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

Paul Patterson - Glenrock Associate Paul Ridzon - Keybanc Capital Markets

Jonathan Lefebvre - Wells Fargo Carl Kirst - BMO Capital Markets

Good day ladies and gentlemen, and welcome to the first quarter 2010 NiSource earnings conference call. My name is Natasha ad I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) I would now like to turn the call over to Mr. Glen Kettering, Senior Vice President of Corporate Affairs; please proceed.

Thank you and good morning. On behalf of NiSource, I’d like to welcome you to our quarterly analyst call. We thank you for taking the time to join us. Joining 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 financial performance for the first quarter of 2010, and provide a business update. We will then open the call to your questions. At times during the call we will refer to supplemental slides available on our website at www.nisource.com. I’d like to remind all of you that some of the statements made on this conference call will be forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statement. Information concerning such risks and uncertainties is included in the MDNA and risk factors section of our periodic SEC filings. Now I’d like to turn the call over to Bob Skaggs.

Thanks Glen. Good morning everyone, and thanks for joining us today. In the sprite of continues improvement, our format for today's call will be somewhat different than our prior calls. Instead of simply reviewing the contents of our quarterly earnings release, which hopefully you’ve had an opportunity to read by now, we are going to streamline things and focus on our financial results, and the progress the team in making on our 2010 business and regulatory priorities. As part of our new approach, you’ll see we’ve added additional supplemental slides that you can refer to on www.nisource.com. We hope that you find the new format helpful and we certainly welcome your feedback. Referring to slide three, you can see that we’ve delivered first quarter net operating earnings, non-GAAP of about $200 million or $0.72 per share, compared to $0.62 per share last year. Operating earnings for the quarter were almost $405 million compared to $370 million for the same period last year. We are encouraged by these results and believe that they demonstrate the teams continuing success in executing our balanced low risk, investment driven strategy for building sustainable growth and shareholder value. With this solid start to the year, we remain on track to deliver our 2010 earnings outlook of $1.10 to $1.20 per share again non-GAAP. Part of reviewing our business results, I’ll take a moment to reiterate our four part strategy to position, build and grow NiSource. The strategy, one we’ve been consistently articulating and pursuing for the last five years is summarized on slide four. Specifically we continue to expand our gas transmission in storage business, particularly in the Marcellus shale region of the Appalachian. We continue to think our long-term utility infrastructure program with complementary regulatory initiatives. We continue to manage our financials in a…

Thank you. (Operator Instructions) Your first question comes from the line of Paul Patterson with Glenmark Associates; please proceed.

Good morning, its Paul Peterson/Patterson, can you hear me?

Yes, good morning Paul.

I want to touch base with you on the gas case that you filed yesterday, the NIPSCO gas case. I’m sorry if I missed this, is there any rate increase that you guys are asking for?

There is no increase in overall revenues for the Indiana gas case. There is a very modest increase on residential customers, it’s a function of rate design and the like.

Okay, and when we’re looking at these businesses, what’s the last 12 month ROE that you guys are getting from these businesses, roughly speaking?

Well, for virtually all of our businesses we are earning at or near, or in some cases a bit above allowed returns. The two notable exceptions are in Indiana on the electric side and the gas side, and we’ll start with the electric side. The ROE is in the single digit’s territory, so clearly under performing. On the gas side of our business that ROE is effectively zero, it’s nil. Consequently the aggressive rate activity in Indiana reflects the need to approve the earnings power of these companies.

Sure, and then with respect to the pension cost reductions and deferrals, could you elaborate a little bit more on that, what’s driving that.

Yes, let me go on and refer to Steve Smith on pension in total and more specifically.

Yes, thanks Paul. On pension, as you know we had a deferral approved in Ohio, which helped us defer some of the costs. When you look at pension expense for 2010 incorporated in our guidance. In the February call it was in the $85 million range for all companies, and if you look at it now, currently what we are anticipating, it will be somewhat less than that in the $75 million plus range. So pension expense has improved somewhat relative to our 2010 guidance.

Okay, and then in terms of other taxes, I notice that there seemed to be some benefit there, the other taxes, I’m not talking about the tracker one, the non-tracker one seemed to go down somewhat, and I’m just wondering if you could elaborate a little bit on that?

