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NiSource Inc. News
NiSource Reports 2007 Earnings
MERRILLVILLE, Ind.,
NiSource's consolidated operating earnings (non-GAAP) for 2007 were
For the three months ended
"During 2007, our core natural gas and regulated electric operations each produced higher revenues, while our Whiting Clean Energy facility delivered significantly improved performance," NiSource President and Chief Executive Officer Robert C. Skaggs, Jr., said. "In addition to delivering business results above our outlook for 2007, our teams made significant strides during the year to clear the decks of a number of distracting legacy issues and to reposition the company to deliver on our fundamental long-term growth initiatives. With that foundational work largely completed, each of our business segments is now poised to do what they do best — and that is to execute on the key elements of our Path Forward strategy to become North America's premier regulated energy company."
2007 Accomplishments Highlighted
Skaggs highlighted a number of important 2007 accomplishments and key business initiatives that will help set the stage for NiSource's future growth.
— In December, NiSource moved forward with its development of a master limited partnership by announcing that its new, wholly-owned subsidiary, NiSource Energy Partners, L.P., had filed a Registration Statement with the Securities and Exchange Commission (SEC). The filing, subject to SEC review, proposed an initial public offering of 12.5 million common units, with the partnership's initial asset being the Columbia Gulf Transmission Company pipeline, an approximately 3,400-mile-long system stretching from Louisiana to Kentucky.
— NiSource's Gas Transmission and Storage (NGT&S) segment advanced a number of important growth projects during 2007, including a May filing with the Federal Energy Regulatory Commission (FERC) to construct the
— Columbia Gulf Transmission also developed a number of new growth projects during 2007, including a proposed expansion of capacity into the Florida Gas Transmission system and a recently completed project providing new firm deliveries in excess of 500,000 Dth per day to the Henry Hub and to Transcontinental Gas Pipeline at two expanded interconnection points. Columbia Gulf also entered into a binding Purchase-Sale Agreement with Tennessee Gas Pipeline Co. whereby Tennessee will buy the majority of Columbia Gulf's offshore Louisiana assets and operations in the Gulf of
— In April, Hardy Storage Company, LLC, a joint venture of subsidiaries of Columbia Gas Transmission and Piedmont Natural Gas, received initial customer injections into its new underground natural gas storage field. Hardy Storage is capable of delivering approximately 100,000 Dth of natural gas per day during the 2007-08 winter heating season, and generated approximately
— In June, construction began on the Millennium Pipeline, a 182-mile- long, 30-inch-diameter pipeline across New York's Southern Tier and lower Hudson Valley. When completed in the fourth quarter of 2008, the project will transport up to 525,400 Dth per day of natural gas to markets along its route, as well as to
During 2007, Northern Indiana Public Service Company (NIPSCO) logged a number of important regulatory and operational accomplishments. In May, the company received Indiana Utility Regulatory Commission (IURC) approval for its Rate Simplification program, which provides benefits for both NIPSCO and its customers, including the creation of a new energy conservation program.
In October, NIPSCO reached a settlement with regulatory stakeholders and large industrial customers regarding the cost of electric power the company purchased to meet growing market demands. The settlement resolved the purchase power matter and contained provisions addressing NIPSCO's need to add to its electric generation portfolio.
In November, NIPSCO filed a comprehensive Integrated Resource Plan (IRP) with the IURC identifying the company's plans for addressing its customers' need for approximately 1,000 megawatts (MW) of additional capacity by 2014. The IRP concluded that the best alternative for addressing this need, and reducing the amount of power purchased from third parties, is the acquisition of gas-fired combined cycle generating capacity, along with wind-generated electric purchases and energy efficiency programs. Consistent with the IRP, NIPSCO filed a request with the IURC to grant a certificate of public convenience and necessity authorizing the purchase of LS Power Group's 535-MW Sugar Creek Power Plant in West Terre Haute, Ind., and NiSource's 525-MW Whiting Clean Energy (WCE) facility for
During the year, NIPSCO also completed significant scheduled maintenance work on its Bailly Generating Station Unit 7. This included cyclone burner replacement and other work to improve unit reliability. Construction also started on installation of selective catalytic reduction (SCR) equipment on Bailly Unit 7, with in-service for the SCR targeted for the spring of 2008.
— As the year drew to a close, Columbia Gas of Ohio (COH) and other stakeholders reached an agreement that establishes the framework for operations under the company's Customer CHOICE(SM) program for the next several years and provides for a wholesale gas supply auction by early 2010. On
"This landmark agreement, which provides COH and its key stakeholders with critically important certainty for the future, is yet another example of our commitment to constructive, collaborative approaches to addressing business and regulatory issues affecting our companies and their customers," Skaggs said. "With this agreement in place - and preparations for the company's 2008 infrastructure-oriented base rate case proceeding - Columbia Gas of Ohio's course over the next several years is now clear."
