Randy G. Hulen - NiSource, Inc. Joseph J. Hamrock - NiSource, Inc. Donald E. Brown - NiSource, Inc.

Paul T. Ridzon - KeyBanc Capital Markets, Inc. Shahriar Pourreza - Guggenheim Securities LLC Charles Fishman - Morningstar, Inc. (Research) Michael Lapides - Goldman Sachs & Co. Larry Liou - JPMorgan Securities LLC

Good day, ladies and gentlemen, and welcome to the NiSource Q1 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host, Mr. Randy Hulen, Vice President of Investor Relations. Sir, you may begin. Randy G. Hulen - NiSource, Inc.: Thank you, Brian, and good morning, everyone. Welcome to the quarterly investor call. Joining me this morning are Joe Hamrock, Chief Executive Officer; and Donald Brown, Chief Financial Officer. The purpose of today's call is to review NiSource's financial performance for the first quarter of 2017, as well as provide an update on our utility operations and growth drivers. We'll then open the call up to your questions. As a reminder, we will be referring to our supplemental earnings slides during this call. These slides are available on our website. Also available on our website is the document that contains segment and financial information to accompanying this presentation. Before turning the call over to Joe, just a quick reminder, 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. In addition, some of the statements made on this conference call relate to non-GAAP measures. For additional information on the most directly comparable GAAP measure and a reconciliation of these measures, please refer to the supplemental slides and additional segment and financial information available on nisource.com. With all that out of the way, the call is now yours, Joe. Joseph J. Hamrock - NiSource, Inc.: Thanks, Randy. And good morning, everyone, and thanks for joining us. NiSource started 2017 with strong first quarter financial and operational results. I'm proud of our talented and dedicated teams across NiSource for delivering sustained value for our customers, community, and investors. The long-term modernization programs underway in each of our states provide clear and compelling investment opportunities, which our teams are effectively executing. Let's look at slide 3 of our supplemental deck and highlights some of our significant achievements thus far in 2017. We delivered net operating earnings per share non-GAAP of $0.71 compared to $0.62 during the same period in 2016. We're on plan to invest $1.6 billion to $1.7 billion in our gas and electric utility infrastructure across our seven states this year. These financial results and investment levels have NiSource on track to deliver non-GAAP annual net operating earnings in the upper half of the company's 2017 guidance range of $1.12 to $1.18 per share. Today, we filed with the Securities and Exchange Commission an at-the-market or ATM equity issuance program. The ATM, combined with future debt offerings and our well-established dividend reinvestment program, is intended to provide a balanced financing approach for NiSource's utility capital investments. Consistent with what we shared with you at our Investor Day in March, we continue to expect to grow our net operating earnings per share and dividend at 5% to 7% annually through 2020. We also expect to invest $1.6 billion to $1.8 billion annually in our utility infrastructure programs from 2018 through 2020. These program investments are part of our more than $30 billion of identified long-term investment opportunities. We're also continuing to execute on our investment and regulatory programs across all seven of our states. The early 2017 highlights include regulatory approval of our base rate case settlement in Virginia, filling of a base rate case in Maryland, approvals of tracker updates for gas infrastructure programs in Massachusetts and Ohio, filling of a long-term infrastructure replacement plan update in Ohio, and continued electric transmission, distribution and environmental investments in Indiana. Now, I'd like to turn the call over to Donald who will discuss our financial performance in more detail. Donald? Donald E. Brown - NiSource, Inc.: Thanks, Joe, and good morning, everyone. As Joe mentioned earlier, it certainly was a strong start to the year. And we are now guiding to the upper half of our non-GAAP 2017 net operating earnings range of $1.12 to $1.18 per share. Now, turning to slide 4. We delivered non-GAAP net operating earnings of about $231 million or $0.71 per share in the first quarter, compared with about $198 million or $0.62 per share for the same period in 2016. On an operating earnings basis, NiSource reported about $447 million for the quarter, which is an increase of about $48 million over the same period in 2016. On a GAAP basis, our operating income was about $417 million for the quarter versus about $381 million in the first quarter of 2016. Biggest driver of our solid financial performance continues to be the impact of our long-term infrastructure modernization investments. Let's now take a closer look at our segment level results. Our Gas Distribution Operations segment delivered operating earnings of about $364 million in the quarter, an increase of about $34 million compared with the same period in 2016. Excluding the impact of trackers, net revenues were up about $63 million, driven primarily by new rates from base rate cases and infrastructure replacement program. This increased gas revenue was partially offset by an approximately $29 million increase in operating expenses related to increased O&M, depreciation expense, and property taxes. Our Electric Operations segment reported operating earnings of about $84 million in the quarter, an increase of about $12 million from the first quarter of 2016. Once again, excluding the impact of trackers, net revenues were up about $24 million, driven by new rates from the base rate case and increased capital spending on the transmission projects. This increased electric revenue was partially offset by increased operating expenses of approximately $12 million, primarily due to increased O&M, a portion of which is related to items formerly tracked or deferred that were rolled into base rate as a result of the rate case. Full details of our first quarter results are available in our earnings release and supplemental financial information posted this morning at nisource.com. Now, turning to slide 5, I'd like to briefly touch on our debt and credit profile. Our debt level as of March 31 was about $7.9 billion, with a weighted average maturity on long-term debt of approximately 13 years and a weighted average interest rate of approximately 5.4%. At the end of the first quarter, we maintained net available liquidity of about $789 million, consisting of cash and available capacity under our credit