Good day, ladies and gentlemen, and welcome to the Q3, 2018 NiSource 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. I would now like to turn the call over to Mr. Randy Hulen, Vice President of Investor Relations. Sir, please begin.

Thanks, Mark, and good morning, everyone. Welcome to the NiSource third quarter 2018 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 third 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. Before turning the floor over to Joe and Donald, just a quick reminder; some of the statements made during this presentation 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. Good morning, everyone, and thank you for joining us. As most of you know in the period since our last investor call NiSource and our customers in the Greater Lawrence, Massachusetts, area experienced an event of unprecedented proportions. This tragic event has been a humbling experience for all of us at NiSource and Columbia Gas, and we realized that much work lies ahead of us to finish our service restoration in Greater Lawrence, and regain the trust of our customers and the communities we serve. In Greater Lawrence, we continue to stay keenly focused on helping our customers and restoring the impacted communities. We are committed to restoring service to customers there safely and as quickly as possible. Safety and the care of our customers is the very foundation of our business. Although, the reviews of this incident are not complete, we are taking steps across our seven-state footprint to enhance system safety. Those measures include procedures and protocols that help guard low pressure systems from the risks that can lead to overpressure incidents with emphasis on enhanced project designs, controls and risk management and enhanced damage prevention protocols. In addition, the plan includes responsive measures such as designs that would automatically shut down an infected system or otherwise protect customer property in the event of an overpressure situation. Across NiSource, our teams continue working to enhance safety for our customers and communities and our team in Indiana is taking significant steps to advancing our long-term electric business strategy. Let's now turn to slide 3, which outlines some of our key accomplishments in the third quarter and early fourth quarter. Our non-GAAP net operating earnings, which excludes the impact of the Greater Lawrence event were $0.10 per share in the third quarter versus $0.07 in 2017, which keeps…

Thanks, Joe, and morning, everyone. Before talking about our non-GAAP earnings, I'd just like to note that our third quarter GAAP results include our current estimates of the emergency response, system restoration and other expenses associated with the Greater Lawrence event, and we will likely see additional incident-related expenses in subsequent quarters. However, we do expect to substantially recover these expenses through insurance, but as of yet have not recorded any insurance recoveries as of September 30th. Excluding this impact, we continue to expect to deliver on our net operating earnings per share guidance for 2018, and deliver on our $1.7 billion to $1.8 billion capital investment plan. On slide 5, you'll see our non-GAAP net operating earnings were approximately $35 million or $0.10 per share in the third quarter, compared with approximately $23 million or $0.07 per share in the same period of 2017. Through the first nine months of 2018, our net operating earnings are approximately $321 million or $0.91 per share, putting us right on track to deliver on our guidance commitment for 2018, which is $1.26 to $1.32 per share, excluding the impact of CMA event. Let's turn now to the non-GAAP financial results for our business segments. Looking at slide 6, our Gas Distribution Operations segment had an operating loss of about $3 million for the quarter, compared with an operating loss of about $9 million in the same period of 2017. Operating earnings, excluding the regulated revenue impact of tax reform were about $25 million higher than a year ago, driven primarily by increased infrastructure investment revenue and lower employee and administrative expenses. Our Electric Operations segment, covered on slide 7, reported operating earnings of about $123 million for the quarter, compared with operating earnings of about $130 million in the same period of…

Thank you, Donald. Now let's turn to some specific highlights for the third quarter and early fourth quarter of 2018 from our gas operations on slide 10. New gas distribution rates took effect October 1st, in Indiana following IURC approval of the settlement agreement in our base rate case. The settlement supports continued investments in system upgrades and other measures to enhance pipeline safety and system reliability. The settlement is expected to ultimately increase annual revenues by approximately $107 million once new rates are fully implemented. Also in Indiana, we continue to execute on our long-term gas modernization program with investments planned through 2020. Our application for a new seven-year program was dismissed without prejudice by the IURC due to pending legal matters, and we're reviewing options to re-file our application at a later date. In Pennsylvania, we filed a settlement agreement in our base rate case on August 31st. The settlement supports continued system upgrades and replacement of natural gas distribution pipelines and reflects the implementation of tax reform legislation. If approved this filed, the settlement is expected to increase annual revenues by $26 million. A Pennsylvania Public Utility Commission order is expected in the fourth quarter of 2018, with new rates effective in December. In Ohio, we filed a settlement agreement on October 25th, with parties to our application for an annual Capital Expenditure Program rider. The initial approximately $75 million rider would allow us to begin recovering capital investments and other deferred expenses made between 2011 and 2017, that are not currently recovered under our infrastructure modernization tracker. The settlement also benefits customers by reducing base rates by approximately $23 million to reflect the impact of federal tax reform. In Virginia, we filed a base rate case with the Virginia State Corporation Commission on August 28th, seeking…

Our first question comes from the line of Paul Ridzon of KeyBanc. Your line is now open.

