |   | Other Equity |   |
|                    |   | Citrus         |      |   | Investments |   |   | Citrus |   |   | Investments |   |
|                    |   | (In thousands) |      |
|                    |   |           |      |   |   |   |   |   |   |   |   |   |
| Balance Sheet Data:     |   |           |      |   |   |   |   |   |   |   |   |   |
| Current assets          |   | $              | 365,414   |   |   | $ | 13,855 |   |   | $ | 78,624 |   |   | $ | 7,813 |   |
| Non-current assets      |   |           | 3,877,135 |   |   |   | 52,813 |   |   |   | 3,459,281 |   |   |   | 43,525 |   |
| Current liabilities     |   |           | 529,136   |   |   |   | 7,722 |   |   |   | 162,342 |   |   |   | 7,716 |   |
| Non-current liabilities |   |           | 2,365,719 |   |   |   | 347 |   |   |   | 2,154,550 |   |   |   | 272 |   |

|                          |           | Years Ended December 31, |
|-------------------------------|----------------|--------------------------|
|                          |           | 2009                     |   |   | 2008 |   |   | 2007 |   |
|                          |           |                     |   |   | Other Equity |   |   |   |   |   | Other Equity |   |   |   |   |   | Other Equity |   |
|                          |           | Citrus                   |   |   | Investments |   |   | Citrus |   |   | Investments |   |   | Citrus |   |   | Investments |   |
|                          | (In thousands) |
|                          |           |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Statement of Operations Data: |           |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                      |           | $                        | 508,416 |   |   | $ | 20,395 |   |   | $ | 504,819 |   |   | $ | 14,291 |   |   | $ | 495,513 |   |   | $ | 13,061 |   |
| Operating income (loss)       |           |                     | 271,897 |   |   |   | 13,765 |   |   |   | 275,245 |   |   |   | 3,019 |   |   |   | 283,203 |   |   |   | 4,424 |   |
| Net earnings                  |           |                     | 129,683 |   |   |   | 13,680 |   |   |   | 126,942 |   |   |   | 1,850 |   |   |   | 157,092 |   |   |   | 5,256 |   |

|                                                       |   | Excess Purchase Costs |    |   | Amortization Period |       |
|------------------------------------------------------------|--------|-----------------------|---------|--------|---------------------|------------|
|                                                       |   | (In thousands)        |    |   |                |       |
|                                                       |   |                  |    |   |                |       |
| Property, plant and equipment                              |   | $                     | 2,885   |   |                | 40 years   |   |
| Capitalized software                                       |   |                  | 1,478   |   |                | 5 years    |   |
| Long-term debt  (1)                              |   |                  | (80,204 | )      |                | 4-20 years |   |
| Deferred taxes  (1)                              |   |                  | (6,883  | )      |                | 40 years   |   |
| Other net liabilities                                      |   |                  | (541    | )      |                |       | N/A |   |
| Goodwill  (2)                                    |   |                  | 664,609 |   |                |       | N/A |   |
|    Sub-total                                     |   |                  | 581,344 |   |                |       |   |   |
| Accumulated, net accretion to equity earnings              |   |                  | 58,265  |   |                |       |   |   |
|    Net investment in excess of underlying equity |   | $                     | 639,609 |   |                |       |   |   |
|                                                       |   |                  |    |   |                |       |   |   |

| (1)   | Accretion of this amount increases equity earnings and accumulated net accretion. |
|-----------------|-----------------------------------------------------------------------------------|

| (2)   | The Company’s tax basis in the investment in Citrus includes equity goodwill. |
|-----------------|-------------------------------------------------------------------------------------|

----

----

----

----

|                                                                                          |   | Years Ended December 31, |    |
|-----------------------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                                          |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                                                                          |   | (In thousands)           |    |
|                                                                                          |   |                     |    |   |   |   |   |   |   |
| Net Earnings                                                                                  |   | $                        | 179,580 |   |   | $ | 295,151 |   |   | $ | 228,711 |   |
| Changes in Other Comprehensive Income (Loss):                                                 |   |                     |    |   |   |   |   |   |   |   |   |   |
| Change in fair value of interest rate hedges, net of tax of $(3,051),                         |   |                     |    |   |   |   |   |   |   |   |   |   |
| $(8,436) and $(6,729), respectively                                                           |   |                     | (4,538  | ) |   |   | (12,726 | ) |   |   | (12,407 | ) |
| Reclassification of unrealized (gain) loss on interest rate hedges                            |   |                     |    |   |   |   |   |   |   |   |   |   |
|     into earnings, net of tax of $8,222, $(2,287) and $(13), respectively |   |                     | 12,350  |   |   |   | (3,268 | ) |   |   | (4 | ) |
| Change in fair value of commodity hedges, net of tax of $3,773,                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| $13,549 and $(775), respectively                                                              |   |                     | 6,696   |   |   |   | 24,045 |   |   |   | (1,279 | ) |
| Reclassification of unrealized (gain) loss on commodity hedges into                           |   |                     |    |   |   |   |   |   |   |   |   |   |
| earnings, net of tax of $(16,231), $(2,466) and $(2,425), repectively                         |   |                     | (28,804 | ) |   |   | (4,375 | ) |   |   | (3,997 | ) |
| Actuarial gain (loss) relating to pension and other postretirement benefits,                  |   |                     |    |   |   |   |   |   |   |   |   |   |
|  net of tax of $6,535, $(23,763) and $3,043, respectively                                |   |                     | 8,185   |   |   |   | (41,784 | ) |   |   | 5,521 |   |
| Prior service cost relating to pension and other postretirement                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| benefit plan amendments, net of tax of $(151), $(3,691) and $(1,987),                         |   |                     |    |   |   |   |   |   |   |   |   |   |
|     respectively                                                          |   |                     | (186    | ) |   |   | (5,677 | ) |   |   | (1,924 | ) |
| Reclassification of net actuarial loss and prior service credit                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| relating to pension and other postretirement benefits into                                    |   |                     |    |   |   |   |   |   |   |   |   |   |
| earnings, net of tax of $2,814, $2,034 and $1,619, respectively                               |   |                     | 4,035   |   |   |   | 2,865 |   |   |   | 3,397 |   |
| Change in other comprehensive income (loss) from equity                                       |   |                     |    |   |   |   |   |   |   |   |   |   |
| investments, net of tax of $(1,744), $0 and $0, respectively                                  |   |                     | (2,820  | ) |   |   | - |   |   |   | - |   |
| Total other comprehensive income (loss)                                                       |   |                     | (5,082  | ) |   |   | (40,920 | ) |   |   | (10,693 | ) |
| Total comprehensive income                                                                    |   | $                        | 174,498 |   |   | $ | 254,231 |   |   | $ | 218,018 |   |

|                                                                             |   | December 31,   |    |
|----------------------------------------------------------------------------------|--------|----------------|---------|
|                                                                             |   | 2009           |    |   | 2008 |   |
|                                                                             |   | (In thousands) |    |
|                                                                             |   |           |    |   |   |   |
| Interest rate hedges, net                                                        |   | $              | (22,905 | ) |   | $ | (30,717 | ) |
| Commodity hedges, net                                                            |   |           | (2,438  | ) |   |   | 19,670 |   |
| Benefit plans:                                                                   |   |           |    |   |   |   |   |   |
| Net actuarial loss and prior service costs, net - pensions                       |   |           | (34,234 | ) |   |   | (44,664 | ) |
| Net actuarial gain and prior service credit, net - other postretirement benefits |   |           | 5,892   |   |   |   | 4,288 |   |
| Equity investments, net                                                          |   |           | (2,820  | ) |   |   | - |   |
| Total Accumulated other comprehensive loss, net of tax                           |   | $              | (56,505 | ) |   | $ | (51,423 | ) |

----

|                                     |   | December 31, 2009 |      |   | December 31, 2008 |   |
|------------------------------------------|--------|-------------------|-----------|--------|-------------------|--------|
|                                     |   | Carrying Value    |      |   | Fair Value        |   |   | Carrying Value |   |   | Fair Value |   |
|                                     |   | (In thousands)    |      |
|                                     |   |              |      |   |              |   |   |   |   |   |   |   |
| Long-Term Debt Obligations:              |   |              |      |   |              |   |   |   |   |   |   |   |
|                                     |   |              |      |   |              |   |   |   |   |   |   |   |
| Southern Union:                          |   |              |      |   |              |   |   |   |   |   |   |   |
| 7.60% Senior Notes due 2024              |   | $                 | 359,765   |   |              | $      | 389,820 |   |   | $ | 359,765 |   |   | $ | 272,165 |   |
| 8.25% Senior Notes due 2029              |   |              | 300,000   |   |              |   | 337,800 |   |   |   | 300,000 |   |   |   | 229,470 |   |
| 7.24% to 9.44% First Mortgage Bonds      |   |              |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| due 2020 to 2027                         |   |              | 19,500    |   |              |   | 21,403 |   |   |   | 19,500 |   |   |   | 16,248 |   |
| 6.089% Senior Notes due 2010             |   |              | 100,000   |   |              |   | 100,250 |   |   |   | 100,000 |   |   |   | 92,701 |   |
| 7.20% Junior Subordinated Notes due 2066 |   |              | 600,000   |   |              |   | 510,000 |   |   |   | 600,000 |   |   |   | 215,999 |   |
| Term Loan due 2011                       |   |              | 150,000   |   |              |   | 150,178 |   |   |   | - |   |   |   | - |   |
| Note Payable                             |   |              | 7,725     |   |              |   | 7,725 |   |   |   | 3,820 |   |   |   | 3,820 |   |
|                                     |   |              | 1,536,990 |   |              |   | 1,517,176 |   |   |   | 1,383,085 |   |   |   | 830,403 |   |
|                                     |   |              |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Panhandle:                               |   |              |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| 6.05% Senior Notes due 2013              |   |              | 250,000   |   |              |   | 269,733 |   |   |   | 250,000 |   |   |   | 211,646 |   |
| 6.20% Senior Notes due 2017              |   |              | 300,000   |   |              |   | 319,455 |   |   |   | 300,000 |   |   |   | 230,956 |   |
| 6.50% Senior Notes due 2009              |   |              | -         |   |              |   | - |   |   |   | 60,623 |   |   |   | 59,604 |   |
| 8.125% Senior Notes due 2019             |   |              | 150,000   |   |              |   | 173,111 |   |   |   | - |   |   |   | - |   |
| 8.25% Senior Notes due 2010              |   |              | 40,500    |   |              |   | 41,143 |   |   |   | 40,500 |   |   |   | 39,668 |   |
| 7.00% Senior Notes due 2029              |   |              | 66,305    |   |              |   | 69,866 |   |   |   | 66,305 |   |   |   | 46,158 |   |
| 7.00% Senior Notes due 2018              |   |              | 400,000   |   |              |   | 434,560 |   |   |   | 400,000 |   |   |   | 318,033 |   |
| Term Loans due 2012                      |   |              | 815,391   |   |              |   | 758,108 |   |   |   | 815,391 |   |   |   | 753,262 |   |
| Net premiums on long-term debt           |   |              | 2,550     |   |              |   | 2,550 |   |   |   | 2,153 |   |   |   | 2,153 |   |
|                                     |   |              | 2,024,746 |   |              |   | 2,068,526 |   |   |   | 1,934,972 |   |   |   | 1,661,480 |   |
|                                     |   |              |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total Long-Term Debt Obligations         |   |              | 3,561,736 |   |              |   | 3,585,702 |   |   |   | 3,318,057 |   |   |   | 2,491,883 |   |
|                                     |   |              |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Credit Facilities                        |   |              | 80,000    |   |              |   | 78,968 |   |   |   | 251,459 |   |   |   | 243,205 |   |
| Short-Term Facility                      |   |              | -         |   |              |   | - |   |   |   | 150,000 |   |   |   | 148,496 |   |
|                                     |   |              |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total consolidated debt obligations      |   |              | 3,641,736 |   |              | $      | 3,664,670 |   |   |   | 3,719,516 |   |   | $ | 2,883,584 |   |
| Less current portion of long-term debt   |   |              | 140,500   |   |              |   |   |   |   |   | 60,623 |   |   |   |   |   |
| Less short-term debt                     |   |              | 80,000    |   |              |   |   |   |   |   | 401,459 |   |   |   |   |   |
| Total long-term debt                     |   | $                 | 3,421,236 |   |              |   |   |   |   | $ | 3,257,434 |   |   |   |   |   |

----

|                   |   |           |    |   |   |   |    |   |   |   |    |   |   |   |    |   | 2015 and   |   |
|------------------------|--------|----------------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|------------|--------|
|                   |   | 2010           |    |   | 2011   |   |    | 2012   |   |   | 2013    |   |   | 2014   |    |   | thereafter |   |
|                   |   | (In thousands) |    |
|                   |   |           |    |   |   |   |    |   |   |   |    |   |   |   |    |   |       |   |
| Southern Union Company |   | $              | 100,000 |   |   | $      | 151,998 |   |   | $      | 964     |   |   | $      | 933     |   |       | $      | 905 |   |   | $ | 1,282,190 |   |
| Panhandle              |   |           | 40,500  |   |   |   | -       |   |   |   | 815,391 |   |   |   | 250,000 |   |       |   | - |   |   |   | 916,305 |   |
|                   |   |           |    |   |   |   |    |   |   |   |    |   |   |   |    |   |       |   |   |   |   |   |   |   |
| Total                  |   | $              | 140,500 |   |   | $      | 151,998 |   |   | $      | 816,355 |   |   | $      | 250,933 |   |       | $      | 905 |   |   | $ | 2,198,495 |   |

----

----

|   | (a)   | Under the Company’s Revolver, the consolidated debt to total capitalization ratio, as defined therein, cannot exceed 65 percent;                                                                                                                                         |
|--------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (b)   | Under the Company’s Revolver, the Company must maintain an earnings before interest, tax, depreciation and amortization interest coverage ratio of at least 2.00 times;                                                                                                  |
|   | (c)   | Under the Company’s First Mortgage Bond indentures for the Fall River Gas division of New England Gas Company, the Company’s consolidated debt to total capitalization ratio, as defined therein, cannot exceed 70 percent at the end of any calendar quarter; and |
|   | (d)   | All of the Company’s major borrowing agreements contain cross-defaults if the Company defaults on an agreement involving at least $2 million of principal.                                                                                                               |

----

|                                             |   | Pension Benefits |    |   | Other Postretirement Benefits |   |
|--------------------------------------------------|--------|------------------|---------|--------|-------------------------------|--------|
|                                             |   | December 31,     |    |   | December 31,                  |   |
|                                             |   | 2009             |    |   | 2008                          |   |   | 2009 |   |   | 2008 |   |
|                                             |   | (In thousands)   |    |
|                                             |   |             |    |   |                          |   |   |   |   |   |   |   |
| Change in benefit obligation:                    |   |             |    |   |                          |   |   |   |   |   |   |   |
| Benefit obligation at beginning of period        |   | $                | 172,063 |   |                          | $      | 162,824 |   |   | $ | 91,119 |   |   | $ | 76,273 |   |
| Service cost                                     |   |             | 2,778   |   |                          |   | 3,245 |   |   |   | 2,970 |   |   |   | 2,664 |   |
| Interest cost                                    |   |             | 9,955   |   |                          |   | 12,466 |   |   |   | 5,481 |   |   |   | 5,938 |   |
| Benefits paid, net                               |   |             | (10,089 | )      |                          |   | (13,325 | ) |   |   | (2,611 | ) |   |   | (2,899 | ) |
| Medicare Part D subsidy receipts                 |   |             | -       |   |                          |   | - |   |   |   | 186 |   |   |   | - |   |
| Actuarial (gain) loss and other                  |   |             | 2,528   |   |                          |   | 6,853 |   |   |   | 572 |   |   |   | (225 | ) |
| Plan amendments                                  |   |             | -       |   |                          |   | - |   |   |   | 338 |   |   |   | 9,368 |   |
| Benefit obligation at end of period              |   | $                | 177,235 |   |                          | $      | 172,063 |   |   | $ | 98,055 |   |   | $ | 91,119 |   |
|                                             |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Change in plan assets:                           |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Fair value of plan assets at beginning of period |   | $                | 102,395 |   |                          | $      | 128,342 |   |   | $ | 51,030 |   |   | $ | 54,010 |   |
| Return on plan assets and other                  |   |             | 19,018  |   |                          |   | (30,983 | ) |   |   | 10,501 |   |   |   | (10,121 | ) |
| Employer contributions                           |   |             | 4,539   |   |                          |   | 18,361 |   |   |   | 9,983 |   |   |   | 10,040 |   |
| Benefits paid, net                               |   |             | (10,089 | )      |                          |   | (13,325 | ) |   |   | (2,611 | ) |   |   | (2,899 | ) |
| Fair value of plan assets at end of period       |   | $                | 115,863 |   |                          | $      | 102,395 |   |   | $ | 68,903 |   |   | $ | 51,030 |   |
|                                             |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Amount underfunded at end of period              |   | $                | (61,372 | )      |                          | $      | (69,668 | ) |   | $ | (29,152 | ) |   | $ | (40,089 | ) |
|                                             |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Amounts recognized in the Consolidated           |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet consist of:                        |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Noncurrent assets                                |   | $                | -       |   |                          | $      | - |   |   | $ | 1,898 |   |   | $ | - |   |
| Current liabilities                              |   |             | (13     | )      |                          |   | (13 | ) |   |   | (79 | ) |   |   | (140 | ) |
| Noncurrent liabilities                           |   |             | (61,359 | )      |                          |   | (69,655 | ) |   |   | (30,971 | ) |   |   | (39,949 | ) |
|                                             |   | $                | (61,372 | )      |                          | $      | (69,668 | ) |   | $ | (29,152 | ) |   | $ | (40,089 | ) |
|                                             |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Amounts recognized in Accumulated other          |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| comprehensive loss (pre-tax basis) consist of:   |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |
| Net actuarial loss (gain)                        |   | $                | 51,686  |   |                          | $      | 68,005 |   |   | $ | (4,174 | ) |   | $ | 1,785 |   |
| Prior service cost (credit)                      |   |             | 3,104   |   |                          |   | 3,655 |   |   |   | (573 | ) |   |   | (2,171 | ) |
|                                             |   | $                | 54,790  |   |                          | $      | 71,660 |   |   | $ | (4,747 | ) |   | $ | (386 | ) |
|                                             |   |             |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |

