Good day, ladies and gentlemen and welcome to the second quarter 2009 NiSource earnings conference call. My name is Kershaw and I will be your operator for today. At this time, all participates are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) I would now like to turn the call over to Mr. Glen Kettering, Senior Vice President of Corporate Affairs, please proceed sir.

Thank you, Kershaw and good morning to everyone on behalf of NiSource I would like to welcome you to our quarterly analysts call. We appreciate the opportunity to be with you today and thank you for taking the time to join us. Joining us this morning are Bob Skaggs, President and Chief Executive Officer; Steve Smith, Executive Vice President and Chief Financial Officer; and Randy Hullen, Director of Investor Relations. As you know, the focus of today’s call is to review our second 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 webcast at which have been posted on the NiSource website at www.nisource.com. Following Bob’s prepared remarks we will open the call to your questions. As always I’d like to remind you that all or some of the statements made on this conference call will be forward-looking statements within the meaning of the Safe Harbor provision of the U.S. 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 management’s discussion and analysis and risk factors sections of our periodic SEC filings. Now I’d like to turn the call over to Bob Skaggs.

Thanks Glen. Good morning and thanks for joining us. As you know we have several important matters to address this morning. First we’ll report on NiSource’s second quarter earnings results. Next we’ll update you on the impacts of the continuing economic downturn on our business and the steps we’re taking to mitigate them. I’ll also briefly update you on our liquidity position, which I’ll preview now by telling you it remains quite solid. Finally we’ll discuss each of our business segment results and continued progress on our balance plan to enhance shareholder value. Let’s begin with a look at our second quarter results. As we noted in our news release this morning, despite extraordinarily bad economic conditions in our market areas, NiSource produced another solid quarter of core earnings while continuing to execute on our business plan. For the second quarter, NiSource delivered net operating earnings on a non-GAAP basis of $6.2 million or $0.02 per share. This compares with $23.2 million or $0.08 per share for the second quarter of 2008. Just to place our performance in perspective, but for increased pension experience which as you may recall is a $0.24 per share drag on earnings for 2009, our operating earnings for the quarter would equal last years second quarter. A remarkable accomplishment given the very stiff economic headwinds our businesses like many others continue to face. Operating earnings, again on a non-GAAP basis were $117 million compared to $119.7 million for the same period in 2008. In addition to increased pension expense, the most significant impacts on second quarter results were reduced revenues in our electric business, resulting from the economic recession, which has hammered Northern Indiana. Incremental interest expense related to the issuance of long term debt under our liquidity plan. These impacts were partially offset by…

(Operator instructions) Your first question comes from the line of Paul Ridzon with KeyBanc; please proceed.

Good morning, how are you?

Good morning. We’re fine.

So it sounds like the settlement discussions are not dead, but you’re less optimistic than you might have been a while back?

Yes, that’s accurate. As I said in my prepared remarks, we’ll never say, never. We’ll continue to develop ideas and surface proposals, but as we sit here today, we’re focused on the hearing that’s actually in motion in Indianapolis and expect it to conclude at week’s end.

Any incite as to what the major stumbling blocks to a settlement might have been?

Obviously, the discussions are confidential. I’ll just give you the overall view that we have about the case. Number one, first case in 20 years of very, very large complex case with many, many moving parts, and from day one we’ve mentioned that cost allocation, particularly among industrial customers, residential commercial customers was going to be a key issue, with likely be contentious, and hard to deal with. That’s still the view we have today.

Okay, you got a charge at transmission and storage on an interest rate hedge. Did you not carve that out as an unusual item?

We didn’t carve it out as an unusual item and actually that charge relates to the Millennium Pipeline and our partnership in Millennium Pipeline. If you’d like, I could ask Steve Smith to give you a little bit more detail around that particular item.

Sure, Bob. Thanks. Hi, Paul, how are you?

Good.

Yes, the Millennium charge is related to the hedges we had in place for a portion of the debt at Millennium. Partnership decided that it made economic sense to roll the hedges an additional 12 months, given that our borrowing costs currently are so low at Millennium, and so that charge is the result of rolling the hedge forward another two months.

Is that $4.2 million after tax?

That’s correct, yes. That’s not all $4.2 million. It’s about $7.9 million is the total charge for us before tax.

