Robert C. Skaggs, Jr. - President, Chief Executive Officer & Director Stephen P. Smith - Chief Financial Officer & Executive Vice President Glen Kettering - Senior Vice President of Corporate Affairs Randy Hulen - Director of Investor Relations

Paul Patterson - Glenrock Associates Carl Kirst - BMO Capital Markets Paul Ridzon - Keybanc Capital Markets Jonathan Lefebvre - Wells Fargo Jay Dobson – Wunderlich Securities

Good day ladies and gentlemen, and welcome to the second quarter 2010 NiSource earnings conference call. [Operator instructions.] I would now like to turn the call over to your host for today, Mr. Glen Kettering, Senior Vice President of Corporate Affairs. Please proceed.

Thank you and good morning. On behalf of NiSource, I’d like to welcome you to our quarterly analyst call. We thank you for taking the time to join us this morning. With me this morning are Bob Skaggs, president and chief executive officer; Steve Smith, executive vice president and chief financial officer; and Randy Hulen, managing director of investor relations. As you know the focus of today’s call is to review our financial performance for the second quarter of 2010 and provide a business update. We will then open the call to your questions. At times during the call we will refer to the supplemental slides available on our website at NiSource.com. I’d like to remind all of you that some of the statements made on this call will be forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statement. Information concerning risk factors and uncertainties is included in the MDNA and risk factors sections of our periodic SEC filings. And now I’d like to turn the call over to Bob Skaggs.