----

|                           |   | Pension Benefits     |    |   |   | Other Postretirement Benefits |    |
|--------------------------------|--------|----------------------|---------|--------|--------|-------------------------------|---------|
|                           |   | December 31,         |    |   |   | December 31,                  |    |
|                           |   | 2009                 |    |   | 2008   |                          |    |   | 2009 |   |   | 2008 |   |
|                           |   |  (In thousands) |    |
|                           |   |                 |    |   |   |                          |    |   |   |   |   |   |   |
| Projected benefit obligation   |   | $                    | 177,235 |   |   | $                             | 172,063 |   |   |   |   | N/A |   |   |   | N/A |   |
| Accumulated benefit obligation |   |                 | 169,564 |   |   |                          | 163,999 |   |   |   | $ | 94,442 |   |   | $ | 86,917 |   |
| Fair value of plan assets      |   |                 | 115,863 |   |   |                          | 102,395 |   |   |   |   | 63,392 |   |   |   | 46,340 |   |

|                                 |   | Pension Benefits         |   |   | Other Postretirement Benefits |   |
|--------------------------------------|--------|--------------------------|--------|--------|-------------------------------|--------|
|                                 |   | Years Ended December 31, |   |   | Years Ended December 31,      |   |
|                                 |   | 2009                     |   |   | 2008                          |   |   | 2007 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                 |   | (In thousands)           |   |
|                                 |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Periodic Benefit Cost:           |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                         |   | $                        | 2,778  |   |                          | $      | 2,596 |   |   | $ | 2,715 |   |   | $ | 2,970 |   |   | $ | 2,525 |   |   | $ | 1,788 |   |
| Interest cost                        |   |                     | 9,955  |   |                          |   | 9,972 |   |   |   | 9,388 |   |   |   | 5,481 |   |   |   | 5,415 |   |   |   | 4,053 |   |
| Expected return on plan assets       |   |                     | (8,577 | )      |                          |   | (11,501 | ) |   |   | (9,619 | ) |   |   | (3,123 | ) |   |   | (3,246 | ) |   |   | (2,858 | ) |
| Prior service cost (credit)          |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| amortization                         |   |                     | 552    |   |                          |   | 560 |   |   |   | 623 |   |   |   | (1,260 | ) |   |   | (1,521 | ) |   |   | (2,809 | ) |
| Actuarial (gain) loss                |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| amortization                         |   |                     | 8,405  |   |                          |   | 6,867 |   |   |   | 8,029 |   |   |   | (847 | ) |   |   | (1,006 | ) |   |   | (768 | ) |
| Transfer of assets in excess         |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of obligations                       |   |                     | -      |   |                          |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,915 |   |
|                                 |   |                     | 13,113 |   |                          |   | 8,494 |   |   |   | 11,136 |   |   |   | 3,221 |   |   |   | 2,167 |   |   |   | 1,321 |   |
| Regulatory adjustment  (1) |   |                     | 54     |   |                          |   | 2,728 |   |   |   | (1,578 | ) |   |   | 2,665 |   |   |   | 2,665 |   |   |   | 2,665 |   |
| Net periodic benefit cost            |   | $                        | 13,167 |   |                          | $      | 11,222 |   |   | $ | 9,558 |   |   | $ | 5,886 |   |   | $ | 4,832 |   |   | $ | 3,986 |   |

| (1)   | In the Distribution segment, the Company recovers certain qualified pension benefit plan and other postretirement benefit plan costs through rates charged to utility customers.  Certain utility commissions require that the recovery of these costs be based on the Employee Retirement Income Security Act of 1974, as amended, or other utility commissionspecific guidelines.  The difference between these regulatory-based amounts and the periodic benefit cost calculated pursuant to GAAP is deferred as a regulatory asset or liability and amortized to expense over periods in which this difference will be recovered in rates, as promulgated by the applicable utility commission. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                          |   | Pension Benefits         |   |   | Other Postretirement Benefits |   |
|-------------------------------|--------|--------------------------|--------|--------|-------------------------------|--------|
|                          |   | Years Ended December 31, |   |   | Years Ended December 31,      |   |
|                          |   | 2009                     |   |   | 2008                          |   |   | 2007 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                          |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount rate                 |   |                     | 5.82   | %      |                          |   | 6.05 | % |   |   | 6.24 | % |   |   | 5.85 | % |   |   | 6.05 | % |   |   | 6.34 | % |
| Rate of compensation increase |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (average)                     |   |                     | 3.24   | %      |                          |   | 3.24 | % |   |   | 3.47 | % |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |

|                          |   | Pension Benefits         |   |   | Other Postretirement Benefits |   |
|-------------------------------|--------|--------------------------|--------|--------|-------------------------------|--------|
|                          |   | Years Ended December 31, |   |   | Years Ended December 31,      |   |
|                          |   | 2009                     |   |   | 2008                          |   |   | 2007 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                          |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount rate                 |   |                     | 6.05   | %      |                          |   | 6.24 | % |   |   | 5.77 | % |   |   | 6.05 | % |   |   | 6.52 | % |   |   | 5.78 | % |
| Expected return on assets:    |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax exempt accounts           |   |                     | 8.50   | %      |                          |   | 8.75 | % |   |   | 8.75 | % |   |   | 7.00 | % |   |   | 7.00 | % |   |   | 7.00 | % |
| Taxable accounts              |   |                     | N/A    |   |                          |   | N/A |   |   |   | N/A |   |   |   | 5.00 | % |   |   | 5.00 | % |   |   | 5.00 | % |
| Rate of compensation increase |   |                     | 3.24   | %      |                          |   | 3.47 | % |   |   | 3.24 | % |   |   | N/A |   |   |   | N/A |   |   |   | N/A |   |
|                          |   |                     |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                               |   | December 31, |   |
|----------------------------------------------------|--------|--------------|--------|
|                                               |   | 2009         |   |   | 2008 |   |
|                                               |   |         |   |   |   |   |
| Health care cost trend rate assumed for next year  |   |         | 8.50   | % |   |   | 9.00 | % |
| Ultimate trend rate                                |   |         | 4.85   | % |   |   | 4.85 | % |
| Year that the rate reaches the ultimate trend rate |   |         | 2017   |   |   |   | 2017 |   |

|                                                    |           | One Percentage |   |   | One Percentage |   |
|---------------------------------------------------------|----------------|----------------|--------|--------|----------------|--------|
|                                                    |           | Point Increase |   |   | Point Decrease |   |
|                                                    | (In thousands) |
|                                                    |           |           |   |   |           |   |
| Effect on total of service and interest cost            |           | $              | 783    |   |           | $      | (793 | ) |
| Effect on accumulated postretirement benefit obligation |           |           | 9,013  |   |           |   | (7,991 | ) |

----

|            |   | Fair Value        |    |   |   |   | Fair Value Measurements at December 31, 2009 |   |
|-----------------|--------|-------------------|---------|--------|--------|--------|----------------------------------------------|--------|
|            |   | as of             |    |   |   |   | Using Fair Value Hierarchy                   |   |
|            |   | December 31, 2009 |    |   |   |   | Level 1                                      |   |   | Level 2 |   |   | Level 3 |   |
|            |   | (In thousands)    |    |
| Asset Category: |   |              |    |   |   |   |                                         |   |   |   |   |   |   |   |
| Cash and Cash   |   |              |    |   |   |   |                                         |   |   |   |   |   |   |   |
| Equivalents     |   | $                 | 9,726   |   |   |   |                                         | $      | 9,726 |   |   | $ | - |   |   | $ | - |   |
| Mutual fund     |   |              | 96,514  |   | (1     | )      |                                         |   | - |   |   |   | 96,514 |   |   |   | - |   |
| Multi-strategy  |   |              |    |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| hedge funds     |   |              | 9,623   |   | (2     | )      |                                         |   | - |   |   |   | 9,623 |   |   |   | - |   |
| Total           |   | $                 | 115,863 |   |   |   |                                         | $      | 9,726 |   |   | $ | 106,137 |   |   | $ | - |   |

|            |   | Fair Value        |   |   |   |   | Fair Value Measurements at December 31, 2009 |   |
|-----------------|--------|-------------------|--------|--------|--------|--------|----------------------------------------------|--------|
|            |   | as of             |   |   |   |   | Using Fair Value Hierarchy                   |   |
|            |   | December 31, 2009 |   |   |   |   | Level 1                                      |   |   | Level 2 |   |   | Level 3 |   |
|            |   | (In thousands)    |   |
| Asset Category: |   |              |   |   |   |   |                                         |   |   |   |   |   |   |   |
| Cash and Cash   |   |              |   |   |   |   |                                         |   |   |   |   |   |   |   |
| Equivalents     |   | $                 | 2,172  |   |   |   |                                         | $      | 2,172 |   |   | $ | - |   |   | $ | - |   |
| Mutual fund     |   |              | 66,731 |   | (3     | )      |                                         |   | 66,731 |   |   |   | - |   |   |   | - |   |
| Total           |   | $                 | 68,903 |   |   |   |                                         | $      | 68,903 |   |   | $ | - |   |   | $ | - |   |

| (1)   | This fund of funds invests primarily in a diversified portfolio of equity and fixed income securities and real estate assets and real estate securities.  As of December 31, 2009, the fund was primarily comprised of approximately 30 percent large-cap U.S. equities, 9 percent multi-cap U.S. equities, 5 percent small-cap U.S. equities, 20 percentinternational equities, 30 percent fixed income securities, 3 percent cash, and 3 percent in other investments.  These investments are generally redeemable on a daily basis at the net asset value per share of the investment. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Primarily includes hedge funds that invest in multiple strategies, including relative value, opportunistic/macro, long/short equities, merger arbitrage/event driven, credit, and short selling strategies, to generate long-term capital appreciation through a portfolio having a diversified risk profile with relatively low volatility and a low correlationwith traditional equity and fixed-income markets.  These investments can generally be redeemed effective as of the last day of a calendar quarter at the net asset value per share of the investment with approximately 65 days prior written notice. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | This fund of funds primarily invests in a combination of equity, fixed income and short-term mutual funds.  As of December 31, 2009, the fund was primarily comprised of approximately 16 percent large-cap U.S. equities, 3 percent small-cap U.S. equities,10 percent international equities, 57 percent fixed income securities, 10 percent cash, and4 percent in other investments.   |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|      |   |           |   |   | Other            |   |   | Other             |   |
|-----------|--------|----------------|--------|--------|------------------|--------|--------|-------------------|--------|
|      |   |           |   |   | Postretirement   |   |   | Postretirement    |   |
|      |   |           |   |   | Benefits         |   |   | Benefits          |   |
|      |   | Pension        |   |   | (Gross, Before   |   |   | (Medicare Part D  |   |
| Years     |   | Benefits       |   |   | Medicare Part D) |   |   | Subsidy Receipts) |   |
|      |   | (In thousands) |   |
| 2010      |   | $              | 10,938 |   |             | $      | 4,070  |              |   | $ | 593 |   |
| 2011      |   |           | 11,034 |   |             |   | 4,591  |              |   |   | 652 |   |
| 2012      |   |           | 11,826 |   |             |   | 5,194  |              |   |   | 739 |   |
| 2013      |   |           | 11,923 |   |             |   | 5,925  |              |   |   | 716 |   |
| 2014      |   |           | 12,274 |   |             |   | 6,686  |              |   |   | 811 |   |
| 2015-2019 |   |           | 63,346 |   |             |   | 42,174 |              |   |   | 6,073 |   |

----

|                               |   | Years Ended December 31, |    |
|------------------------------------|--------|--------------------------|---------|
|                               |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                               |   |                     |    |   |  (In thousands) |   |   |   |   |
| Current:                           |   |                     |    |   |   |   |   |   |   |
| Federal                            |   | $                        | (44,060 | ) |   | $ | 22,267 |   |   | $ | 18,458 |   |
| State                              |   |                     | (5,250  | ) |   |   | (558 | ) |   |   | 5,654 |   |
|                               |   |                     | (49,310 | ) |   |   | 21,709 |   |   |   | 24,112 |   |
|                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Deferred:                          |   |                     |    |   |   |   |   |   |   |   |   |   |
| Federal                            |   |                     | 108,956 |   |   |   | 68,370 |   |   |   | 62,502 |   |
| State                              |   |                     | 12,254  |   |   |   | 14,696 |   |   |   | 8,645 |   |
|                               |   |                     | 121,210 |   |   |   | 83,066 |   |   |   | 71,147 |   |
|                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Total federal and state income tax |   |                     |    |   |   |   |   |   |   |   |   |   |
| expense from continuing operations |   | $                        | 71,900  |   |   | $ | 104,775 |   |   | $ | 95,259 |   |
|                               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Effective tax rate                 |   |                     | 29      | % |   |   | 26 | % |   |   | 29 | % |
|                               |   |                     |    |   |   |   |   |   |   |   |   |   |

|                                              |   | December 31,         |       |
|---------------------------------------------------|--------|----------------------|------------|
|                                              |   | 2009                 |       |   |   | 2008 |   |
|                                              |   |  (In thousands) |       |
|                                              |   |                 |       |   |   |   |   |
| Deferred income tax assets:                       |   |                 |       |   |   |   |   |
| Alternative minimum tax credit                    |   | $                    | 27,894     |   |   |   | $ | 7,249 |   |
| Post-retirement benefits                          |   |                 | 31,159     |   |   |   |   | 34,492 |   |
| Pension benefits                                  |   |                 | 16,162     |   |   |   |   | 25,470 |   |
| Unconsolidated investments                        |   |                 | 5,431      |   |   |   |   | 5,448 |   |
| Derivative financial instruments (interest rates) |   |                 | 16,152     |   |   |   |   | 19,578 |   |
| Derivative financial instruments (commodities)    |   |                 | 19,114     |   |   |   |   | - |   |
| Other                                             |   |                 | 33,110     |   |   |   |   | 23,515 |   |
| Total deferred income tax assets                  |   |                 | 149,022    |   |   |   |   | 115,752 |   |
|                                              |   |                 |       |   |   |   |   |   |   |
| Deferred income tax liabilities:                  |   |                 |       |   |   |   |   |   |   |
| Property, plant and equipment                     |   |                 | (929,424   | ) |   |   |   | (770,761 | ) |
| Unconsolidated Investments (Citrus)               |   |                 | (11,640    | ) |   |   |   | (6,204 | ) |
| Derivative financial instruments (commodities)    |   |                 | -          |   |   |   |   | (33,233 | ) |
| Goodwill                                          |   |                 | (18,249    | ) |   |   |   | (16,953 | ) |
| Environmental reserve                             |   |                 | (13,844    | ) |   |   |   | (10,999 | ) |
| Other                                             |   |                 | (39,611    | ) |   |   |   | (22,807 | ) |
| Total deferred income tax liabilities             |   |                 | (1,012,768 | ) |   |   |   | (860,957 | ) |
| Net deferred income tax liability                 |   |                 | (863,746   | ) |   |   |   | (745,205 | ) |
| Less current income tax assets (liabilities)      |   |                 | 41,841     |   |   |   |   | (22,655 | ) |
| Accumulated deferred income taxes                 |   | $                    | (905,587   | ) |   |   | $ | (722,550 | ) |

