Good day ladies and gentlemen, and welcome to NiSource first quarter 2009 Earnings Call. (Operator Instructions). I would now like to turn the presentation over to your host for today's call, Mr. Glen Kettering, Senior Vice President of Corporate Affairs. Please proceed.

Thank you, Mary, and good morning to everyone. On behalf of NiSource we'd like to welcome you to our quarterly analyst call. We appreciate the opportunity to be with you today and thank you for taking the time to join us. With me this morning are Bob Skaggs, President and Chief Executive Officer; Steve Smith, Executive Vice President and Chief Financial Officer; and Randy Hulen, Director of Investor Relations. As you know, the focus of today's call is to review our first quarter 2009 earnings results and provide a general business update. During the course of the call, we will be referring to certain supplemental materials, which are available to those accessing our call via website and which have been posted on the NiSource website at nisource.com. Following Bob's prepared remarks, we will open the call to your questions. I'd like to remind all of you that some of the statements made on this conference call, will be forward-looking statements within the meaning of the Safe Harbor provisions of the US Federal Securities Laws. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Information concerning factors that could cause actual results to differ materially is included in the managements' discussion and analysis and risk factors section of our periodic SEC filings. Now I'd like to turn the call over to Bob Skaggs.

Thanks, Glenn. Good morning and thanks for joining us. During today's discussion we have several important points to address. First and foremost, we report on NiSource's first quarter earnings results. Next, we'll update you on the series of concrete steps we've taken to maintain NiSource's financial flexibility and enhance our solid liquidity position, and finally, we'll discuss our business segment results and highlight the progress we are making on our balance plan to enhance shareholder value. As Glen mentioned we have posted certain supplemental materials on our website, some of which I will refer to in my remarks. These include an update to the 2009 sources and uses of fund schedule we reviewed on our February 4th call, a schedule showing net available liquidity for NiSource at the end of the first quarter, a slide showing 2008 and 2009 projected capital expenditures by business units, and lastly a timeline for a number of ongoing initiatives across NiSource. Let's begin with a look at our first quarter results. As we noted in our news release this morning, despite extraordinarily challenging economic conditions in our market areas NiSource produced another solid quarter of core earnings, while continuing to execute on our business plan. For the first quarter, NiSource delivered net operating earnings on a non-GAAP basis of $170 million or $0.62 per share. This compares with $189 million or $0.69 per share for the first quarter of 2008. For reconciliation of net operating earnings and operating earnings to GAAP, please see schedules one and two of the earnings release, which is also available at nisource.com. Operating earnings, again on a non-GAAP basis were almost $370 million compared to about $395 million for the same period in 2008. As we indicated during our last earnings call in early February the most significant impact…

(Operator instructions) Our first question comes from the line of Jonathan Arnold of Merrill Lynch.

Yes. We can give you a sense if again the commissions would act favorably on those filings. The Kentucky positive impact would be $1 million or so. Again we are asking deferral from the beginning of the year until new rates go into effect and again you're aware that Columbia and Kentucky just is in the process of filing a rate case later today. For Columbia gas of Ohio again they've filed for a deferral retroactive back to the first of the year and in terms of pretax positive impact if the commission acted favorably and without modification, it would be about $15 million again pretax in 2009.

That's the 2009 impact of a full year of the difference between what's in rates and what you are currently incurring.

That's correct.

What is the precedent like in the States is there anything like that?

This would be ploughing new ground.

Okay. One other question I had, you had $0.12 of negative interest expense for the year. It's kind of flat in the first quarter and I'm guessing that's partly because you have a bigger short-term debt balance in Q1, and rates on that were down. Given the financing you managed to achieve and the outcome of the tender offer is that $0.12 still a good estimate for the year or could that be a little on the conservative side?

I would characterize that we are on budget. Interest expense for the year, Steve would you like to provide any additional color?

Yes. I would totally agree with that, Bob. I think we should be able to manage interest expense within the confines of the guidance that we gave at the end of the year with respect to the dollar to $1.10. So we are currently anticipating that we will stay within that range.

You still expect to have a $0.12 negative delta in interest for the year?

Yes. That's correct.

Okay. If I may just one last thing, there was in the adjustments from GAAP to non-GAAP you had $9 million I think revenue, revenue adjustment in the electric segment, which I'm guessing was like unbilled sales or something of that nature, but could you elaborate on what that is?

It's effectively an adjustment of reserve for regulatory, commercial proceedings and activities at NIPSCO electric.

Meaning, I'm not sure if I know what that is.

As you know, NIPSCO has many different relationships and many different cases and initiatives going on in Indiana with any number of parties. Now that adjustment reflects the current status of those discussions and interactions both commercial and regulatory.

Okay. That was a negative for the quarter, is that correct?

That's correct.