Thank you Glen. Good morning, and thanks for joining us today. Prior to reviewing our second quarter financial results, I want to thank those of you who participated, in person or virtually, in NiSource’s July 22 Investor Day, our first in over five years. It was a privilege for the NiSource team, our business unit CEOs Jimmy Staton and Chris Helms, and our CFO Steve Smith to provide an in depth profile of the company and its business segment strategies, and to detail the deep inventory of investment-driven growth opportunities at each of our units. Again, we appreciate your interest and time invested to learn more about our business, our core strategy, and ultimately, why we believe that NiSource presents a compelling investment proposition. And as a reminder, if you weren’t able to join us, you can access our Investor Day presentations and a full transcript at NiSource.com. In particular, I would suggest taking a look at our Investor Day slide deck. It provides a crisp “why” NiSource is such an attractive investment. Now let’s turn to our second quarter results, and the second quarter slides that are available on NiSource.com. On slide 3, you can see that we delivered second quarter net operating earnings non-GAAP, of $37 million, or $0.13 per share, compared to $0.02 per share last year. Operating earnings for the quarter were $154 million, compared to $117 million for the same period last year. As these strong results demonstrate, the NiSource team continues to execute on our balanced, low-risk, infrastructure investment-driven strategy for building sustainable growth and shareholder value. As we pass the halfway mark in 2010, I’m pleased to note that our financial performance is in line with our plan and that we remain on track to deliver our non-GAAP 2010 earnings outlook of $1.10 to $1.20 per share. Before drilling into our second quarter results, let’s spend a moment on NiSource’s strategic framework. Slide four of our supplemental package outlines NiSource’s aspiration, our investment value proposition, and our balanced four-part business strategy. Most of you have seen this, but I think it bears ongoing emphasis. This is the fundamental plan that’s underpinned our business over the last five years, and that drives our team’s performance day in and day out, year after year. I’d add that slide ten in the appendix provides a good snapshot of how we think about each business unit going forward. Let’s now take a look at our second quarter results, starting with NiSource Gas Distribution, or NGD, on slide five. You’ll see NGD delivered operating earnings for the quarter of nearly $36 million, up from $7.5 million in 2009. Revenues for the quarter were up about $35 million, primarily due to ongoing regulatory initiatives and infrastructure investments, as well as the effect of rate increases at a number of our utilities. Contributing to NGD’s 2010 second quarter revenue increase was Columbia Gas of Ohio’s full implementation of the levelized rate design provided for in its 2008 rate case settlement. This rate design change effectively means that COH’s fixed costs will be recovered as a fixed monthly charge versus volumetric rate design. This fundamental change is representative of several similar steps we’re taking at all of our gas distribution companies. Turning to NGD’s growth initiatives, a key milestone on the infrastructure investment front was Columbia Gas of Virginia’s completion of the Bear Garden expansion project, the largest new business project in NGD’s history. That project serves Dominion Virginia Power’s 580 megawatt natural gas fire generating station in Buckingham County Virginia. Demonstrating our team’s ability to execute, this construction project was completed on schedule and well within budget. The NGD regulatory teams continue to make progress on the rate case front during the quarter. In Pennsylvania, we have a settlement on file and late last week the administrative law judge issued a recommended decision approving the settlement as filed. Pending Pennsylvania Public Utility Commission approval, new rates are anticipated to be in place early in the fourth quarter. As you know, we also have a case pending in Virginia, which we expect to resolve through settlement prior to year’s end. We also filed a gas rate case during the second quarter at Northern Indiana Public Service Company, or NIPSCO, and the NIPSCO regulatory team is actively pursuing settlement of that case with its stakeholders. As we discussed during our first quarter earnings call in early May, this case proposes to restore NIPSCO’s earnings to an appropriate level with virtually no impact on customers. The filing also contains a proposal to extend low income and energy efficiency programs providing customers with tools to reduce their energy consumption and manage cost. So our NGD team continues to deliver strong, balanced performance across the customer, operational, regulatory, and financial dimensions. And because of this consistent execution, we remain confident that our investment-driven strategy will deliver earnings growth at this segment of approximately 3% per year over the long term. Let’s now take a look at NiSource Gas Transmission and Storage, or NGT&S, highlighted on slide six. In the second quarter, our NGT&S team achieved operating earnings of about $75 million compared to $81 million in 2009. For the six months, the segment’s operating earnings were about $201 million, or nearly $9 million over last year’s level. Second quarter net revenues at NGT&S increased $7 million, driven by growth projects placed into service in 2009, as well as increased customer demand margins. I’d note that the revenue increase is net of a reduction of short term park-and-loan type business of about $5 million for the quarter, reflecting relatively modest seasonal price spreads and market volatility compared to last year. Operating expenses were up in the second quarter, primarily due to the timing of expenditures and increased spending in our pipeline integrity management program. Turning to NGT&S’s growth initiatives during the quarter, our NGT&S team continued to execute on expansion projects in the Marcellus Shale region, where NGT&S has one of the area’s most, if not the most, extensive pipeline and storage footprints. The team placed the Cobb compressor station project into service in May. This $15 million project, built on schedule and on budget, will provide Appalachian producers with over 25,000 decatherms per day of long-term firm transportation service. The team also advanced a series of projects in the Majorsville, Pennsylvania area, that support increased production from the Marcellus region. Majorsville is an anchor project for us in southwestern Pennsylvania, representing an investment of nearly $80 million that will provide increased capacity of 325,000 decatherms per day when placed into service during the third quarter. These projects will be gathering gas from key Marcellus producers, including Range Resources and Chesapeake, into a processing plant being built by MarkWest, which can provide 120 million cubic feet per day of processing capacity. MarkWest also recently announced plans to more than double the plant’s capacity in 2011. As Chris Helms covered in his Investor Day presentation, over the course of the next several years, we anticipate making Marcellus area growth project investments of approximately $200 million annually, following a disciplined strategy of aggregating supply, transporting gas to and from market centers, as well as providing downstream transportation and storage services. Turning now to NIPSCO’s electric business on slide seven. NIPSCO Electric reported second quarter operating earnings of approximately $48 million, an increase of about $17 million over the same period in 2009. Consistent with the first quarter, NIPSCO saw an increase in its industrial and residential margins that helped drive a revenue increase of about $27 million. Operating expenses increased by about $10 million over last year’s levels, due primarily to property taxes and storm damage costs. Although much work remains to be done as we work to restore NIPSCO Electric’s earnings power and position it to grow on a long term basis, we’re encouraged by this year’s progress made by Jimmy Staton and his team. In addition to improved financial results, the NIPSCO team is dramatically improving its operating and customer service metrics, as well as advancing its key regulatory agenda. Notably, generation reliability has improved by 40% and outage duration times have been reduced by 35%. Another notable example of progress being made by the NIPSCO team is reflected in J.D. Power’s 2010 electric utility residential customer satisfaction study, which showed that NIPSCO was among the top performers in the nation driving improved residential customer satisfaction levels. I’d also note that on the gas side, NIPSCO climbed to fourth place out of 17 utilities in J.D. Power’s Midwest large segment residential natural gas satisfaction survey, released this quarter. NIPSCO’s focus on its customers sharpened yet again in June, with the filing at the Indiana Utility Regulatory Commission, or IURC, to expand customer efficiency programs. The programs include appliance rebates and recycling, low income weatherization, air conditioning cycling, energy audits, and new construction incentives, again with the objective of helping customers actively manage their energy costs. Turning to NIPSCO’s regulatory agenda, on the rate case front, as most of you are aware, our 2008 rate case remains pending with the IURC. Our current expectation is that we will see an order in the third quarter. And just a reminder, as we discussed on a number of occasions, an additional NIPSCO electric rate case is expected to be filed in the fall of this year. We’re planning a very straightforward case with the filing reflecting recent demand and cost levels, plus enhanced energy efficiency and customer assistance programs. The core objective of the second rate case is to restore NIPSCO Electric’s earnings to an appropriate level, and to do so in a manner that’s responsive to the interests of its customers and to other key stakeholders. Our goal is to have a resolution of that case in place by late 2011 or early 2012. To wrap up with slide eight, NiSource’s overall business and financial performance for the quarter was quite strong and firmly in line with our business plan. We remain committed to our 2010 net operating earnings guidance, and to delivering on our outlook for the fourth consecutive year. Looking forward, our approach to infrastructure investment and growth opportunities will remain thoughtful and straightforward, focused on meeting our customer needs and on making investments that create value for our shareholders. This disciplined development approach has served us well, and it’s one that we’ll continue to follow religiously. Finally, as we emphasized during the course of our Investment Day discussions, one of NiSource’s fundamental objectives continues to be to increase the level of our infrastructure investments to about $1 billion annually, and to do so in a manner that is value-added for shareholders and at the same time supportive of our investment-grade credit profile. And as we increase the annual capital spend towards that higher level, we would expect our annual earnings growth rate to fall on the upper end of the 3% to 5% range. As always, we remain committed to communicating with our investors in a transparent and timely manner regarding these and all of our efforts. Ongoing updates will be provided through our analyst calls and news releases posted on NiSource.com. Thank you for participating today, and for your continued interest and support of NiSource. Operator, at this point let’s open the call to questions.