----

|                                                  |   | Years Ended December 31, |    |
|-------------------------------------------------------|--------|--------------------------|---------|
|                                                  |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                                  |   | (In thousands)           |    |
|                                                  |   |                     |    |   |   |   |   |   |   |
| Computed statutory income tax expense at 35%          |   | $                        | 88,018  |   |   | $ | 139,974 |   |   | $ | 113,389 |   |
| Changes in income taxes resulting from:               |   |                     |    |   |   |   |   |   |   |   |   |   |
| Dividends received deduction                          |   |                     | -       |   |   |   | (24,142 | ) |   |   | (28,994 | ) |
| Reduction in deferred tax liability related to        |   |                     |    |   |   |   |   |   |   |   |   |   |
| unconsolidated investments                            |   |                     | -       |   |   |   | (20,720 | ) |   |   | - |   |
| Earnings from unconsolidated investments related to   |   |                     |    |   |   |   |   |   |   |   |   |   |
| anticipated receipt of dividends                      |   |                     | (20,300 | ) |   |   | - |   |   |   | - |   |
| State income taxes, net of federal income tax benefit |   |                     | 4,553   |   |   |   | 9,190 |   |   |   | 9,295 |   |
| Other                                                 |   |                     | (371    | ) |   |   | 473 |   |   |   | 1,569 |   |
| Actual income tax expense from continuing operations  |   | $                        | 71,900  |   |   | $ | 104,775 |   |   | $ | 95,259 |   |

|                                |   | Years ended December 31, |   |
|-------------------------------------|--------|--------------------------|--------|
|                                |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
|                                |   | (In thousands)           |   |
|                                |   |                     |   |   |   |   |   |   |   |
| Beginning of the year               |   | $                        | 7,210  |   |   | $ | 570 |   |   | $ | 570 |   |
|                                |   |                     |   |   |   |   |   |   |   |   |   |   |
| Additions:                          |   |                     |   |   |   |   |   |   |   |   |   |   |
| Tax positions taken in prior years  |   |                     | 2,195  |   |   |   | 4,427 |   |   |   | - |   |
| Tax positions taken in current year |   |                     | 3,459  |   |   |   | 2,783 |   |   |   | - |   |
|                                |   |                     |   |   |   |   |   |   |   |   |   |   |
| Reductions:                         |   |                     |   |   |   |   |   |   |   |   |   |   |
| Lapse of statute of limitations     |   |                     | -      |   |   |   | (570 | ) |   |   | - |   |
|                                |   |                     |   |   |   |   |   |   |   |   |   |   |
| End of year                         |   | $                        | 12,864 |   |   | $ | 7,210 |   |   | $ | 570 |   |

----

----

|                                            |                                     |   | Fair Value (1) |      |
|-------------------------------------------------|------------------------------------------|--------|----------------|-----------|
|                                            | Balance Sheet                            |   | December 31,   |      |
|                                            | Location                                 |   | 2009           |      |   | 2008 |   |
|                                            |                                     |   | (In thousands) |      |
| Cash Flow Hedges:                               |                                     |   |           |      |   |   |   |
| Commodity contracts - Gathering and Processing: |                                     |   |           |      |   |   |   |
| Natural gas price swaps                         |  Derivative instruments-assets      |   | $              | -         |   |   | $ | 30,753 |   |
|                                            |  Deferred credits                   |   |           | 314  |   |   |   | -  |   |
|                                            |                                     |   |  $        | 314  |   |   |  $ | 30,753  |   |
| Economic Hedges:                                |                                     |   |           |      |   |   |   |   |   |
| Commodity contracts - Gathering and Processing: |                                     |   |           |      |   |   |   |   |
| NGL processing spread swaps                     |  Derivative instruments-assets      |   | $              | -         |   |   | $ | 59,706 |   |
|                                            |                                     |   |           |      |   |   |   |   |   |
| Other derivative instruments                    |  Derivative instruments-assets      |   |           | 5         |   |   |   | 964 |   |
|                                            |  Derivative instruments-liabilities |   |           | 166       |   |   |   | - |   |
|                                            |                                     |   |           |      |   |   |   |   |   |
| Commodity contracts - Distribution:             |                                     |   |           |      |   |   |   |   |   |
| Natural gas price swaps                         |  Derivative instruments-liabilities |   |           | 582       |   |   |   | - |   |
|                                            |  Deferred credits                   |   |           | 15        |   |   |   | - |   |
|                                            |                                     |   | $              | 768       |   |   | $ | 60,670 |   |
| Other:                                          |                                     |   |           |      |   |   |   |   |   |
| Commodity contracts - Gathering and Processing: |                                     |   |           |      |   |   |   |   |
| Other derivative instruments                    | Derivative financial - asset             |   | $              | 162       |   |   | $ | - |   |
|                                            |                                     |   |           |      |   |   |   |   |   |
| Total                                           |                                     |   | $              | 1,244     |   |   | $ | 91,423 |   |
|                                            |                                     |   |           |      |   |   |   |   |   |

| (1) | See Note 11 – Fair Value Measurement for information related to the framework used by the Company to measure the fair value of its derivative instruments as of December 31, 2009. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                            |                                     |   | Fair Value (1) |    |
|-------------------------------------------------|------------------------------------------|--------|----------------|---------|
|                                            | Balance Sheet                            |   | December 31,   |    |
|                                            | Location                                 |   | 2009           |    |   | 2008 |   |
|                                            |                                     |   | (In thousands) |    |
| Cash Flow Hedges:                               |                                     |   |           |    |   |   |   |
| Interest rate contracts                         |  Derivative instruments-liabilities |   | $              | 18,754  |   |   | $ | - |   |
|                                            |  Deferred credits                   |   |           | 13,975  |   |   |   | 43,630 |   |
|                                            |                                     |   |           |    |   |   |   |   |   |
| Commodity contracts - Gathering and Processing: |                                     |   |           |    |   |   |   |   |   |
| Natural gas price swaps                         |  Derivative instruments-liabilities |   |           | 4,126   |   |   |   | -  |   |
|                                            |                                     |   | $              | 36,855  |   |   | $ | 43,630 |   |
| Economic Hedges:                                |                                     |   |           |    |   |   |   |   |   |
| Commodity contracts - Gathering and Processing: |                                     |   |           |    |   |   |   |   |
| NGL processing spread swaps                     |  Derivative instruments-liabilities |   | $              | 34,477  |   |   | $ | - |   |
|                                            |  Deferred credits                   |   |           | 10,410  |   |   |   | - |   |
|                                            |                                     |   |           |    |   |   |   |   |   |
| Other derivative instruments                    |  Derivative instruments-liabilities |   |           | 193     |   |   |   | 1,008 |   |
|                                            |                                     |   |           |    |   |   |   |   |   |
| Commodity contracts - Distribution:             |                                     |   |           |    |   |   |   |   |   |
| Natural gas price swaps                         |  Derivative instruments-liabilities |   |           | 40,206  |   |   |   | 76,546 |   |
|                                            |  Deferred credits                   |   |           | 3,991   |   |   |   | 16,137 |   |
|                                            |                                     |   | $              | 89,277  |   |   | $ | 93,691 |   |
| Other:                                          |                                     |   |           |    |   |   |   |   |   |
| Commodity contracts - Gathering and Processing: |                                     |   |           |    |   |   |   |   |
| Other derivative instruments                    |  Derivative instruments-assets      |   | $              | 30      |   |   | $ | - |   |
|                                            |                                     |   |           |    |   |   |   |   |   |
| Total                                           |                                     |   | $              | 126,162 |   |   | $ | 137,321 |   |
|                                            |                                     |   |           |    |   |   |   |   |   |

| (1)   | See Note 11 – Fair Value Measurement for information related to the framework used by the Company to measure the fair value of its derivative instruments as of December 31, 2009. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                             |   | Years Ended December 31, |    |
|----------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                             |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                                                             |   | (In thousands)           |    |
|                                                                             |   |                     |    |   |   |   |   |   |   |
| Cash Flow Hedges:  (1)                                                 |   |                     |    |   |   |   |   |   |   |
| Interest rate contracts:                                                         |   |                     |    |   |   |   |   |   |   |
| Change in fair value - increase in Accumulated other comprehensive loss,         |   |                     |    |   |   |   |   |   |   |
| excluding tax expense effect of $3,051, $8,436 and $6,729, respectively          |   | $                        | 7,589   |   |   | $ | 21,162 |   |   | $ | 19,136 |   |
| Reclassification of unrealized gain (loss) from Accumulated other comprehensive  |   |                     |    |   |   |   |   |   |   |   |   |   |
| loss - decrease (increase) of Interest expense, excluding tax expense effect     |   |                     |    |   |   |   |   |   |   |   |   |   |
| of $(8,222), $2,287 and $13, respectively                                        |   |                     | (20,572 | ) |   |   | 5,555 |   |   |   | 17 |   |
| Commodity contracts - Gathering and Processing:                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
| Change in fair value - increase/(decrease) in Accumulated other comprehensive    |   |                     |    |   |   |   |   |   |   |   |   |   |
| loss, excluding tax expense effect of $(3,773), $(13,549) and $775, respectively |   |                     | (10,469 | ) |   |   | (37,594 | ) |   |   | 2,054 |   |
| Reclassification of unrealized gain from Accumulated other comprehensive loss -  |   |                     |    |   |   |   |   |   |   |   |   |   |
| increase of Operating revenues, excluding tax expense effect of $16,231,         |   |                     |    |   |   |   |   |   |   |   |   |   |
| $2,466 and $2,425, respectively                                                  |   |                     | 45,035  |   |   |   | 6,841 |   |   |   | 6,422 |   |
|                                                                             |   |                     |    |   |   |   |   |   |   |   |   |   |
| Economic Hedges:                                                                 |   |                     |    |   |   |   |   |   |   |   |   |   |
| Commodity contracts - Gathering and Processing:                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
| Change in fair value - (increase)/decrease in Operating revenues                 |   |                     | 88,787  |   |   |   | (49,399 | ) |   |   | 3,074 |   |
| Commodity contracts - Distribution:                                              |   |                     |    |   |   |   |   |   |   |   |   |   |
| Change in fair value - increase/(decrease) in Deferred gas purchases             |   |                     | (49,083 | ) |   |   | 70,335 |   |   |   | 3,392 |   |
|                                                                             |   |                     |    |   |   |   |   |   |   |   |   |   |
| Other:                                                                           |   |                     |    |   |   |   |   |   |   |   |   |   |
| Commodity contracts - Gathering and Processing:                                  |   |                     |    |   |   |   |   |   |   |   |   |   |
| Change in fair value - decrease in Operating revenues                            |   |                     | 832     |   |   |   | (830 | ) |   |   | (1,837 | ) |

| (1)   | See Note 6 – Accumulated Other Comprehensive Income (Loss) for additional related information. |
|-----------------|------------------------------------------------------------------------------------------------------|

----

|                           |   | Fair Value        |    |   | Fair Value Measurements at December 31, 2009 |    |
|--------------------------------|--------|-------------------|---------|--------|----------------------------------------------|---------|
|                           |   | as of             |    |   | Using Fair Value Hierarchy                   |    |
|                           |   | December 31, 2009 |    |   | Level 1                                      |    |   | Level 2 |   |   | Level 3 |   |
|                           |   | (In thousands)    |    |
|                           |   |              |    |   |                                         |    |   |   |   |   |   |   |
| Assets:                        |   |              |    |   |                                         |    |   |   |   |   |   |   |
| Commodity derivatives          |   |  $           | 137     |   |                                         |  $ | - |   |   |  $ | 137 |   |   |   | - |   |
| Long-term investments          |   |              | 867     |   |                                         |    | 867 |   |   |   | - |   |   |   | - |   |
| Total                          |   |  $           | 1,004   |   |                                         |  $ | 867 |   |   |  $ | 137 |   |   | $ | - |   |
|                           |   |              |    |   |                                         |    |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                   |   |              |    |   |                                         |    |   |   |   |   |   |   |   |   |   |   |
| Commodity derivatives          |   | $                 | 92,326  |   |                                         | $       | 171 |   |   | $ | 92,155 |   |   | $ | - |   |
| Interest-rate swap derivatives |   |              | 32,729  |   |                                         |    | - |   |   |   | 32,729 |   |   |   | - |   |
| Total                          |   | $                 | 125,055 |   |                                         | $       | 171 |   |   | $ | 124,884 |   |   | $ | - |   |

|                           |   | Fair Value        |    |     | Fair Value Measurements at December 31, 2008 |    |
|--------------------------------|--------|-------------------|---------|----------|----------------------------------------------|---------|
|                           |   | as of             |    |     | Using Fair Value Hierarchy                   |    |
|                           |   | December 31, 2008 |    |     | Level 1                                      |    |   | Level 2 |   |   | Level 3 |   |
|                           |   | (In thousands)    |    |
| Assets:                        |   |              |    |     |                                         |    |   |   |   |   |   |   |
| Commodity derivatives          |   |  $           | 91,423  |  (1 | )                                            |  $ | - |   |   |  $ | 90,459 |   |   |  $ | 964 |   |
| Long-term investments          |   |              | 729     |     |                                         |    | 729 |   |   |   | - |   |   |   | - |   |
| Total                          |   |  $           | 92,152  |     |                                         |  $ | 729 |   |   |  $ | 90,459 |   |   |  $ | 964 |   |
|                           |   |              |    |     |                                         |    |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                   |   |              |    |     |                                         |    |   |   |   |   |   |   |   |   |   |   |
| Commodity derivatives          |   | $                 | 93,692  |     |                                         | $       | - |   |   | $ | 93,786 |   |   | $ | (94 | ) |
| Interest-rate swap derivatives |   |              | 43,630  |     |                                         |    | - |   |   |   | - |   |   |   | 43,630 |   |
| Total                          |   | $                 | 137,322 |     |                                         | $       | - |   |   | $ | 93,786 |   |   | $ | 43,536 |   |

| (1)   | The Company’s commodity derivative asset balance is primarily associated with two separate counterparties, one of which comprised $68.9 million of the asset balance and the other of which comprised $20.1 million of the asset balance as of December 31, 2008. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                             |   | Level 3 Financial Assets and Liabilities |    |
|--------------------------------------------------|--------|------------------------------------------|---------|
|                                             |   | Assets                                   |    |   | Liabilities |   |
|                                             |   | Commodity                                |    |   | Commodity |   |   | Interest-rate |   |
|                                             |   | Derivatives                              |    |   | Derivatives |   |   | Derivatives |   |
|                                             |   | (In thousands)                           |    |
|                                             |   |                                     |    |   |   |   |   |   |   |
| Balance at January 1, 2008                       |   | $                                        | 1,320   |   |   | $ | (5,404 | ) |   | $ | 17,121 |   |
| Reclassification between assets and liabilities  |   |                                     | 4,084   |   |   |   | 4,084 |   |   |   | - |   |
| Total gains or losses (realized and unrealized): |   |                                     |    |   |   |   |   |   |   |   |   |   |
| Included in operating revenues  (1)    |   |                                     | 52,108  |   |   |   | 683 |   |   |   | - |   |
| Included in other comprehensive income           |   |                                     | 37,594  |   |   |   | - |   |   |   | 34,019 |   |
| Purchases and settlements, net                   |   |                                     | (3,683  | ) |   |   | 543 |   |   |   | (7,510 | ) |
| Transfers out of Level 3                         |   |                                     | (90,459 | ) |   |   | - |   |   |   | - |   |
| Balance at December 31, 2008                     |   | $                                        | 964     |   |   | $ | (94 | ) |   | $ | 43,630 |   |
| Reclassification between assets and liabilities  |   |                                     | -       |   |   |   | - |   |   |   | - |   |
| Total gains or losses (realized and unrealized): |   |                                     |    |   |   |   |   |   |   |   |   |   |
| Included in operating revenues (2)               |   |                                     | 290     |   |   |   | 61 |   |   |   | - |   |
| Included in other comprehensive income           |   |                                     | -       |   |   |   | - |   |   |   | 4,787 |   |
| Purchases and settlements, net                   |   |                                     | -       |   |   |   | (206 | ) |   |   | (12,696 | ) |
| Transfers out of Level 3                         |   |                                     | (1,254  | ) |   |   | 239 |   |   |   | (35,721 | ) |
| Balance at December 31, 2009                     |   | $                                        | -       |   |   | $ | - |   |   | $ | - |   |

