Steel industry woes unplug utility profits
Keith Benman - keith.benman@nwi.com, (219) 933-3326 | Posted: Tuesday, August 4, 2009 12:00 am
MERRILLVILLE | NiSource Inc. earnings from continuing operations swung to a loss in the second quarter, with much of the loss coming on increased pension expenses and sagging industrial demand in northern Indiana.
The utility-holding company reported a loss of $8.7 million, or 3 cents per share, on earnings from continuing operations in the second quarter, as compared to a gain of $19.7 million, or 7 cents per share, in the second quarter of 2008.
"While the effects of the economic downturn are proving to be deeper and longer than we had hoped, our teams are working day and night to mitigate these impacts and deliver results in line with the earnings outlook we provided earlier this year," said NiSource CEO Robert Skaggs Jr.
NiSource recorded a $24.8 million increase in pension expenses in the second quarter, due to the deterioration in global securities markets in 2008, Skaggs said.
A drop off of almost 25 percent in industrial demand for electricity at NIPSCO depressed NiSource electric operations earnings to $31.1 million in the second quarter, as compared to $52.1 million in the same quarter last year.
Skaggs affirmed the company's year-long earnings guidance of $1 to $1.10 per share for 2009.
NiSource's outlook assumes a gradual economic recovery during the second half of 2009, Skaggs noted. But so far, the company has not seen evidence of that pickup, the CEO said in a conference call with investors.
For the first six months of the year, NiSource reported income from continuing operations of $150.6 million, or 55 cents per share, as compared to $208.3 million or 76 cents per share in the first six months of 2008.
The second and third quarters generally provide NiSource with its thinnest profit margins of the year, as the bulk of its business remains tied to natural gas deliveries during the winter heating season.
Gross revenues for the second quarter plunged 35 percent to $1 billion, as compared to $1.56 billion in the second quarter of 2008. That drop was mainly due to the plunging price of natural gas.
Total net revenues actually recorded a slight increase of $5.8 million for the quarter.
NiSource recorded a net income loss of $4.8 million for the second quarter as compared to a net loss of $202.3 million in the second quarter of 2008. The loss last year was due to a lawsuit brought by West Virginia landowners over natural gas royalties. After a jury ruled against NiSource, the utility-holding company agreed to pay $338.8 million to finally settle the long-running lawsuit.
NiSource is the parent company of NIPSCO, which has 712,000 natural gas and 457,000 electric customers in northern Indiana. In all, the company has 3.8 million customers in the Midwest, New England and the Mid-Atlantic states.
Industrial customers account for more than 50 percent of NIPSCO's electric business. Two of the largest are U.S. Steel and ArcelorMittal, both of which have laid off hundreds of employees and idled some blast furnaces in the past year.