We are in the midst of a rapidly evolving energy marketplace.

Undergoing its greatest changes since the energy crises of the 1970s, the energy landscape is being shaped by the convergence of three revolutions. The shale gas revolution has enhanced our energy supply with an abundance of this clean, reliable resource. The renewable energy revolution is yielding new ways to expand the energy market and to establish more efficient, sustainable solutions. And the technology revolution, impacting almost every industry, has increased the customer's ability to more accurately control their connection to energy and, combined with social media, is significantly altering customer relationships and expectations.

These three dynamics are creating new opportunities for companies nimble enough to capitalize on them. In fiscal year 2015, WGL proved it is effectively aligning its utility-based strengths with evolving customer needs and the rapidly changing energy landscape of this century. Our transformation lies in the creativity and innovation of our solutions, but is driven by our core expertise in the safe, reliable delivery of energy services. We are committed to an asset-based growth strategy designed to provide the best solutions for customers and predictable, steady returns for shareholders. Our integrated and collaborative energy company of the 21st century is built upon 167 successful years and a robust portfolio that we believe positions us for reliable long-term growth.

As we strengthen our core natural gas utility business through upgraded infrastructure and with projects and investments that link our service area to enormous gas reserves in neighboring states, WGL is delivering energy answers that also include electricity, solar power, wind energy, carbon offsets and distributed generation.

We believe we are superbly positioned to grow in a market in which natural gas will remain abundant for the foreseeable future and new technologies enable energy to become more predictable, reliable, responsive and secure. Our solutions fulfill environmental objectives, increase jobs and economic development, improve security and sustain the communities we serve.

We provide these energy answers through the collaborative and proven expertise of the companies that comprise WGL: Washington Gas, WGL Energy Services, WGL Energy Systems, WGL Midstream and Hampshire Gas.

Together, WGL Holdings' companies achieved record results in FY2015 with non-GAAP operating earnings of $158.2 million, or $3.16 per share, an 18 percent non-GAAP operating EPS increase over FY2014. We realized a nine percent compounded annual growth rate in non-GAAP earnings per share since 2011. WGL increased its annual dividend by nine cents in FY2015, a five percent increase over last year, to $1.85 per share. This marks the 39th consecutive year that the company has increased the dividend on its common stock. Segment highlights include the following:

  • Washington Gas added more than 12,700 active customer meters. Utility service was available to 99.8 percent of customers without interruption this year.
  • WGL Energy Services reported record adjusted EBIT of $68.5 million, an increase of $57.8 million over the previous year. WGL Energy Systems reported strong adjusted EBIT of $16.8 million in 2015, a 37 percent increase over last year.
  • WGL Midstream secured an opportunity to invest approximately $210 to $245 million for an interest in the Mountain Valley Pipeline project, a 300-mile pipeline to supply abundant, affordable natural gas from the Marcellus and Utica shale formations.
  • The company accelerated carbon emission reduction and is well ahead of pace to achieve its 2020 objectives through pipeline replacement, energy efficiency measures at our sites and increasing the number of vehicles in our fleet running on compressed natural gas.
  • WGL significantly exceeded our supplier diversity objectives and was recognized by the Women's Forum of New York for the diversity of our Board of Directors.
  • Our highly engaged employees and their families exceeded WGL's goal for total volunteer hours by more than 22 percent through support of a wide range of programs designed to strengthen education, health and the environment in WGL's communities.
  • By all measures, including system maintenance and construction, pipeline integrity and personnel safety, we are proud to say we delivered a strong safety performance during a year that included record cold temperatures. The safe delivery of natural gas and other energy services remains our number one priority.

Infrastructure development and expansion remain critical to the success of our company and our investments reflect this focus. In FY2015, we invested $327.4 million in our regulated utility and $42.7 million in midstream pipeline projects. Utility investments drove higher net revenue through our accelerated replacement programs and by accommodating customer growth. In addition to installed meters, this year we expanded our utility growth strategy to include economic development initiatives such as natural gas infrastructure expansion and single-meter large throughput solutions.

Our FY2015 investments also underscore our commitment to diversify our portfolio with owned assets that provide relatively predictable revenue streams. We invested $158.3 million in distributed generation in 2015, adding new solar energy and fuel cell projects to our portfolio and bringing our total capital investment in this strategic market to $500 million. WGL's assets now consist of more than 150MW of distributed generation capacity across 120 projects installed or under construction. We plan to increase distributed generation capacity by 50 percent in FY2016.

Customers of all types and sizes—consumers, corporations, governments and campuses—are seeking solutions that incorporate multiple resources, and that are reliable and environmentally friendly. Our foundational strength in the safe and reliable delivery of natural gas combined with asset-based investments in the broader energy spectrum, enable WGL's most differentiated offering: Distributed Impact.

Distributed Impact draws from resources across the energy spectrum. The integration of and redundancy enabled by diverse energy resources feeding into one intelligent solution increases security and reliability while enabling better control of energy spend to support our customers' profitability, sustainability and environmental goals.

Distributed Impact has the potential to shape how entire communities are powered and to change the perception of energy from a cost to an asset. And, it is just one of the ways we are contributing to the communities we serve. We are also proud of a long-standing, high-impact commitment to volunteerism and philanthropy supported by our 1,500 employees who serve educational, health and environmental needs throughout our service territory.

Our FY2015 financial performance, and the company that WGL is today, are best understood through the strengths that guide our decisions and our customer and community interactions. On the pages that follow, we'll show you how we lead, anticipate, innovate and listen. These are some of the qualities that guide the transformation of our company to address a dynamic and rapidly changing energy industry. When you're looking for Energy Answers, Ask Us.

Terry D. McCallister

Chairman and Chief Executive Officer

Adrian P. Chapman

President and Chief Operating Officer

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