NiSource Inc. on Tuesday said cold weather and an asset sale offset the negative effects of a rate review settlement, accounting rule change and higher pension expense during the first quarter, resulting in a 5% hike in its first quarter net income from a year ago.

The Merrillville, IN-based energy company reported net income of $254.9 million, or $1 a share, on net revenues of $1.086 billion for the first quarter, compared to $242.2 million, or $1.18 a share, on net revenues of $1.038 billion for the same period in 2002. Earnings from continuing operations were pegged at $1.05 a share, according to NiSource.

“Our continuing actions to streamline our operations, while meeting customer needs during the cold weather, positively contributed to cash flow from operations and strengthened our financial position,” said Chairman Gary L. Neale. Because of the company’s increased liquidity, “we no longer required a $500 million, 364-day credit facility,” he noted, adding that NiSource’s short-term debt hit zero on Feb. 20 for the first time since it acquired Columbia Energy Group in November 2000.

Since December 2000, Neale reported the company has reduced its overall debt by approximately $2 billion through the sale of non-strategic assets and the issuance of common stock.

Cold weather during the first quarter bolstered the company’s pre-tax operating income by $59.7 million, or 15 cents a share after tax, NiSource said. The company’s exploration and production (E&P) segment also saw an increase of $38.5 million in operating income during the period, reflecting a pre-tax gain from the sale of an interest in a natural gas exploration and production joint venture in New York state.

On the downside, NiSource reported an after-tax reduction to net income of $8.8 million, or 4 cents a share, as a result of a change in an accounting rule involving asset retirement obligations, a charge of $13.5 million for credits to customers of affiliate Northern Indiana Public Service Co., and a $9.4 million increase in pension expense.

The mainstay of the company, its gas distribution operations, posted operating income of $314.2 million for the first quarter, up $64.6 million from the same period in 2002, NiSource said. The increase was primarily due to higher sales and deliveries of natural gas during the colder weather.

However, reported operating income for its gas transmission and storage operations fell $15.5 million to $111.3 million from the year-ago period, reflecting lower interruptible transmission service revenues and higher costs to meet customer demand during a period of sustained cold weather in the Northeast market areas, the company said.

The performance of NiSource’s electric operations was disappointing in the first quarter as well, with reported operating income falling $19.2 million to $52.6 million from the comparable period in 2002.

The reported operating income for the E&P segment more than doubled to $71.2 million during the quarter, but mostly as the result of a gain realized from the sale of NiSource’s interest in an E&P joint venture.

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