| (1)   | The amount included in operating revenues for the year ended December 31, 2008 that is attributable to the change in unrealized gains or losses relating to commodity derivative assets and commodity derivative liabilities held at December 31, 2008 were gains of $52.1 million and $100,000, respectively. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The amount included in operating revenues for the year ended December 31, 2009 that is attributable to the change in unrealized gains or losses relating to commodity derivative assets and commodity derivative liabilities held at December 31, 2009 were gains of $725,000 and $221,000, respectively. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                           |   |                    |   |   |           |   |      |          |   |
|------------------------------------------------|--------|-------------------------|--------|--------|----------------|--------|-----------|---------------|--------|
|                                           |   |                    |   |   | December 31,   |   |
|                                           |   | Lives in Years (1) |   |   | 2009 (2)  |   |      | 2008 (2) |   |
|                                           |   |                    |   |   | (In thousands) |   |
|                                           |   |                    |   |   |           |   |      |          |   |
| Regulated Operations:                          |   |                    |   |   |           |   |      |          |   |
| Distribution plant                             |   |                    | 25-60  |   |           | $      | 974,116   |          |   | $ | 945,132 |   |
| Gathering and processing plant                 |   |                    | 26     |   |           |   | 188,927   |          |   |   | 110,246 |   |
| Transmission plant                             |   |                    | 5-46   |   |           |   | 2,130,978 |          |   |   | 2,088,018 |   |
| General - LNG                                  |   |                    | 5-40   |   |           |   | 626,853   |          |   |   | 624,883 |   |
| Underground storage plant                      |   |                    | 5-46   |   |           |   | 310,963   |          |   |   | 307,401 |   |
| General plant and other                        |   |                    | 2-50   |   |           |   | 276,422   |          |   |   | 257,456 |   |
| Construction work in progress                  |   |                    |   |   |           |   | 499,435   |          |   |   | 409,973 |   |
|                                           |   |                    |   |   |           |   | 5,007,694 |          |   |   | 4,743,109 |   |
| Less accumulated depreciation and amortization |   |                    |   |   |           |   | 926,811   |          |   |   | 803,091 |   |
|                                           |   |                    |   |   |           |   | 4,080,883 |          |   |   | 3,940,018 |   |
|                                           |   |                    |   |   |           |   |      |          |   |   |   |   |
| Non-regulated Operations:                      |   |                    |   |   |           |   |      |          |   |   |   |   |
| Distribution plant                             |   |                    | 25-75  |   |           |   | 54,637    |          |   |   | 17,846 |   |
| Gathering and processing plant                 |   |                    | 1-50   |   |           |   | 1,685,960 |          |   |   | 1,617,734 |   |
| General plant and other                        |   |                    | 3-15   |   |           |   | 11,333    |          |   |   | 11,581 |   |
| Construction work in progress                  |   |                    |   |   |           |   | 32,275    |          |   |   | 41,386 |   |
|                                           |   |                    |   |   |           |   | 1,784,205 |          |   |   | 1,688,547 |   |
| Less accumulated depreciation and amortization |   |                    |   |   |           |   | 235,875   |          |   |   | 171,560 |   |
|                                           |   |                    |   |   |           |   | 1,548,330 |          |   |   | 1,516,987 |   |
|                                           |   |                    |   |   |           |   |      |          |   |   |   |   |
| Net property, plant and equipment              |   |                    |   |   |           | $      | 5,629,213 |          |   | $ | 5,457,005 |   |

| (1)   | The composite weighted-average depreciation rates for the years ended December 31, 2009, 2008 and 2007 were 3.5 percent, 3.5 percent and 3.4 percent, respectively. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Includes capitalized computerized software cost totaling: |
|-----------------|-----------------------------------------------------------|

| Unamortized computer software cost      |   | $      | 125,495 |   |   | $      | 116,010 |   |
|-----------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|
| Less accumulated amortization           |   |   | 70,238  |   |   |   | 57,020  |   |
| Net capitalized computer software costs |   | $      | 55,257  |   |   | $      | 58,990  |   |
|                                    |   |   |    |   |   |   |    |   |

----

|                    |   | Years ended December 31, |
|-------------------------|--------|--------------------------|
|                    |   | 2009                     |   | 2008 |   | 2007 |
|                    |   |                     |   |   |   |   |
| Expected volatility     |   | 32.22% to 33.69%         |   | 30.57% |   | 30.11% to 32.12% |
| Expected dividend yield |   | 2.37% to 2.45%           |   | 2.19% |   | 2.10% |
| Risk-free interest rate |   | 2.34% to 2.72%           |   | 1.71% |   | 3.70% to 3.89% |
| Expected life           |   | 4.75 to 6 years          |   | 6 years |   | 6 to 7.5 years |

----

|                          |   | Third Amended 2003 Plan |      |   | 1992 Plan |   |
|-------------------------------|--------|-------------------------|-----------|--------|-----------|--------|
|                          |   |                    |      |   | Weighted  |   |   |   |   |   | Weighted |   |
|                          |   | Shares                  |      |   | Average   |   |   | Shares |   |   | Average |   |
|                          |   | Under                   |      |   | Exercise  |   |   | Under |   |   | Exercise |   |
|                          |   | Option                  |      |   | Price     |   |   | Option |   |   | Price |   |
|                          |   |                    |      |   |      |   |   |   |   |   |   |   |
| Outstanding December 31, 2006 |   |                    | 1,010,479 |   |      | $      | 21.39 |   |   |   | 715,196 |   |   | $ | 12.60 |   |
| Granted                       |   |                    | 717,098   |   |      |   | 28.48 |   |   |   | - |   |   |   | - |   |
| Exercised                     |   |                    | (98,027   | )      |      |   | 19.32 |   |   |   | (176,515 | ) |   |   | 10.51 |   |
| Forfeited                     |   |                    | (97,875   | )      |      |   | 22.95 |   |   |   | (1,979 | ) |   |   | 13.03 |   |
| Outstanding December 31, 2007 |   |                    | 1,531,675 |   |      | $      | 24.74 |   |   |   | 536,702 |   |   | $ | 13.28 |   |
| Granted                       |   |                    | 792,934   |   |      |   | 12.55 |   |   |   | - |   |   |   | - |   |
| Exercised                     |   |                    | (12,725   | )      |      |   | 16.83 |   |   |   | (224,593 | ) |   |   | 12.71 |   |
| Forfeited                     |   |                    | (773      | )      |      |   | 16.83 |   |   |   | - |   |   |   | - |   |
| Outstanding December 31, 2008 |   |                    | 2,311,111 |   |      | $      | 20.61 |   |   |   | 312,109 |   |   | $ | 13.70 |   |
| Granted                       |   |                    | 752,433   |   |      |   | 20.72 |   |   |   | - |   |   |   | - |   |
| Exercised                     |   |                    | (14,889   | )      |      |   | 16.83 |   |   |   | (263,090 | ) |   |   | 13.52 |   |
| Forfeited                     |   |                    | (34,435   | )      |      |   | 17.39 |   |   |   | - |   |   |   | - |   |
| Outstanding December 31, 2009 |   |                    | 3,014,220 |   |      | $      | 20.69 |   |   |   | 49,019 |   |   | $ | 14.65 |   |
|                          |   |                    |      |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable December 31, 2007 |   |                    | 565,560   |   |      |   | 22.25 |   |   |   | 536,702 |   |   |   | 13.28 |   |
| Exercisable December 31, 2008 |   |                    | 769,216   |   |      |   | 22.66 |   |   |   | 312,109 |   |   |   | 13.70 |   |
| Exercisable December 31, 2009 |   |                    | 1,229,447 |   |      |   | 20.70 |   |   |   | 49,019 |   |   |   | 14.65 |   |

|                     |          |   | Options Outstanding |   |                  | Options Exercisable |           |
|--------------------------|---------------|--------|---------------------|--------|-----------------------|---------------------|----------------|
|                     |          |   |                |   | Weighted Average      |                | Weighted       |   |   |   |   |   | Weighted |   |
|                     |          |   |                |   | Remaining             |                | Average        |   |   |   |   |   | Average |   |
| Range of Exercise Prices |          |   | Number of Options   |   | Contractual Life |                | Exercise Price |   |   | Number of Options |   |   | Exercise Price |   |
|                     |          |   |                |   |                  |                |           |   |   |   |   |   |   |   |
| Third Amended 2003 Plan: |          |   |                |   |                  |                |           |   |   |   |   |   |   |   |
|                     | 12.55 - 15.00 |   |                |   | 792,934               |                | 8.96 years     |   | $ | 12.55 |   |   |   | 264,310 |   |   | $ | 12.55 |   |
|                     | 15.01 - 20.00 |   |                |   | 329,511               |                | 6.01 years     |   |   | 16.88 |   |   |   | 210,991 |   |   |   | 16.83 |   |
|                     | 20.01 - 25.00 |   |                |   | 1,174,677             |                | 7.89 years     |   |   | 22.50 |   |   |   | 570,394 |   |   |   | 23.41 |   |
|                     | 25.01 - 28.48 |   |                |   | 717,098               |                | 7.96 years     |   |   | 28.48 |   |   |   | 183,752 |   |   |   | 28.48 |   |
|                     |          |   |                |   | 3,014,220             |                | 7.98 years     |   | $ | 20.69 |   |   |   | 1,229,447 |   |   | $ | 20.70 |   |
|                     |          |   |                |   |                  |                |           |   |   |   |   |   |   |   |   |   |   |   |   |
| 1992 Plan:               |          |   |                |   |                  |                |           |   |   |   |   |   |   |   |   |   |   |   |
|                     | 14.65         |   |                |   | 49,019                |                | 1.42 years     |   | $ | 14.65 |   |   |   | 49,019 |   |   | $ | 14.65 |   |
|                     |          |   |                |   | 49,019                |                | 1.42 years     |   | $ | 14.65 |   |   |   | 49,019 |   |   | $ | 14.65 |   |
|                     |          |   |                |   |                  |                |           |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                          |   | Third Amended 2003 Plan |      |
|-------------------------------|--------|-------------------------|-----------|
|                          |   |                    |      |   | Weighted Average |   |
|                          |   | SARs                    |      |   | Exercise Price |   |
|                          |   |                    |      |   |   |   |
| Outstanding December 31, 2006 |   |                    | 133,610   |   |   | $ | 28.07 |   |
| Granted                       |   |                    | 282,163   |   |   |   | 28.48 |   |
| Forfeited                     |   |                    | -         |   |   |   | - |   |
| Outstanding December 31, 2007 |   |                    | 415,773   |   |   | $ | 28.35 |   |
| Granted                       |   |                    | 784,779   |   |   |   | 12.55 |   |
| Forfeited                     |   |                    | -         |   |   |   | - |   |
| Outstanding December 31, 2008 |   |                    | 1,200,552 |   |   | $ | 18.02 |   |
| Granted                       |   |                    | 417,647   |   |   |   | 21.64 |   |
| Exercised                     |   |                    | (50,174   | ) |   |   | 12.55 |   |
| Forfeited                     |   |                    | (74,894   | ) |   |   | 18.82 |   |
| Outstanding December 31, 2009 |   |                    | 1,493,131 |   |   | $ | 19.18 |   |
|                          |   |                    |      |   |   |   |   |   |
| Exercisable December 31, 2007 |   |                    | 44,533    |   |   |   | 28.07 |   |
| Exercisable December 31, 2008 |   |                    | 183,115   |   |   |   | 28.28 |   |
| Exercisable December 31, 2009 |   |                    | 494,775   |   |   |   | 22.06 |   |

|                     |   |           | SARs Outstanding |    |             | SARs Exercisable |           |
|--------------------------|--------|----------------|------------------|---------|------------------|------------------|----------------|
|                     |   |           |             |    | Weighted Average |             | Weighted       |   |   |   |   | Weighted |   |
|                     |   |           |             |    | Remaining        |             | Average        |   |   |   |   | Average |   |
| Range of Exercise Prices |   | Number of SARs | Contractual Life |    | Exercise Price   |             | Number of SARs |   | Exercise Price |   |
|                     |   |           |             |    |             |             |           |   |   |   |   |   |   |   |
|  12.55 - 17.50      |   |           |             | 689,446 |             | 8.96 years       |           | $ | 12.55 |   |   |   | 196,349 |   |   | $ | 12.55 |   |
|  17.51 - 25.00      |   |           |             | 417,647 |             | 9.95 years       |           |   | 21.64 |   |   |   | - |   |   |   | - |   |
|  25.01 - 28.48      |   |           |             | 386,038 |             | 7.65 years       |           |   | 28.35 |   |   |   | 298,426 |   |   |   | 28.31 |   |
|                     |   |           |             |    | 1,493,131        |             | 8.90 years     |   | $ | 19.18 |   |   |   | 494,775 |   |   | $ | 22.06 |   |
|                     |   |           |             |    |             |             |           |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                             |   | Number of         |     |   | Weighted-Average |   |
|--------------------------------------------------|--------|-------------------|----------|--------|------------------|--------|
|                                             |   | Restricted Shares |     |   | Grant-Date       |   |
|                                             |   | Outstanding       |     |   | Fair-Value       |   |
|                                             |   |              |     |   |             |   |
| Nonvested restricted shares at December 31, 2006 |   |              | 168,784  |   |             | $      | 25.98 |   |
| Granted                                          |   |              | 156,044  |   |             |   | 28.99 |   |
| Vested                                           |   |              | (111,322 | )      |             |   | 26.67 |   |
| Forfeited                                        |   |              | (12,336  | )      |             |   | 24.96 |   |
| Nonvested restricted shares at December 31, 2007 |   |              | 201,170  |   |             | $      | 28.00 |   |
| Granted                                          |   |              | 252,066  |   |             |   | 14.99 |   |
| Vested                                           |   |              | (90,051  | )      |             |   | 28.10 |   |
| Forfeited                                        |   |              | -        |   |             |   | - |   |
| Nonvested restricted shares at December 31, 2008 |   |              | 363,185  |   |             | $      | 18.94 |   |
| Granted                                          |   |              | 165,567  |   |             |   | 20.24 |   |
| Vested                                           |   |              | (146,990 | )      |             |   | 19.90 |   |
| Forfeited                                        |   |              | (2,788   | )      |             |   | 18.98 |   |
| Nonvested restricted shares at December 31, 2009 |   |              | 378,974  |   |             | $      | 19.14 |   |
|                                             |   |              |     |   |             |   |   |   |

----

|                                            |   | Number of                  |     |   | Weighted-Average |   |
|-------------------------------------------------|--------|----------------------------|----------|--------|------------------|--------|
|                                            |   | Restricted Stock Liability |     |   | Grant-Date       |   |
|                                            |   | Units Outstanding          |     |   | Fair-Value       |   |
|                                            |   |                       |     |   |             |   |
| Nonvested restricted units at December 31, 2006 |   |                       | 108,869  |   |             | $      | 28.07 |   |
| Granted                                         |   |                       | 143,460  |   |             |   | 28.49 |   |
| Vested                                          |   |                       | (36,283  | )      |             |   | 28.07 |   |
| Forfeited                                       |   |                       | (2,744   | )      |             |   | 28.07 |   |
| Nonvested restricted units at December 31, 2007 |   |                       | 213,302  |   |             | $      | 28.35 |   |
| Granted                                         |   |                       | 418,583  |   |             |   | 13.88 |   |
| Vested                                          |   |                       | (82,431  | )      |             |   | 28.31 |   |
| Forfeited                                       |   |                       | (815     | )      |             |   | 28.48 |   |
| Nonvested restricted units at December 31, 2008 |   |                       | 548,639  |   |             | $      | 17.31 |   |
| Granted                                         |   |                       | 268,027  |   |             |   | 21.06 |   |
| Vested                                          |   |                       | (204,937 | )      |             |   | 19.38 |   |
| Forfeited                                       |   |                       | (48,079  | )      |             |   | 16.87 |   |
| Nonvested restricted units at December 31, 2009 |   |                       | 563,650  |   |             | $      | 18.38 |   |