During 2007, COH also filed with the PUCO a Joint Stipulation that clarifies the company's operational responsibilities for customer-owned service lines and faulty risers. The stipulation establishes a recovery mechanism to collect certain costs associated with repair or replacement of customer-owned service lines and replacement of risers and resolves outstanding issues related to this important customer safety program.
— After reaching out to stakeholders during 2007, Columbia Gas of Pennsylvania (CPA), on
"Our Pennsylvania team is collaborating with a wide range of stakeholders to synchronize this unprecedented infrastructure investment program with appropriate and timely regulatory recovery initiatives," Skaggs noted. "For example, CPA is actively supporting legislation in Pennsylvania that would provide for a regulatory mechanism to recover the costs associated with natural gas infrastructure improvement programs on a timely basis. We have been encouraged by the support we have seen for this initiative, as well as for CPA's overall infrastructure enhancement commitment."
— On
— At Bay State Gas Company (BSG), the Massachusetts Department of Public Utilities approved a
— Columbia Gas of Kentucky received approval during 2007 of a base rate case settlement with regulatory stakeholders that increases total annual revenues by
— NiSource Finance successfully issued
— In December, NiSource and IBM finalized a restructuring of their business services agreement. Under the restructured agreement, IBM will primarily provide information technology services, with a number of other business service functions to be transitioned back to the NiSource organization. Going forward, NiSource will be in a position to more effectively manage its employee and administrative expenses, while ensuring delivery of services to meet the company's needs.
"This impressive list of 2007 key accomplishments is a testament to our team's ability to execute on our game plan to position the company to deliver on our four-part business plan for long-term, sustainable growth," Skaggs said.
Investment Grade Credit Ratings Maintained
In late 2007, both Moody's and Standard & Poor's confirmed investment grade credit ratings for NiSource, with the company receiving a Baa3 rating from Moody's and a BBB- rating from Standard & Poor's.
"While obviously we would prefer to have retained our prior ratings levels, we nonetheless are encouraged by the favorable view of NiSource's business profile expressed by the ratings agencies," Skaggs said. "We will continue to report our progress on key milestones that will help set a foundation for future earnings growth. We believe these actions, when accompanied by solid financial performance, will lead to the improvement of NiSource's ratings over time."
2008: A 'Pivotal Year' in NiSource's Path Forward Strategy
Skaggs noted that NiSource's four-part business plan continues to center on expansion of and commercial growth in the natural gas pipeline and storage business, regulatory and commercial initiatives at its utilities, financial management, and process and expense management. Within that plan, NiSource will place particular emphasis on three important areas during 2008.
— Achieving Key Regulatory Initiatives, including gas base rate cases in Pennsylvania and Ohio, as well as NIPSCO's electric rate case scheduled for filing on
— Advancing NGT&S' Growth Strategy, including securing approvals and timely construction of announced projects, developing an array of potential new growth opportunities, and continuing with the formation of NiSource Energy Partners, LP.
— Executing on Major Infrastructure Enhancement Projects, which will constitute a significant portion of NiSource's more than
"Clearly, this is a pivotal year for NiSource, and the entire team is energized and focused on delivering on our business plan," Skaggs noted. "Our sights are squarely set on the fundamental components of our plan-enhancing and expanding NiSource's core strategic assets, executing on an array of promising growth projects, and synchronizing our investments with complementary commercial and regulatory initiatives. And as a regulated energy company, we welcome those priorities; it's what we do best."
Skaggs acknowledged that some of the actions taken during 2007 to establish a foundation for future growth will place pressure on NiSource earnings in 2008.
"For example, our planned acquisition of new generating facilities will impact earnings prior to the effectiveness of our electric rate case," Skaggs said. "Having said that, with our regulatory and commercial initiatives firmly in queue, we are excited about the prospects for long-term earnings growth for NiSource."
Skaggs confirmed that net operating earnings (non-GAAP) per share for the 2008-2010 period are expected to fall within a range of
"We believe that range reasonably reflects NiSource's near-term earnings expectations as our Path Forward strategy unfolds over the course of the next few years," Skaggs said. "Thereafter, we expect our ongoing capital investment program and our growth projects currently in the pipeline to begin producing meaningful and sustainable annual growth in earnings per share."