Well, in terms of our effective tax rate, we had a much higher effective tax rate in the first quarter of 2009, that was around 38%, and when you look at the effective tax rate for the first quarter of 2010, that’s closer to 36%. So we have some benefits there, mostly driven by higher state income tax benefits and some timing differences for depreciation.

Okay, when we are looking at your guidance that you guys have, what is the effective tax rate that you guys have for that?

It’s around the 36% range.

Okay, and then the other taxes which went down, looks like around $6 million or $7 million I guess in the income statement, why did that go down?

I’ll have to get that for you Paul.

Okay, thanks so much.

Paul, just if you have detailed questions of that nature, maybe you could call Randy Hulen immediately after the call and he’ll be more than happy to drill down on that sort of thing for you.

Okay, thanks so much guys.

Okay, thank you.

Your next question comes from the line of Paul Ridzon with Keybanc; please proceed.

Good morning Paul. Paul Ridzon – Keybanc Capital Markets: Good morning, how are you?

Doing well. We feel good about the quarter. Paul Ridzon – Keybanc Capital Markets: What you are asking for as far as the depreciation change in Indiana Gas?

The Indiana Gas depreciation change is going to amount to about $50 million, about reduction. Right now it’s roughly $90 million, and we would reduce that by about $50 million. $25 million of that give or take would be a deferral of depreciation expense for six years or so, and the balance of the reduction is a reduction of the depreciation rate form roughly 5% to roughly 1.5%. So that’s the way the reduction is layered. Paul Ridzon – Keybanc Capital Markets: That sounds like it should be pretty non-controversial.

Well I think we are going to have to work through this. This is a bit unconventional, and we’re going to have to work with the stakeholders to ensure there is good a understanding of what we are proposing. Paul Ridzon – Keybanc Capital Markets: Then, given kind of what you see as your investment opportunities, moving a little bit north, how are you thinking of buying them, albeit at this point?

Working with the board, we continue to review the MLP. A couple of dimensions to that ongoing review is number one, what help does it provide in the way of financing; and then secondly, what will it do for us commercially? So we’re taking a very thoughtful look. It is strategic in nature, and we are approaching it in that way. So Paul it continues, and we’ll be having board meetings next week and this will be a topic of conversation. Paul Ridzon – Keybanc Capital Markets: Then, where are industrial sales kind of relative to how you were thinking about the rollback in February.

-: Paul Ridzon – Keybanc Capital Markets: Then finally, what was the magnitude of the gain of transferring gas to Hardy’s?

Roughly, $8 million pretax. Paul Ridzon – Keybanc Capital Markets: Thank you very much.

Okay. Make just another note on the transfer of the native gas. I did see a report earlier today questioning whether it is in fact recurring. We’ve had a history of storage gas sales, transfers, dispositions. We have also done the same with gas reserves, write aways, and other core assets. So we do consider part of our ongoing business, supposed to be an extraordinary one continually seeking value from our core assets and that’s just one good example of finding value and will continue to do so. Paul Ridzon – Keybanc Capital Markets: Yes I understand, thank you.

Your next question comes from the line of Barry Klein; please proceed.

Hi guys.

Hey Barry, how are you?

I just have one follow-up on the NITSCO gas case. I figured everyone else asked it as their first question, so I might as well follow the trend. There is not much of an increase in rates, the depreciation change is about $50 million. As far as it draws down to the operating income line, pretty much the $50 million would be the impact on EBIT?

Give or take, lets say that’s a good analysis.

Okay great; and then with the change in the Ohio rate structure, in the past you’ve given a sensitivity I think to changes in weather and degree days. Is there a new sensitivity now on any changes in degree days?

Very little sensitivity now. When you are on a levelized rate design, it affectively normalizes the weather and throughput.

Okay, so if we see favorable or unfavorable weather from quarter-to-quarter, the impact on overall earnings from weather, there is still somewhat of an impact right from their service areas.

Somewhat, but it is relatively nominal, and we’ll certainly give you those impacts and you will see it in the reconciling schedule one in the earnings release. So we’ll give you that information, but we’ve really dampened the impact of weather and demand in Ohio.