----

|                            |   | December 31,   |   |
|---------------------------------|--------|----------------|--------|
|                            |   | 2009           |   |   | 2008 |   |
|                            |   | (In thousands) |   |
|                            |   |           |   |   |   |   |
| Current                         |   | $              | 7,745  |   |   | $ | 3,513 |   |
| Noncurrent                      |   |           | 16,964 |   |   |   | 15,626 |   |
| Total environmental liabilities |   | $              | 24,709 |   |   | $ | 19,139 |   |
|                            |   |           |   |   |   |   |   |   |

----

----

----

----

----

| Shareholder        | Date             |   | Amount    |   |   | Amount         |   |
|--------------------|------------------|--------|-----------|--------|--------|----------------|--------|
| Record Date        | Paid             |   | Per Share |   |   | Paid           |   |
|               |             |   |      |   |   | (In thousands) |   |
|               |             |   |      |   |   |           |   |
| December 25, 2009  | January 8, 2010  |   | $         | 0.15   |   |           | $      | 18,657 |   |
| September 25, 2009 | October 9, 2009  |   |      | 0.15   |   |           |   | 18,610 |   |
| June 26, 2009      | July 10, 2009    |   |      | 0.15   |   |           |   | 18,607 |   |
| March 27, 2009     | April 10, 2009   |   |      | 0.15   |   |           |   | 18,607 |   |
|               |             |   |      |   |   |           |   |   |   |
| December 26, 2008  | January 9, 2009  |   | $         | 0.15   |   |           | $      | 18,600 |   |
| September 26, 2008 | October 10, 2008 |   |      | 0.15   |   |           |   | 18,597 |   |
| June 27, 2008      | July 11, 2008    |   |      | 0.15   |   |           |   | 18,595 |   |
| March 28, 2008     | April 11, 2008   |   |      | 0.15   |   |           |   | 18,592 |   |
|               |             |   |      |   |   |           |   |   |   |
| December 28, 2007  | January 11, 2008 |   | $         | 0.15   |   |           | $      | 17,999 |   |
| September 28, 2007 | October 12, 2007 |   |      | 0.10   |   |           |   | 11,997 |   |
| June 29, 2007      | July 13, 2007    |   |      | 0.10   |   |           |   | 11,995 |   |
| March 30, 2007     | April 13, 2007   |   |      | 0.10   |   |           |   | 11,977 |   |

----

----

| ·   | items that do not impact net earnings, such as extraordinary items, discontinued operations and the impact of changes in accounting principles; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | income taxes; |
|--------------------|---------------|

| ·   | interest; |
|--------------------|-----------|

| ·   | dividends on preferred stock; and |
|--------------------|-----------------------------------|

| ·   | loss on extinguishment of preferred stock. |
|--------------------|--------------------------------------------|

|                                                   |   | Years Ended December 31, |      |
|--------------------------------------------------------|--------|--------------------------|-----------|
|                                                   |   | 2009                     |      |   | 2008 |   |   | 2007 |   |
|                                                   |   | (In thousands)           |      |
|                                                   |   |                     |      |   |   |   |   |   |   |
| Operating revenues from external customers:            |   |                     |      |   |   |   |   |   |   |
| Transportation and Storage                             |   | $                        | 749,161   |   |   | $ | 721,640 |   |   | $ | 658,446 |   |
| Gathering and Processing                               |   |                     | 732,251   |   |   |   | 1,521,041 |   |   |   | 1,221,747 |   |
| Distribution                                           |   |                     | 692,904   |   |   |   | 821,673 |   |   |   | 732,109 |   |
| Total reportable segment operating revenues            |   |                     | 2,174,316 |   |   |   | 3,064,354 |   |   |   | 2,612,302 |   |
| Corporate and other activities                         |   |                     | 4,702     |   |   |   | 5,800 |   |   |   | 4,363 |   |
|                                                   |   | $                        | 2,179,018 |   |   | $ | 3,070,154 |   |   | $ | 2,616,665 |   |
|                                                   |   |                     |      |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization:                         |   |                     |      |   |   |   |   |   |   |   |   |   |
| Transportation and Storage                             |   | $                        | 113,648   |   |   | $ | 103,807 |   |   | $ | 85,641 |   |
| Gathering and Processing                               |   |                     | 66,690    |   |   |   | 62,716 |   |   |   | 59,560 |   |
| Distribution                                           |   |                     | 31,269    |   |   |   | 30,530 |   |   |   | 30,251 |   |
| Total reportable segment depreciation and amortization |   |                     | 211,607   |   |   |   | 197,053 |   |   |   | 175,452 |   |
| Corporate and other activities                         |   |                     | 2,220     |   |   |   | 2,196 |   |   |   | 2,547 |   |
|                                                   |   | $                        | 213,827   |   |   | $ | 199,249 |   |   | $ | 177,999 |   |
|                                                   |   |                     |      |   |   |   |   |   |   |   |   |   |
| Earnings (loss) from unconsolidated investments:       |   |                     |      |   |   |   |   |   |   |   |   |   |
| Transportation and Storage                             |   | $                        | 75,205    |   |   | $ | 75,173 |   |   | $ | 99,222 |   |
| Gathering and Processing                               |   |                     | 4,410     |   |   |   | (990 | ) |   |   | 1,300 |   |
| Corporate and other activities                         |   |                     | 1,175     |   |   |   | 847 |   |   |   | 392 |   |
|                                                   |   | $                        | 80,790    |   |   | $ | 75,030 |   |   | $ | 100,914 |   |
|                                                   |   |                     |      |   |   |   |   |   |   |   |   |   |
| Other income (expense), net:                           |   |                     |      |   |   |   |   |   |   |   |   |   |
| Transportation and Storage                             |   | $                        | 1,657     |   |   | $ | 1,951 |   |   | $ | 1,604 |   |
| Gathering and Processing                               |   |                     | (84       | ) |   |   | 104 |   |   |   | 140 |   |
| Distribution                                           |   |                     | 7,447     |   |   |   | (1,830 | ) |   |   | (1,902 | ) |
| Total reportable segment other income (expense), net   |   |                     | 9,020     |   |   |   | 225 |   |   |   | (158 | ) |
| Corporate and other activities                         |   |                     | 12,381    |   |   |   | 2,100 |   |   |   | (725 | ) |
|                                                   |   | $                        | 21,401    |   |   | $ | 2,325 |   |   | $ | (883 | ) |

----

|                                           |   | Years Ended December 31, |    |
|------------------------------------------------|--------|--------------------------|---------|
|                                           |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                           |   | (In thousands)           |    |
|                                           |   |                     |    |   |   |   |   |   |   |
| Segment performance:                           |   |                     |    |   |   |   |   |   |   |
| Transportation and Storage EBIT                |   | $                        | 411,935 |   |   | $ | 404,834 |   |   | $ | 407,459 |   |
| Gathering and Processing EBIT                  |   |                     | (40,470 | ) |   |   | 145,363 |   |   |   | 65,368 |   |
| Distribution EBIT                              |   |                     | 67,302  |   |   |   | 61,418 |   |   |   | 62,195 |   |
| Total reportable segment EBIT                  |   |                     | 438,767 |   |   |   | 611,615 |   |   |   | 535,022 |   |
| Corporate and other activities                 |   |                     | 9,513   |   |   |   | (4,281 | ) |   |   | (7,906 | ) |
| Interest expense                               |   |                     | 196,800 |   |   |   | 207,408 |   |   |   | 203,146 |   |
| Federal and state income taxes                 |   |                     | 71,900  |   |   |   | 104,775 |   |   |   | 95,259 |   |
| Net earnings                                   |   |                     | 179,580 |   |   |   | 295,151 |   |   |   | 228,711 |   |
| Preferred stock dividends                      |   |                     | 8,683   |   |   |   | 12,212 |   |   |   | 17,365 |   |
| Loss on extinguishment of preferred stock      |   |                     | -       |   |   |   | 3,527 |   |   |   | - |   |
| Net earnings available for common stockholders |   | $                        | 170,897 |   |   | $ | 279,412 |   |   | $ | 211,346 |   |

|                            |   | December 31,   |      |
|---------------------------------|--------|----------------|-----------|
|                            |   | 2009           |      |   | 2008 |   |
|                            |   | (In thousands) |      |
| Total assets:                   |   |           |      |   |   |   |
| Transportation and Storage      |   | $              | 5,138,042 |   |   | $ | 4,969,336 |   |
| Gathering and Processing        |   |           | 1,666,935 |   |   |   | 1,764,497 |   |
| Distribution                    |   |           | 1,109,492 |   |   |   | 1,177,124 |   |
| Total reportable segment assets |   |           | 7,914,469 |   |   |   | 7,910,957 |   |
| Corporate and other activities  |   |           | 160,605   |   |   |   | 86,950 |   |
| Total consolidated assets       |   | $              | 8,075,074 |   |   | $ | 7,997,907 |   |

|                                      |   | Years Ended December 31, |    |
|-------------------------------------------|--------|--------------------------|---------|
|                                      |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                                      |   | (In thousands)           |    |
|                                      |   |                     |    |   |   |   |   |   |   |
| Expenditures for long-lived assets:       |   |                     |    |   |   |   |   |   |   |
| Transportation and Storage                |   | $                        | 247,097 |   |   | $ | 434,004 |   |   | $ | 591,153 |   |
| Gathering and Processing                  |   |                     | 70,221  |   |   |   | 67,317 |   |   |   | 48,633 |   |
| Distribution                              |   |                     | 46,090  |   |   |   | 41,125 |   |   |   | 44,769 |   |
| Total reportable segment expenditures for |   |                     |    |   |   |   |   |   |   |   |   |   |
| long-lived assets                         |   |                     | 363,408 |   |   |   | 542,446 |   |   |   | 684,555 |   |
| Corporate and other activities            |   |                     | 30,141  |   |   |   | 9,345 |   |   |   | 4,173 |   |
| Total consolidated expenditures for       |   |                     |    |   |   |   |   |   |   |   |   |   |
| long-lived assets  (1)          |   | $                        | 393,549 |   |   | $ | 551,791 |   |   | $ | 688,728 |   |

| (1)   | Includes net period changes in capital accruals totaling $(22) million, $(21.9)million and$71.8 million million for the years ended December 31, 2009, 2008 and 2007, respectively. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                   |   |                          |   |    |                             |   |   |    |   |   |   |   |   |   |   |   |   |   |
|------------------------|--------|-------------------------------|--------|---------|----------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                   |   | Percent of Transportation and |   |    | Percent of Consolidated          |   |
|                   |   | Storage Segment Revenues      |   |    | Company Total Operating Revenues |   |
|                   |   | Years Ended December 31,      |   |    | Years Ended December 31,         |   |
|                   |   | 2009                          |   |    | 2008                             |   |   | 2007    |   |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|                   |   |                          |   |    |                             |   |   |    |   |   |   |   |   |   |   |   |   |   |
| BG LNG Services        |   |                          | 22     |  % |                             |   | 23     |  % |   |   | 28     | %      |   |   | 8      | %      |   |   | 6 |  % |   |   | 7 | % |
| ProLiance              |   |                          | 13     |    |                             |   | 12     |    |   |   | 11     |   |   |   | 4      |   |   |   | 3 |   |   |   | 3 |   |
| Other top 10 customers |   |                          | 26     |    |                             |   | 26     |    |   |   | 26     |   |   |   | 9      |   |   |   | 7 |   |   |   | 6 |   |
| Remaining customers    |   |                          | 39     |    |                             |   | 39     |    |   |   | 35     |   |   |   | 13     |   |   |   | 9 |   |   |   | 9 |   |
| Total percentage       |   |                          | 100    | %       |                             |   | 100    | %       |   |   | 100    | %      |   |   | 34     | %      |   |   | 25 | % |   |   | 25 | % |
|                   |   |                          |   |    |                             |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                  |   | Percent of Gathering and    |   |   | Percent of Consolidated          |   |
|---------------------------------------|--------|-----------------------------|--------|--------|----------------------------------|--------|
|                                  |   | Processing Segment Revenues |   |   | Company Total Operating Revenues |   |
|                                  |   | Years Ended December 31,    |   |   | Years Ended December 31,         |   |
|                                  |   | 2009                        |   | 2008   |                             | 2007   |   |   | 2009 |   | 2008 |   | 2007 |   |
|                                  |   |                        |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Louis Dreyfus Energy Services, LP     |   |                        | 12     | %      |                             |   | 11 | % |   |   | 0 | % |   |   | 4 | % |   |   | 6 | % |   |   | 0 | % |
| ConocoPhillips Company  (1) |   |                        | 7      |   |                             |   | 8 |   |   |   | 16 |   |   |   | 2 |   |   |   | 4 |   |   |   | 8 |   |
| Other top 10 customers                |   |                        | 48     |   |                             |   | 41 |   |   |   | 47 |   |   |   | 17 |   |   |   | 20 |   |   |   | 22 |   |
| Remaining customers                   |   |                        | 33     |   |                             |   | 40 |   |   |   | 37 |   |   |   | 12 |   |   |   | 17 |   |   |   | 17 |   |
| Total percentage                      |   |                        | 100    | %      |                             |   | 100 | % |   |   | 100 | % |   |   | 35 | % |   |   | 47 | % |   |   | 47 | % |

| (1)   | For the five-year period ended December 31, 2014, SUGS has contracted to sell its entire owned or controlled output of NGL to Conoco Phillips Company (Conoco).  Pricing for the NGL equity volumes sold to Conoco throughout the contract period will be OPIS pricing based at Mont Belvieu, Texas delivery points.  SUGS has an option toextend the sales agreement for an additional five year period. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                            |   | Amounts        |   |
|---------------------------------|--------|----------------|--------|
|                            |   | (In thousands) |   |
|                            |   |           |   |
| Balance as of December 31, 2006 |   | $              | 89,227 |   |
| Impairment losses               |   |           | -      |   |
| Balance as of December 31, 2007 |   |           | 89,227 |   |
| Impairment losses               |   |           | -      |   |
| Balance as of December 31, 2008 |   |           | 89,227 |   |
| Impairment losses               |   |           | -      |   |
| Balance as of December 31, 2009 |   | $              | 89,227 |   |

----

|                                        | In Service |                                        |   |           |   |
|---------------------------------------------|------------|---------------------------------------------|--------|----------------|--------|
| ARO Description                             | Date       | Long-Lived Assets                           |   | Amount         |   |
|                                        |       |                                        |   | (In thousands) |   |
|                                        |       |                                        |   |           |   |
| Retire offshore platforms and lateral lines | Various    | Offshore lateral lines                      |   | $              | 3,356  |   |
| Other                                       | Various    | Mainlines, compressors and gathering plants |   | $              | 3,752  |   |

|              |   | Years Ended December 31, |   |
|-------------------|--------|--------------------------|--------|
|              |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
|              |   | (In thousands)           |   |
|              |   |                     |   |   |   |   |   |   |   |
| Beginning balance |   | $                        | 51,641 |   |   | $ | 12,762 |   |   | $ | 10,535 |   |
| Incurred          |   |                     | 10,770 |   |   |   | 33,773 |   |   |   | 64 |   |
| Revisions         |   |                     | (3,246 | ) |   |   | 6,379 |   |   |   | 2,250 |   |
| Settled           |   |                     | (1,557 | ) |   |   | (2,141 | ) |   |   | (907 | ) |
| Accretion expense |   |                     | 4,059  |   |   |   | 868 |   |   |   | 820 |   |
| Ending balance    |   | $                        | 61,667 |   |   | $ | 51,641 |   |   | $ | 12,762 |   |
|              |   |                     |   |   |   |   |   |   |   |   |   |   |

