NiSource (NI)

Q2 2011 Earnings Call

August 02, 2011 9:00 am ET

Executives

Glen Kettering - Senior Vice President of Corporate Affairs

Robert Skaggs - Chief Executive Officer, President and Director

Analysts

Paul Ridzon - KeyBanc Capital Markets Inc.

Paul Patterson - Glenrock Associates

Yves Siegel - Crédit Suisse AG

Carl Kirst - BMO Capital Markets U.S.

Thomas O'Neill

James Dobson - Wunderlich Securities Inc.

Stephen Maresca - Morgan Stanley

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 NiSource Inc. Earnings Conference Call. My name is Crystal, and I will be your operator for today. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to turn the conference over to your host for today, Mr. Glen Kettering, Senior Vice President of Corporate Affairs.

Glen Kettering

Thank you, Crystal, and good morning, 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 second quarter of 2011 and provide a business update. We'll 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 also like to remind all of you that some of the statements made on this conference call will be forward-looking statements, and these statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning those risks and uncertainties is included in the MD&A and Risk Factors sections of our periodic SEC filings. And now I'll turn the call over to Bob Skaggs.

Robert Skaggs

Thanks, Glen. Good morning, and thanks for joining us today. This morning's agenda is brief to allow as much time as possible for questions and discussion. To start things off, I'll touch on a few takeaways from our second quarter, including outstanding progress the team has made in executing our business plan. I'll then turn to key highlights for NiSource in each of our business units, and then we'll open the line to your questions.

First, I'd like to direct your attention to Slide 3 in the supplemental deck. As you'll see from the highlight of accomplishments for the quarter, we've made significant progress across NiSource in delivering on our balanced 4-part strategy for long-term sustainable growth.

Turning first to Indiana. As most of you know, on July 18, we filed a landmark settlement with the Indiana Utility Regulatory Commission of NIPSCO's 2010 electric rate case. The settlement, which enjoys widespread support, is the product of literally months of extensive discussions with customers and other regulatory stakeholders.

The agreement resolves all issues in the preceding -- will establish the foundation for NIPSCO to make ongoing investments in Northern Indiana's energy infrastructure. These investments will help fuel job creation, improve reliability, pave the way for new customer programs and provide a reasonable return for shareholders.

In terms of financial impacts, we're confident the settlement, if approved by the IURC, would position NIPSCO to deliver results fully in line with our expectations. As you would expect, the party's attention is now keenly focused on the approval process. And together, we've asked the IURC to act on the settlement by year end so the new rates can be placed into effect by early 2012.

Also on the regulatory front, in early July, we filed a partial settlement of our Columbia Gas of Pennsylvania rate case. If approved, the case will increase revenues by about $17 million annually. Among the 2 issues reserved for a determination by the Pennsylvania Commission is the prospective rate design for residential customers.

As many of you know, rate design reform is an area where we have made significant progress in a number of our states. And we're pleased to have the opportunity to make our case with the Pennsylvania Commission. We anticipate a resolution of the litigated issues as well as the settlement in time to place new rates into effect during the fourth quarter of this year.

Our NiSource's Gas Transmission & Storage, or NGT&S, unit delivered second quarter earnings that were impacted positively by a number of growth projects completed during the second half of 2010. The NGT&S team is delivering projects on time and on budget, and is continuing to build a solid portfolio of projects particularly in the Marcellus supply area.

Also noted on Slide 3, we remain committed to thoughtful and disciplined financial management and in particular to maintaining the strength and flexibility to execute our long-term $1 billion plus annual capital expenditure program.

During the second quarter, our finance team completed a $400 million 3-year bond offering, taking advantage of a very attractive interest rate environment.

We also introduced a $500 million commercial paper program, which further diversifies our short-term funding sources and is fully supported by our recently renewed revolving credit facility.

Although not mentioned on the slide, on the equity side of the balance sheet, as most of you know during September of last year, we successfully executed a $400 million forward equity sale, which we can draw upon at anytime through September of next year. Now a bit of a heads up, as we discussed on prior calls, our modeling assumption has been to draw half of the equity this September and the balance in September of 2012. That said, we've not yet made a firm decision on timing. Given our strong cash position including the significant positive impact of bonus depreciation, we're now considering the possibility of drawing the entire amount of the equity during the second half of next year.

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