Good day, ladies and gentlemen, and welcome to NiSource Second Quarter 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 be given at that time. As a reminder, today's conference is being recorded. And I'd like to turn the call to Mr. Randy Hulen, Vice President, Investor Relations. You may begin.

Thank you, Victor, and good morning, everyone, and welcome to the NiSource second quarter 2018 investor call. Joining me today are Joe Hamrock, Chief Executive Officer; and Donald Brown, Chief Financial Officer. The purpose of today's call is to review the NiSource financial performance for the second quarter of 2018 as well as provide an update on our operations, growth drivers and financing plans. Following our presentation, we'll open the call up to your questions. During this call, we will be referring to supplemental slides that are available on our website at nisource.com. Before turning the call over to Joe and Donald, just a quick reminder; some of the statements made during 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 recording 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 information, including our full financial schedules available at nisource.com. With all that out of the way, I'd like to now turn the call over to Joe.

Thanks, Randy, and good morning, everyone. Thank you for joining us. NiSource's strong momentum continued through the second quarter. Our team further executed on our long-term growth investments and we took steps in the financing arena that enhanced the sustainability of our plan. These steps in response to the new federal tax framework improved our credit metrics and strengthened our balance sheet. They included the $600 million common equity block offering that we discussed on our first quarter call, followed by long-term debt refinancing completed in mid-July, which included issuing $400 million in preferred stock and $350 million in five-year notes with the proceeds used to acquire $760 million of higher coupon notes outstanding. We believe these equity and debt issuances combined with our regulatory strategy, business initiatives and a proactive focus on cost management, have resolved the cash and credit impacts of tax reform. And we remain on pace to deliver on our earnings, capital investments and customer commitments. Let's now turn to slide 3, which outlines some of our key accomplishments thus far in 2018. Our non-GAAP net operating earnings were $0.07 per share in the second quarter versus $0.10 in 2017, which keeps us right on plan to achieving our net operating earnings per share guidance of $1.26 to $1.32 for 2018. We also remain on plan to invest $1.7 billion to $1.8 billion in our regulated utility infrastructure in 2018. On the regulatory front, we're awaiting a final order on our gas rate case settlement in Indiana, and just yesterday we filed a settlement in our Maryland rate case. We've also continued to advance settlement discussions in our Massachusetts' base rate case. We continue to execute on our gas modernization programs across our footprint and have applications for a long-term program extensions pending in Indiana and Maryland. In our electric business, we placed our two major transmission projects into service and environmental upgrades are moving forward at our Michigan City and Schahfer generating stations. In addition, we continue to execute on our long-term electric transmission and distribution system modernization program and have received approval of our latest modernization tracker update. Our Integrated Resource Plan stakeholder process continues in Indiana with a robust response to our request for proposals that should provide diverse options to meet our customers' electricity needs for years to come. We continue to target an IRP submission by year's end with the complete generation and regulatory strategy coming together by early next year. Now, I'd like to turn the call over to Donald, who will discuss our financial performance and financing plan updates in more detail. Donald?

Thanks, Joe, and good morning, everyone. As always, the biggest driver of our financial performance continues to be the impact of our long-term infrastructure modernization investment, supported by solid regulatory outcome and established infrastructure trackers. On slide 4, you'll see our non-GAAP net operating earnings were approximately $26 million or $0.07 per share in the second quarter compared with approximately $33 million or $0.10 per share in the same period of 2017. Through the first half of 2018, our net operating earnings are approximately $286 million or $0.83 per share, putting us right on track to deliver on our guidance commitment for 2018 which is $1.26 to $1.32 per share. Due to financial statement impacts and the timing of federal tax reform implementation, our year-over-year consolidated results can be difficult to compare. However, I would like to highlight the approximately $20 million decrease in operating and maintenance expenses, driven in part by our overall expense management and decreased generation maintenance activities. I expect this trend to continue through the next two quarters, which will exceed our commitment of flat O&M expenses compared with 2017. Let's turn now to the non-GAAP financial results for our business segments. Looking at slide 6, our Gas Distribution Operations segment had operating earnings of about $36 million for the quarter compared with operating earnings of about $54 million in the same period of 2017. Operating earnings excluding the regulated revenue impact of tax reform were up approximately $6.5 million from a year ago, driven primarily by increased infrastructure investment revenues. Our Electric Operations segment, covered on slide 7, reported operating earnings of about $77 million for the quarter, a decrease of about $8 million for the same period of 2017. However, excluding the regulated revenue impact to tax reform, electric segment operating earnings increased by…