----

|                                |   | Quarters Ended                           |    |
|-------------------------------------|--------|------------------------------------------|---------|
|                                |   | March 31                                 |    |   | June 30 |   |   | September 30 |   |   | December 31 |   |
|                                |   | (In thousands, except per share amounts) |    |
|                                |   |                                     |    |   |   |   |   |   |   |   |   |   |
| Operating revenues                  |   | $                                        | 683,863 |   |   | $ | 453,025 |   |   | $ | 438,451 |   |   | $ | 603,679 |   |
| Operating income                    |   |                                     | 91,707  |   |   |   | 72,654 |   |   |   | 90,175 |   |   |   | 91,553 |   |
| Earnings from continuing operations |   |                                     | 46,257  |   |   |   | 33,280 |   |   |   | 46,919 |   |   |   | 53,124 |   |
| Net earnings available for common   |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders                        |   |                                     | 44,086  |   |   |   | 31,110 |   |   |   | 44,748 |   |   |   | 50,953 |   |
| Diluted net earnings per share      |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available for common stockholders:  |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing operations               |   | $                                        | 0.36    |   |   | $ | 0.25 |   |   | $ | 0.36 |   |   | $ | 0.41 |   |
| Available for common stockholders   |   | $                                        | 0.36    |   |   | $ | 0.25 |   |   | $ | 0.36 |   |   | $ | 0.41 |   |
|                                |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                |   | Quarters Ended                           |    |
|-------------------------------------|--------|------------------------------------------|---------|
|                                |   | March 31                                 |    |   | June 30 |   |   | September 30 |   |   | December 31 |   |
|                                |   | (In thousands, except per share amounts) |    |
|                                |   |                                     |    |   |   |   |   |   |   |   |   |   |
| Operating revenues                  |   | $                                        | 952,698 |   |   | $ | 733,055 |   |   | $ | 657,283 |   |   | $ | 727,118 |   |
| Operating income                    |   |                                     | 153,555 |   |   |   | 90,277 |   |   |   | 97,280 |   |   |   | 188,867 |   |
| Earnings from continuing operations |   |                                     | 82,908  |   |   |   | 42,910 |   |   |   | 46,776 |   |   |   | 122,557 |   |
| Net earnings available for common   |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders                        |   |                                     | 78,567  |   |   |   | 37,479 |   |   |   | 42,476 |   |   |   | 120,890 |   |
| Diluted net earnings per share      |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available for common stockholders:  |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing operations               |   | $                                        | 0.64    |   |   | $ | 0.30 |   |   | $ | 0.34 |   |   | $ | 0.97 |   |
| Available for common stockholders   |   | $                                        | 0.64    |   |   | $ | 0.30 |   |   | $ | 0.34 |   |   | $ | 0.97 |   |

----

----

----

| CITRUS CORP. AND SUBSIDIARIES                           |                                            |   |   |
|---------------------------------------------------------|-------------------------------------------------|--------|--------|
| CONSOLIDATED FINANCIAL STATEMENTS                       |                                            |   |   |
|                                                    |                                            |   |   |   |
| Years ended December 31, 2009, 2008 and 2007            |                                            |   |   |
|                                                    |                                            |   |   |   |
|                                                    |                                            |   |   |   |
|                                                    |                                            |   |   |   |
|                                                    | Table of Contents                               |   |   |   |
|                                                    |                                            |   |   |   |
|                                                    |                                            |   | Page   |   |
|                                                    |                                            |   |   |   |
| Report of Independent Registered Public Accounting Firm |                                            | 2      |   |
|                                                    |                                            |   |   |   |
| Audited Consolidated Financial Statements               |                                            |   |   |
|                                                    | Consolidated Balance Sheets                     |   | 3      |   |
|                                                    | Consolidated Statements of Income               |   | 4      |   |
|                                                    | Consolidated Statements of Comprehensive Income |   | 4      |   |
|                                                    | Consolidated Statements of Shareholders' Equity |   | 5      |   |
|                                                    | Consolidated Statements of Cash Flows           |   | 6      |   |
|                                                    | Notes to Consolidated Financial Statements      |   | 7 - 29 |   |
|                                                    |                                            |   |   |   |

----

----

| CITRUS CORP. AND SUBSIDIARIES                                                          |   |
|----------------------------------------------------------------------------------------|--------|
| CONSOLIDATED BALANCE SHEET                                                             |   |
|                                                                                   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |
|                                                                                   |   | December 31, |   |
|                                                                                   |   | 2009 |   |   | 2008 |   |
|                                                                                   |   | (In thousands) |   |
| ASSETS                                                                                 |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |
| Current assets                                                                         |   |   |   |   |   |   |
| Cash and cash equivalents                                                              |   | $ | 305,597 |   |   | $ | 20,032 |   |
| Accounts receivable, billed and unbilled,                                              |   |   |   |   |   |   |   |   |
|      less allowances of $17 and $18, respectively             |   |   | 41,002 |   |   |   | 40,308 |   |
| Materials and supplies                                                                 |   |   | 14,403 |   |   |   | 14,692 |   |
| Exchange gas receivable                                                                |   |   | 2,183 |   |   |   | 1,519 |   |
| Other                                                                                  |   |   | 2,229 |   |   |   | 2,073 |   |
|     Total current assets                                           |   |   | 365,414 |   |   |   | 78,624 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Property, plant and equipment (Note 10)                                                |   |   |   |   |   |   |   |   |
| Plant in service                                                                       |   |   | 4,646,727 |   |   |   | 4,499,383 |   |
| Construction work in progress                                                          |   |   | 769,298 |   |   |   | 405,585 |   |
|                                                                                   |   |   | 5,416,025 |   |   |   | 4,904,968 |   |
| Less accumulated depreciation and amortization                                         |   |   | 1,574,765 |   |   |   | 1,478,890 |   |
|     Net property, plant and equipment                              |   |   | 3,841,260 |   |   |   | 3,426,078 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Other assets                                                                           |   |   |   |   |   |   |   |   |
| Unamortized debt expense                                                               |   |   | 7,824 |   |   |   | 4,048 |   |
| Regulatory assets (Note 11)                                                            |   |   | 21,908 |   |   |   | 22,241 |   |
| Other                                                                                  |   |   | 6,143 |   |   |   | 6,914 |   |
|     Total other assets                                             |   |   | 35,875 |   |   |   | 33,203 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Total assets                                                                           |   | $ | 4,242,549 |   |   | $ | 3,537,905 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                   |   |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Current liabilities                                                                    |   |   |   |   |   |   |   |   |
| Current portion of long-term debt                                                      |   | $ | 346,322 |   |   | $ | 51,500 |   |
| Accounts payable - trade and other                                                     |   |   | 34,595 |   |   |   | 33,539 |   |
| Accounts payable - affiliated companies                                                |   |   | 10,642 |   |   |   | 8,533 |   |
| Accrued interest                                                                       |   |   | 29,380 |   |   |   | 20,918 |   |
| Accrued income taxes                                                                   |   |   | 5,687 |   |   |   | - |   |
| Accrued taxes, other than income                                                       |   |   | 13,680 |   |   |   | 5,217 |   |
| Exchange gas payable                                                                   |   |   | 21,073 |   |   |   | 20,752 |   |
| Capital accruals                                                                       |   |   | 61,342 |   |   |   | 14,377 |   |
| Other                                                                                  |   |   | 6,415 |   |   |   | 7,506 |   |
|     Total current liabilities                                      |   |   | 529,136 |   |   |   | 162,342 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Deferred credits                                                                       |   |   |   |   |   |   |   |   |
| Deferred income taxes, net (Note 9)                                                    |   |   | 834,522 |   |   |   | 802,006 |   |
| Regulatory liabilities (Note 12)                                                       |   |   | 13,681 |   |   |   | 9,206 |   |
| Other                                                                                  |   |   | 16,679 |   |   |   | 16,318 |   |
|     Total deferred credits                                         |   |   | 864,882 |   |   |   | 827,530 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Long-term debt (Note 7)                                                                |   |   | 1,500,837 |   |   |   | 1,327,020 |   |
| Commitments and contingencies (Note 13)                                                |   |   |   |   |   |   |   |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Stockholders' Equity                                                                   |   |   |   |   |   |   |   |   |
| Common stock, $1 par value; 1,000 shares  authorized, issued and outstanding |   |   | 1 |   |   |   | 1 |   |
| Additional paid-in capital                                                             |   |   | 634,271 |   |   |   | 634,271 |   |
| Accumulated other comprehensive loss                                                   |   |   | (8,248 | ) |   |   | (5,246 | ) |
| Retained earnings                                                                      |   |   | 721,670 |   |   |   | 591,987 |   |
|      Total stockholders' equity                               |   |   | 1,347,694 |   |   |   | 1,221,013 |   |
|                                                                                   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                             |   | $ | 4,242,549 |   |   | $ | 3,537,905 |   |

----

| CITRUS CORP. AND SUBSIDIARIES                              |   |
|------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF INCOME                          |   |
|                                                       |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |
|                                                       |   | Years Ended December 31, |   |
|                                                       |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                                       |   |   |   |   | (In thousands) |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |
| Operating revenues                                         |   |   |   |   |   |   |   |   |   |
| Transportation of natural gas                              |   | $ | 508,416 |   |   | $ | 504,819 |   |   | $ | 495,513 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total operating revenues           |   |   | 508,416 |   |   |   | 504,819 |   |   |   | 495,513 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Operations and maintenance                                 |   |   | 53,714 |   |   |   | 54,625 |   |   |   | 53,757 |   |
| Operations and maintenance - affiliate                     |   |   | 37,671 |   |   |   | 34,689 |   |   |   | 28,301 |   |
| Depreciation and amortization                              |   |   | 110,384 |   |   |   | 105,849 |   |   |   | 100,634 |   |
| Taxes, other than on income                                |   |   | 34,750 |   |   |   | 34,411 |   |   |   | 29,618 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total operating expenses           |   |   | 236,519 |   |   |   | 229,574 |   |   |   | 212,310 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                           |   |   | 271,897 |   |   |   | 275,245 |   |   |   | 283,203 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense)                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense and related charges, net                  |   |   | (118,806 | ) |   |   | (82,830 | ) |   |   | (73,871 | ) |
| Other, net                                                 |   |   | 55,021 |   |   |   | 8,008 |   |   |   | 39,984 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total other income (expense), net  |   |   | (63,785 | ) |   |   | (74,822 | ) |   |   | (33,887 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes                                 |   |   | 208,112 |   |   |   | 200,423 |   |   |   | 249,316 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income taxes (Note 9)                                      |   |   | 78,429 |   |   |   | 73,481 |   |   |   | 92,224 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                 |   | $ | 129,683 |   |   | $ | 126,942 |   |   | $ | 157,092 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME            |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   | Years Ended December 31, |   |
|                                                       |   |   | 2009 |   |   |   | 2008 |   |   |   | 2007 |   |
|                                                       |   |   |   |   |   | (In thousands) |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                 |   | $ | 129,683 |   |   | $ | 126,942 |   |   | $ | 157,092 |   |
| Recognition in earnings of realized                        |   |   |   |   |   |   |   |   |   |
|      loss on cash flow hedges     |   |   | 2,703 |   |   |   | 2,639 |   |   |   | 2,639 |   |
| Realized loss on settlement of interest                    |   |   |   |   |   |   |   |   |   |   |   |   |
|     rate hedge - Treasury Lock, net of |   |   |   |   |   |   |   |   |   |   |   |   |
|     tax $3.5 million                   |   |   | (5,705 | ) |   |   | - |   |   |   | - |   |
| Total comprehensive income                                 |   | $ | 126,681 |   |   | $ | 129,581 |   |   | $ | 159,731 |   |

----

| CITRUS CORP. AND SUBSIDIARIES                                        |   |
|----------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                      |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   | December 31, |   |
|                                                                 |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                 |   |   |   |   | (In thousands) |   |   |   |   |
|                                                                 |   |   |   |   |   |   |   |   |   |
| Common stock                                                         |   |   |   |   |   |   |   |   |   |
| Balance, beginning and end of period                                 |   | $ | 1 |   |   | $ | 1 |   |   | $ | 1 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Additional paid-in capital                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, beginning and end of period                                 |   |   | 634,271 |   |   |   | 634,271 |   |   |   | 634,271 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Accumulated other comprehensive loss                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, beginning of period                                         |   |   | (5,246 | ) |   |   | (7,885 | ) |   |   | (10,524 | ) |
| Recognition in earnings of realized loss on cash                     |   |   |   |   |   |   |   |   |   |   |   |   |
|      flow hedges                            |   |   | 2,703 |   |   |   | 2,639 |   |   |   | 2,639 |   |
| Realized loss on settlement of interest rate hedge -                 |   |   |   |   |   |   |   |   |   |   |   |   |
|      Treasury Lock, net of tax $3.5 million |   |   | (5,705 | ) |   |   | - |   |   |   | - |   |
| Balance, end of period                                               |   |   | (8,248 | ) |   |   | (5,246 | ) |   |   | (7,885 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Retained earnings                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, beginning of period                                         |   |   | 591,987 |   |   |   | 576,745 |   |   |   | 669,353 |   |
| Net income                                                           |   |   | 129,683 |   |   |   | 126,942 |   |   |   | 157,092 |   |
| Dividends                                                            |   |   | - |   |   |   | (111,700 | ) |   |   | (249,700 | ) |
| Balance, end of period                                               |   |   | 721,670 |   |   |   | 591,987 |   |   |   | 576,745 |   |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Total stockholders' equity                                           |   | $ | 1,347,694 |   |   | $ | 1,221,013 |   |   | $ | 1,203,132 |   |

----

|  CITRUS CORP. AND SUBSIDIARIES                                                         |   |
|---------------------------------------------------------------------------------------------|--------|
|  CONSOLIDATED STATEMENTS OF CASH FLOWS                                                 |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |
|                                                                                        |   | Years Ended December 31, |   |
|                                                                                        |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   | (In thousands) |   |   |   |   |
| Cash flows provided by (used in) operating activities                                       |   |   |   |   |   |   |   |   |   |
| Net income                                                                                  |   | $ | 129,683 |   |   | $ | 126,942 |   |   | $ | 157,092 |   |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                               |   |   | 110,384 |   |   |   | 105,849 |   |   |   | 100,634 |   |
| Deferred income taxes                                                                       |   |   | 36,216 |   |   |   | 37,772 |   |   |   | (12,277 | ) |
| Allowance for funds used during construction                                                |   |   | (37,060 | ) |   |   | (7,093 | ) |   |   | (4,683 | ) |
| Other                                                                                       |   |   | (17,128 | ) |   |   | 3,842 |   |   |   | 5,411 |   |
| Changes in operating assets and liabilities:                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|     Other current assets and liabilities                                |   |   | 21,500 |   |   |   | (5,169 | ) |   |   | 7,782 |   |
|     Accounts payable - affiliates                                       |   |   | 2,109 |   |   |   | 118 |   |   |   | 5,593 |   |
|     Other long-term assets and liabilities                              |   |   | 3,938 |   |   |   | (680 | ) |   |   | 74,668 |   |
|     Net cash flows provided by operating activities                     |   |   | 249,642 |   |   |   | 261,581 |   |   |   | 334,220 |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows provided by (used in) investing activities                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                                                        |   |   | (455,064 | ) |   |   | (521,435 | ) |   |   | (175,370 | ) |
| Allowance for funds used during construction                                                |   |   | 37,060 |   |   |   | 7,093 |   |   |   | 4,683 |   |
|     Net cash flows used in investing activities                         |   |   | (418,004 | ) |   |   | (514,342 | ) |   |   | (170,687 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows provided by (used in) financing activities                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of long-term debt                                                                  |   |   | 600,000 |   |   |   | 500,000 |   |   |   | - |   |
| Issuance costs of debt                                                                      |   |   | (5,964 | ) |   |   | (662 | ) |   |   | (528 | ) |
| Dividends paid                                                                              |   |   | - |   |   |   | (154,300 | ) |   |   | (207,100 | ) |
| Repayment of long-term debt obligation                                                      |   |   | (51,500 | ) |   |   | (44,000 | ) |   |   | (44,000 | ) |
| Net change in revolving credit facilities                                                   |   |   | (79,375 | ) |   |   | (31,817 | ) |   |   | 76,400 |   |
| Interest rate hedge - settlement                                                            |   |   | (9,234 | ) |   |   | - |   |   |   | - |   |
|     Net cash flows provided by (used in) financing activities           |   |   | 453,927 |   |   |   | 269,221 |   |   |   | (175,228 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Change in cash and cash equivalents                                                         |   |   | 285,565 |   |   |   | 16,460 |   |   |   | (11,695 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                                            |   |   | 20,032 |   |   |   | 3,572 |   |   |   | 15,267 |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at end of period                                                  |   | $ | 305,597 |   |   | $ | 20,032 |   |   | $ | 3,572 |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid for interest, net of amounts capitalized                                          |   | $ | 118,569 |   |   | $ | 75,194 |   |   | $ | 72,439 |   |
| Cash paid for income taxes, net of refunds                                                  |   | $ | 36,311 |   |   | $ | 43,570 |   |   | $ | 103,589 |   |

