Randy G. Hulen - VP, IR Robert C. Skaggs, Jr. - President and CEO Stephen P. Smith - CFO and EVP

Paul T. Ridzon - KeyBanc Capital Markets Charles J. Fishman - Morningstar Inc.

Good day, ladies and gentlemen, and welcome to the Q2 2014 NiSource Earnings Conference Call. My name is Grant and I'll be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator Instructions). As a reminder this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Randy Hulen, Vice President, Investor Relations. Please proceed. Randy G. Hulen: Thank you, Grant and good morning, everyone. On behalf of NiSource I would like to welcome you to our quarterly analyst call. Joining me this morning are Bob Skaggs, President and Chief Executive Officer and Steve Smith, Executive Vice President and Chief Financial Officer. As you know the focus of today's call is to review our financial performance for the second quarter of 2014 and to provide an overall business update. We will then open the call to your questions. Also at times during the call we will refer to the supplemental slides available on nisource.com. I would like to remind all of you that some of the statements made on this conference call will be forward-looking. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning such risks and uncertainties is included in the MD&A and Risk Factors sections of our periodic SEC filings. And finally prior to turning the call over to Bob Skaggs I wanted to confirm that we have formally scheduled an Investor Day meeting in New York for September 29. This event will be webcast so that all interested investors can participate. We look forward to your participation so stay tuned for further details on timing and location. Now Bob, the call is yours. Robert C. Skaggs: Thanks Randy. Good morning, everyone and thank you for joining us. As we noted in this morning's release, the NiSource team delivered another quarter of solid execution and financial performance. On today call we'll touch on key highlights from the quarter, discuss how they position NiSource for continued growth in 2014 and beyond. Chief Financial Officer Steve Smith will review our financial results. We'll also provide updates on key execution highlights across each of our businesses, and of course we'll leave plenty of time for your questions. So with that in mind, let's get started with some key takeaways from the quarter. You'll see these listed on slide three in the supplemental deck that was posted online this morning. As I mentioned, our NiSource team once again delivered a solid quarter. Each of our business units continued to execute on our investment-driven business plan. This consistent execution has put us in a position to deliver earnings at the upper half of our non-GAAP earnings guidance of $1.61 to a $1.71 per share. Our Columbia Pipeline Group Unit continued to make steady progress on expanding inventory of growth, modernization in midstream investment opportunities. Many of these initiatives are tied closely to the company's strategic position in the Marcellus and Utica Shale regions. In our gas distribution business, Massachusetts Governor, Deval Patrick signed landmark legislation authorizing accelerated recovery of infrastructure modernization investments. Columbia Gas of Massachusetts intends to file a construction plan with the DPU by October 31st of this year and expects to begin recovering investments on May 1, 2015. In Indiana, our NIPSCO gas and electric business obtained regulatory approval of a $700 million natural gas modernization program, which will complement a $1.1 billion electric system modernization program. In addition to system modernization, the NIPSCO gas program provides for expansion of its gas distribution system into rural areas in Northern Indiana. With those quick highlights let me turn the call over to Steve Smith to take a closer look at our financial results on Page four of our supplemental slides. Stephen P. Smith: Thanks Bob and good morning everyone. As Bob mentioned the NiSource team delivered another solid quarter and we're on track to deliver year-end earnings at the upper half of our guidance range. We generated quarterly non-GAAP net operating earnings of about $78 million or $0.25 per share, which compares to about $73 million or $0.23 per share in 2013. On an operating earnings basis, NiSource was up about $24 million when compared to the same period in 2013. On a GAAP comparison, our income from continuing operations was about $79 million for the second quarter of 2014 versus about $72 million in 2013. At the segment level, you will see that each of our three core business units delivered solid financial results during the second quarter. Columbia Pipeline Group or CPG delivered operating earnings of about $104 million compared to about $89 million in 2013. CPG's net revenues, excluding the impact of trackers, were up about $22 million, primarily as a result of growth projects placed in to service and increased mineral rights royalty revenue. Operating expenses, again excluding the impact of trackers, increased by about $10 million, primarily due to an increase in employee and administrative costs and higher depreciation. NIPSCO's electric operations delivered about $60 million in operating earnings compared to about $59 million for the prior year. Net revenues, excluding trackers were up about $12 million, primarily due to higher industrial and commercial margins and increased environmental investment cost recovery. These increases were partially offset by a decrease in off-system sales. Operating expenses, excluding the impact of trackers, increased by about $11 million, due primarily to higher electric generations cost. And finally earnings for the quarter at our gas distribution business came in at about $63 million compared with about $52 million for 2013. Net revenues, again excluding the impact of trackers, were up by nearly $26 million, primarily due to increases in regulatory and service programs. Operating expenses excluding the impact of trackers increased by about $15 million, due primarily to increased outside service costs, higher depreciation, due to an increase in capital expenditures and increased employee and administrative costs. Overall, it was another solid quarter for the NiSource team. Full details are available in our earnings release posted online this morning. Now turning to slide five, I'd like to quickly touch on our financing and liquidity highlights. As you can see, we retained a strong liquidity position with approximately $1.2 billion of net available liquidity at the end of the second quarter. I'm also pleased to reiterate that our capital program for 2014 remains on track at about $2.2 billion. As we've indicated in the past, the majority, actually more than three quarters of our investments are focused on tracked and other revenue generating opportunities. Looking ahead, our financial strategy continues to be balanced, straightforward and fully aligned with our robust long-term capital investment outlook. And we remain strongly committed to maintaining our investment grade credit ratings as well as sustainable earnings and dividend growth. With that, I'll turn the call back to