Thank you, Donald. Before we jump into our detailed operational and regulatory updates, I'd like to mention a couple items that speak to our progress in other areas. As I've mentioned before, our employees are key to meeting the needs of our customers and communities and creating value for all our stakeholders. To attract and retain the best team, we've strived to be recognized as the best place to work in all of our communities. That's why I'm so pleased that in May, for the third consecutive year, we were recognized by Forbes magazine as one of the top large employers in the country. When we provide the right training and development opportunities for our employees, they are more prepared to serve our customers and company well. To that point, I'm happy to say that we opened another state-of-the-art employee training center in Massachusetts this spring, completing the four centers we announced in 2016. The others are in Ohio, Pennsylvania and Virginia. Now, let's turn to some specific highlights for the second quarter and early third quarter of 2018 from our gas operations on slide 11. The settlement agreement in our gas base rate case remains pending in Indiana, with a decision expected in the third quarter of this year. The settlement supports continued investments in system upgrades and other measures to increase pipeline safety and system reliability. If approved as filed, the settlement is expected to increase annual revenues by approximately $107 million. Also in Indiana, a decision on our application to extend our gas modernization program is expected in the fourth quarter. The filing represents approximately $1.25 billion of gas infrastructure investments through 2025. NIPSCO has invested more than $400 million in the previously approved programs since 2014. The latest tracker update covering approximately $54 million of investments…

And our first question comes from the line of Paul Ridzon from KeyBanc. You may begin.

Joe, Donald, how are you this morning?

Doing well, Paul. Good morning.

Good morning.

Just a couple questions on the O&M front. How should we think about the trajectory post 2018, given that you're now down 4% versus flat and what are the EPS implications for 2018 on that? And then just if you could review what the coupons on the new financings are versus those that were retired?

Yeah, Paul, sure. So we're in our planning process right now, it's a little early to guide something as specific as O&M outlook beyond 2018. That said, the efforts that are underway that we refer to as customer value, drive performance improvements and affordability improvements for our customers. And we're confident that we're on a trajectory that's flat relative to last year, if not, better than that, and look for an update on that as we gear toward the end of the year here, especially as it relates to 2019 guidance and beyond. Let me ask Donald to refer to the financing question.

Hi, Paul. So I think you asked what were the coupons of the refinance debt and the new rate...

Yes, kind of the relative interest savings here.

Yeah. So when you look at what we did, refinanced our maturities in 2019, 2020 and 2022 and they had about an average after tax interest rate of about 4.79%. And then when you look at the new securities between the five-year notes and the perpetual preferred stock, the weighted average after tax interest rate was about 4.36%. So there was absolutely some savings, but not to the same extent as last year because of the preferred notes that we issued to get the equity credit.

And just back on the O&M, we can expect that some of this is going to be sustainable?

Absolutely. Absolutely. I think we are certainly starting to see through our customer value efforts, opportunities in our gas and electric operations as well as on the corporate side. But to Joe's point, it's too early to guide too much into the future, but we're certainly seeing opportunities and starting to realize benefits.

Thank you very much.

Thank you, Paul.

And our next question comes from the line of Michael Lapides from Goldman Sachs. You may begin. Michael Lapides - Goldman Sachs & Co. LLC: Hey, guys. Thanks for taking my question. Actually I have a couple of them. So can you rehash a little bit the need for the electric rate case at NIPSCO (24:52) what you anticipate as under-earning or is this being anticipated by future capital investments that may not be in your plan now, but might be in the future plan. And therefore, you want to make sure you get an adequate return and reduce lag as much as possible.