----

|   | Regulatory Accounting.  Florida Gas’ accounting policies conform to authoritative guidance which is in accordance with the accounting requirements and ratemaking practices of the regulatory authorities.  Accordingly, certain assets and liabilities that resultfrom the regulated ratemaking process are recorded that would not be recorded under GAAP for non-regulated entities. Certain allowable regulatory deferrals of phase-in costs are prohibited under GAAP.  As a consequence, certain phase-in costs of Florida Gas’ Phase III expansion are not deferred for GAAP, but are deferred for future recovery for ratemaking purposes. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Use of Estimates.  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash and Cash Equivalents.  All liquid investments with maturities of three months or less at the date of purchase are considered cash equivalents.  The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of these investments. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Materials and Supplies. Materials and supplies are valued at the lower of cost or market value.  Materials transferred out of warehouses are priced at average cost.  Materials and supplies include spare parts which are critical to the pipeline system operations. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Fuel Tracker.  The fuel tracker is the cumulative balance owed to Florida Gas by its customers or owed by Florida Gas to its customers for gas used in the operation of its system, including costs incurred in the operation of electric compression and gas lost from the systemor otherwise unaccounted for.  The customers, pursuant to Florida Gas’ tariff and related contracts, provide fuel to Florida Gas based on specified percentages of the customers’ natural gas volumes delivered into the pipeline.  The percentages are designed to match the actual fuel consumed in moving the natural gas through Florida Gas’ facilities, with any difference between the volumes provided versus fuel consumed reflected in the fuel tracker. Aregulatory liability is recorded in the accompanying consolidated balance sheet for net volumes of natural gas owed to customers collectively.  Whenever fuel is due from customers from prior under recovery based on contractual and specific tariff provisions a regulatory asset is recorded.  Natural gas owed from or to customers is valued at market and a surcharge is invoiced to recover or refund the previous under or over collections.  Changes in the balances have no effect on theconsolidated income of Florida Gas. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Property, Plant and Equipment.  Property, Plant and Equipment consists primarily of natural gas pipeline and related facilities and is recorded at its original cost.  Florida Gas capitalizes all construction-related direct labor and material costs, as well as indirectconstruction costs.  The cost of replacements and betterments that extend the useful life of property, plant and equipment is also capitalized.  The cost of repairs and replacements of minor property, plant and equipment items is charged to expense as incurred. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | When property, plant and equipment is retired, the original cost less salvage value is charged to accumulated depreciation and amortization.  When entire regulated operating units of property, plant and equipment are retired or sold, the property and related accumulated depreciation and amortization accounts are reduced, and any gain or loss is recorded in income. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The recognition of an allowance for funds used during construction (AFUDC) is a utility accounting practice with calculations under guidelines prescribed by the FERC and capitalized as part of the cost of utility plant.  It represents the cost of capital invested in construction work-in-progress.  AFUDC has been segregated into two component parts – borrowed funds and equity funds.  Theallowance for borrowed and equity funds used during construction, including related amounts to gross up equity AFUDC to a before tax basis, totaled $73.2 million, $15.6 million and $10.3 million for the years ended December 31, 2009, 2008 and 2007, respectively.  AFUDC-borrowed funds are included as a reduction in Interest expense and AFUDC-equity funds are included in Other income in the accompanying statements of income. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Asset Impairment. An impairment loss is recognized when the carrying amount of a long-lived asset used in operations is not recoverable and exceeds its fair value.  The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flowsexpected to result from the use and eventual disposition of the asset. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Environmental Expenditures.  Environmental expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future generation, are expensed.  Environmental expenditures relating to current or future revenues are expensed or capitalized as appropriate.  Liabilitiesare recorded when environmental assessments and/or clean-ups are probable and the cost can be reasonably estimated. Remediation obligations are not discounted because the timing of future cash flow streams is not predictable. See Note 13 – Commitment and Contingencies. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Revenues.  Revenues from transportation of natural gas are based on capacity reservation charges and commodity usage charges.   Reservation revenues are based on contracted rates and capacity reservedby the customers and are recognized monthly.  Revenues from commodity usage charges are also recognized monthly based on the volumes of natural gas delivered.  Revenues for all services are generally based on the thermal quantity of natural gas delivered or subscribed at a rate specified in the contract. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Because Florida Gas is subject to FERC regulations, revenues collected during the pendency of a rate proceeding may be required by the FERC to be refunded in the final order.  Florida Gas establishes reserves for such potential refunds, as appropriate.  There were no reserves for potential rate refund at December 31, 2009 and 2008, respectively. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Accounts Receivable and Allowance for Doubtful Accounts.  The Company manages trade credit risks to minimize exposure to uncollectible trade receivables.  Prospective and existing customers are reviewed for creditworthiness based upon pre-established standards.  Customersthat do not meet minimum standards are required to provide additional credit support.  The Company considers many factors including historical customer collection experience, general and specific economic trends and known specific issues related to individual customers, sectors, and transactions that might impact collectability.  Increases in the allowance are recorded as a component of operating expenses.  Reductions in the allowance are recorded when receivables are written offor subsequently collected.   Unrecovered accounts receivable charged against the allowance for doubtful accounts were nil, nil and $0.3 million in the years ended December 31, 2009, 2008 and 2007, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The following table presents the relative contribution to the Company’s total operating revenue of each customer that comprised at least ten percent of its operating revenues for the periods presented. Revenues from individual third party and affiliate customers exceeding 10 percent of total revenues were approximately 54 percent, 55 percent and 56 percent of total revenue for the years ended December 31, 2009,2008 and 2007, respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                              |   | Years Ended December 31, |    |
|-----------------------------------|--------|--------------------------|---------|
|                              |   | 2009                     |    |   | 2008 |   |   | 2007 |   |
|                              |   | (In thousands)           |    |
|                              |   |                     |    |   |   |   |   |   |   |
| Florida Power & Light Company |   | $                        | 199,217 |   |   | $ | 197,301 |   |   | $ | 195,622 |   |
| TECO Energy, Inc.                 |   |                     | 73,430  |   |   |   | 78,255 |   |   |   | 80,815 |   |

|                              | December 31, |           |
|-----------------------------------|--------------|----------------|
|                              |         | 2009           |   |   | 2008 |   |
|                              |         | (In thousands) |   |
|                              |         |           |   |   |   |   |
| Florida Power & Light Company |         | $              | 15,246 |   |   | $ | 15,293 |   |
| TECO Energy, Inc.                 |         |           | 5,558 |   |   |   | 5,430 |   |

----

|   | Derivative and Hedging Activities.  All derivatives are recognized on the consolidated balance sheet at their fair value.  On the date the derivative contract is entered into, the Company designates the derivative as (i) a hedge of the fair value of a recognized assetor liability or of an unrecognized firm commitment (a fair value hedge); (ii) a hedge of a forecasted transaction or the variability of cash flows to be received or paid in conjunction with a recognized asset or liability (a cash flow hedge); or (iii) an instrument that is held for trading or non-hedging purposes (a trading or economic hedging instrument).  Forderivatives treated as a fair value hedge, the effective portion of changes in fair value is recorded as an adjustment to the hedged item.  The ineffective portion of a fair value hedge is recognized in earnings if the short cut method of assessing effectiveness is not used.  Upon termination of a fair value hedge of a debt instrument, the resulting gain or loss is amortized to earnings through the maturity date of the debt instrument.  For derivatives treated as a cash flow hedge,the effective portion of changes in fair value is recorded in Accumulated other comprehensive loss until the related hedged items impact earnings.  Any ineffective portion of a cash flow hedge is reported in current-period earnings.  Upon termination of a cash flow hedge, the resulting gain or loss is amortized to earnings through the maturity date of the hedged forecasted transactions.  For derivatives treated as trading oreconomic hedging instruments, changes in fair value are reported in current-period earnings. Fair value is determined based upon quoted market prices and pricing models using assumptions that market participants would use.  As of December 31, 2009 and 2008, the Company does not have any hedges in place; it is only amortizing previously terminated cash flow hedges. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 – Observable inputs such as: (i) quoted prices for similar assets or liabilities in active markets; (ii) quoted prices for identical or similar assets or liabilities in markets that are not active and do not require significant adjustment based on unobservable inputs; or (iii) valuations based on pricing models, discounted cash flow methodologiesor similar techniques where significant inputs (e.g., interest rates, yield curves, etc.) are derived principally from observable market data, or can be corroborated by observable market data, for substantially the full term of the assets or liabilities; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 – Unobservable inputs, including valuations based on pricing models, discounted cash flow methodologies or similar techniques where at least one significant model assumption or input is unobservable. Unobservable inputs are used to the extent that observable inputs are not available and reflect the Company’s own assumptions about theassumptions market participants would use in pricing the assets or liabilities. Unobservable inputs are based on the best information available in the circumstances, which might include the Company’s own data. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Asset Retirement Obligations (ARO).  Legal obligations associated with the retirement of long-lived assets are required to be recognizedat their fair value at the time the obligations are incurred.  Upon initial recognition of a liability, costs are capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset.  The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related long-lived asset.  The Company records ARO accretion and amortization expenses as a regulatory asset based on the probabilityof recovery in rates in future rate cases. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Income Taxes.  Income taxes are accounted for under the asset and liability method.  Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carryingamounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date.  Valuation allowances are established when necessary to reduce deferred tax assets to theamounts more likely than not to be realized. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|   | Florida Gas purchases transportation services from Southern Natural Gas Company (Southern), a subsidiary of El Paso, in connection with its Phase III Expansion completed in early 1995.  Florida Gas is currently contracted for firm capacity of 100,000 Mcf/day on Southern’s system through August 31, 2013.  The amount expensed for theseservices totaled $7.1 million, $6.8 million and $6.8 million in the years ended December 31, 2009, 2008 and 2007, respectively.  Florida Gas had net accounts payable to Southern of $600,000 and $542,000 as of December 31, 2009 and 2008, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Although a number of other assets in the Company’s system are subject to agreements or regulations that give rise to an ARO or a Conditional ARO upon the Company’s discontinued use of these assets, AROs were not recorded for most of these assets because the fair values of these AROs were not reliably estimable.  The principal reason the fair values of these AROs were not subject to reliableestimation was because the lives of underlying assets are indeterminate.  Management has concluded that the Company’s pipeline system, as a whole, has an indeterminate life.  In reaching this conclusion, management considered its intent for operating the pipeline system, the economic life of the underlying assets, its past practices and industry practice. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company intends to operate the pipeline system indefinitely as a going concern.  Individual component assets have been and will continue to be replaced, but the pipeline system will continue in operation as long as supply and demand for natural gas exists.  Based on the widespread use of natural gas in industrial and power generation activities, management expects supply and demand to existfor the foreseeable future. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company has in place a rigorous repair and maintenance program that keeps the pipeline system in good working order.  Therefore, although some of the individual assets on the pipeline system may be replaced, the pipeline system itself will remain intact indefinitely.  AROs generally do not arise unless a pipeline system (or portion thereof) is abandoned.  The Company does not intendto make any such abandonments as long as supply and demand for natural gas remains relatively stable. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                 |   | In Service |   |                      |   |           |   |
|----------------------|--------|------------|--------|---------------------------|--------|----------------|--------|
| ARO Description      |   | Date       |   | Long-Lived Assets         |   | Amount         |   |
|                 |   |       |   |                      |   | (In thousands) |   |
|                 |   |       |   |                      |   |           |   |
| Retire lateral lines |   | Various    |   | Offshore lateral lines    |   | $              | 953    |   |
| Remove asbestos      |   | Various    |   | Mainlines and compressors |   | $              | 489    |   |

----

|   | Florida Gas recorded ARO accretion and amortization expenses of $1.5 million at December 31, 2009 (See Note 11 – Regulatory Assets) as a regulatory asset based on the probability of recovery in rates in its next rate case. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |       The following table is a reconciliation of the carrying amount of the ARO liability for the periods presented: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|              |   | Years Ended December 31, |
|-------------------|--------|--------------------------|
|              |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
|              |   | (In thousands)           |   |
|              |   |                     |   |   |   |   |   |   |   |
| Beginning balance |   | $                        | 1,819 |   |   | $ | 471 |   |   | $ | 481 |   |
| Incurred          |   |                     | 2,064 |   |   |   | 1,358 |   |   |   | - |   |
| Settled           |   |                     | (1,450 | ) |   |   | (37 | ) |   |   | (37 | ) |
| Accretion         |   |                     | 152 |   |   |   | 27 |   |   |   | 27 |   |
| Ending balance    |   | $                        | 2,585 |   |   | $ | 1,819 |   |   | $ | 471 |   |

|                                                                                                                                             |   |                     |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                             |   | Years Ended December 31, |   |
|                                                                                                                                             |   | 2009                     |   |   | 2008   |   |   | 2007   |   |
|                                                                                                                                             |   | (In thousands)           |   |
| Reclassification of realized loss on interest rate hedge of 7.625% $325 million      note due 2010 into net income |   | $                        | 1,872  |   |   | $      | 1,873  |   |   | $ | 1,873 |   |
| Reclassification of realized loss on interest rate hedge of 7.0% $250 million note      due 2012 into net income   |   |                     | 1,228  |   |   |   | 1,228  |   |   |   | 1,228 |   |
| Reclassification of realized gain on interest rate hedge of 9.19% $150 million      note due 2024 into net income  |   |                     | (462   | )      |   |   | (462   | )      |   |   | (462 | ) |
| Realized loss on interest rate hedge on 9.393% $500 million      note due 2029, net of tax $40                     |   |                     | 65     |   |   |   | -      |   |   |   | - |   |
| Realized loss on settlement of interest rate hedge, net of tax $3.5 million                                                                      |   |                     | (5,705 | )      |   |   | -      |   |   |   | - |   |
|                Total                                                  |   | $                        | (3,002 | )      |   | $      | 2,639  |   |   | $ | 2,639 |   |

----

|                                          |   | December 31, 2009 |      |   | December 31, 2008 |   |
|-----------------------------------------------|--------|-------------------|-----------|--------|-------------------|--------|
|                                          |   | Book Value        |      |   | Fair Value        |   |   | Book Value |   |   | Fair Value |   |
|                                          |   | (In thousands)    |      |
| Citrus                                        |   |              |      |   |              |   |   |   |   |   |   |   |
| 8.490% Senior Notes due 2009                  |   | $                 | -         |   |              | $      | - |   |   | $ | 30,000 |   |   | $ | 31,439 |   |
| Revolving Credit Agreement Citrus due 2012    |   |              | 5,208     |   |              |   | 4,899 |   |   |   | 40,643 |   |   |   | 37,729 |   |
| Construction and Term Loan Agreement due 2033 |   |              | 500,000   |   |              |   | 682,214 |   |   |   | 500,000 |   |   |   | 500,000 |   |
| FGT                                           |   |              |      |   |              |   |   |   |   |   |   |   |   |   |   |   |
| 10.110% Senior Notes due 2013                 |   |              | 56,000    |   |              |   | 64,236 |   |   |   | 70,000 |   |   |   | 77,010 |   |
| 9.190% Senior Notes due 2024                  |   |              | 112,500   |   |              |   | 141,109 |   |   |   | 120,000 |   |   |   | 127,945 |   |
| 7.625% Senior Notes due 2010                  |   |              | 325,000   |   |              |   | 344,012 |   |   |   | 325,000 |   |   |   | 341,574 |   |
| 7.000% Senior Notes due 2012                  |   |              | 250,000   |   |              |   | 283,057 |   |   |   | 250,000 |   |   |   | 261,891 |   |
| 7.900% Senior Notes due 2019                  |   |              | 600,000   |   |              |   | 731,582 |   |   |   | - |   |   |   | - |   |
| Revolving Credit Agreement FGT due 2012       |   |              | -         |   |              |   | - |   |   |   | 43,940 |   |   |   | 40,790 |   |
|    Total debt outstanding      |   | $                 | 1,848,708 |   |              | $      | 2,251,109 |   |   | $ | 1,379,583 |   |   | $ | 1,418,378 |   |
| Current portion of long-term debt             |   |              | (346,322  | )      |              |   |   |   |   |   | (51,500 | ) |   |   |   |   |
| Unamortized debt discount and swap loss       |   |              | (1,549    | )      |              |   |   |   |   |   | (1,063 | ) |   |   |   |   |
|    Total long-term debt        |   | $                 | 1,500,837 |   |              |   |   |   |   | $ | 1,327,020 |   |   |   |   |   |

|       |   | December 31,   |      |
|------------|--------|----------------|-----------|
| Year       |   | 2009           |      |
|       |   | (In thousands) |      |
|       |   |           |      |
| 2010       |   | $              | 346,500   |   |
| 2011       |   |           | 21,500    |   |
| 2012       |   |           | 276,708   |   |
| 2013       |   |           | 21,500    |   |
| 2014       |   |           | 7,500     |   |
| Thereafter |   |           | 1,175,000 |   |
|       |   | $              | 1,848,708 |   |