Good morning, Joe. Good morning, Don.

Good morning, Paul.

Good morning.

Just a quick question. I looked at your second quarter deck and the third quarter, the financing plan slide really hasn't changed with regards to the ATM. I think there's some confusion in the market that this announcement today is incremental to the prior ATM. Can you just clarify if that's not the case?

Thanks, Paul. Good morning. No, this $200 million, $300 million that we outlined in Q2 is still the plan, the ATM that we filed. The new ATM we filed this morning is consistent with that. As you recall, we had used up all of the previous ATM and needed to file a new one.

And then looking at slide 12, that's like the cost estimate on the Lawrence incident. How much of this is covered by insurance or what's not going to be covered by insurance?

So our insurance coverage is fairly broad to cover this type of event and incident. We got total liability coverage of about $800 million and expect substantially all of these costs to be recovered through the process. However, we did not book a receivable at our September 30th close, because it's early in the process. We really are in Q4, incurring most of these expenses and felt that it was prudent to really get through seeing the claims and the cost before booking a receivable, which we'll do as Q4.

Great. Okay. Thank you very much.

And Paul, just to clarify slide 12 also includes the capital expenditures related to the system rebuild. Those obviously would not be insurance-related costs.

Understood, understood.

Thank you.

And our next question comes from the line of Julien Dumoulin-Smith of Bank of America Merrill Lynch. Your line is now open.

Hey, good morning.

Good morning ,Julien.

Hey, just to clarify the last one real quickly. So when you said substantively all of it would be recoverable from insurance, that's under the additional incident-related expenses of $415 million to $450 million and the $180 million to $210 million?

That's correct Julien. It's both of those categories really from an accounting perspective and how we need to book show that from an accounting perspective, we put it into two categories around third-party claims and other expenses. But they are all event expenses that we expect to be recovered through insurance.

Got it, excellent. And then just a follow-up on that, in terms of the rate case timing, obviously, withdrawn (00:23:39) it. What's the expectation with respect to going back in Mass, once this is said and done and filing for recovery of whatever you deem appropriate. And then at the same time, how are the rating agencies viewing and how are you viewing your balance sheet given the cash flow timing issues, perhaps related to insurance here.

Yeah, Julien. It's Joe. I'll take the first part. Our focus is on the restoration effort and getting customers back in service. Those are questions for another day related to the ultimate regulatory plan for the investments we've been making.

From a financing standpoint, obviously, it's a large event that we are financing now. We have significant liquidity to finance this event. However, we are looking at ensuring that we hit our metrics that we've promised at year-end here 2018 and assessing any needs to make sure we hit that. But, again, it's all timing around financing, because we do expect to recover the claims expenses through insurance.

One quick clarification on capital spend with the IRP, when do you expect to more fully delineate some of the timeline for generation associated with that NIPSCO filing, specific investment (00:25:06).

Yeah. That's a work in progress. Julien, that's one of the areas that we expect to update when we do further look probably mid-2019.

Okay, excellent. Thank you all very much.

Thank you.

And our next question comes from the line of Christopher Turnure of JPMorgan. Your line is now open.

Good morning, Joe and Don. You guys clearly talked about the expenses related to the incident in Massachusetts and definitely we appreciate the details there, but is there a way to think about costs that might not directly be related to that and perhaps other parts of the company, or perhaps corporate costs outside of what you've outlined here that could spill into 2019 or future years?

Yeah. It's a good question, Chris, and good morning. It's a little early for that. That's the area that we would expect to delineate more in our 2019 guidance on our Q4 call.

Okay. But we should assume that there might be some pressure there that wouldn't necessarily be able to be offset by cost discipline in other areas. Is that fair?

I don't know that, I'd go to that extent. You know we've got work to do to pull all those details together, but I don't see it that way at this point.