facility. It's worth mentioning again that our credit ratings at the three major agencies are investment grade. Standard & Poor's rates NiSource at BBB+; Moody's at Baa2; and Fitch at BBB, all with stable outlook. Going forward, our financial foundation is solid and poised for continued growth. I'd also like to highlight that we filed an ATM equity issuance program with the SEC earlier this morning. This is consistent with the approach we outlined at our Investor Day in March, and is part of our balanced, predictable approach to financing our infrastructure investment programs. Keep in mind that all of our financing costs are included in our updated 2017 earnings guidance and the long-term earnings and dividend annual growth rates of 5% to 7% through 2020. Now, I'll turn the call back to Joe to discuss a few customer, infrastructure investment, and regulatory highlights. Joseph J. Hamrock - NiSource, Inc.: Thanks, Donald. Before getting into those details, I'd like to highlight a recognition we received that we're quite proud of. In March, the Ethisphere Institute named NiSource to its list of the world's most ethical companies for the sixth consecutive year. This designation supports our stakeholder commitments and is influenced by our employees' actions and the systems and processes we have in place. Our commitment to doing the right thing crosses every aspect of our day-to-day business interactions, ensuring we serve our customers with fairness, honesty, integrity, and trust day in and day out. And I would also like to encourage you to read our 2016 Integrated Annual Report which was published in April. For the first time, we combined our Annual Report to Stockholders and our Corporate Sustainability Report into a single publication. We did this to further illustrate how we've integrated our operational, financial, and social performance across our business strategy. In addition to our financial performance, the report focuses on other sustainability issues which are important to our stakeholders. Across both our gas and electric business segments, we're continuing to execute on our customer focused infrastructure modernization investments. Together with regulatory initiatives and enhanced customer programs, these investments are helping to improve system safety and reliability, customer service and response, and our system's environmental performance. Now, let's turn to some specific highlights for the first quarter from our gas operations on slide 6. We continue to make progress on our regulatory initiatives across all states. On the rate case front, we received approval of our settlement in Virginia and also filed a new case in Maryland. The Virginia order received in March, related to our 2016 base rate case, it allows for about a $29 million annual revenue increase and supports our continued investments related to safety, reliability, and system growth. Maryland's request filed last month supports continued replacement of aging pipe and adoption of pipeline safety upgrades. If approved, just filed, the Maryland base rate adjustment would result in an annual revenue increase of approximately $6 million. Our teams also continue to execute on our gas infrastructure replacement programs and make progress on tracker updates. Just last week, Columbia Gas of Massachusetts received regulatory approval of its 2017 Gas System Enhancement Plan which includes about $69 million of investments this year. In Indiana, we filed our semi-annual tracker update in late February, covering approximately $61 million of investments made in the second half of 2016. And in Ohio, we received an order on April 26 on our annual infrastructure replacement program rider adjustment, covering $235 million of investments made in 2016. Also, in Ohio, we filed for authority to continue our Infrastructure Replacement Program through the end of 2022. This well-established pipeline replacement program covers accelerated replacement of priority mainline pipe, and immediate replacement of targeted customer service lines. Now, let's turn to our Electric Operations on slide 7. In our electric business, we've continued to focus on investments which enhance safety, service reliability, environmental performance, and customer service as well as regulatory initiatives to support those investments. These include plans for environmental upgrades at certain units at our Michigan City and Schahfer generating stations. These investments, estimated at $400 million, are designed to reduce our impact on local waterways as well as coal ash emissions from these units and keep our fleet in compliance with federal regulations. We're also focused on executing our seven-year electric infrastructure modernization program which includes enhancements to electric transmission and distribution infrastructure, designed to improve system safety and reliability. Approximately $1.25 billion of investments are planned through 2022. And we began recovering on approximately $46 million of these investments effective in February of 2017. Our two major electric transmission projects remain on schedule with anticipated in-service dates in the second half of 2018. The 100-mile 345-kV and 65-mile 765-kV projects are designed to enhance region-wide system flexibility and reliability. Substation, line and tower construction are well underway for both projects. So, as we wrap up today, just some key takeaways before opening the call to your questions. NiSource's long-term utility infrastructure modernization programs continue to create value for customers and communities while also driving solid financial performance for our shareholders. Our successful regulatory outcomes in recent years support our high-value customer programs, things like pipeline and wire replacement, leak repair, enhanced line locating and capabilities, vegetation management and electric generation investments. These investments are leading to positive customer outcomes with respect to safety, reliability, and environmental performance of our systems. We expect to deliver 2017 non-GAAP net operating earnings at the upper end of our $1.12 to $1.18 per share guidance range, with about $1.6 billion to $1.7 billion in capital investments. And we continue to expect to invest $1.6 billion to $1.8 billion annually in our utility infrastructure from 2018 through 2020, and remain on track to execute against our more than $30 billion in identified long-term investment opportunities. With our robust investment plans, we continue to expect to grow both operating earnings and our dividend by 5% to 7% annually through 2020, while maintaining our investment grade credit ratings. Thank you all for participating today and for your ongoing interest in and support of NiSource. Now, let's open the call to your questions. Brian?