Conference Call to Be Held This Morning
NiSource will host an analyst conference call at
Full Year 2007 Operating Earnings - Segment Results (non-GAAP)
NiSource's consolidated operating earnings (non-GAAP) for the year ended
Operating earnings for NiSource's business segments for the year ended
Gas Distribution Operations reported operating earnings of
Gas Transmission and Storage Operations reported operating earnings of
While stabilization in the natural gas market has moderated optimization revenues this year, firm capacity and commodity revenues have been strong compared to last year. A key driver behind this improvement is that the Columbia Gulf mainline and onshore capacity is almost fully subscribed and pipeline throughput has increased as a result of higher storage injections, gas-fired electric generation demands, and increased marketing activities. Equity earnings from unconsolidated affiliates increased by
Electric Operations reported operating earnings of
Other Operations reported operating earnings of
Other Items
Interest expense increased by
Fourth Quarter 2007 Operating Earnings - Segment Results (non-GAAP)
NiSource's consolidated operating earnings (non-GAAP) for the quarter ended
Operating earnings for NiSource's business segments for the three months ended
Gas Distribution Operations reported operating earnings of
Gas Transmission and Storage Operations reported operating earnings of
Electric Operations reported operating earnings of
Other Operations reported operating earnings of
Other Items
Interest expense increased by
Income from Continuing Operations (GAAP)
On a GAAP basis, NiSource reported income from continuing operations for the year ended
On a GAAP basis, NiSource reported income from continuing operations for the three months ended
Refer to Schedule 1 for a complete list of the items included in 2007 and 2006 GAAP Income from Continuing Operations but excluded from net operating earnings.
Definition of non-GAAP measures
NiSource focuses on net operating earnings and operating earnings, which are both non-GAAP measures, because management believes these measures better represent the fundamental earnings strength and performance of the company. NiSource uses these measures internally for budgeting, for reporting to the board of directors, and for purposes of determining the payout under NiSource's annual incentive compensation plan for its employees.
Net operating earnings are a non-GAAP financial measure that NiSource defines as income from continuing operations determined in accordance with Generally Accepted Accounting Principles (GAAP) adjusted for certain items. Operating earnings are operating income determined in accordance with GAAP adjusted for certain items. Adjustments reflected in these measures are primarily weather, restructuring and transition costs related to the outsourcing contract with IBM, gains and losses on the sale of assets, certain reserve adjustments and other items. See Schedule 1 and Schedule 2 of this news release for the reconciliations of net operating earnings and operating earnings, respectively, to GAAP.
About NiSource
NiSource Inc. (NYSE: NI), based in Merrillville, Ind., is a Fortune 500 company engaged in natural gas transmission, storage and distribution, as well as electric generation, transmission and distribution. NiSource operating companies deliver energy to 3.8 million customers located within the high- demand energy corridor stretching from the Gulf Coast through the Midwest to New England. Information about NiSource and its subsidiaries is available via the Internet at www.nisource.com. NI-F
Forward-Looking Statements
This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements include statements regarding the intent, belief or current expectations of NiSource and its management. Although NiSource believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Readers are cautioned that the forward-looking statements in this presentation are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following: weather; fluctuations in supply and demand for energy commodities; growth opportunities for NiSource's businesses; increased competition in deregulated energy markets; the success of regulatory and commercial initiatives; dealings with third parties over whom NiSource has no control; the success of NiSource's restructured outsourcing agreement; actual operating experience of NiSource assets; the regulatory process; regulatory and legislative changes; changes in general economic, capital and commodity market conditions; and counter-party credit risk.