[Operator instructions.] Your first question comes from the line of Paul Patterson of Glenrock. Please proceed. Paul Patterson - Glenrock Associates: I wanted to touch base with you on the 2008 case. It seems to be taking considerably longer than you guys had expected and I’m just wondering why you think it’s taking so much longer than you guys thought it would.

Well, just a couple of prefacing it observations. Number one, as you and virtually everybody else knows, it’s the first case that we’ve had at NIPSCO Electric in over 20 years. The case covers everything, from A to Z, and one central feature or issue in the case has been rate design and cost allocation, and again, that was litigated as well as everything in the case was litigated. So to say the obvious, complex, involved case that the parties needed to go through in great detail. So that’s an introductory of sorts. I’d also make the observation that the commission has only had the case now for about six months, and their typical deliberating process endures or continues for about six months, so I think we’re still within the window of that decision making process, and as I said in my prepared remarks, we expect an order yet this quarter.

Right, but in the last quarter conference call you guys expected something by the middle of 2010. We’re now in August and I haven’t even seen it on the agenda. Has anything changed in that period of time?

Again, I tried to indicate. I think they’re going through their normal deliberating process. It’s a big, complex case and so I think it’s just part of the normal process. We don’t read anything into it, negative or positive, and again we expect a decision within the short term.

Does it delay the filing, the third quarter filing potentially?

Yes. We would like to get this case in hand. We’d like to be able to digest it, and we’d also like to preview the follow up case with our stakeholders. So it does almost by definition delay. We will not delay indefinitely, but again we expect the commission to act within a short period of time and the second case will follow closely thereafter.

Your next question comes from the line of Carl Kirst, of NiSource.

Hey Carl, welcome aboard! [Laughter.] Carl Kirst – BMO Capital Markets: I’m actually still with BMO last I checked.

Okay, yeah. That would have been the biggest surprise in today’s call, wouldn’t it?

I’m always glad there are options. [Laughter.] Sorry, so, a few questions here. First off, on the LDC side, nice beat, nice results overall. I’m trying to get a better sense of, we knew the levelized rates was certainly redistributing some of the winter period earnings, but how much of second quarter where the increase in revenue came from off system sales, and perhaps how much operating income came from off system sales. Just trying to get a better sense of that.

It’s about $10 million, give or take.

And is that just basically related to the increasing basis that we saw, and sort of just movement across the system, or what do you attribute that to?