Are we going to be living with this run rate on pension for the entire year, or is there an opportunity in ‘09 to open that up again?

No, that’s set for the entire year Paul, and it’s recalculated for the succeeding year for 2010, January 1 of 2010. So it’s locked in.

Then what was the cost of the lowered depreciation and amortization at NIPSCO?

Roughly $7 million was the adjustment that was made in 2008. If I’m off a few dollars here and there, Randy can certainly provide that clarification.

Okay. I’ll circle back.

That’s the order of magnitude.

Thank you.

Yes.

Your next question comes from the line of Carl Kirst with BMO Capital; please proceed.

Hey, good morning, everybody.

Hey, good morning Carl.

A few questions if I could. The first, starting off of on industrial demand, it looked like the actual decline picked up a little bit relative to the first quarter. Bob, you said you tempered the outlook a little bit for the second half of the year. One, I didn’t know if through the second quarter you had seen any variations from April to June or perhaps even how we stand here in July? I didn’t know if, perhaps, you could actually quantify when you said, moderating outlook kind of what the expectations are now for second half decline in industrial demand?

Yes, Carl let me start with a bit of color around the second quarter. You are right the decline picked up a bit, but I wouldn’t say it was a material up tick. Slow the first quarter, and it was slow the second quarter. We just have not seen much, if any pickup to this point. We’ve been following carefully the commentary provided by U.S. Steel, in their earnings announcement. We’ve also been following closely commentary from middle. We’ve been noting that steel inventories have declined, and we hear and read about glimmers, but frankly we have not seen those translate in to up ticks in our meter readings. So, this reduction that we’ve seen over the first quarter and second quarter, frankly we just don’t expect much material improvement in those deliveries for the balance of the year, and again, our original forecast had assumed some recovery. We just haven’t seen and we felt like it wasn’t prudent to count on it for the balance of the year. What we have charged the teams to do is to continue to mitigate offset through aggressive cost management, regulatory initiatives, commercial arrangements, do we can’t offset that reduction.

Then Bob, don’t mean to beat the dead horse or kind of parse words here, but it sounds like you are reiterating your earnings forecast with not just kind of a moderating outlook, but it sounds like you’re not expecting much in the way of an improvement in the second half?

I think that’s absolutely correct. We are clearly reaffirming the earnings outlook. Highlighted the sensitivities to the economy and so, that the color around that reaffirmation is, we are highly sensitive to what’s going on in the economy, particularly in Northwest Indiana.

Great, now appreciate that. Second question is just going to the NIPSCO rate case and I don’t want to read too much into this. You mentioned the new rates being likely effective in first quarter ‘10. My understanding is, I guess after the hearings, which should end here in August…

Actually, let me jus interrupt. We expect the hearings could conclude, as early as the end of this week.

Okay and at that point then we’re just waiting for the IURC to act, as I mean not that they would do it soon, but I mean is that the case or is there any other road signs along the way we should be looking for?

Yes, it’s the latter Carl. Once the earning closes, procedurally the administrative judge will set a briefing schedule and again, given the size and complexity of this case and where it stands in the way of litigation. We would expect that there will be a considerable amount of time spent on briefing, both initial briefs, reply briefs and the like and that the deliberations could extend through the balance of the year and in to the first quarter, and again, I’m basing that on the complexity of the case, the gravity of the case, particularly in this economic climate that we are in.

Fair enough. I appreciate the clarification and then lastly, maybe switching to the pipelines. You guys have got a lot of good things as far as new Appalachian interconnects storage revenue. The question I had was really on TCO, Columbia Gas. My recollection is there are shorter duration contracts on that system, and I guess my question is, has the recent flattening of basis differentials? Does that cause any risk to the Columbia Gas going forward?

First, maybe I can address the premise of the propositions question. The average term of the firm contracts are five to seven years in duration. So, there are long-lived agreements. The team has done a terrific job of continually renewing and extending contracts. In fact we’ve gone through a wave of renewals over the past year, and I think it’s accurate to say that those went off, as we had hoped. Again, long term, tend to be max rate agreements. On the horizon, we’ll have renewals, but I can’t recall offhand, Carl anything that is material or would suggest that we’re going to have a revenue runoff at Columbia Gas Transmission due to contract renewals or weakness in the market. In fact, I’d say it’s to the contrary, the market is holding up quite well, and again, I think the track record on renewals would support that.