Thank you. And our first question comes from the line of Paul Ridzon from KeyBanc. Sir, your line is now open. Paul T. Ridzon - KeyBanc Capital Markets, Inc.: Good morning. Congratulations on the quarter. Joseph J. Hamrock - NiSource, Inc.: Hey, good morning, Paul. Thank you very much. Paul T. Ridzon - KeyBanc Capital Markets, Inc.: Just a clarification on the ATM. The $500 million, the tenure of the ATM is two years. So, it's basically in line with the $200 million to $300 million you talked about at Analyst Day, is that the right way to think about it? Joseph J. Hamrock - NiSource, Inc.: Yeah. Paul, understanding that we're limited in what we can say about the ATM program and noting that all of the details about the program are in the prospectus supplement, the supplement filed today is consistent with the financing plan we outlined on Investor Day, calling for $200 million to $300 million of ATM equity each year. Paul T. Ridzon - KeyBanc Capital Markets, Inc.: Got it. And then how should we think about the base going forward for your 5% to 7% earnings growth? Should we still be thinking about the midpoint of original guidance or kind of the midpoint of the upper half at this point? I know it's kind of splitting hairs, but just kind of want to get your views on it. Donald E. Brown - NiSource, Inc.: Hi, Paul. This is Donald. I'll take this. What we did outline in March was 5% to 7% annual earnings and dividend growth. So, I would certainly take the midpoint of kind of your expectation for our updated guidance and use the 5% to 7% annual growth off of that. Paul T. Ridzon - KeyBanc Capital Markets, Inc.: Thank you very much. It clears that up. And you had a tailwind from some debt refinancings, that we've lapped that at this point, haven't we? Donald E. Brown - NiSource, Inc.: I'm sorry. Could you ask that again, Paul? Paul T. Ridzon - KeyBanc Capital Markets, Inc.: You had a little bit of a tailwind in the first quarter from some debt refinancings, but we've lapped that at this point, is that correct? Donald E. Brown - NiSource, Inc.: Yes. So, we had some maturities over the last quarter, but no refinancings in the last year. Paul T. Ridzon - KeyBanc Capital Markets, Inc.: Okay. And thank you very much. Joseph J. Hamrock - NiSource, Inc.: Thanks, Paul.

