NiSource Inc. (NI)

Q2 2010 Earnings Call

August 2, 2010 9:00 a.m. 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

Analysts

Paul Patterson - Glenrock Associates

Carl Kirst - BMO Capital Markets

Paul Ridzon - Keybanc Capital Markets

Jonathan Lefebvre - Wells Fargo

Jay Dobson – Wunderlich Securities

Presentation

Operator

Good day ladies and gentlemen, and welcome to the second quarter 2010 NiSource earnings conference call. [Operator instructions.] I would now like to turn the call over to your host for today, 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 this morning. With 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 second 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 the supplemental slides available on our website at NiSource.com.

I’d like to remind all of you that some of the statements made on this 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 statement. Information concerning risk factors and uncertainties is included in the MDNA and risk factors sections of our periodic SEC filings.

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

Robert Skaggs

Thank you Glen. Good morning, and thanks for joining us today. Prior to reviewing our second quarter financial results, I want to thank those of you who participated, in person or virtually, in NiSource’s July 22 Investor Day, our first in over five years. It was a privilege for the NiSource team, our business unit CEOs Jimmy Staton and Chris Helms, and our CFO Steve Smith to provide an in depth profile of the company and its business segment strategies, and to detail the deep inventory of investment-driven growth opportunities at each of our units.

Again, we appreciate your interest and time invested to learn more about our business, our core strategy, and ultimately, why we believe that NiSource presents a compelling investment proposition. And as a reminder, if you weren’t able to join us, you can access our Investor Day presentations and a full transcript at NiSource.com. In particular, I would suggest taking a look at our Investor Day slide deck. It provides a crisp “why” NiSource is such an attractive investment.

Now let’s turn to our second quarter results, and the second quarter slides that are available on NiSource.com. On slide 3, you can see that we delivered second quarter net operating earnings non-GAAP, of $37 million, or $0.13 per share, compared to $0.02 per share last year. Operating earnings for the quarter were $154 million, compared to $117 million for the same period last year.

As these strong results demonstrate, the NiSource team continues to execute on our balanced, low-risk, infrastructure investment-driven strategy for building sustainable growth and shareholder value. As we pass the halfway mark in 2010, I’m pleased to note that our financial performance is in line with our plan and that we remain on track to deliver our non-GAAP 2010 earnings outlook of $1.10 to $1.20 per share.

Before drilling into our second quarter results, let’s spend a moment on NiSource’s strategic framework. Slide four of our supplemental package outlines NiSource’s aspiration, our investment value proposition, and our balanced four-part business strategy.

Most of you have seen this, but I think it bears ongoing emphasis. This is the fundamental plan that’s underpinned our business over the last five years, and that drives our team’s performance day in and day out, year after year. I’d add that slide ten in the appendix provides a good snapshot of how we think about each business unit going forward.

Let’s now take a look at our second quarter results, starting with NiSource Gas Distribution, or NGD, on slide five. You’ll see NGD delivered operating earnings for the quarter of nearly $36 million, up from $7.5 million in 2009. Revenues for the quarter were up about $35 million, primarily due to ongoing regulatory initiatives and infrastructure investments, as well as the effect of rate increases at a number of our utilities.

Contributing to NGD’s 2010 second quarter revenue increase was Columbia Gas of Ohio’s full implementation of the levelized rate design provided for in its 2008 rate case settlement. This rate design change effectively means that COH’s fixed costs will be recovered as a fixed monthly charge versus volumetric rate design. This fundamental change is representative of several similar steps we’re taking at all of our gas distribution companies.

Turning to NGD’s growth initiatives, a key milestone on the infrastructure investment front was Columbia Gas of Virginia’s completion of the Bear Garden expansion project, the largest new business project in NGD’s history. That project serves Dominion Virginia Power’s 580 megawatt natural gas fire generating station in Buckingham County Virginia. Demonstrating our team’s ability to execute, this construction project was completed on schedule and well within budget.

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