Bob to cover some of our business unit initiatives and execution highlights. Robert C. Skaggs: Thanks Steve. Before opening the call to your questions, let me hit on some key execution highlights at each of our business units. Let's start with the CPG Group on slide six. Our CPG team originated and delivered significant customer-driven growth projects in the quarter and continues to extend its already deep inventory of projects. From a growth project perspective the team began engineering and planning for the Utica access project. This $50 million project will transport Utica gas for Eclipse Resources to liquid trading points on the Columbia Gas Transmission system in West Virginia. Additionally, Columbia Transmission reached an agreement to provide firm transportation service to a natural fired gas electric generation plant in Kentucky. The roughly 70 million cubic feet per day, $25 million project is expected to begin service in mid-2016. Meanwhile CPG’s 250 million cubic feet per day Warren County project is ready for service to support WABCO’s new gas fire electric plant in Virginia. CPG also continues to advance its Rayne, Leach and WB XPress projects, which we regard as been transformational in nature. The Rayne and Leach projects are in the latter stages of development and we expect to have additional details to share on these projects in a matter of weeks. As a reminder the two projects will provide additional transportation capacity of about 1.5 Bcf and 800 million cubic feet per day on the Columbia transmission and Columbia Gulf transmission systems. The projects will go into service late 2017. On the WB XPress, this project is a bit further out, but we also expect to share additional details on this build later this quarter. This project would add another 1.3 billion cubic feet per day of transportation of Marcellus production to pipeline interconnects an east coast markets. The WB XPress project will go in to service late 2018. Columbia transmission also remains on track with the second year of its long-term system modernization program. Under the program, CPG is investing approximately $300 million annually in improvements to system reliability, integrity and flexibility. Settlement with company's customers addresses the initial five years of an expected 10 to 15 year program that will exceed $4 billion in investments. At NiSource Midstream Services, the team has completed the facility’ of its first phase of its Hickory Bend gathering and processing project. In addition our Midstream team has begun executing on the approximately $120 million Washington County gathering project announced on our first quarter call. As a reminder this project is anchored by a long-term agreement with Range Resources. This project is expected to be in service during the second half 2015. The Midstream team is also in advance discussions with customers about 175 million cubic feet per day expansion of the Big Pine Gathering System. As you can see the CPG team continues to capitalize on its solid relationships and strategic position to extend an already deep inventory of projects. Next let's shift to our Indiana electric business summarized on slide seven. NIPSCO continues to advance a broad agenda of system modernization, reliability and environmental improvements. On the projects front NIPSCO is moving forward with its $1.1 billion electric modernization program, approved in February by the IURC. The seven year program provides for the replacement and upgrade of underground circuits, transformers and poles, helping increase system reliability and deliver economic development benefits to the region. Progress also continued on two major NIPSCO electric transmission projects designed to enhance region wide system flexibility and reliability. Both are on schedule and on budget. Most recently the route was selected for the Greentown-Reynolds project, a roughly 70-mile, 765 KV line being constructed jointly with Pioneer Transmission. Meanwhile the 100-mile, 345 KV Reynolds to Topeka project remains on schedule with right-of-way acquisition and permitting in process. These projects involve an investment of about $500 million for NIPSCO and are expected to be in service by the end of 2018. And as we've discussed on prior calls, our NIPSCO power gen scrubber projects remain on schedule and on budget With completion dates of year end 2014 and year end 2015 these investments are part of more than $850 million of the environmental investments at NIPSCO. Let's turn now to our gas distribution operations discussed on slide eight. Our gas distribution teams continue to steadily execute on their long term and growing inventory of infrastructure replacement and enhancement programs. We're on track to invest approximately $785 million in 2014 on system modernization and other capital improvements. And as you know we pair those investments with complementary legislative and regulatory initiatives as well as customer programs. I already mentioned the landmark legislation signed in to law in Massachusetts. This is a significant achievement which provides a mechanism that better aligns the timing of investments with recovery and paves the way for a sustained system modernization program. As I noted earlier, our CMA team will be submitting a construction plan under the new law later this year. On the regulatory front, we filed our first rate case in four years of Columbia Gas of Virginia. The case is seeking a revenue increase of approximately $25 million which would support CGV's ongoing efforts to accommodate growth as well as cost recovery of CGV's multi-year distribution system modernization program. A decision is expected by the end of the year. Meanwhile the Columbia Gas of Pennsylvania's rate case remains on track. That's a $54 million request which would support continuation of CPA's ongoing modernization program. We expect a resolution later this year. As you can see, our gas distribution companies continue to steadily execute on a well-established agenda of long-term investment in system reliability and customer programs. To wrap up, given the team’s strong execution of the plan we're now positioned to achieve results at the upper half of our 2014 non-GAAP guidance range of $1.61 to a $1.71 per share. I also want to reiterate that our team continues to execute against NiSource’s robust investment driven business strategy and we're doing so while staying true to our well established core commitments. Those are maintaining stable, investment grade credit ratings, delivering stable and long-term dividend growth, delivering stable and long-term earnings growth. And last but not least, as Randy mentioned in his introduction we're hosting an Investor day on Monday, September 29th. Consistent with our past sessions our team will be providing a detailed discussion of the NiSource investment proposition, supported by an in-depth review of our growth opportunities and investment inventories across each of our business units. We're looking forward to that meeting and your participation. Again thank you for participating today and for your ongoing interest in and support of NiSource. Grant, we can now open the call for questions.