Your next question comes from the line of Barry Klein of Citigroup.

For the gas you are putting into storage and the impact on working capital, what gas prices are you assuming for that gas going into storage?

Thanks Barry. This is Steve. When we spoke earlier at year end we talked about our weighted-average cost of gas that we were anticipating in 2009. That was about $7.50 for gas and when we look at it currently today, it's closer to $4.50. So the gas rate card is about $3 lower than we were anticipating in February. We talked also in February about our rule of thumb with respect to $1 in gas prices and for every dollar in gas prices, higher or lower, it contributes about $50 million or so of working capital. So if you look at the slide that we put out for everyone on the sources and uses, the working capital increased from $250 million to $500 million and more than half of that increase is driven by the fact that we are seeing lower gas prices out in the market in terms of the storage refill. Again that level is around $4.50.

(Operator instructions). We have a question from the line of Mark Finn of T. Rowe Price

If you guys proceed down the NIPSCO rate case, we get intervener testimony coming up, I guess next week. What would be the steps if you were to engage in settlement talks? How would that proceed or what would be sort of a timeline or when could you engage. I guess, this is more of an observation, but I'm curious whether or not are you getting a sense that the Indiana Commission is taking notice of sort of the dramatic change that you guys have made to the culture of NiSource. I know Bob, you've been working hard in that regard in a lot of different jurisdictions. Indiana is the one that we haven't seen a lot out of yet, because there hasn't been a lot for them to rule on. I mean, we saw a little bit on the plant that you bought. I just would be curious about how you proceed on sort of rate case settlement discussions if that's possible and how you are perceiving sort of the commission's kind of observation or your relationship with the commission as we go into this? Thanks for any comments you can give.

Yes. We will try to give you some color and insight. Let me answer first question about settlements. I see the opportunity to pursue this on two paths, and one path is clearly set forth and that's the litigation path and you're correct, intervener testimony is due early this month. The final hearing, evidentiary hearing is set for July, and then if you follow it up briefing and commission decision late this year, first quarter of 2010. The second path would be the settlement discussions. We hope that we are in a position to engage the parties in meaningful settlement discussions once we see their formal positions go on record, here the first week of May. So over the course of the summer we hope to engage, we hope that those discussions are fruitful. Having said that, we certainly anticipate that litigation path will continue to proceed, but again, we would go down both paths with vigor. Mark and others I think are familiar with our approach. We prefer to collaborate, settle with parties and we are certainly going to give that every effort and again I see it going down two paths. In terms of the commission, quite frankly, we are in a show me position or show them position. The record NIPSCO over the past 10, 15, 20 years has been quite frankly checkered. The commission I believe is giving us every opportunity to show ourselves relationship wise, and as parties to a major rate case is being constructive, forthcoming, transparent and alike, but they have challenged us to show them operationally, relationship wise and other wise that we are true to our word and that we will work with them and others in a constructive fashion. They have opened the door for that showing, and I think one hopeful piece of evidence that we are beginning to work better with the commission is the commissions ruling on our Sugar Creek facility. Number one to say that's part of the rate base as of the ends of last year and to grant deferral treatment of that. Mark, as you and others recognized that effectively collapsed a two-step rate case into one-step. So I don't mean to over read that, but I do think it is a bit of evidence that we continue to make progress. Having said that, it's an everyday process we need to show the commission and others that we are intent, true on a straight board and we mean what we say.

I understand. Can I ask one quick follow up on the gas pipeline side?

Sure.

The recent pull down in natural gas prices to 350 or so, does that cause you guys to have to go back and sort of continually reassess the bolt-on opportunities that you have in the Marcellus and things like that. I'm just curious whether or not you're sort of continuously looking at that sort of every step of the way?

Yes, we are continuously looking at. It is a very fluid situation. Having said that, we continue to see positive producer indications and activity in and around Marcellus. The pace may have slowed a bit but we are still seeing activity. I noted I believe its yesterday gas, daily where a Range Resources at a conference continued to have a very bullish statement about its activity in the Marcellus, particularly in their western Pennsylvania portion of the Marcellus where we are situated. We'll continue to be very measured, but we continue to see activity in the region.

Your next question comes from the line of Carrie Saint Louis of Fidelity

I just wanted to congratulate you guys on the large steps with respect to liquidity this quarter. I think you guys acted both rapidly and responsibly and I appreciate that. Just wanted to kind of follow-up on a couple of future data points. So I didn't hear the number that you filed for with respect total financing on Sugar Creek. Did you say 200 million?

That's 120 million, Carrie.

Okay, a 120 million.

That's correct.

Then in prior quarterly discussion I think you said you have the opportunity to issue up to 350 at the operating companies. Is that still a good reasonable estimate?