And our next question comes from the line of Shahriar Pourreza from Guggenheim. Your line is now open. Shahriar Pourreza - Guggenheim Securities LLC: Good morning, guys. Joseph J. Hamrock - NiSource, Inc.: Good morning, Shahriar. Shahriar Pourreza - Guggenheim Securities LLC: Let me ask you, I mean, you did – on the CapEx that you highlighted at the Analyst Day, the capital of $1.6 billion to $1.8 billion through 2020. It seems like you've got the O&M levers, rates remain relatively low. You've got the subsidy from gas. Is there an opportunity to accelerate some of that $30 billion-plus that you've identified in the Analyst Day pull forward, or sort of should we be thinking about the $1.6 billion to $1.8 billion somewhere around the midpoint? Joseph J. Hamrock - NiSource, Inc.: Yeah, you should stick to the $1.6 billion to $1.8 billion, keeping in mind, that is accelerated from where we had been for the past couple years. We've been steadily building to that level over the past couple years, and that's our new expected run rate for the planning horizon that we outlined at Investor Day, and feel very comfortable about executing in that range. Shahriar Pourreza - Guggenheim Securities LLC: Okay. Got it. And then, just lastly on the update to the infrastructure program in Ohio, is there another data point or we're just at a waiting point? Joseph J. Hamrock - NiSource, Inc.: There is no update to that. We're pending before the commission, we'd expect an order later this year. I would say that the plan we propose is consistent with the CapEx plan that we laid out on Investor Day as well. Shahriar Pourreza - Guggenheim Securities LLC: Okay. Excellent. Thanks, guys. Congrats on the quarter. Joseph J. Hamrock - NiSource, Inc.: Thanks, Shahriar. Appreciate that.

Our next question comes from the line of Charles Fishman from Morningstar. Your line is now open. Charles Fishman - Morningstar, Inc. (Research): Good morning. Donald, if I could just ask for some clarification or maybe I just misunderstood this, I thought on – I thought you said that electric revenues benefited from the two transmission projects under construction and I – do you have a tracker that automatic – that goes to rates? Or I thought that was just a deferral on those until they are in operation. Donald E. Brown - NiSource, Inc.: There is a tracker on our environmental spend in Indiana, and so we're receiving increased revenues as we spend on those programs. Charles Fishman - Morningstar, Inc. (Research): But on the two transmissions projects, is that where I misunderstood, you were talking about the environmental? Donald E. Brown - NiSource, Inc.: I'd say on both, at environmental spend as well as on our transmission projects, we do earn as we're spending. Charles Fishman - Morningstar, Inc. (Research): But it also goes into revenue as well on the transmission? Or I mean, I know you earn on it as you told it. Donald E. Brown - NiSource, Inc.: Yes. That's correct. Charles Fishman - Morningstar, Inc. (Research): Okay. That resolves that. That's the only question I had. Thank you. Donald E. Brown - NiSource, Inc.: All righty. Thank you.