Great now, the five to seven years was what I needed. So, appreciate the color and good luck. Thanks.

Thank you.

Your next question comes from the line of Carrie Saint Louis with Fidelity. Please proceed.

Hi, good morning.

Hey, Carrie, how are you?

Good. First, I was wondering it seems like weather was a hurt. I was wondering if you have like weather-adjusted sales data yet.

We do have weather-adjusted sales data.

If you go back to the earnings release, and the segment information, you’ll see where we stand with regard to Heating Degree Days and Cooling Degree say days okay, and just for the three months on, the electric side, we’re about 14% off in regards to weather. Now, I will also suggest that just looking at Degree Days for July, way, way off, material off. As you know, it’s been quite cool here in the Midwest.

Yes. All right, thanks for that. In terms of the NIPSCO financing application, did you say you expected that to be resolved in the third quarter?

Yes.

Yes, that’s correct, Carrie. This is Steve. We anticipate getting an order out of the commission by the end of the third quarter.

Okay. Okay and then, you know, it means reference to potentially a need of $500 million of financing. Do you have any thoughts about timing and, you know, the strategy that you are going to pursue, and when do you kind of have more, would you have more clarity on that?

I would say, by the end of the third quarter we’d have a lot more clarity on that, Carrie. Obviously we’ve got the $75 million order out of Virginia. We’re very pleased with that, and we’re anticipating getting a good order out of Indiana on the $120 million, and I think at that point, we’ll be able to strategize, on what the appropriate actions should be going forward, but my bias would be to take care of any financing, you know, as soon as we can.

Carrie, I would just add a couple of points of color. Number one, financing requirement, we’ve said, is up to $500 million. So we’re suggesting it could be somewhere south of that. I’d also suggest that the numbers reflect ongoing improvement in cash and liquidity, and so, again, we’re trying to minimize the amount that we’ll need to finance.

Great and then last question, since you filed the NIPSCO rate case, clearly there’s been both the hit in volumes, and the pension. I was just wondering if you could talk about the longer-term regulatory strategy, and how you are going to work to get those recovered, and just remind me about when you could be able to file, if that’s a strategy, another rate case to kind of go after those more kind of perfunctory issues that you would like to get resolved?

Right. You hit the nail on the head with volumes and pension expense both going against us here over the past 12 months. Those items are not included in the test year that the current case is being litigated on. Just for everybody on the phone call, that the test year for the current NIPSCO rate case is calendar year 2007. So obviously since then, we have volume issues, we have pension expense issues that we have to deal with, which suggests to us, and I think to most others that a second case, second NIPSCO rate case almost inevitable. I said it’s apparent to almost everybody. Our stakeholders are very sophisticated parties. Clearly the Indiana Commission is sophisticated and well regarded, and they clearly understand that we have two very big items that are outside of the current case. Again, it certainly suggests that a rate case is in the offing sooner rather than later. Having said that, there are many, many considerations that we have to deal with regarding the what, how, and the when. So we don’t have definitive plans at this point, Carrie on when we’ve file would that volume would look like. The rules provide that we could file a second rate case as early as the fourth quarter of this year. Again, we don’t have definitive plans, but as you would suggest, we are certainly considering next steps, the key considerations, and what that second case would look like. For the time being, though, for the moment at hand, first thing is first. We’re focused on this current rate case and seeing that to resolution.

Yes, absolutely. Okay, great. That color was helpful.

Okay.

Your next question comes from the line of Barry Klein with Citigroup. Go ahead, please.

Good morning, guys. Actually Faisal

Hey, good morning.

Just a couple of questions here, on the gas utility filings you guys made in Massachusetts and Kentucky, will those rate cases address pension costs?

That they certainly will and you may recall current rates reflect a pension expense tracker.

Oh, right. Okay. Got you.

So we certainly are attempting to renew that, or continue a mechanism of that sort. We’re also attempting to address pension expense in Kentucky and back we have an application pending requesting deferral of expense pending this rate case.