That's a good reasonable estimate. Yes, we are still working on filings in some of our other jurisdictions. Here in the second quarter you will probably see some more activity in Columbia Gas of Virginia. We're also looking at various opportunities in Pennsylvania and we also have the opportunity at the pipeline as well, if we decide we want to go that way.

Do you think that with the upsized term loan and the robustness of the working capital forecast. Do you think that at this point you guys might be able to plug the funding gap strictly by using the [OPCO] financing vehicle?

Yes. There's a high probability of that. I mean, when we look at 2010, we think probably somewhere up to $500 million would be what the need is in 2010. So we feel pretty comfortable with the subsidiary activities we have available to us here, and also potentially NiSource Finance Corp. issuance that will be able to deal with any liquidity needs that we would have in 2010, relative to the November 2010 maturity.

I had seen in your slide that you had mentioned $100 million of open market purchases. Were those incremental open market debt purchases versus your prior release or is that inclusive of what you had done previously?

That's inclusive of what we had done previously Carrie.

I think maybe sometime in this quarter, I think it was IMP, Indiana Michigan Power received its rates treatment in Indiana?

They had a settlement that was approved, Carrie, by the commission.

Yes, I think it was about a 1075 ROE.

That was the neighborhood, yes.

Is there any parallels we can draw from that with respect to NIPSCO or how are you guys, how did you guys think about that?

We considered it positive indicator on the commissions approach to the rate cases and the settlement. Hard to draw a lot of point on parallels to our case, again first case in 20 years, many, many more moving parts we believe in our case. So it was instructive, but hard to draw many parallels.

Okay, but I guess the context that it was a settlement versus the fully litigated case was positive so it's a direct [all] settlement for you guys, right?

Correct. Again we continue to regard Indiana as a bottom line regulatory environment and we think they proved that out again in the [I&M] case.

Your next question comes from the line of Raymond Leung of Goldman Sachs

Can you talk a little bit more about what's going on with the economy and have things sort of levelized of, like we're hearing a lot of other utilities talk about, March being sort of a point where we have sort of stopped seeing the declines, and sort of remind us what's embedded in your guidance for sales growth?

Yes. Just at the most micro level it continues to be soft. Of course our service territory is that great industrial, manufacturing hard land and so it continues to be very soft. I don't believe I would consider March a turnaround month. If anything I would say that the rate of decline has slowed somewhat but it's still just very, very soft. I would just use as evidence of that if you look at any indicator be it unemployment, production, inventories, again all those numbers are extremely soft for the bulk of our market. I cited in the prepared remarks and the press release reflect, earnings release reflect that the sorts of softness we've seen particularly in the large industrial, smaller industrial markets, again upwards of 20% off at NIPSCO electric, the gas large industrials 5% to 10% off depending on what you're looking at. What market you are looking at for them again, year-over-year. In terms of our earnings outlook we provided in February and what we are reaffirming today, again I think what we've seen is consistent with the market activity. In certain spots it has been a little bit worse than we anticipated but still manageable. Our team has done a good job of mitigating the impacts with the reduction of discounts, the use of demand charges, moving to new agreements and the like. So we are again consistent with the outlook. I would give you one caveat that we again mentioned in the prepared remarks and I will continue to mention. We are going to watch the situation very carefully. Our outlook assumed a gradual recovery in large industrial, small industrial markets over the balance of the year, over the second half of the year. So that's a key sensitivity that we will continue to monitor and we will continue to bring you up to date on our views on that.

With respect to the rate case, are there any key items of hurdle points that would maybe prohibit as settlements or is it, it's been so long since the rate case that this probably has to get fully litigated?

Yes, one, it has been so long since the rates have been fully examined, so that's a key consideration. What we continue to believe and what we consistently said to you and others is that the cost allocation is you have costs or how rates are going to be, costs allocated and rates designed in this proceeding are in many respects the central feature of the case, and because you have such strong industrial interests, strong residential commercial consumer interest. That issue is device, it can be divisive and it will be we believe the single largest hurdle to resolving the case via settlement.

Finally one last thing, with respect to the Sugar Creek financing, that you talked about the 120. What's the time line of that with the IURC is that the same as the rate case or is that on a different track?

It's on a different track. It's a separate filing, hearing is at the end of this month.

June 30

I'm getting help here, June 30 is the hearing on that and so traditionally or typically disposition of a financing application is handled a lot more expeditiously.

Typically what about, hearings after a month, which is a month after that or so?

[Hieman] is suggesting it's going to be 60 days after the hearing.

Thank you. There are no other questions at this time. I would like to hand the call to Bob Skaggs for closing remarks.

Thank you all for your participation, your support, your recognition that the team over the past 90 days has made remarkable progress, both on our business initiatives, as well as improving and enhancing our liquidity position. So again, thank you for your interest and support and we will talk to you soon. Have a good weekend.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a great day