NiSource Inc. Friday announced net operating earnings of $21.5 million (8 cents/share) for 3Q2007, down from $29.6 million (11 cents/share) in 3Q2006 and said it intends to form a master limited partnership (MLP) for certain gas transmission and storage assets.

NiSource said it remains on track to achieve its 2007 net operating earnings outlook of approximately $1.35/share. Basic earnings per share from continuing operations are projected to be approximately $1.21. Looking forward, net operating earnings per share and basic earnings per share from continuing operations for the 2008-2010 period are expected to fall within a range of $1.25 to $1.35. Thereafter, NiSource expects its ongoing capital investment program of more than $1 billion annually to produce meaningful annual growth in earnings per share.

The company's operating earnings were $132.4 million for 3Q2007, compared to $142.9 million for the same period in 2006. The operating earnings reduction was the result of a one-time $16.2 million reserve associated with subsidiary Northern Indiana Public Service Co.'s (NIPSCO) settlement last month with regulatory stakeholders and large industrial customers. The settlement, which could resolve a dispute over the cost of electric power NIPSCO was required to purchase to meet growing market demands, is expected to be ruled on by the Indiana Utility Regulatory Commission by the end of the year.

According to CEO Robert C. Skaggs Jr., Merrillville, IN-based NiSource "has made significant progress on several threshold business initiatives," which will advance the company's ongoing efforts to reposition for long-term, sustainable earnings growth. "They are, in many respects, watershed events that will help unlock the underlying value of our assets, address legacy issues and set the stage for future earnings growth," he said.

The initiatives included: the NIPSCO settlement; NIPSCO's filing of a comprehensive integrated resource plan concluding that the acquisition of gas-fired combined cycle generating capacity is the best alternative to meet the company's need for approximately 1,000 MW of additional capacity by 2014; last month's joint stipulation filed by Columbia Gas of Ohio (COH) and the Public Utilities Commission of Ohio clarifying COH's operational responsibilities for customer-owned service lines and faulty risers; Columbia Gulf Transmission Co.'s agreement to sell a majority of its offshore Louisiana assets and operations in the Gulf of Mexico to Tennessee Gas Pipeline Co; and NiSource's agreement in principle with IBM to restructure their business services agreement.

Skaggs said that, with board approval, NiSource intends to file a registration statement with the Securities and Exchange Commission later this year to form a new subsidiary MLP for gas transmission and storage assets.

"We believe the formation of a master limited partnership is a natural complement to our gas transmission and storage growth strategy, and should provide access to competitively priced capital to support future growth investment," Skaggs said.

Skaggs also cited a series of base rate case settlements by NiSource subsidiaries, the Aug. 31 issuance of $800 million of 6.4%, 10.5-year senior unsecured notes and NiSource Gas Transmission & Storage expansion projects -- including continuing construction on the Millennium Pipeline, due to begin in November 2008 and a recent favorable environmental assessment for Columbia Gas Transmission Corp.'s $140 million Eastern Market Expansion Project -- as examples of continuing progress on key elements of NiSource's long-term plan for achieving sustainable earnings growth.

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