NiSource Inc. Consolidated Net Operating Earnings (Non - GAAP) Three Months Twelve Months Ended December 31, Ended December 31, (in millions, except per share amounts) 2007 2006 2007 2006 Net Revenues Gas Distribution $1,337.1 $1,213.4 $4,459.5 $4,262.3 Gas Transportation and Storage 311.4 289.4 1,090.1 1,033.2 Electric 335.3 306.4 1,385.2 1,301.0 Other 280.8 253.1 1,045.2 968.3 Gross Revenues 2,264.6 2,062.3 7,980.0 7,564.8 Cost of Sales (excluding depreciation and amortization) 1,349.0 1,178.4 4,676.2 4,365.4 Total Net Revenues 915.6 883.9 3,303.8 3,199.4 Operating Expenses Operation and maintenance 353.1 330.0 1,250.3 1,177.0 Operation and maintenance - trackers 54.2 51.5 202.8 182.4 Depreciation and amortization 139.8 137.9 559.2 549.2 Other taxes 52.1 48.5 207.2 195.2 Other taxes - trackers 27.9 28.3 95.8 94.3 Total Operating Expenses 627.1 596.2 2,315.3 2,198.1 Equity Earnings (Loss) in Unconsolidated Affiliates 1.6 (0.1) 9.4 0.7 Operating Earnings 290.1 287.6 997.9 1,002.0 Other Income (Deductions) Interest expense, net (103.2) (102.5) (400.7) (387.4) Dividend requirements on preferred stock of subsidiaries - - - (1.1) Other, net (4.7) 0.4 (6.5) (6.5) Total Other Income (Deductions) (107.9) (102.1) (407.2) (395.0) Operating Earnings From Continuing Operations Before Income Taxes 182.2 185.5 590.7 607.0 Income Taxes 63.7 68.6 214.9 218.5 Net Operating Earnings from Continuing Operations 118.5 116.9 375.8 388.5 GAAP Adjustment (43.6) (24.5) (53.8) (75.0) GAAP Income from Continuing Operations $74.9 $92.4 $322.0 $313.5 Basic Net Operating Earnings Per Share from Continuing Operations 0.43 0.43 1.37 1.43 GAAP Basic Earnings Per Share from Continuing Operations 0.28 0.34 1.18 1.15 Basic Average Common Shares Outstanding (millions) 273.9 272.9 273.8 272.6 NiSource Inc. Segment Operating Earnings (Non-GAAP) Three Months Twelve Months Gas Distribution Operations Ended December 31, Ended December 31, (in millions) 2007 2006 2007 2006 Net Revenues Sales Revenues $ 1,490.3 $1,369.3 $5,011.9 $4,771.6 Less: Cost of gas sold 1,046.7 923.7 3,477.2 3,277.0 Net Revenues 443.6 445.6 1,534.7 1,494.6 Operating Expenses Operation and maintenance 168.7 156.4 621.3 580.7 Operation and maintenance - trackers 42.4 41.0 155.0 140.1 Depreciation and amortization 58.7 58.1 234.5 231.4 Other taxes 20.7 19.4 77.9 74.3 Other taxes - trackers 27.9 28.3 95.8 94.3 Total Operating Expenses 318.4 303.2 1,184.5 1,120.8 Operating Earnings $125.2 $142.4 $350.2 $373.8 GAAP Adjustment (23.6) (20.8) (17.4) (83.8) GAAP Operating Income $101.6 $121.6 $332.8 $290.0 Three Months Twelve Months Gas Transmission and Storage Ended December 31, Ended December 31, Operations (in millions) 2007 2006 2007 2006 Net Revenues Transportation revenues $203.8 $190.0 $686.7 $681.6 Storage revenues 44.6 44.4 179.4 176.8 Other revenues 1.3 1.3 4.4 6.1 Total Revenues 249.7 235.7 870.5 864.5 Less: Cost of gas sold (0.1) 0.4 - 14.0 Net Revenues 249.8 235.3 870.5 850.5 Operating Expenses Operation and maintenance 83.8 87.5 293.2 288.6 Operation and maintenance - trackers 10.7 8.5 42.1 35.5 Depreciation and amortization 29.1 29.3 117.1 114.9 Other taxes 13.5 13.5 55.7 54.6 Total Operating Expenses 137.1 138.8 508.1 493.6 Equity Earnings (Loss) in Unconsolidated Affiliates 1.6 (0.1) 9.4 0.7 Operating Earnings $114.3 $96.4 $371.8 $357.6 GAAP Adjustment (1.8) (13.8) (9.8) (16.8) GAAP Operating Income $112.5 $82.6 $362.0 $340.8 NiSource Inc. Segment Operating Earnings (Non-GAAP) (continued) Three Months Twelve Months Electric Operations Ended December 31, Ended December 31, (in millions) 2007 2006 2007 2006 Net Revenues Sales Revenues $336.6 $307.5 $1,390.2 $1,305.6 Less: Cost of gas sold 132.1 109.3 551.5 481.4 Net Revenues 204.5 198.2 838.7 824.2 Operating Expenses Operation and maintenance 88.8 71.2 291.6 258.0 Operation and maintenance - trackers 1.1 2.0 5.7 6.8 Depreciation and amortization 48.1 47.0 191.9 187.3 Other taxes 14.8 15.0 60.7 58.0 Total Operating Expenses 152.8 135.2 549.9 510.1 Operating Earnings $51.7 $63.0 $288.8 $314.1 GAAP Adjustment 3.4 7.7 (10.5) (3.7) GAAP Operating Income $55.1 $70.7 $278.3 $310.4 Three Months Twelve Months Other Operations Ended December 31, Ended December 31, (in millions) 2007 2006 2007 2006 Net