Yeah. Okay.

And I'd say – I'd add that, we don't expect that this changes our long-term guidance of 5% to 7% earnings and dividend growth. As we came out last year committing to flat O&M expense after 2017, and we still expect to be able to meet that commitment.

Okay. And then in Massachusetts specifically clearly out of the gate there were a plenty of negative headlines directed toward the company and I think the DPU even came out with some sort of suspension of work request for you – and since that time, could you characterize how your dialogue has been with both, the political and regulatory community there?

Yeah. You recognize some of the issues that we've worked through over the last several weeks since the incident. We worked day-by-day with the leaders in the state and the community and our partners across this to all stay focused on restoration of service to the community and the customers in the community. And I would say that is a very collaborative effort working very closely together. We will have work to do as we get beyond service restoration as well with the ongoing effort to replace some of the equipment that we'll repair immediately. So this has got this has got a longer tail on it than just service restoration and we've, we've made a long-term commitment to rebuild trust and confidence in the community and with the leaders in this state.

Would you say that there has been an ongoing dialogue there since the initial incident?

Oh yeah we're, we're day-to-day working very closely together.

Okay. Great. Thank you.

Thank you.

And our next question comes from the line of Insoo Kim of Goldman Sachs. Your line is open.

Hi. Good morning, everyone.

Good morning.

Just on the financing side, it seems like you're leaving some room open for potentially more preferred equity or subordinated debt, is that kind of an option for this as well as next year as a financing vehicle away from additional equity or file ATMs (00:28:54) to support your credit metric guidance for 2019 and 2020?

Thank you. Yes. It was certainly a good transaction, the preferred equity that we did in May, we continue to look at that option as a long-term lower cost way to provide equity content versus issuing common equity. So absolutely. However we will continue to compare that versus issuing through the ATM program as well as regular debt financing.

Understood. And then, given what's happened in Massachusetts, do you see as you look forward to the next few years, the mix of your future, CapEx and rate base items, leaning a bit more towards gas versus electric or does that not really change that much?

So I wouldn't think at this point, the mix is going to change in any significant way. I think we're certainly working through our electric generation plan and we'll be able to provide an update on that in mid-2019. But at this point, I don't see a significant departure from the current mix.

Understood. Thank you very much.

Thank you.

And our next question comes from Steve Fleishman of Wolfe Research. Your line is now open.

Hi. Good morning. Just...

Good morning.

Just to clarify better on – you mentioned the rating agency commitments. So, what are some of the options? You mentioned kind of options to make sure you meet them for this year. Is it just kind of timing of your ATM or is it other things that you might do if you need to?

Yeah. I really think it's certainly timing if we were to do any type of transaction with equity content, it really is timing to support the restoration efforts in Massachusetts. But the ATM program that we filed as well as if we were to issue any type of preferred or equity content security that would support hitting our metrics at yearend.

Okay.

(00:31:27) we're looking at as we evaluate cash flows in metrics.

Okay. And as you kind of step back and look at your whole system, are you reviewing kind of timing of replacing pipes or other operational changes kind of more broadly as a company in your other states?

Yeah. Steve. We're always reviewing that. It's always a risk-based evaluation. We do that on an ongoing basis. As I noted earlier in the call, we have also reviewed the other profile around low pressure systems and we expect to make some investments along that line of assets as well in the near-future, but we're still working through the details on that and would expect to share more on that in the near-future.

But, I would add that, if you think about our programs in each state, we'll typically have five- and seven-year commitments around our infrastructure investments. And so, I would not expect a material change state-to-state as we are – do intend to hit those commitments on those programs.

Okay. Thank you.

Thanks. Have a good day.

And our next question comes from the line of Shar Pourreza of Guggenheim Partners. Your line is now open.

Hey. Good morning, guys.

Good morning, Shar.

Good morning.

Don, do you have – just around the ongoing O&M expense? I mean, presumably you are doing a lot more inspections through your system given sort of the design failure. Do you have sort of an estimate of what could be ongoing in the near-term at least?

So, no. That's something that we are evaluating right now as we look at our operations and the needs. Joe, outlined some of the steps that we're taking around low pressure systems and we'll be able to provide more information in the future on that. But at this point, don't expect there to be significant O&M that would change our long-term O&M plan.