No, I’m sorry, I may have misunderstood the question. At the gas distribution companies, just for clarity’s sake, about $10 million came from the rate design change at Columbia Gas of Ohio. Okay? And we had a bit of an uptick in off system sales between $10 million and $15 million at the gas distribution companies. I wouldn’t attribute it to basis per se. It was a bit opportunistic and so I’d separate it from that.

Okay. The $10 million is sort of what we might consider to be the base foundation if you will?

From the Columbia Gas of Ohio rate design change.

Exactly.

Correct.

And then two other just quick detail questions. I noticed in the reconciliation, also in the LDC, there was a $5.7 million revenue adjustment, but I didn’t see any description for what that was and . . .

Yeah, that was a legal reserve that was reflected earlier in revenue and now we’ve taken a reserve on it.

Great, thank you. And you know, maybe just a broader question and I can back in queue. You know, understanding we’re in a situation of kind of under-promising and over-delivering, you guys have just put up excellent results in the first half of the year. I know we’re staying with this $1.10 to $1.20 guidance. Certainly though, when I look at what happened with the second half of last year for instance, as far as year over year comparisons, in order to kind of stick even with the high end of that guidance you guys would be below second half ’09 results. Is this just out of an abundance of caution, and wanting to see the NIPSCO ruling first, or should we be expecting some negative year over year comps in the second half of the year?

Well, number one, Carl, we always try to give you our best shot on an earnings outlook, so we always try to shoot straight with that. But you really hit the nail on the head. We have this huge, and I’ll say it again, huge, rate case pending that as you know has many, many, many moving parts. Now we’ve tried to model and give the market our best take on that, but in all fairness to us and the process, again it’s a huge, complex case that is extremely difficult to model. And that’s the primary reason that we’re staying with what we’ve given you so far on the outlook.

Understood. Appreciate the color. Thanks guys.

Your next question comes from the line of Paul Ridzon of Keybanc. Please proceed. Paul Ridzon - Keybanc Capital Markets: You’ve got some timing issues on the expenses at NGT&S. Can you kind of quantify how big that was, and when we get that back?

Yeah, really what we’ve attempted to do is to take the opportunity to step up our maintenance, and I highlighted in my remarks our Integrity Management Program, so that’s what’s really driving the bump in that spending, and give or take it’s between $7 million to $8 million. That’s the bump that we’ve incurred.

And how big were the storm costs at NIPSCO?

They were about $3.5 million. And just for everybody on the call, in Indiana, like much of the Midwest, there were a series of very, very heavy storms and so about $3.5 million to restore customer service in the aftermath of those strikes, storms.

That’s not netted out in your weather adjustment, is it?

No, it’s not. We just went on and hit operating earnings as part of ongoing business.

Okay. It looks like industrial is really starting to accelerate. Any color on what you’ve seen thus far? You have July under your belt.

Yeah, it’s certainly better than what we had anticipated. Better than what we reflected in our outlook. From our perspective it’s still slow. If anything we expect it to slow down a bit for the balance of the summer and into the balance of the third quarter. So like many of our brother and sister utilities in this area, we’re seeing flickers, but nothing that we would ever characterize as sustained uptick.

As we move into ’11, can you kind of talk about some of the impacts on earnings at the Ohio Auction [inaudible]?

We certainly expect the auction to reduce our off system sales capability in Ohio. And when we provide guidance and now look in 2011 we’ll give you a little bit more color and detail. But that will be the key sort of impact to watch when we guide for ’11.

And then just finally, just to clarify, your 3% to 3.5% growth aspiration is EPS, not net income, correct?

It’s earnings per share growth. You’re correct.

Your next question comes from the line of Jonathan Lefebvre of Wells Fargo. Please proceed. Jonathan Lefebvre - Wells Fargo: Just on Carl’s question, I wanted to clarify. Is it $10 million per quarter for the new rate design in Columbia of Ohio? Is that how we should be thinking about it for 3Q and 4Q?

Well, I’ve got to think about that for a moment, but no, because of, when it was implemented in 2009, and I can’t recall exactly when it was implemented, but I think you will see part of it in the third quarter, and you’ll certainly see quarter to quarter it was definitely in during the fourth quarter of 2009.

But we should expect fourth quarter will be down a bit year over year due to the levelizing mechanism?

It should be apples to apples.

Gotcha.

If you get me, because I believe we implemented, I can’t recall when we implemented in 2009 quite frankly, but I’m sure it was in towards the latter part of the year.

Okay. And then just in terms of the –

And by the way, we’ll ask Randy to follow up with you on that, because we’re relying on my memory and I just can’t nail that.