Revenues Products and services revenue $270.3 $235.9 $1,017.8 $929.9 Less: Cost of gas sold 250.8 229.2 952.0 893.7 Net Revenues 19.5 6.7 65.8 36.2 Operating Expenses Operation and maintenance 7.8 12.2 39.7 46.4 Depreciation and amortization 2.6 2.4 10.5 9.8 Other taxes 1.6 1.5 6.4 4.3 Total Operating Expenses 12.0 16.1 56.6 60.5 Operating Earnings (Loss) $7.5 $(9.4) $9.2 $(24.3) GAAP Adjustment (0.1) (17.0) (1.1) (15.9) GAAP Operating Income (Loss) $7.4 $(26.4) $8.1 $(40.2) Three Months Twelve Months Corporate Ended December 31, Ended December 31, (in millions) 2007 2006 2007 2006 Operating Earnings (Loss) $(8.6) $(4.8) $(22.1) $(19.2) GAAP Adjustment (10.0) (0.5) (10.3) (1.8) GAAP Operating Income (Loss) $(18.6) $(5.3) $(32.4) $(21.0) NiSource Inc. Segment Volumes and Statistical Data Three Months Twelve Months Gas Distribution Operations Ended December 31, Ended December 31, 2007 2006 2007 2006 Sales and Transportation (MMDth) Residential 83.3 79.3 274.8 241.8 Commercial 49.8 49.6 177.9 163.9 Industrial 101.6 92.9 380.8 365.4 Off System 22.7 13.7 88.1 54.9 Other 0.8 0.3 1.4 0.9 Total 258.2 235.8 923.0 826.9 Weather Adjustment 7.6 13.6 2.3 50.9 Sales and Transportation Volumes - Excluding Weather 265.8 249.4 925.3 877.8 Heating Degree Days 1,658 1,595 4,815 4,347 Normal Heating Degree Days 1,778 1,768 4,941 4,933 % Colder (Warmer) than Normal (7%) (10%) (3%) (12%) Customers Residential 3,080,799 3,074,115 Commercial 293,322 292,566 Industrial 8,171 8,268 Other 71 73 Total 3,382,363 3,375,022 Three Months Twelve Months Gas Transmission and Storage Ended December 31, Ended December 31, Operations 2007 2006 2007 2006 Throughput (MMDth) Columbia Transmission Market Area 287.9 263.1 1,030.0 932.1 Columbia Gulf Mainline 161.5 135.8 651.3 533.5 Short-haul 69.8 46.1 229.4 129.9 Columbia Pipeline Deep Water 0.5 1.6 2.6 8.3 Crossroads Gas Pipeline 9.3 10.1 36.9 38.5 Granite State Pipeline 9.7 7.8 32.3 26.9 Intrasegment eliminations (139.8) (121.8) (559.7) (491.2) Total 398.9 342.7 1,422.8 1,178.0 NiSource Inc. Segment Volumes and Statistical Data (continued) Three Months Twelve Months Electric Operations Ended December 31, Ended December 31, 2007 2006 2007 2006 Sales (Gigawatt Hours) Residential 781.0 752.8 3,549.2 3,293.9 Commercial 996.7 934.7 4,039.7 3,855.7 Industrial 2,442.3 2,322.5 9,525.5 9,503.2 Wholesale 126.9 53.0 909.1 661.4 Other 38.9 35.2 142.3 114.1 Total 4,385.8 4,098.2 18,165.8 17,428.3 Weather Adjustment (43.9) 6.7 (111.2) 148.3 Sales Volumes - Excluding Weather impacts 4,341.9 4,104.9 18,054.6 17,576.6 Cooling Degree Days 919 714 Normal Cooling Degree Days 812 803 % Warmer (Colder) than Normal 13% (11%) Electric Customers Residential 400,991 398,349 Commercial 52,815 52,106 Industrial 2,509 2,509 Wholesale 6 5 Other 755 759 Total 457,076 453,728 NiSource Inc. Schedule 1 - Reconciliation of Net Operating Earnings to GAAP Three Months Twelve Months (in millions, except per Ended December 31, Ended December 31, share amounts) 2007 2006 2007 2006 Net Operating Earnings from Continuing Operations $118.5 $116.9 $375.8 $388.5 Items excluded from operating earnings: Net Revenues: Weather - compared to normal (6.7) (21.0) 7.0 (83.1) Purchased Power settlement - - (17.3) - Unbilled revenue and other changes (13.0) 8.3 (13.0) 8.3 Operating Expenses: Restructuring, transition and consulting charges (outsourcing initiative) (9.6) (0.5) (13.2) (12.3) BP contract revision - (17.0) - (17.0) Gain/loss on sales of assets, asset impairments and other (2.8) (1.2) (12.6) (4.9) Loss on Equity Earnings - (13.0) - (13.0) Total items excluded from operating earnings (32.1) (44.4) (49.1) (122.0) Loss on early extinguishment of long-term debt (40.6) - (40.6) - Loss on early redemption of preferred stock - - - (0.7) Tax effect of above items and other income tax adjustments 29.1 19.9 35.9 47.7 Reported Income from Continuing Operations - GAAP $74.9 $92.4 $322.0 $313.5 Basic Average Common Shares Outstanding (millions) 273.9 272.9 273.8 272.6 Basic Net Operating Earnings Per Share from Continuing Operations 0.43 0.43 1.37 1.43 Items excluded from net operating earnings (after-tax) (0.15) (0.09) (0.19) (0.28) GAAP Basic Earnings Per Share from Continuing Operations 0.28 0.34 1.18 1.15 NiSource Inc.