Okay and then on the pipeline side, in terms of your storage contracts on the pipeline side, are those at max tariff, and is there any room as some of those contracts rollover to renegotiate higher prices.

They are at max tariff expect them to continue at max tariff. The only storage field or storage opportunity that has market based rates is the recently approved Ohio storage project and that is a notable move by the team, notable approval by the FERC that’s only in globe market based rate opportunities.

Is that sold out? That facility?

It’s pretty much sold out, but not 100% sold out.

Okay and in terms of a lot of the intersections that you guys of announced in your press release in your prepared comments, what do you think those interconnections due for your pipeline system? Does it increase the tenure, the contracts the pipeline it increase interruptible revenues? What do you think the net increase is?

It’s all of the above. I think it just continues to support the viability of the Columbia Gulf system in particular. We believe it is the cheapest, most effective transport out there and the on slot or the flood of volumes coming in to it, reaffirms that value, both long term and short term.

Okay. In terms of where you guys are in terms of gas and storage, what percentage full are you guys in terms of gas and storage both at the utility and at the pipeline.

Well, part and parcel of this saying we have tariffs that require customers to provide injections over the course of the summer with peak storage capacity at or about hitting in October, give or take. So there’s a fairly regulated schedule of injections that must be maintained so that we have the required pressures as we enter in to the winter season. I don’t have the exact percentage. I would suggest it is going to be a fairly high percentage and Randy can provide that to you and others that are interested. I can assume you all of the customers are on schedule and meeting those storage injection levels, again so they can assure themselves of having the required capacity when they get in to the winter. Our LDC is the affiliated Columbia LDC are the largest firm storage customer on Columbia Gas Transmission, and consistent with my answer to the pipeline question, they will be right on schedule with those required injections.

Okay. Gotcha, so there’s no real change from the way you are injecting gas in the storage compared to last year?

No. No. This is very tariff controlled and reliability dictated.

Okay. Gotcha and in terms that your guys said you have about $0.5 million in financing needs for next year and that has been whittled down pretty significantly. I am curious at the end of the day I think you did pay down some of that debt ahead of time, and maybe below par. How much of a discount were you able to get on buying back some of that debt?

We had a couple of repurchases, we had the first one in January of $100 million, and we took out $33 million of the floating rate notes, and about $67 million of the 2010 notes. We were able to buy those, somewhat below par, not, not huge discounts below par, but for the most part below par on the 2010 notes and then we had a tender offer, you’ll recall for $250 million of notes for the 2010 maturity and that was pretty much at par in terms of the repurchase. So that leaves us in 2010 with the $682 million of maturity coming due in November.

Okay, got it. Thanks, I appreciate your time guys.

Okay. Thanks.

Thank you.

The next question comes from the line of Shneur Gershuni with UBS; please proceed.

Hi, good morning, guys.

Hey, good morning.

Thanks for the great color. A lot of my questions have actually been answered. I was just wondering if you can sort of touch base on some of the growth projects you highlighted, if you sort of have a number with respect to the growth CapEx that’s related to those projects.

Sure, where would you like to begin, Shneur? We listed a lot of Columbia Gas Transmission projects, and NGT&S projects, Ohio storage?

If you have a total, I recognize you don’t want to break them all up right now, if you kind of have a total number and I guess the expected return hurdle?

Yes, Randy can give you the total. Let me just give you again, some color around it. These projects generally speaking, range from $20 million to as high as $180 million. $180 million give or take was the Eastern market expansion. So the projects are relatively speaking bite sized projects. I think as we’ve shown, we’re executing on these projects and delivering them on time and on budget.

Okay. I guess maybe I’m just circle up with Randy with respect to that?

Yes, we can give you a total of what those growth projects are and again we’re talking over multiple years. So it depends on how you want to cut that CapEx spend.

Okay. A question with respect to the utility, kind of in the past when we’ve had dig recessions, we kind of seen customer counts falloff in the second quarter, as people try to skip on their bills and so forth. Are you seeing that? Or things little different and have there been benefits, if can you give us some color on that?

Yes, customer counts are way down, and again, when you look at the earnings release, you’ll see that the customer counts quarter-to-quarter are in fact down for the most part. There maybe a few variances or outliers, but by in large we’re seeing them down. I would also add, as you would expect due to the housing meltdown, new customer additions are de minimis across all of our companies.