Yeah. Good morning, Michael. Really as noted, it helps us to navigate and position for a number of policy issues, including changes in tax rates; we just filed that notice yesterday with the IURC relative to tax reform, also implementation of the long-term generating strategy as will be laid out in the IRP later this year, all part of a strategy to balance affordability, reliability and risks in our generation portfolio. And an important foundation there is dealing with the remaining useful life of our existing coal assets. So it's a myriad of issues, not specifically an under-earning concern as you alluded to. Michael Lapides - Goldman Sachs & Co. LLC: Got it. And one other question thinking about the IRP process. Do utilities in Indiana, the electric ones, do you submit self-build alternatives or utility-owned alternatives as part of the IRP and RFP process? Or does anything you do have to be contracted via PPA?

It's really more of an outlook for the type of capacity. We would, in all likelihood, follow with the CPC and outline, whether it's a self-build or a PPA or some combination of those two. So it's a bit less precise or less prescriptive regarding the form of the capacity in terms of whether it's contracted or owned. But we'll certainly look at all of those options including self-build as we evaluate all of the plans for the 20-year horizon we're planning for. Michael Lapides - Goldman Sachs & Co. LLC: Got it. Last one just on kind of the thought about renewables or other types of generation. But when I think about Indiana as a state and I look at the state kind of generating capacity and not just for your service territory, but everyone's, Indiana relative to some of its neighbors especially to the west of you, has very little wind or solar capacity. Is that a resource issue, meaning that the resource qualification in Indiana is weaker than maybe in Southern Illinois or in other places? Or is that simply just due to a supply and demand issue and a little bit slower movement in kind of retrofitting the generation fleet over time?

Yeah, it's a great question and it's probably a bit of all of the above. If you look at the energy cost profile, you're certainly going to want to be where the wind blows more frequently and the sun shines more hours of the year. So that's not always the only driver, RPS mandates can drive that as well. So it's a little hard to answer that with one of those factors being the driver. All of that said, that's why we did the RFP as a part of the IRP process, so that we could get an up-close look at what's available to us both in Indiana and outside in the MISO region. And we just shared a high level review of those results with the stakeholders last week or a week or so ago. So I think we're getting a really robust picture of that that we'll continue to evaluate and update in the upcoming IRP stakeholder meetings. Michael Lapides - Goldman Sachs & Co. LLC: Got it. Thank you, Joe. Much appreciate it.

Thanks, Michael. Have a great day.

And our next question comes from the line of Michael Weinstein from Credit Suisse. You may begin. Michael Weinstein - Credit Suisse Securities (USA) LLC: Hi. Good morning, guys.

Good morning, Michael.

Good morning. Michael Weinstein - Credit Suisse Securities (USA) LLC: Hey. So when the IRP is filed, that, what you said was going to be around early 2019 you think you'll be ready?

IRP will be early in November; we expect it to be in November. Michael Weinstein - Credit Suisse Securities (USA) LLC: November?

Yes. Michael Weinstein - Credit Suisse Securities (USA) LLC: And what are you saying for the first quarter or early 2019, are you planning on an Investor Day at that point to talk about it or are we going to have – yeah.

Yeah, date to be determined. We expect to be in a position to do an Investor Day and an update on our long-range outlook sometime in the first quarter ideally. So that – all of that comes together as well as other factors in our planning process that will give us much greater visibility and clarity after the IRP and the planning process that we're in, and work with our board that we do in January. So, sometime in the first quarter is what we expect. Michael Weinstein - Credit Suisse Securities (USA) LLC: Would you expect to have some kind of resolution in the electric rate case by that point or if some – maybe does that to be resolved before you do that?