Not a problem. And then in terms of the interest expense. You’re running kind of below where we thought year to date on the second half, I mean do you think this is a reasonable run rate?

Well, I think this -

This is Steve by the way.

Yes, Steve, thanks Bob. I think, you know, vis-a-vis what we anticipated for the year in guidance, I would say interest rates have performed well in terms of they’ve been a lot lower for a whole host of reasons. So we’ve continued to see some upside on the interest expense line. And again, you know, that’s largely driven by what’s taken place in the broader economy at large. You know, Treasury rates are pretty low and have been for quite some time.

Fair enough, and the PA settlement, was that in the $1.10 to $1.20, can you refresh my memory there.

Yes it was.

And then finally, just in terms of the financing outlook, and I know you touched on this on your analyst day, but as you think about, you know, growing your transmission and storage business, I’m sure you’ve seen the recent storage IPOs in the MLP space, and what they went out at. Care to comment on what you’re seeing there, and if that’s catching your eye at all and maybe rank that versus doing some type of equity versus MLP at this point? Which would you prefer?

Yeah, at this point we continue to monitor closely the MLP IPO activity, but as I mentioned at Investor Day on July 22, we’ve taken that off the table for the time being. Again, we continue to monitor, we see some advantages in the approach, but for us we’re taking it off the table for the time being.

So I guess it would be more preferable to look at equity to continue the growth at NGT&S if that was the right thing to do.

Well, let me just talk a little bit about financing. Number one, and again I mentioned this during Investor Day, our first and foremost consideration is do we have value-enhancing franchise-enhancing investments? Is the inventory good? Is the inventory of investments compelling? And as you know we’ve been striving to increase the spend, annual spend, to about $1 billion a year, so that’s first and foremost as we think about things. And then we move to financing, and literally we have not made a decision on how, what, when, where and the like. We continue to study that. We continue to consider our financing options, but we’ve just made no decision in that regard. When we, though, begin the process of looking at financing and perhaps pulling the trigger on financing, there are certain key principles that we’re going to measure against. Number one is what really Paul mentioned earlier, 3% to 5% earnings per share growth. That’s the first commitment. The second commitment is to our current dividend level of $0.92, and the third point that we’re committed to is the investment-grade credit rating. So that’s where our thinking is, and that’s the process and the standards we’re going to measure any decision against.

Okay. I appreciate the color. Nice quarter guys.

There are no further questions in queue. [Operator instructions.]

All right operator. Maybe we can just make a few concluding comments.

Pardon the interruption. You have a question from the line of Jay Dobson of Wunderlich Securities. Please proceed. Jay Dobson – Wunderlich Securities: Right under the wire there, Bob.

Yeah, you just made it Jay.

Exactly. Just a quick follow up. I don’t remember who asked it earlier, but in talking about the Indiana rate case outcome maybe just give us a little sense of your confidence level around a third quarter decision. And certainly understand the question’s a really tough one to answer. It’s certainly not within your control, but I guess in as much as you emphasize appropriately how important a rate case and perhaps more importantly a complex rate case it is, it’s certainly key on investors’ minds. So I guess the way I’d ask the question is, you know, what’s the probability we’re on the third quarter earnings call, and we don’t have a decision?

Yeah, it’s very difficult to predict with precision. I go back to the point that I made, though with Paul at the outset, that the commission has had this case now for give or take six months, and I think Indiana practice has been to decide major cases and proceedings within a six to nine month time frame. We know that the commission has held one executive session to consider the case, or to consider the decision making process in the case. We know that they are working hard on this case, and have been working hard on that case. So all indications, based on history, based on the flurry of activity we see, that the six to nine month decision making framework is probable.

Gotcha. You’d still anticipate the next case coming sort of right on the heels of that, so you know, if this does end up pushing into fourth quarter a decision then, you know, we’d be delaying and pushing that next case into the fourth quarter.

That’s correct. But we will move with dispatch. We’ll give ourselves a bit of time to digest, socialize, and follow the follow-on.

Hey, that’s great. Thanks for the time.

This concludes the question and answer section of the call. I would now like to turn the call over to Mr. Bob Skaggs for closing remarks.

Thank you operator and thanks again everyone for your participation, your interest and support of NiSource. Again, I would just put a pitch in for our recent Investor Day work and the materials that are available on NiSource.com. If you haven’t had a chance to look at those I think it would be worth you taking a look at the materials, the transcript and the presentations. So with that, thank you and have a good day.