NiSource Inc. (NI)

Q1 2010 Earnings Call

May 4, 2010; 09:00 am ET

Executives

Robert C. Skaggs, Jr. - President, Chief Executive Officer & Director

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

Glen Kettering - Senior Vice President of Corporate Affairs

Randy Hulen - Director of Investor Relations

Analyst

Paul Patterson - Glenrock Associate

Paul Ridzon - Keybanc Capital Markets

Barry Klein - Citigroup

Jonathan Lefebvre - Wells Fargo

Carl Kirst - BMO Capital Markets

Presentation

Operator

Good day ladies and gentlemen, and welcome to the first quarter 2010 NiSource earnings conference call. My name is Natasha ad I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions)

I would now like to turn the call over to Mr. Glen Kettering, Senior Vice President of Corporate Affairs; please proceed.

Glen Kettering

Thank you and good morning. On behalf of NiSource, I’d like to welcome you to our quarterly analyst call. We thank you for taking the time to join us. Joining me this morning are Bob Skaggs, President and Chief Executive Officer; Steve Smith, Executive Vice President and Chief Financial Officer; and Randy Hulen, Director of Investor Relations.

As you know the focus of today’s call is to review our financial performance for the first quarter of 2010, and provide a business update. We will then open the call to your questions. At times during the call we will refer to supplemental slides available on our website at www.nisource.com.

I’d like to remind all of you that some of the statements made on this conference call will be forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statement. Information concerning such risks and uncertainties is included in the MDNA and risk factors section of our periodic SEC filings.

Now I’d like to turn the call over to Bob Skaggs.

Bob Skaggs

Thanks Glen. Good morning everyone, and thanks for joining us today. In the sprite of continues improvement, our format for today's call will be somewhat different than our prior calls.

Instead of simply reviewing the contents of our quarterly earnings release, which hopefully you’ve had an opportunity to read by now, we are going to streamline things and focus on our financial results, and the progress the team in making on our 2010 business and regulatory priorities.

As part of our new approach, you’ll see we’ve added additional supplemental slides that you can refer to on www.nisource.com. We hope that you find the new format helpful and we certainly welcome your feedback.

Referring to slide three, you can see that we’ve delivered first quarter net operating earnings, non-GAAP of about $200 million or $0.72 per share, compared to $0.62 per share last year. Operating earnings for the quarter were almost $405 million compared to $370 million for the same period last year.

We are encouraged by these results and believe that they demonstrate the teams continuing success in executing our balanced low risk, investment driven strategy for building sustainable growth and shareholder value. With this solid start to the year, we remain on track to deliver our 2010 earnings outlook of $1.10 to $1.20 per share again non-GAAP.

Part of reviewing our business results, I’ll take a moment to reiterate our four part strategy to position, build and grow NiSource. The strategy, one we’ve been consistently articulating and pursuing for the last five years is summarized on slide four. Specifically we continue to expand our gas transmission in storage business, particularly in the Marcellus shale region of the Appalachian.

We continue to think our long-term utility infrastructure program with complementary regulatory initiatives. We continue to manage our financials in a disciplined, thoughtful manner, with an unwavering focus on delivering long-term value to our shareholders and other financials stack-holders; and finally we continue to manage costs and processes across the corporation.

Lets now take a look at our NiSource gas distribution unit or NGD on slide five. You’ll see NGD delivered operating earnings for the quarter of nearly $235 million, essentially flat to 2009. I’d note that this is a bit of an apples-to-oranges comparison, in particular NGDs 2010 first quarter revenues were reduced by about $20 million compared to last year, as the result of Columbia Gas of Ohio’s full implementation of the so called levelized rate design or some might say, straight fixed variable.

This change effectively means that all of COH’s fixed cost will be recovered on a fixed monthly basis going forward, versus the traditional model under which a significant portion of its costs were recovered on a volumetric basis. Because the new methodology results in a more even spread of revenues over the course of the year, the revenue decrease experienced in the first quarter will be offset over the balance of the year.

I’d also note that increased revenue from our other utilities, including the impact of the recent rate cases, helped to offset some of the reduced Colombia of Ohio revenue in the quarter. Looking forward, the remainder of 2010 will be quite active for NGD as we continue to synchronize our infrastructure programs with various customer and regulatory initiatives.

Lets start with Indiana. As you know, Jimmy Staton is now also leading our Indiana utilities as group CEO. Jimmy has a strong track record of developing and executing regulatory and business strategies, designed to benefit customers and other key stake holders.

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