Okay. Perfect. And then just on Massachusetts. When do you expect sort of everyone to sort of come back to their homes right. And then, again, just remind us how many are still outside of their homes?

Yeah. We announced last week a revision to the original schedule that now has the ultimate return between December 2 and December 16, though we work every day to accelerate that schedule and we're still pushing for earlier than those dates with resource redeployment of additional resources bringing in additional contractors. So it's an urgent focus across the entire team to work towards an accelerated return home for those affected customers. It's very disruptive for them. In terms of the number who are out right now, subject to check. I need to look at the most recent, but we have – we provide daily stats on the number of folks that are in alternative housing and a number of folks that are affected by this and still not able to function in their homes normally. So, as we as we sit here today, we've restored about 20% of the affected customers and we work with each of the affected customers to be sure they're accommodated.

Excellent. Okay. Thanks, so much.

Thank you.

And our next question comes from the line of Michael Weinstein of Credit Suisse. Your line is now open. Michael Weinstein - Credit Suisse Securities (USA) LLC: Hi. Good morning, Joe and Don.

Good morning, Michael.

Good morning. Michael Weinstein - Credit Suisse Securities (USA) LLC: Hey. So just to be clear, the equity plan is unchanged essentially going forward, and that includes the expectation for an accelerated capital replacement program that's happening right now in Massachusetts. So that, you know, in other words, there's no additional equity that you think might be needed as a result of accelerating the program.

That is correct. We executed on this work in Massachusetts. And just think about it from a resource standpoint, we brought a lot of resources over from other states to support this effort in Massachusetts. And so, we did balance out a little bit across the states, so that our overall capital plan doesn't change significantly. There were also I'd say some lower priority corporate and IT initiatives that we delayed that supported not really changing our capital plan and/or our financing need. Michael Weinstein - Credit Suisse Securities (USA) LLC: Got it. And also for the guidance, the guidance is unchanged for EPS 5% to 7% growth, but is that – are you still also trying to say that you'll be in the middle of that guidance or is there any change or shift in that end of the range?

For 2018, well, I would say... Michael Weinstein - Credit Suisse Securities (USA) LLC: ...just going forward, the 5% to 7%. Yeah.

Yeah. So, 5% to 7%, yeah, I think if you recall in thinking about the range of outcomes for our business, it's primarily driven by our infrastructure programs and 75% of that is tracked. And so, the movement within the range is really around regulatory outcomes and timing of those outcomes, O&M expense and financing costs. So, I think this doesn't change that. This event does not change that from a long-term standpoint. Michael Weinstein - Credit Suisse Securities (USA) LLC: Got you. And has anything changed regarding your plan for an Analyst Day next year, maybe sometime around the end of the first quarter or?

Yeah. As I noted on the call earlier, we're now looking at mid-2019 for an Analyst Day, and an update on the longer range plan. Michael Weinstein - Credit Suisse Securities (USA) LLC: Got you. I missed that...

That's all right. Michael Weinstein - Credit Suisse Securities (USA) LLC: Okay. Thank you very much.

Thank you.

And our next question comes from the line of Charles Fishman of Morningstar Research. Your line is now open.

Thank you. I certainly admit I haven't looked at the IRP yet that you submitted yesterday, but it appears from your slides that there you're accelerating your coal plant retirements from what you had previously indicated, which is certainly not unique in the industry. Joe, I guess my question is, what drove you to that decision to accelerate coal plant retirements? Was it the more renewable energy or the cost of renewable energy was lower than you thought going into this, was it the discussions with the Commission? Was it just customer feedback, first that. And then I guess related to that is, do you have the ability to downsize your environmental upgrades at Michigan City in Schahfer, because it would appear that you'd be retiring those units earlier than you had originally planned?

