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Pension Expenses, Industrial Slowdown Hit NiSource Bottom Line

A $25 million jump in pension expenses related to last year's securities market collapse and a slowdown in industrial activity in the Northern Indiana Public Service Co. (NIPSCO) service territory dragged NiSource Inc.'s 1Q2009 net operating earnings down 10.1% to $170.2 million (62 cents/share) compared with $189.4 million (69 cents/share) in 1Q2008.

The twin hits from the sagging economy were both anticipated when the company previously announced 2009 guidance of $1.00-1.10/share, NiSource CEO Robert Skaggs said during a conference call with analysts Friday. The increased pension expense cost the company approximately 6 cents/share and the effects of the NIPSCO territory slowdown are still being felt, he said.

"A NIPSCO team is closely monitoring economic conditions in our northern Indiana service territory. Industrial production in particular has been impacted by the regional economy, with volumes down approximately 20% compared to last year," Skaggs said. NiSource expects gradual improvement in the NIPSCO territory to begin in the second half of the year.

NIPSCO serves more than 445,000 electric customers and 712,000 natural gas customers across the northern third of Indiana. State regulators are expected to rule later this year on NIPSCO's first electric base rate case in 20 years.

Another NiSource business segment, NiSource Gas Transmission & Storage (NGT&S), recently said it would cut 370-380 positions across its 16-state operating territory during the course of 2009 (see Daily GPI, March 2). NGT&S houses Columbia Gas Transmission LLC, Columbia Gulf Transmission Co. and Crossroads Pipeline and holds partnership interests in Central Kentucky Transmission Co., Hardy Storage Co. and Millennium Pipeline LLC.

NiSource's gas distribution operations segment reported operating earnings of $237.3 million in 1Q2009, compared to $255.6 million in 1Q2008. Gas transmission and storage operations reported 1Q2009 operating earnings of $111.1 million , up from $104.4 million in 1Q2008. The increase was due in part from increases in firm capacity reservation fees that were a result of higher Columbia Gas Transmission revenue for storage services, new Appalachian Supply interconnects and incremental revenue from transportation agreements on both Columbia Gulf Transmission and Columbia Gas Transmission. Electric operations reported 1Q2009 operating earnings of $26.1 million, compared with $38 million in 1Q2008.

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