NiSource operations earnings hit target

By Times Staff | Wednesday, August 06, 2008

NiSource Inc. net income was down sharply, due mainly to a $220.5 million loss recorded on income from discontinued operations.

Earnings from continuing operations fell $7.8 million in the second quarter. The earnings were affected by anticipated higher employee and administrative costs, as well as a one-time adjustment to electric operations depreciation expense of $8.3 million.

Earnings from continuing operations for the three months that ended June 30 was $21 million, or 8 cents per share, compared to $28.9 million, or 11 cents per share, in the same period a year ago, according to results released Tuesday

The company reported that the impact of higher costs and the depreciation expense was mostly offset by higher total net revenues and lower taxes and interest expense.

Net income for the second quarter was recorded as a loss of $202.3 million, as compared to a gain of $26.7 million in the previous quarter.

"I am pleased to report that NiSource remains on track to achieve 2008 financial results which are in line with our business plan," NiSource President and CEO Robert C. Skaggs Jr. said in a prepared release. "In particular, I have been encouraged by our team's ability to overcome challenges and remain focused on executing a broad array of important initiatives across each of our business units."

Skaggs noted that the company is maintaining its net operating earnings outlook of $1.25 to $1.35 per share for the 2008-2010 time period. On a GAAP basis, for 2008, the lower end of the range for basic earnings from continuing operations is $1.23 per share primarily due to transition costs associated with NiSource's amended business services agreement with IBM.

Skaggs highlighted a number of recent accomplishments in each of NiSource's business units that support key elements of the company's business strategy.

-- During the second quarter, Northern Indiana Public Service Company (NIPSCO) acquired the $330 million Sugar Creek Power Plant, a 535-megawatt combined cycle gas turbine, in West Terre Haute, Ind. The Indiana Utility Regulatory Commission (IURC) approved NIPSCO's acquisition of the plant in an order issued May 28.

The order denied certain cost deferral and rate treatment proposed by NIPSCO, and indicated that the company could seek such treatment by means of an Alternative Regulatory Plan filing. On June 6, NIPSCO filed an ARP proposal with the IURC seeking approval for the deferral of certain costs associated with the Sugar Creek plant. NIPSCO's ARP proposal is pending.

-- On July 24, the IURC issued an order approving NIPSCO's proposed purchase power agreement with Iberdrola Renewables, one of the world's leading producers of power from wind and other renewable sources. The agreement provides NIPSCO the opportunity to purchase 100 megawatts of wind power commencing in early 2009.

-- NIPSCO also continued to advance its regulatory agenda with the June 27 filing of a petition with the IURC to modify its rates and charges for electric utility service. A formal filing will be made with the IURC later this month.

"NIPSCO's landmark electric rate case marks the first time in more than 20 years that the company has sought a comprehensive review of its electric services, cost levels and rates," Skaggs said. "Our team looks forward to exploring those changes -- in a collaborative fashion -- with all of NIPSCO's stakeholders."

-- On June 30, NiSource closed on the sale of its Whiting Clean Energy (WCE) unit to BP Alternative Energy North America (BPAE). BPAE purchased the Whiting facility for approximately $217 million, including working capital.

-- In the first quarter of 2008, NiSource began accounting for the operations of Northern Utilities, Granite State Gas and Whiting Clean Energy as discontinued operations. In the first quarter of 2008, NiSource recorded an estimated after-tax loss of $96.1 million (35 cents per share) for the disposition of these operations. MERRILLVILLE || NiSource Inc. profits fell 54 percent in the first quarter, due mainly to a loss recorded for the expected sale of a New England utility and the Whiting Clean Energy plant.
Net earnings or profit fell to $99.3 million, or 36 cents per share, compared to
$216.7 million, or 79 cents per share, in the first quarter of 2007, according to results released Friday.
Income from continuing operations missed analysts' estimates. That mainly was because of purchased power expenses and back payments to a Midwest system grid operator at NiSource's NIPSCO subsidiary.
Earnings from continuing operations were $189.4 million, or 69 cents per share, as compared to $206.5 million, or 75 cents per share in the first quarter of 2007.
Analysts polled by Thomson Financial had expected earnings from continuing operations of 76 cents per share.
NiSource CEO Robert Skaggs Jr. confirmed the company's full-year operating earnings forecast.
"NiSource's first quarter results are consistent with our business outlook and squarely in step with the earnings guidance of $1.25 to $1.35 per share we have provided for the 2008 to 2010 time frame," Skaggs said.
NiSource's stock price fell 38 cents to $17.95 per share on heavy trading volume of 3.8 million shares Friday on the New York Stock Exchange.
Earnings from continuing operations were dinged for about $4 million by a settlement NIPSCO reached last year with major industrial users, Skaggs said. That settlement has NIPSCO absorbing some of the cost of power it purchases from other utilities when the price rises above a certain benchmark.
The operating earnings also reflected nonrecoverable payments of $11.4 million made to the Midwest Independent Transmission System Operator, according to NiSource. The payment settles a long-running dispute over fees owed the MISO for carrying electricity between utilities.
NIPSCO has obtained federal approval for its proposed $330 million purchase of the Sugar Creek gas-fired generating plant in southern Indiana and expects state approval soon, Skaggs said.
A NIPSCO plan to purchase NiSource's Whiting Clean Energy plant was shortcircuited last month when the BP Whiting refinery exercised its right of first refusal on the deal. BP has an agreement to purchase the plant for $210 million.
In February, NiSource announced it had an agreement to sell its Northern Utilities and Granite State Gas Transmission subsidiaries to Unitil Corp. for $185 million.