Thank you. (Operator Instructions). Please standby for your first question. And our first question is coming from the line of Paul Ridzon from KeyBanc. Please go ahead. Paul T. Ridzon - KeyBanc Capital Markets: Good morning. Robert C. Skaggs: Hey, good morning Paul. How are you? Paul T. Ridzon - KeyBanc Capital Markets: Good, good. Congratulations on another solid quarter. Robert C. Skaggs: Thank you. Well it was a nice quarter. I appreciate it. Paul T. Ridzon - KeyBanc Capital Markets: Can we put bookmarks around the potential capital for Leach and Rayne? Robert C. Skaggs: Paul, I ask you to bear with me. In just a matter of weeks, a mere matter of weeks, we're going to give you a lot of detail around both of those projects and there'll be a heck of a lot more than bookmarks. Paul T. Ridzon - KeyBanc Capital Markets: Sounds good. And then how should we think about the dividend going forward just growing with earnings? Robert C. Skaggs: Continue to grow on a robust basis. We'll give you more of a sense at Investor Day about the way we think about it. But as you know, we're balancing a very, very strong investment program, strong earnings growth rate and a strong dividend. So again I ask you to bear with me a little bit more color commentary when we see in the -- in to September. Paul T. Ridzon - KeyBanc Capital Markets: And given the pretty impressive backlog of projects could we look for you to revisit your growth rate in September? Robert C. Skaggs: We'll talk about that in September, Paul again, we're going to cover the waterfront, certainly earnings growth will be one of the key topics among many, that we'll touch on. Paul T. Ridzon - KeyBanc Capital Markets: September can't get here soon enough, I guess. So I’m looking forward to it. Thank you guys. Robert C. Skaggs: Thank you. Thanks, Paul. Stephen P. Smith: Thanks Paul.