Yeah. Good morning, Charles. And thanks for the question. We did as you noted, accelerate relative to the last Integrated Resource Plan, accelerate the plan for coal retirements with now all of the Schahfer stations slated for retirement within the next five years, and the Michigan City unit within 10 years. And it was driven by I would characterize it as all of the factors that you noted, a rigorous economic analysis looking at the long run cost, expected cost of all available sources, including continuing to run the existing assets, providing for environmental retrofits known to comply with current regulations. And then to look at – we ran an RFP earlier in the year that we shared with stakeholders for and all of the above supply portfolio to replace capacity. And when we ran all of that analysis and looked at all of the options, what emerged as the best solution or the most viable solution is the plan that we put out yesterday with the IRP, with that further acceleration of coal retirement. And as we sit here today in expectation that renewables would be the most viable, most economic and cleanest supply portfolio for us. We will continue to evaluate that side of it as we step through time. We'll look at what's available in the marketplace now, and then we'll take another look as we get closer to the timeline of needing to replace capacity across the next 10 years. So, that's an ongoing evaluation. And so the rate case that was also filed yesterday is really designed to complement that Integrated Resource Plan to reset the depreciation rates, to now acknowledge the accelerated retirement plan. And with your last question, you may recall that we filed last year a CPCN and for both the CCR and the ELG, both the coal ash and the water rule compliance and we have proceeded with the CCR, but we'll continue that, because that compliance date is upon us. On the ELG side, the water rule, we'll continue to evaluate that and likely would not make those investments under this plan consistent with what you indicated in your question. So, it's a comprehensive look at all of the options, all of the economics. And coming up with the solution that best fits our expected needs and our customers' supply needs.

So, it sounds like though the IRP is, you're coordinating that what your base rate cases, so there won't be any risk of a stranded investment here, where you recently made some environmental upgrades and you're stuck with the – you're prevented from recovering all of it, correct?

That's the idea, to get the rate case to set the depreciation rates for the existing assets, so that we can move forward in time with other decisions based on having established that foundation.

Okay. That's all I have. Thank you.

Yeah. Thank you very much.

Thank you.

And we have a follow up from the line Charles Fishman. Your line is now open.

Okay. Well, since nobody else had one let me just pop in one more quick one. You've always included slide, something like slide 14 that shows roughly a 75% of your investments are recovered within 12 months. You had this tracker, I forget was it approved in Ohio or you're proposing it I guess in Ohio, or you reached a settlement? I'm sorry, that includes this new tracker. Would that increase the percentage of investments recovered under trackers, so you'd be going over 75% now?

Yeah. That is correct, Charles. That portion of our investment in Ohio typically would have gone through a base rate case. And so now, from the Ohio perspective, almost all of the investments would be recovered through a tracker or a rider.

I mean, in Ohio significant, so it could conceivably be touching 80% of your investments covered by trackers now. Is that – my thinking about that correctly?

I'd have to look at it. We can get back to you and we'll certain will update that....

Okay. But I got the...

...once that order is approved. Yeah.

I got the direction right.

Yes. Thank you.

Okay. Thanks.

And our next question comes from the line of Julien Dumoulin-Smith of Bank of America Merrill Lynch. Your line is now open.

Hey guys, just wanted to follow up here on this IRP just a little bit more detail if you can. Curious, I mean, you have a pretty healthy amount of solar in that IRP, especially even in the near dated years for 2023. How are you thinking about your ability to own that, and do you have any constructs rate basing it, because obviously that has a – could have a potential meaningful impact?

Yeah. We are looking at opportunities to own that as well as PPA. When we ran the IRP or the RFP, this summer, bids came in for both, PPA as well as ownership. We're looking at what that opportunities are around ownership, and in firming up those bids. I mean what that structure would be to include that in rate base. So, that will be part of our plan and how we would come out next year to talk about the future investments and generation, but we think certainly opportunity to own.

Right. And you would expect that given the 2023 timeline for that IRP that you'd be issuing RFPs in the 2019 and 2020 timeframe to take advantage of IT save (00:45:57)?

I don't know if we've come out what a date yet on the next RFP, but certainly we would need to likely. I'd say you're probably right, it's probably in the 2021 timeframe to be in place by 2023.

Thank you.

Thank you.

And our next question comes from the line of Paul Ridzon of KeyBanc. Your line is now open.

Just following up on that. My understanding is legislation in Indiana, I think it was Senate Bill 309 that kind of gives – basically prefers company-owned generation, do I have that right?

Paul, I'm not sure that's right. I'd have to check on that.

But traditionally.

I'll circle back.

Traditionally, Indiana has preferred utility ownership for generations.

Okay. Thank you.

Thank you.

And I'm showing no further questions at this time. I would now like to turn the call back to Joe Hamrock, CEO for closing remarks.

Thank you, Mark, and thank you, all again for joining us this morning and for your interest in and support of NiSource. We look forward to talking to you again soon. Have a good day.

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.