After making in August 2002 what were expected to be the last remaining organizational changes since it bought Columbia Energy Group in 2000 (see Daily GPI, Aug. 30, 2002), NiSource announced another major corporate restructuring last week that includes the internal promotion of six new leaders for its major utility companies.

The moves are part of what has become an industry trend of selling off high-risk and costly unregulated operations and focusing on a back-to-basics strategy of optimizing regulated utility and pipeline businesses.

“This new management reporting structure is a natural outgrowth of our efforts to identify and create business opportunities derived from our core assets,” said NiSource CEO Gary L. Neale. “This structure will strengthen the integration of our core regulated assets and enhance our ability to generate shareholder value.”

The company has named Robert C. Skaggs Jr. to the newly created position of executive vice president of regulated revenue. In addition, six new utility executives have been promoted as new presidents of the company’s 10 utilities. Most of the utilities previously were all overseen by Skaggs. Only one executive, former NIPSCO President and CEO Barrett Hatches, left the company in the reorganization.

Skaggs said the new organizational structure “positions us to increase our focus on our local markets and remain engaged with and responsive to our key constituencies within those markets, including customers, regulators, government officials and community leaders.”

NiSource spokeswoman Kris Falzone said the company looked at some other regulated utility holding companies, such as Southern Company, and determined that this was the best structure going forward. NiSource has sold off or is in the process of selling all of its unregulated businesses, including exploration and production, telecommunications, pipeline construction, electric generation, propane distribution, water and utility line locating operations.

“All of it went to paying down debt,” said Falzone, adding that debt has been reduced by about $1.5 million since NiSource bought Columbia in November 2000. NiSource has had a difficult year, trimming its dividend 20% in July and reporting a net loss of $325 million, or $1.24/share in the second quarter compared to net income of $25 million or 12 cents per share in 2Q2002. Income from continuing operations was $39.3 million or 15 cents per share compared with $21 million or 10 cents per share a year earlier. The company reported a net loss of $70 million or 27 cents per share for the first six months of 2003.

However, the company’s moves to cut its dividend, sell assets, make an equity offering and pay down debt were influential in a decision by Moody’s Investors Service to remove the negative outlook on NiSource and affirm its investment grade credit rating.

Going forward, Neale said NiSource’s focus will be on optimizing its utility and pipeline businesses to enhance shareholder value. Skaggs will oversee all the regulated businesses and will report to Neale. He joins an executive leadership team that also includes Stephen P. Adik, vice chairman; Samuel W. Miller Jr., executive vice president and COO; Michael W. O’Donnell, executive vice president and CFO; Peter V. Fazio Jr., executive vice president and general counsel; and S. LaNette Zimmerman, executive vice president, human resources and communications.

Reporting to Skaggs will be the new presidents of NiSource’s local distribution companies. The new appointments last week include the following: Stephen H. Bryant as president of Bay State Gas Co. and Northern Utilities, Inc.; Joseph W. Kelly as president of Columbia Gas of Kentucky; John W. “Jack” Partridge Jr. as president of Columbia Gas of Ohio; Terrence J. Murphy as president of Columbia Gas of Pennsylvania and Columbia Gas of Maryland; Kathleen O’Leery as president of Columbia Gas of Virginia; and Mark Maassel as president of Northern Indiana Public Service Company (NIPSCO).

These individuals will have responsibility for external relations and regulatory strategy in their respective businesses. Also reporting to Skaggs is Glen Kettering, the president of Columbia Gas Transmission, NiSource’s interstate pipeline, with responsibilities for the pipeline’s marketing, regulatory and external affairs activities.

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