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NiSource Beats Earnings Estimates, Posts Higher Income Despite Adverse Weather

Despite adverse weather conditions during the fourth quarter and full year and lower throughput on its gas pipelines, NiSource beat analysts' earnings estimates and posted higher net income. Income from continuing operations for 2004 was $1.63/share compared to analysts' estimates of $1.60/share, while quarterly income from continuing operations was 2 cents more than estimates at 59 cents/share.

"In 2004, we continued to hold the line on operation and maintenance costs, strengthened our balance sheet and lowered interest expense," stated CEO Gary L. Neale. "These positive efforts largely offset the adverse impact of weather on our natural gas and electric distribution businesses. Weather in our gas markets was somewhat warmer than normal overall during the year, while the summer was significantly cooler than normal in our northern Indiana electric market.

"Our strong, balanced portfolio of utility and pipeline assets continues to deliver solid performance, resulting in full-year earnings above the revised guidance we had set in October 2004," Neale added.

Income from continuing operations for the year was $430.2 million compared with $425.7 million, or $1.64 per share, in 2003. Net income for 2004 was $436.3 million, or $1.65 per share, compared with $85.2 million, or 33 cents per share, in 2003. NiSource recognized losses associated with discontinued operations during the 2003 period.

Neale noted that interest expense was $60.8 million lower in 2004 compared to 2003. "We continued to strengthen the balance sheet in 2004, reducing total debt by more than $350 million," he said. "At the end of 2004, our debt ratio stood at 57%, down from over 60% at the end of 2003."

NiSource President Robert C. Skaggs said accomplishments during 2004 included the implementation of regulatory and commercial strategies in key states that benefit both customers and shareholders, such as the renewal of customer choice in Ohio. Also, the NiSource pipelines completed the renegotiation of long-term contracts with their largest customers and made notable progress with several major transmission, storage and access expansion initiatives.

"Our pipelines are focused on new expansion and storage projects to bring additional natural gas supplies to key markets. These important developments provide NiSource with a strong platform for longer-term, sustainable growth," said Skaggs.

For the quarter, the company posted income from continuing operations of $156.9 million, or 59 cents per share, compared with $140.6 million, or 54 cents per share, for the same period a year earlier. Net income was $159.4 million, or 60 cents per share, compared with $139.8 million, or 54 cents per share, in 4Q2003.

Gas distribution operating income was up 8% for the quarter but down 13% for the year. The weather in NiSource's gas utility service territories was 4% warmer than normal for the quarter and 2% warmer than normal for the year. Gas pipeline and storage operations posted flat operating income for the quarter and a 9% drop in operating income for the year. Electric utility operating income was up both for the quarter (14%) and for the year (15%) despite much cooler than normal weather last summer.

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