And our next question comes from the line of Michael Lapides from Goldman Sachs. Your line is now open. Michael Lapides - Goldman Sachs & Co.: Hey, guys. Thanks for taking my question. I want to probe a little bit at both the gas and the electric side on O&M. And the only reason why is I'm looking at the detailed supplemental financials you provide, and I recognized that – and I love your disclosure because you break out. You're one of the only guys who does this, by the way, who breaks out what O&M or D&A were covered via trackers and what is just kind of true core O&M, that is unbelievably helpful. But if I look at true core O&M, and let's start with the gas side. Going from $200 million to $223 million. And then, on the electric side, going from $109.5 million to almost $124.5 million. Percentage wise, those are really big increases. And just curious, if they're not covered via trackers, how much of that is creating lag for NiSource? And how much of that is already kind of embedded in forward-looking rates? Joseph J. Hamrock - NiSource, Inc.: Yeah. Michael, let me take a first crack at that and ask Donald to add some detail. You kind of hit on one of the key themes, the first thing I'd say, the O&M you're seeing in this quarter reflects our expected annual run rate fully ramped up now to the capabilities and investments that we set forth as we walked through the separation a couple years ago and it does reflect a shift of formerly tracked or deferred items that we rode in through the base rate case cycle we've been through over the past year, year and a half. So, you're seeing some of that geography shift as well. And inside those cases reflects commitments to some increased programs that we laid out in the various base rate cases, reliability, tree trimming programs, those kinds of things. So, I would characterize it not as indicative of expected ongoing growth, but a step that reflects our commitment to this level of spending and this level of customer value. That said, we expect it to flatten off here as we go forward and level off a bit as we go forward, and we did outline that at Investor Day. Anything you want to add to that Donald? Donald E. Brown - NiSource, Inc.: No. I think you've said most of it. The key really is, if you think about last year being in five base rate cases, and many of those rate cases having forward test years or some portion of their rates having some forward looks to them, and so our O&M that's in our numbers and consistent with our plan are really embedded in much of our rates this year. Having said that, during our March Analyst Day, we talked about our transformation program that we've really started last year and have kicked off this year. That is not in rates built into our rate program, and so there is some lag to those. But we expect that those dollars that we're spending and investing in that program will ultimately lead to us being able to level off our total O&M spending and have flatter expenses after 2017. Michael Lapides - Goldman Sachs & Co.: Got it. And if I were to just look back at 2016 and then look at your 2017 guidance, if you had to think about what's your earned return on rate base is, what was 2016 just kind of a system wide average? And what does your guidance imply for 2017? Donald E. Brown - NiSource, Inc.: So, I'd say – no, from an ROE standpoint, we are typically earning close to our authorized rates of return which are – we've got them posted in our materials, they range from 9.5% to 10% ROE. So, with our tracker programs and about 70% to 75% of our capital rolling through those tracker programs, we're able to stay pretty close to our overall authorized rates – returns on equity. Michael Lapides - Goldman Sachs & Co.: Got it. Thank you, guys. Much appreciated. Joseph J. Hamrock - NiSource, Inc.: Thanks, Michael.

Our next question comes from the line of Larry Liou from JPMorgan. Sir, your line is now open. Larry Liou - JPMorgan Securities LLC: Thanks for taking my question. Can you just expand a little bit on your decision to merge NiSource FinCo, Capital Markets, and also kind of change the structure you will be issuing debt out of? Donald E. Brown - NiSource, Inc.: Yes, certainly. And this is Donald again. So, the merger of NiSource Finance with NiSource, Inc really is a cleanup of our legal entity structures and will allow us to really just simplify our overall structure. Over the past, as you know, NiSource, Inc has guaranteed all of the debt of NiSource Finance. And so, as we look at just the overall strategy, it just makes sense to bring them together since NiSource, Inc was already on the hook for that debt in the first place. So, we do need to go through the approvals. We've got a couple states that we'll require to go through a regulatory process to get approval to merge these. But assuming we do get that approval, we would then merge NiSource Finance into NiSource, Inc and issue all future debt out of NiSource, Inc. Larry Liou - JPMorgan Securities LLC: Okay. And I guess just when it comes to the intercompany notes when you can borrow from the holding company and then you kind of inject it down to the opco, would you classify those as kind of promissory notes, like, is there a written agreement between the two? Or is it just more general in that? Joseph J. Hamrock - NiSource, Inc.: They are promissory notes, absolutely. They are legal promissory notes. Larry Liou - JPMorgan Securities LLC: Okay. Thank you.

Our next question comes from the line of Paul Ridzon from KeyBanc. Sir, your line is now open. Paul T. Ridzon - KeyBanc Capital Markets, Inc.: Thanks. I noticed you broke out customer growth at the gas companies. Kind of how is that trending and kind of what's the trajectory for your initiatives to a kind of that – the customer growth are you seeing? Joseph J. Hamrock - NiSource, Inc.: Yeah. Paul, thanks for asking that. We are on track, maybe a little bit ahead of plan, so far, this year in terms of the outlook that we shared on Investor Day, which was steady climb to a net 1% per year growth by 2020. So, we're well in line with that plan, and had favorable conditions in the first quarter as well for construction, which I think helped us to stay on or a bit ahead of track there. Paul T. Ridzon - KeyBanc Capital Markets, Inc.: Got it. That helps. Thank you. Joseph J. Hamrock - NiSource, Inc.: Thank you.

And I am showing no further questions, and I would like to turn the call back to Joe Hamrock, CEO, for any further remarks. Joseph J. Hamrock - NiSource, Inc.: Thank you, Brian. And thanks to all of you for your ongoing interest and your support of NiSource. Again, we appreciate your engagement and the opportunity to talk with you. Have a great day and a safe day. Take care. Bye-bye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program, and you may all disconnect. Everyone, have a great day.