Schedule 2 - Quarterly Adjustments by Segment from Operating Earnings to GAAP
For Quarter ended December 31, 2007 2007 (in millions) Gas Gas Transmission Distribution and Storage Electric Other Corporate Total Operating Earnings (Loss) $125.2 $114.3 $51.7 $7.5 $(8.6) $290.1 Net Revenues: Weather (compared to normal) (9.7) - 3.0 - - (6.7) Unbilled revenue and other changes (13.0) - - - - (13.0) Total Impact - Net Revenues (22.7) - 3.0 - - (19.7) Operating Expenses: Restructuring, transition and consulting charges (outsourcing initiative) 0.6 (0.3) (0.1) - (9.8) (9.6) Gain/loss on sale of assets, asset impairments and other (1.5) (1.5) 0.5 (0.1) (0.2) (2.8) Total Impact - Operating Expenses (0.9) (1.8) 0.4 (0.1) (10.0) (12.4) Total Impact - Operating Income (Loss) (23.6) (1.8) 3.4 (0.1) (10.0) (32.1) Operating Income (Loss) - GAAP $101.6 $112.5 $55.1 $7.4 $(18.6) $258.0 2006 (in millions) Gas Gas Transmission Distribution and Storage Electric Other Corporate Total Operating Earnings (Loss) $142.4 $96.4 $63.0 $(9.4) $(4.8) $287.6 Net Revenues: Weather (compared to normal) (20.5) - (0.5) - - (21.0) Unbilled revenue and other changes - - 8.3 - - 8.3 Total Impact - Net Revenues (20.5) - 7.8 - - (12.7) Operating Expenses: Restructuring, transition and consulting changes (outsourcing initiative) (0.3) - (0.1) - (0.1) (0.5) BP contract revision - - - (17.0) - (17.0) Gain/loss on sale of assets, asset impairments and other - (0.8) - - (0.4) (1.2) Total Impact - Operating Expenses (0.3) (0.8) (0.1) (17.0) (0.5) (18.7) Loss on Equity Earnings - (13.0) - - - (13.0) Total Impact - Operating Income (Loss) (20.8) (13.8) 7.7 (17.0) (0.5) (44.4) Operating Income (Loss) - GAAP $121.6 $82.6 $70.7 $(26.4) $(5.3) $243.2 NiSource Inc. Schedule 2 - Year-to-Date Adjustments by Segment from Operating Earnings to GAAP For Twelve Months ended December 31, 2007 2007 (in millions) Gas Gas Transmission Distribution and Storage Electric Other Corporate Total Operating Earnings (Loss) 350.2 371.8 288.8 9.2 (22.1) $997.9 Net Revenues: Weather (compared to normal) - - 7.0 - - 7.0 Purchased Power settlement - - (17.3) - - (17.3) Unbilled revenue and other changes (13.0) - - - - (13.0) Total Impact - Net Revenues (13.0) - (10.3) - - (23.3) Operating Expenses: Operation and Maintenance Expenses- Restructuring, transition and consulting charges (outsourcing initiative) (1.4) (1.2) (0.6) (0.1) (9.9) (13.2) Gain/loss on sale of assets, asset impairments and other (3.0) (8.6) 0.4 (1.0) (0.4) (12.6) Total Impact - Operating Expenses (4.4) (9.8) (0.2) (1.1) (10.3) (25.8) Total Impact - Operating Income (Loss) (17.4) (9.8) (10.5) (1.1) (10.3) (49.1) Operating Income (Loss) - GAAP $332.8 $362.0 $278.3 $8.1 $(32.4) $948.8 2006 (in millions) Gas Gas Transmission Distribution and Storage Electric Other Corporate Total Operating Earnings (Loss) 373.8 357.6 314.1 (24.3) (19.2) $1,002.0 Net Revenues: Weather (compared to normal) (73.0) - (10.1) - - (83.1) Unbilled revenue and other changes - - 8.3 - - 8.3 Total Impact - Net Revenues (73.0) - (1.8) - - (74.8) Operating Expenses: Operation and Maintenance Expenses- Restructuring, transition and consulting charges (outsourcing initiative) (8.5) (1.4) (1.5) (0.1) (0.8) (12.3) BP contract revison - - - (17.0) - (17.0) Gain/loss on sale of assets, asset impairments and other (2.3) (2.4) (0.4) 1.2 (1.0) (4.9) Total Impact - Operating Expenses (10.8) (3.8) (1.9) (15.9) (1.8) (34.2) Loss on Equity Earnings - (13.0) - - - (13.0) Total