Got you, and then with regard to the electric operations, the net revenue excluding the trackers were up as a result of industrial and residential customer margins. On the residential side, it didn’t look like there was a big tick up in volumes. Was there a change in the unit margins?

No, it was primarily driven by the increased deliveries, and again the up-tick is relatively normal. It’s about $2 million quarter-over-quarter, so it’s not a big number.

From the residential side?

From the residential side.

Then the industrial makes up the…?

About $10 million

Okay, thanks a lot.

Thank you.

Your next question comes from the line of Jonathan with Wells Fargo; please proceed.

Good morning guys, a nice quarter.

Yes, thank you. We appreciate that.

Just, I wanted to follow up on the MLP question, and I know your very early stages at looking at this, but perhaps you can maybe give us some color on what type of strategy if you were to pursue it. Would it be a dropdown-type strategy or would you follow more of the Williams-type strategy? How do you see that unfolding?

Yes, too early to really give you much more color on that. We are certainly looking at the alternatives and you kind of nailed the book-in’s, but we could consider a small MLP that would be analogous lets say to a spectra; where we can look at the bigger one that Williams has announced. We are practically something in between. Our prior experience with the MLP rule was gosh, three or four years ago when we did file an S1, you may recall that that S1 was predicated on a small, lets call it drop down sort of MLP. So that’s been our history. Again, we will give this a good thorough look, but at this point I don’t have any bios to share with you or additional color, other than we are going through that structure analysis.

So, would you see it more as a way to close the evaluation gap, or would you see it as a more of a financing vehicle.

Yes, that’s what I meant to convey in my earlier comments. We are again considering those strategic or value considerations. What it will do for us financing wise, what might it do for us evaluation, and then also commercially, strategically what it would do for us? So those are the sorts of things that we are working through with our board’s finance committee as we speak.

Okay great, and any type of timeline where we think we might have more definitive answers around this?

Obviously, the analysis will progress over the course of the summer, and on this call, AGA, certainly the Investor Day we’ll continue to give you an update, and the progress report on the analysis.

Okay thanks, I appreciate the time.

Yes, thank you.

(Operator Instructions) Your next question comes from the line of Carl Kirst with BMO Capital; please proceed. Carl Kirst – BMO Capital Markets.: Hi, thanks. Good morning everybody and nice quarter as well.

Hi, thank you. Carl Kirst – BMO Capital Markets.: A couple questions, and why not start with NIPSCO gas.

As opposed to NIPSCO electric? Carl Kirst – BMO Capital Markets.: Well, you know Indiana gas. The question was just as we change the depreciation, would that have any bearing as you look at it over the next several years from a capital expenditure stance. Will that change any of your thoughts of how much money we’d be spending there?

Oh gosh Carl, I think the CapEx decision consideration stands on its own. We are going to look at the needs of that system and invest appropriately. I would just again give you an editorial. The NIPSCO gas system is in exceedingly good shape. So its very modern, safe, reliable system. So just keep that in your mind when you analyze that company. Carl Kirst – BMO Capital Markets.: Okay, I appreciate it.

Currently, we are spending about between $35 million and $40 million annually at NIPSCO gas. I think that’s probably a pretty good representative spend. Carl Kirst – BMO Capital Markets.: So that’s essentially what the depreciation would be going down to?

Effectively, yes. Carl Kirst – BMO Capital Markets.: Okay, alright, so that’s sort of really synchronizing there, okay. Then a last question if I could, what is the current state of the natural gas marketing effort?

You have to help me on that one Carl. The disposition of our non-regulated units? Carl Kirst – BMO Capital Markets.: Correct.

We are in wind down mode for those units. Carl Kirst – BMO Capital Markets.: Okay, was that a material contributor or detractor for the quarter, just out of curiosity?

No, virtually nothing. Carl Kirst – BMO Capital Markets.: Alright, thank you.

Yes, thank you.

I show no further questions in the queue. I would now like to turn the call over for any closing remarks.

Thank you, and again, just to thank everyone for your participation, interest, and support and another plug for the upcoming Investor Day, which Glen, help me with the date again, it’s July 22?

July 22.

July 22. So again, thank you for your participation and support. Have a good day.

This concludes the presentation. You may all now disconnect, and have a good day.