NiSource (NI)

Q3 2011 Earnings Call

October 28, 2011 9:00 am ET


Stephen P. Smith - Chief Financial Officer and Executive Vice President

Glen L. Kettering - Senior Vice President of Corporate Affairs

Robert C. Skaggs - Chief Executive Officer, President and Director


Gabriele Sorbara - Caris & Company, Inc., Research Division

Stephen J. Maresca - Morgan Stanley, Research Division

Andrew Levi - Caris & Company, Inc., Research Division

Craig Shere - Tuohy Brothers Investment Research, Inc.

Carl L. Kirst - BMO Capital Markets U.S.

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Yves Siegel - Crédit Suisse AG, Research Division

Faisel Khan - Citigroup Inc, Research Division



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» NiSource's CEO Discusses Q2 2011 Results - Earnings Call Transcript
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Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 NiSource Earnings Conference Call. My name is Lacey and I'll be your coordinator for today. [Operator Instructions] And I would now like to turn the presentation over to your host for today's call, Mr. Glen Kettering, Senior Vice President of Corporate Affairs. Please proceed.

Glen L. Kettering

Thank you, Lacey, and good morning to everyone. On behalf of NiSource, I'd like to welcome you to our quarterly analyst call.

Joining me this morning are Bob Skaggs, President and Chief Executive Officer; Steve Smith, Executive Vice President and Chief Financial Officer; and Randy Hulen, Managing Director of Investor Relations.

As you know, the focus of today's call is to review our financial performance for the third quarter of 2011 and provide a business update. We'll then open the call to your questions.

At times during the call, we'll refer to the supplemental slides available on our website at I'd like to remind all of you that some of the statements made on this conference call will be forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning such risks and uncertainties is included in the MD&A and Risk Factors sections of our periodic SEC filings.

And now, I'd like to turn the call over to Bob Skaggs.

Robert C. Skaggs

Thank you, Glen. Good morning, and thanks for joining us today. This morning's agenda is brisk to allow time for your questions.

To start things off, I'll touch on a few key highlights that demonstrate the team's continued progress on executing NiSource's business plan. I'll provide a few specific updates on NiSource's results, as well as the performance of our key business units, and then we'll open the line to your questions.

starting off, let's turn to Slide 3 in the supplemental deck, labeled Key Takeaways for the Third Quarter. I'll discuss in a moment, despite sluggish economic conditions, our balanced investment-driven strategy continues to deliver solid earnings growth and increased shareholder value. Our strategy also has remained true to our underlying commitments to do the right thing in enhancing customer service, modernizing our energy infrastructure and expanding our network across the entire NiSource footprint.

As noted in this morning's release, our performance today has NiSource on pace to deliver earnings at the upper half of our 2011 guidance range of $1.25 to $1.35 per share, non-GAAP. NiSource is also on track to deliver double-digit shareholder returns for the third consecutive year, significantly outperforming the utility indices and the broader markets. This performance record is the direct result of the continued exceptional execution in array of core initiatives across each segment of NiSource's businesses.

Just a few examples. From a regulatory standpoint, we've received approval for a significant rate case settlement in Pennsylvania. We also advanced settlement of our Columbia Gulf rate case, as FERC approval targeted by year end. In Indiana, our watershed electric rate case settlement remains on track for approval late this year or early 2012. Meanwhile, NIPSCO's substantial environmental scrubber investment program at our Schahfer Generating Station remains on schedule and on budget. And then our Gas Transmission & Storage business, new CEO Jimmy Staton is driving development with an aggressive comprehensive plan to leverage NiSource's unparalleled position in the Marcellus and Utica shale regions.

With that premise, let's now take a closer look at the quarter, starting with the financial highlights on Slide 4.

As you can see, we delivered third quarter net operating earnings, non-GAAP, of about $33 million or $0.11 per share compared to $0.04 per share in 2010. Our operating earnings increased for the quarter from about $110 million to over $140 million. As I mentioned a moment ago, given our strong year-to-date performance, coupled with our expectations for the balance of the year, we expect that our full year results will be in the upper half of our non-GAAP earnings range of $1.25 to $1.35 per share for 2011.

Shifting to our individual business unit results. Let's start in Indiana with our Electric business, as summarized on Slide 5. The pending electric rate case settlement is unquestionably a huge milestone for NIPSCO, its customers and our many other Indiana stakeholders. This landmark agreement has been literally years in the making, sets the stage for NIPSCO to provide customers with reliable, competitively-priced electric service while making long-term investments in our infrastructure. This outcome contributes to the economic vitality, environmental sustainability of northern Indiana while earning a fair return on NIPSCO's investment base. As I mentioned earlier, we anticipate receiving approval of the pending settlement by year end or early 2012.

Our Indiana team also continues to make significant progress on efforts to improve operating performance, meet customer needs and modernize our systems. For example, on the customer front, we received approval for a number of new electric energy efficiency programs that complement our existing natural gas conservation programs and help customers manage their energy costs. Progress also continues on significant environmental upgrades at NIPSCO's Schahfer Generating Station. I noted earlier, this work remains on schedule and on budget. As you'll recall, the Schahfer improvements are part of the NIPSCO environmental investments stream. With the next 6 to 8 years, that will approach $900 million. Taken together, these efforts are helping NIPSCO customers manage energy use, providing a long-term environmental and economic benefits for northern Indiana, supporting stable and sustaining earnings growth.

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