No. No. As I said earlier, the rate case is really more of a policy matter to set the foundation. One of the key areas on the generation side is the remaining useful life. That doesn't have to be resolved per se for us to provide that guidance. That'd be a nice thing to have, but it's not what we would expect. Michael Weinstein - Credit Suisse Securities (USA) LLC: Okay. Hey. One last question here. The adjusted FFO to total debt ratio is expected to improve 14% to 15% range 2019, 2020. What's the major driver of that? Is that, of the cash flow improvement, is that debt reduction that's improving that ratio, or is it more from cost savings and O&M as discussed earlier, or is it something else?

Yeah. It's really our earnings. If you think about our program, we're investing $1.6 billion to $1.8 billion a year that drives earnings and cash flows. And so, over time, our FFO to debt metric was going to improve anyway. So we don't need to necessarily do any other significant refinancing in our program. It just really does get us back on track including the $200 million to $300 million of equity through an ATM program. Michael Weinstein - Credit Suisse Securities (USA) LLC: Okay. Great. Thank you.

Thank you, Michael.

Our next question comes from line of Greg Gordon from Evercore ISI. You may begin.

Good morning, team. It's actually Durgesh on for Greg.

Good morning.

Good morning. I have two questions. First on the quarter for Donald. The revenue reserve that was booked, Donald, does that go – like in other words, was that a one-time charge and does that hit the bottom line or is that an offsetting income tax expense? Just trying to understand the quarter-over-quarter EPS drivers and that one sort of (31:58) for me.

Yeah. So, we started the revenue reserves really in the first quarter. And so, there's not – if you think about seven jurisdictions and most of our jurisdictions did require us to reserve the difference in the tariff rate between the 35% and the 21%. So that happens throughout the year. When you look at year-over-year and the impact of tax reform, there is some quarterly impact regarding how our pre-tax earnings on a quarter-to-quarter basis are impacted by the lower tax rate this year versus last year. But over the course of a year, it all evens out. Randy, you want to give a little bit more detail?

Yeah. Basically, you book the impact of tax reform on your revenues based on your revenue curve, Durgesh, and you book the benefit of taxes based on your pre-tax income curve. And at the end of the year they converge, it will be a net zero on a regulated basis. But sometimes in the smaller quarters, it can throw off a bit of a variance. So we're seeing a little bit of that timing. In fact, if you add the impact of tax reform that we outlined in our slides, together it's about $37 million of negative impact on regulated revenues. And on the income tax benefit side, you're only seeing, give or take, about half of that flow through. So it is putting a little bit of pressure on the quarterly number.

I see. But throughout the course of the year we should expect that $37 million versus $18 million where the difference is to be more or less close to zero?

Yes. That's right.

Correct.

And then once we get into 2019, you would not see that difference because you'd be back on a period where the tax rates are the same.

Perfect. Thanks for that. And then just high level sort of your long-term guidance question for the team. So given that now that you've completed your sort of the – your credit improvement initiatives, the equity, the refinancing, and then you obviously reaffirmed your CapEx plan, so where are you in that 5% to 7% long-term EPS growth range? In the last call, I believe, you might have stated that you have the ability to hit the high end. So given where you are now, what are your chances of hitting the high end of that long-term EPS growth range?

Yeah. Nothing has changed. I think it's where we did reaffirm our guidance for the full range. It's too early to narrow that range with the number of moving parts with our regulatory initiatives, both base rate cases and some of our tracker programs, and then almost half a year of our operating programs. But we've got confidence that we can hit the top end of the range and we'll be able to provide more information through at our next earnings call.

Perfect. Thank you.

Thanks, Durgesh.

And our next question comes from the line of David Peters from Wolfe Research. You may begin. Your line maybe on mute. All right, we have no further questions at this time. I'd now like to turn the call back to Joe Hamrock, for closing remarks.

Thank you, Victor, and thanks again to everybody for participating today and for your continued interest in and support of NiSource. Have a great day. We look forward to talking to you soon. Take care.

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