----

----

----

|                                                            |   | Other Postretirement Benefits |   |
|-----------------------------------------------------------------|--------|-------------------------------|--------|
|                                                            |   | December 31,                  |   |
|                                                            |   | 2009                          |   |   | 2008 |   |
|                                                            |   | (In thousands)                |   |
| Change in benefit obligation:                                   |   |                          |   |   |   |   |
| Benefit obligation at beginning of period                       |   | $                             | 16,010 |   |   | $ | 5,302 |   |
| Service cost                                                    |   |                          | 529    |   |   |   | 165 |   |
| Interest cost                                                   |   |                          | 945    |   |   |   | 545 |   |
| Actuarial (gain)/loss                                           |   |                          | (925   | ) |   |   | 662 |   |
| Benefits paid, net                                              |   |                          | (346   | ) |   |   | (556 | ) |
| Medicare Part D subsidy received                                |   |                          | 83     |   |   |   | - |   |
| Plan amendments   (1)                            |   |                          | 1,375  |   |   |   | 9,892 |   |
| Benefit obligation at end of year                               |   |                          | 17,671 |   |   |   | 16,010 |   |
|                                                            |   |                          |   |   |   |   |   |   |
| Change in plan assets:                                          |   |                          |   |   |   |   |   |   |
| Fair value of plan assets at beginning of period                |   |                          | 8,243  |   |   |   | 8,599 |   |
| Return on plan assets and other                                 |   |                          | 1,722  |   |   |   | (1,132 | ) |
| Employer contributions                                          |   |                          | 1,035  |   |   |   | 1,332 |   |
| Benefits paid, net                                              |   |                          | (346   | ) |   |   | (556 | ) |
| Fair value of plan assets at end of period   (2) |   |                          | 10,654 |   |   |   | 8,243 |   |
|                                                            |   |                          |   |   |   |   |   |   |
|                                                            |   |                          |   |   |   |   |   |   |
| Amount underfunded at end of period   (3)        |   | $                             | 7,017  |   |   | $ | 7,767 |   |
|                                                            |   |                          |   |   |   |   |   |   |
| Amount recognized in the consolidated balance sheet             |   |                          |   |   |   |   |   |   |
| consist of:                                                     |   |                          |   |   |   |   |   |   |
| Regulatory assets (Note 11)                                     |   | $                             | 7,017  |   |   |   | 7,675 |   |
| Deferred credits - other (Note 12)                              |   |                          | (7,017 | ) |   |   | (7,767 | ) |
|                                                            |   |  $                       | -      |   |   |  $ | (92 | ) |

|                  (1) | The Plan was amended to provide an annual increase to the dollar multiplier used to establish initial account balances for employees who retire on or after October 1, 2008.  This amendment was adopted in late September 2009.  It is required that amendments be measured and recognized at the time of adoption.  Accordingly, the amendment was measured at September 30, 2009, the end of themonth nearest to the month of adoption. |
|------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2)  Plan assets are recorded at fair value versus a calculated value as of the December 31, 2009 and 2008 measurement dates.  Plan assets at December 31, 2008 include the amounts of assets received from the Enron Trust of $7.1 million as final settlement. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3)  Underfunded balance is recognized as a deferred credit-other, offset by a regulatory asset for amounts due from customers, in the consolidated balance sheet. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |   | Other Postretirement Benefits |   |
|------------------------------------------------------|--------|-------------------------------|--------|
|                                                 |   | Years Ended December 31,      |   |
|                                                 |   | 2009                          |   |   | 2008 |   |   | 2007 |   |
|                                                 |   | (In thousands)                |   |
| Net Periodic Benefit Cost:                           |   |                          |   |   |   |   |   |   |   |
|    Service cost                       |   | $                             | 529    |   |   | $ | 165 |   |   | $ | 37 |   |
|    Interest cost                      |   |                          | 945    |   |   |   | 545 |   |   |   | 296 |   |
|    Expected return on plan assets     |   |                          | (441   | ) |   |   | (440 | ) |   |   | (414 | ) |
|    Prior service cost amortization    |   |                          | 1,088  |   |   |   | 351 |   |   |   | - |   |
|    Actuarial gain amortization        |   |                          | -      |   |   |   | (218 | ) |   |   | (230 | ) |
|    Net periodic benefit cost (credit) |   | $                             | 2,121  |   |   | $ | 403 |   |   | $ | (311 | ) |

|                                 |   | Years Ended December 31, |   |
|--------------------------------------|--------|--------------------------|--------|
|                                 |   | 2009                     |   |  2008 |   | 2007 |   |
|                                 |   |                     |   |   |   |   |   |
|  Discount rate                  |   |                     | 6.14   | % | Jan-Aug: 6.09%  |   |   | 5.68 | %  |
|                                 |   |                     |   |   | Sep-Dec: 7.02% |   |   |   |   |
|  Expected return on plan assets |   |                     | 5.00   | % |  5.00% |   |   | 5.00 | % |

|                                               |   | December 31, |   |
|----------------------------------------------------|--------|--------------|--------|
|                                               |   | 2009         |   |   | 2008 |   |
|                                               |   |         |   |   |   |   |
| Health care cost trend rate assumed for next year  |   |         | 8.50   | % |   |   | 9.00 | % |
| Ultimate trend rate                                |   |         | 4.85   | % |   |   | 4.85 | % |
| Year that the rate reaches the ultimate trend rate |   |         | 2017   |   |   |   | 2017 |   |

----

|                                                    |   | One Percentage Point Increase |   |   | One Percentage Point Decrease |   |
|---------------------------------------------------------|--------|-------------------------------|--------|--------|-------------------------------|--------|
|                                                    |   | (In thousands)                |   |
| Effect on total service and interest cost               |   | $                             | 155    |   |                          | $      | (150 | ) |
| Effect on accumulated postretirement benefit obligation |   |                          | 2,304  |   |                          |   | (2,065 | ) |

|                                              |   | Fair Value        |   |     |
|---------------------------------------------------|--------|-------------------|--------|----------|
|                                              |   | as of             |   |     |
|                                              |   | December 31, 2009 |   |     |
|                                              |   | (In thousands)    |   |     |
| Asset Category:                                   |   |              |   |     |
|     Cash and cash equivalents |   | $                 | 959    |     |   |
|     Mutual fund               |   |              | 9,695  |  (1 | ) |
|     Total                     |   | $                 | 10,654 |     |   |

| (1)   | This fund of funds invests primarily in a diversified portfolio of equity, fixed income and short-term mutual funds.  As of December 31, 2009, the fund was primarily comprised of approximately 16 percent large-cap U.S. equities, 3 percent small-cap U.S. equities,10 percent international equities, 57 percent fixed income securities, 10 percentcash, and 4 percent in other investments. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Years           |   |   | Expected Benefits Before Effect of Medicare Part D |   |   | Payments Medicare Part D Subsidy Receipts |   |   | Net    |   |
|-----------------|--------|--------|----------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|--------|--------|
|            |   |   |                                               |   |   | (In thousands)                            |   |   |   |   |
|            |   |   |                                               |   |   |                                      |   |   |   |   |
| 2010            |   |   | $                                                  | 637    |   |                                      | $      | 89     |   |   | $ | 548 |   |
| 2011            |   |   |                                               | 743    |   |                                      |   | 97     |   |   |   | 646 |   |
| 2012            |   |   |                                               | 833    |   |                                      |   | 107    |   |   |   | 726 |   |
| 2013            |   |   |                                               | 923    |   |                                      |   | 118    |   |   |   | 805 |   |
| 2014            |   |   |                                               | 1,011  |   |                                      |   | 133    |   |   |   | 878 |   |
|  2015-2019 |   |   |                                               | 6,710  |   |                                      |   | 885    |   |   |   | 5,825 |   |

----

|                      |   | December 31, |   |
|---------------------------|--------|--------------|--------|
|                      |   | 2009         |   |   | 2008 |   |
|                      |   |         |   |   |   |   |
| Equity securities         |   |         | 35     | % |   |   | 30 | % |
| Debt securities           |   |         | 56     | % |   |   | 70 | % |
| Cash and cash equivalents |   |         | 9      | % |   |   | 0 | % |
| Total                     |   |         | 100    | % |   |   | 100 | % |

|                                                                              |   | Years Ended December 31, |   |
|-----------------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                              |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
| Current income taxes                                                              |   | (In thousands)           |   |
| Federal                                                                           |   | $                        | 38,954 |   |   | $ | 34,899 |   |   | $ | 99,083 |   |
| State                                                                             |   |                     | 3,259  |   |   |   | 810 |   |   |   | 5,418 |   |
|          Total current income taxes  |   |                     | 42,213 |   |   |   | 35,709 |   |   |   | 104,501 |   |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Deferred income taxes                                                             |   |                     |   |   |   |   |   |   |   |   |   |   |
| Federal                                                                           |   |                     | 30,793 |   |   |   | 33,051 |   |   |   | (14,531 | ) |
| State                                                                             |   |                     | 5,423  |   |   |   | 4,721 |   |   |   | 2,254 |   |
|          Total deferred income taxes |   |                     | 36,216 |   |   |   | 37,772 |   |   |   | (12,277 | ) |
| Total income tax expense                                                          |   | $                        | 78,429 |   |   | $ | 73,481 |   |   | $ | 92,224 |   |
|                                                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
| Effective tax rate                                                                |   |                     | 37.7   | % |   |   | 36.7 | % |   |   | 37.0 | % |

|                                                      |   | Years Ended December 31, |   |
|-----------------------------------------------------------|--------|--------------------------|--------|
|                                                      |   | 2009                     |   |   | 2008 |   |   | 2007 |   |
|                                                      |   | (In thousands)           |   |
|                                                      |   |                     |   |   |   |   |   |   |   |
| Income tax , computed at the statutory rate               |   | $                        | 72,839 |   |   | $ | 70,148 |   |   | $ | 87,261 |   |
| Adjustments:                                              |   |                     |   |   |   |   |   |   |   |   |   |   |
|    State income tax, net of federal effect |   |                     | 5,643  |   |   |   | 3,595 |   |   |   | 4,986 |   |
|    Permanent differences and other         |   |                     | (53    | ) |   |   | (262 | ) |   |   | (23 | ) |
| Total income tax expense                                  |   | $                        | 78,429 |   |   | $ | 73,481 |   |   | $ | 92,224 |   |

----

|                                                                      |   | December 31,   |     |
|---------------------------------------------------------------------------|--------|----------------|----------|
|                                                                      |   | 2009           |     |   | 2008 |   |
|                                                                      |   | (In thousands) |     |
| Deferred income tax asset:                                                |   |           |     |   |   |   |
| Regulatory and other reserves                                             |   | $              | 5,635    |   |   | $ | 4,403 |   |
|       Total deferred income tax asset       |   |           | 5,635    |   |   |   | 4,403 |   |
|                                                                      |   |           |     |   |   |   |   |   |
| Deferred income tax liabilities:                                          |   |           |     |   |   |   |   |   |
| Depreciation and amortization                                             |   |           | (836,498 | ) |   |   | (796,339 | ) |
| Deferred charges and other assets                                         |   |           | (3,618   | ) |   |   | (3,807 | ) |
| Other                                                                     |   |           | (41      | ) |   |   | (6,263 | ) |
|       Total deferred income tax liabilities |   |           | (840,157 | ) |   |   | (806,409 | ) |
|                                                                      |   |           |     |   |   |   |   |   |
| Net deferred income tax liabilities                                       |   | $              | (834,522 | ) |   | $ | (802,006 | ) |

|                                                                                    |   | Lives in |   |       | December 31,   |   |
|-----------------------------------------------------------------------------------------|--------|----------|--------|------------|----------------|--------|
|                                                                                    |   | Years    |   |       | 2009           |   |   | 2008 |   |
|                                                                                    |   |     |   |       | (In thousands) |   |
|                                                                                    |   |     |   |       |           |   |   |   |   |
| Transmission                                                                            |   |     | 20-50  |       |           | $      | 3,344,407 |   |   | $ | 3,208,476 |   |
| General                                                                                 |   |     | 3-40   |       |           |   | 22,561 |   |   |   | 19,893 |   |
| Intangibles  (1)                                                              |   |     | 6-10   |       |           |   | 27,294 |   |   |   | 18,548 |   |
| Construction work-in-progress                                                           |   |     |   |       |           |   | 769,298 |   |   |   | 405,585 |   |
| Acquisition adjustment                                                                  |   |     | 62.5   |       |           |   | 1,252,465 |   |   |   | 1,252,466 |   |
|                                                                                    |   |     |   |       |           |   | 5,416,025 |   |   |   | 4,904,968 |   |
| Less accumulated depreciation and amortization                                          |   |     |   | (1,574,765 | )              |   |   | (1,478,890 | ) |
| Net property, plant and equipment                                                       |   |     |   |       |           | $      | 3,841,260 |   |   | $ | 3,426,078 |   |
|                                                                                    |   |     |   |       |           |   |   |   |   |   |   |   |
|                                                                                    |   |     |   |       |           |   |   |   |   |   |   |   |
| (1) Includes capitalized computer software costs totaling:                         |   |     |   |       |           |   |   |   |   |
|        Computer software cost                        |   |     |   |       |           | $      | 22,648 |   |   | $ | 14,556 |   |
|        Less accumulated amortization                 |   |     |   |       |           |   | (8,653 | ) |   |   | (6,363 | ) |
|           Net computer software costs |   |     |   |       |           | $      | 13,995 |   |   | $ | 8,193 |   |

----

|                                                  |   | December 31,   |   |
|-------------------------------------------------------|--------|----------------|--------|
|                                                  |   | 2009           |   |   | 2008 |   |
|                                                  |   | (In thousands) |   |
|                                                  |   |           |   |   |   |   |
| Ramp-up assets, net (1)                               |   | $              | 10,993 |   |   | $ | 11,304 |   |
| Fuel tracker                                          |   |           | -      |   |   |   | 102 |   |
| Other postretirement benefits (Note 8)                |   |           | 7,017  |   |   |   | 7,675 |   |
| Cash balance plan settlement                          |   |           | -      |   |   |   | 465 |   |
| Environmental non-PCB clean-up cost (Note 13)         |   |           | 1,147  |   |   |   | 1,147 |   |
| Asset retirement obligation (Note 5)                  |   |           | 1,506  |   |   |   | - |   |
| Other miscellaneous                                   |   |           | 1,245  |   |   |   | 1,548 |   |
|      Total regulatory assets |   | $              | 21,908 |   |   | $ | 22,241 |   |

| (1)   | Ramp-up assets are regulatory assets which Florida Gas was specifically allowed to establish in the FERC certificates authorizing the Phase IV and V Expansion projects. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                       |   | December 31,   |   |
|------------------------------------------------------------|--------|----------------|--------|
|                                                       |   | 2009           |   |   | 2008 |   |
|                                                       |   | (In thousands) |   |   |   |   |
|                                                       |   |           |   |   |   |   |
| Balancing tool (1)                                         |   | $              | 12,937 |   |   | $ | 9,178 |   |
| Fuel Tracker                                               |   |           | 744    |   |   |   | - |   |
| Other miscellaneous                                        |   |           | -      |   |   |   | 28 |   |
|      Total regulatory liabilities |   | $              | 13,681 |   |   | $ | 9,206 |   |

|   | (1)  Balancing tool is a regulatory method by which Florida Gas recovers or refunds the net costs of operational natural gas balancing of the pipeline’s system.  The balance can be a deferred charge or credit, depending on timing, rate changes and operational activities. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                         |   | December 31,   |   |
|--------------------------------------------------------------|--------|----------------|--------|
|                                                         |   | 2009           |   |   | 2008 |   |
|                                                         |   | (In thousands) |   |
|                                                         |   |           |   |   |   |   |
| Post construction mitigation costs                           |   | $              | 1,247  |   |   | $ | 1,354 |   |
| Other postretirement benefits (Note 8)                       |   |           | 7,017  |   |   |   | 7,767 |   |
| Deferred compensation                                        |   |           | 485    |   |   |   | 687 |   |
| Environmental non-PCB clean-up cost reserve                  |   |           | 1,166  |   |   |   | 1,283 |   |
| Taxes payable                                                |   |           | 3,358  |   |   |   | 2,246 |   |
| Asset retirement obligation (Note 5)                         |   |           | 2,585  |   |   |   | 1,819 |   |
| Other miscellaneous                                          |   |           | 821    |   |   |   | 1,162 |   |
|      Total Deferred Credits - other |   | $              | 16,679 |   |   | $ | 16,318 |   |

----

----

----