Thank you for your question there. Our next question comes from the line of Charles Fishman from Morningstar. Please proceed. Charles J. Fishman - Morningstar Inc.: Good morning. Robert C. Skaggs: Hi Charles. Charles J. Fishman - Morningstar Inc.: Massachusetts, can you just over what was the key differences in the existing prior program and under the new legislation and I guess the follow-up already would be is $25 million to $50 million that you are showing on, actually what slide 16 of annualized investment, can we anticipate that to go up or would that -- will the new legislation just put that in the upper range? Robert C. Skaggs: Yeah, let me start with the question about then and now. The Massachusetts regulatory approach was a more traditional regulatory approach. We file periodically rate cases and because of that convention there tended to be a significant lag, much greater than 12 months on CapEx investments. So again a traditional rate case sort of mode that we follow and all the other utilities follow to Massachusetts. What the new legislation would provide for you to file an annual construction plan for your modernization activities. We intend to file that plan by the end of October. The DPU has six months to consider the plan and then you begin rate recovery on investments beginning in the spring of 2015. So the lag is effectively eliminated. You'll be recovering on your investments as you make those investments during the period. So that's how the mechanism will work versus how it worked traditionally. Give or take we’re spinning annually about $40 million in Massachusetts on modernization, ongoing maintenance and the like. Under the new program, again we're developing our plan. We'll file it at the end of October. We anticipate our spending will pick up but we've been spending at a very good clip in Massachusetts up to this point. By the way I would add that there is a cap in the legislation on how large the programs can be and I’ll have Randy check this, but I believe it's 1.5% of your firm annual revenues, is how the program is capped. Charles J. Fishman - Morningstar Inc.: And that program is a traditional type, replacement type program? Robert C. Skaggs: Correct. Charles J. Fishman - Morningstar Inc.: That's it. Thanks Bob. Robert C. Skaggs: Yeah. You're welcome.

Thank you for your question now. Our next question comes from the line of [Brian Luski] from Morgan Stanley. Please proceed.

Hi. Good morning gentlemen. Robert C. Skaggs: Good morning.

I was just wondering whether or not you’ll have a decision on your MLP at the Analyst Day. Is that your expectation that you would have a decision one way or another there? Robert C. Skaggs: Well again I'm just going to ask you to bear with me. I'm going to pass on that question and I'll just repeat that the meeting in September 29th is intended to be exhaustive. So we're going to deep dive all of our businesses and all the considerations that we've been working on.

Perfect. Thank you very much. Robert C. Skaggs: All right.

Thank you for your question. (Operator Instructions). We have no further questions at this time. I would therefore now like to turn the call over to Bob Skaggs for closing remarks. Robert C. Skaggs: All right. Grant, thank you very much and thanks to everyone for participating today and your ongoing interest and support of the company. We look forward to seeing you and speaking with you on September 29th in New York. So thanks and have a good day.

Thank you, ladies and gentlemen for your participation in today's conference. This now concludes your presentation. You may now disconnect. Enjoy the rest of your day.