Okay and then one final question with respect to what Carl was talking about on the generation side. Are you seeing any green shoots at all whatsoever, or is it basically it continues to be challenging? I was wondering if you could talk about coal stockpiles as well, and if fuel switching at something that impacts you guys?

Yes, just let me start at the back end. We have not seen fuel switching, per se in our area. We’ve not seen any to use your term green shoes. It’s just been very, very slow and we have just not seen any glimmers. We’ve not seen any glimmers on the industrial side. It’s interesting, residential demand was okay for the second quarter. Probably surprise a little bit on the positive side, but again the industrial and the commercial was just not good at all.

Okay, great. Thank you very much.

Your next question comes from the line of Josh Golden with JP Morgan. Go ahead, please.

Hi, good morning. Sorry about that.

No problem.

Question for you, would I sort of missed your comment about the rating agencies. When are you going to be sitting down with them and sort of going through and reviewing your case?

Yes, we’ll be going through our long term financial plan with all of the agencies in late October or early November, and that’s our traditional cycle when we go through a deep dive with them. Precise dates haven’t been set, but that’s traditionally when we do it.

Okay, great. Am I correct in seeing that you still believe even with dividend that you are going to be capable of maintaining the investment grade rating particularly now that your quarterly issues have been cleared up to some degree?

Yes, we continue to reiterate our commitment to the investment grade credit ratings, and believe that we can maintain those ratings.

Okay. Great, thanks.

Your next question comes from the line of Scott Sanchar [ph] with Decade. Please proceed.

Hi, good morning.

Hey Scott, how are you?

Good. Could you just please go over the process to recover the higher pension expense in Indiana? I believe the use like an average over the past five years, but I’m just wondering if that’s on the test year of its ‘08 levels or ‘09 levels or how that works?

It begins with test year, which again, for folks on the call is calendar year 2007, and typically they do use an averaging process. Offhand, I can’t recall what we proposed. I believe it was five years, but subject to check we can provide that, but that’s tends to be a typical sort of approach on pension expense.

Okay. Great and then I noticed the customer count was down a little bit at NIPSCO electric, and I think some other companies in your region saw the same thing. Any color you can give us on what’s driving that?

The economy, throughout our areas and you can look at a variety of reports and sources. That unemployment in most of our key larger market areas is double-digit in nature, and so that’s really the key driver in the flat or flattish numbers that we show you, and we are seeing reductions Scott, but when you look at the numbers, it’s a couple of thousand. So it’s not completely off the table, but it is certainly flat and it is certainly soft.

Okay. So it sounds like shutoffs are more than I guess people leaving.

Yes, I would say it’s more that the shutoff activity, as opposed to leaving the market area. Again, I noted on an earlier answer that new business, due to the housing meltdown. We just don’t see much activity at all.

Okay and then, do you expect to file a rate case at NIPSCO gas anytime in the future?

I’m sorry, would you repeat that.

Sure. Do you expect to file a rate case at NIPSCO gas anytime in the future?

We certainly expect that we are going to have regulatory activity at some sort at NIPSCO gas.

Okay, great. Thanks.

Your next question is a follow-up question from the line of Carl Kirst with BMO Capital. Go ahead.

Thanks, guys. Just one quick follow-up, Bob you had mentioned. I’m not sure that’s Bob or Steve, but one of you had mentioned in the very end of your commentary when you were reiterating the commitments to the investment grade rating and to keeping the kind of dividend, would there be no large-scale equity issuances. I didn’t know if that was just sort of talking around for instance the normal ongoing dividend reinvestment program or if there were some contemplations of perhaps one of these equity dribble programs that other utilities have done?

No, we just wanted to distinguish, the large scale offering from the ongoing DRIP activity that we have in place in motion and that's been activated.

Carl, this is Steve. We anticipate in the $15 million range through that DRIP program that we have in place at NiSource per year.

Great, thanks guys.

There are no further questions. I’d now like to turn the call back over to Mr. Bob Skaggs, President and CEO.

Kershaw thank you and again, thank you for your interest, your participation, your ongoing support at NiSource and the management team. We certainly appreciate and look forward to talking to you in the not too distant future. Have a good day.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day