Impact - Operating Income (Loss) (83.8) (16.8) (3.7) (15.9) (1.8) (122.0) Operating Income (Loss) - GAAP $290.0 $340.8 $310.4 $(40.2) $(21.0) $880.0 NiSource Inc. Income Statement (GAAP) (unaudited) Three Months Twelve Months Ended December 31, Ended December 31, (in millions, except per share amounts) 2007 2006 2007 2006 Net Revenues Gas Distribution $1,314.4 $1,192.9 $4,446.5 $4,189.3 Gas Transportation and Storage 311.4 289.4 1,090.1 1,033.2 Electric 338.3 314.2 1,374.9 1,299.2 Other 280.8 253.1 1,045.2 968.3 Gross Revenues 2,244.9 2,049.6 7,956.7 7,490.0 Cost of Sales (excluding depreciation and amortization) 1,348.9 1,178.4 4,676.1 4,365.4 Total Net Revenues 896.0 871.2 3,280.6 3,124.6 Operating Expenses Operation and maintenance 418.8 399.7 1,468.2 1,389.5 Depreciation and amortization 139.8 137.9 559.2 549.2 Impairment and (gain) loss on sale of assets 1.0 0.5 10.8 4.1 Other taxes 80.0 76.8 303.0 289.5 Total Operating Expenses 639.6 614.9 2,341.2 2,232.3 Equity Earnings (Loss) in Unconsolidated Affiliates 1.6 (13.1) 9.4 (12.3) Operating Income 258.0 243.2 948.8 880.0 Other Income (Deductions) Interest expense, net (103.2) (102.5) (400.7) (387.4) Dividend requirement on preferred stock of subsidiaries - - - (1.1) Other, net (4.7) 0.4 (6.5) (6.5) Loss on early extinguishment of long-term debt (40.6) - (40.6) - Loss on early redemption of preferred stock - - - (0.7) Total Other Income (Deductions) (148.5) (102.1) (447.8) (395.7) Income From Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle 109.5 141.1 501.0 484.3 Income Taxes 34.6 48.7 179.0 170.8 Income From Continuing Operations Before Cumulative Effect of Change in Accounting Principle 74.9 92.4 322.0 313.5 Income (Loss) from Discontinued Operations - net of taxes 0.7 (29.5) 1.1 (31.7) Gain (Loss) on Disposition of Discontinued Operations - net of taxes 1.4 (0.4) 8.3 - Income Before Change in Accounting Principle 77.0 62.5 331.4 281.8 Cumulative Effect of Change in Accounting Principle - net of taxes - - - 0.4 Net Income $77.0 $62.5 $331.4 $282.2 Basic Earnings Per Share ($) Continuing operations $0.28 0.34 $1.18 1.15 Discontinued operations - (0.11) 0.03 (0.11) Basic Earnings Per Share $0.28 0.23 $1.21 1.04 Diluted Earnings Per Share ($) Continuing operations $0.28 0.33 $1.18 1.14 Discontinued operations - (0.11) 0.03 (0.11) Diluted Earnings Per Share $0.28 0.22 $1.21 1.03 Dividends Declared Per Common Share ($) $0.23 0.23 $0.92 0.92 Basic Average Common Shares Outstanding (millions) 273.9 272.9 273.8 272.6 Diluted Average Common Shares (millions) 274.7 274.0 274.7 273.4 NiSource Inc. Consolidated Balance Sheets (unaudited) As of December 31, (in millions) 2007 2006 ASSETS Property, Plant and Equipment Utility Plant $17,543.5 $17,194.9 Accumulated depreciation and amortization (7,850.5) (7,850.0) Net utility plant 9,693.0 9,344.9 Other property, at cost, less accumulated depreciation 338.8 349.6 Net Property, Plant and Equipment 10,031.8 9,694.5 Investments and Other Assets Assets of discontinued operations and assets held for sale 41.2 43.0 Unconsolidated affiliates 72.7 59.6 Other investments 117.2 116.1 Total Investments and Other Assets 231.1 218.7 Current Assets Cash and cash equivalents 50.0 33.1 Restricted cash 59.4 142.5 Accounts receivable (less reserve of $38.0 and $42.1, respectively) 977.6 866.3 Gas inventory 458.2 550.5 Underrecovered gas and fuel costs 146.7 163.2 Materials and supplies, at average cost 88.4 89.0 Electric production fuel, at average cost 58.1 63.9 Price risk management assets 102.2 237.7 Exchange gas receivable 223.9 252.3 Regulatory assets 218.0 272.7 Prepayments and other 112.7 111.7 Total Current Assets 2,495.2 2,782.9 Other Assets Price risk management assets 25.2 49.9 Regulatory assets 881.2 1,127.3 Goodwill 3,677.3 3,677.3 Intangible assets 422.0 435.7 Postretirement and postemployment benefits assets 157.8 32.8 Deferred charges and other 123.5 137.4 Total Other Assets 5,287.0 5,460.4 Total Assets $18,045.1 $18,156.5 NiSource Inc. Consolidated Balance Sheets (continued) (unaudited) As of December 31, (in millions, except share amounts) 2007 2006 CAPITALIZATION AND LIABILITIES Capitalization Common Stockholders' Equity Common stock - $0.01 par value, 400,000,000 shares authorized; 274,176,752 and 273,654,180 shares issued and outstanding, respectively $2.7 $2.7 Additional paid-in capital 4,011.1 3,998.3 Retained earnings 1,084.5 1,012.9 Accumulated other comprehensive income 11.7 20.9 Treasury stock (23.3) (21.2) Total Common Stockholders' Equity 5,086.7 5,013.6 Long-term debt, excluding amounts due within one year 5,594.4 5,146.2 Total Capitalization 10,681.1 10,159.8 Current Liabilities Current portion of long-term debt 33.9 93.3 Short-term borrowings 1,061.0 1,193.0 Accounts payable 743.3 713.1 Customer deposits 114.4 108.4 Taxes accrued 201.7 196.0 Interest accrued 99.3 107.1 Overrecovered gas and fuel costs 10.4 126.7 Price risk management liabilities 80.3 259.4 Exchange gas payable 441.6 396.6 Deferred revenue 38.7 55.9 Regulatory liabilities 89.7 40.7 Accrued liability for postretirement and postemployment benefits 4.8 4.7 Other accruals 503.7 526.3 Total Current Liabilities 3,422.8 3,821.2 Other Liabilities and Deferred Credits Price risk management liabilities 1.7 38.2 Deferred income taxes 1,563.3 1,553.7 Deferred investment tax credits 53.5 61.5 Deferred credits 98.3 119.3 Deferred revenue 0.2 21.9 Accrued liability for postretirement and postemployment benefits 547.9 799.5 Liabilities of discontinued operations and liabilities held for sale 6.3 11.9 Regulatory liabilities and other removal costs 1,353.1 1,253.8 Asset retirement obligations 131.1 131.6 Other noncurrent liabilities 185.8 184.1 Total Other Liabilities and Deferred Credits 3,941.2 4,175.5 Commitments and Contingencies - - Total Capitalization and Liabilities $18,045.1 $18,156.5 NiSource Inc. Other Information (unaudited) December 31, December 31, (in millions, except per share amounts) 2007 2006 Total Common Stockholders' Equity $ 5,086.7 $ 5,013.6 Shares Outstanding (thousands) 274,177 273,654 Book value of Common Shares $ 18.55 $ 18.32 NiSource Inc. Statements of Consolidated Cash Flow (unaudited) Twelve Months Ended December 31, (in millions) 2007 2006 Operating Activities Net income $331.4 $282.2 Adjustments to reconcile net income to net cash from continuing operations: Loss on early extinguishment of long-term debt 40.6 - Loss on early redemption of preferred stock - 0.7 Depreciation and amortization 559.2 549.2 Net changes in price risk management assets and liabilities 1.7 (10.9) Deferred income taxes and investment tax credits 6.5 (113.4) Deferred revenue (38.8) (34.0) Stock compensation expense 4.4 6.9 Gain on sale of assets (0.3) (1.1) Loss on impairment of assets 11.1 5.2 Cumulative effect of change in accounting principle - net of taxes - (0.4) Loss (Income) from unconsolidated affiliates (14.1)
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