Randy G. Hulen - Vice President of Investor Relations Robert C. Skaggs - Chief Executive Officer, President, Director and Interim Chief Executive Officer for Gas Distribution Segment Stephen P. Smith - Chief Financial Officer and Executive Vice President.

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division Charles J. Fishman - Morningstar Inc., Research Division Faisel Khan - Citigroup Inc, Research Division.

Good day, ladies and gentlemen, and welcome to the Q3 2014 NiSource Earnings Conference Call. My name is Michelle, and I'm your event manager. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to hand the call over to Mr. Randy Hulen, Vice President of Investor Relations. Please proceed, sir..

Thank you, and good morning, everyone. On behalf of NiSource, I would like to welcome you to our quarterly analyst call. Joining me this morning are Bob Skaggs, President and Chief Executive Officer; and Steve Smith, Executive Vice President and Chief Financial Officer.

As you know, the focus of today's call is to review our financial performance for the third quarter of 2014 and to provide an overall business update. We will then open the call to your questions. At times during the call, we will refer to the supplemental slides available on nisource.com.

I would like to remind all of you that some of the statements made on 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. And prior to turning the call over to Bob Skaggs, I wanted to remind everyone that we did file our S-1 on September 29 with the SEC for our planned MLP.

As we did on Investor Day, we appreciate your patience around the amount of information that we're going to be able to provide around the entire CPG segment. And with those items out of the way, the call is now yours, Bob..

First, the transaction is expected to be tax-free and value creating. Second, both companies are expected to be investment-grade credits after the separation. And third, we expect to complete the transition in mid-2015.

As Randy mentioned, our planned master limited partnership, Columbia Pipeline Partners, filed a form S-1 registration with the SEC on September 29. All details of the planned MLP can be found in that form S-1. Now let me turn the call over to Steve Smith to review our third quarter financial results on Page 4 of the supplemental slides..

Thanks, Bob, and good morning, everyone. As Bob mentioned, we're right on plan for the third quarter and on track to deliver year-end earnings at the upper half of our guidance range. We generated quarterly non-GAAP net operating earnings of about $46 million or $0.14 per share, which compares to about $57 million or $0.18 per share in 2013.

On an operating earnings basis, NiSource was down about $3 million when compared to the same period in 2013. On a GAAP comparison, our income from continuing operations was about $32 million for the third quarter of 2014 versus about $50 million in 2013.

At the segment level, you will see that each of our 3 core business units delivered solid financial results during the third quarter. CPG delivered operating earnings of about $94 million compared to about $99 million in 2013.

CPG's net revenues, excluding the impact of trackers, were up about $19 million, primarily due to growth projects placed into service.

Operating expenses, excluding the impact of trackers, increased by about $25 million, primarily due to higher employee and administrative costs and the current-period impact of a gain on the sale of storage assets in 2013. NIPSCO's electric operations delivered about $90 million in operating earnings compared to about $91 million for the prior year.

Net revenues, excluding trackers, were up about $12 million, primarily due to higher industrial and residential margins and increased environmental investment cost recovery.

Operating expenses, again excluding the impact of trackers, increased by about $12 million due primarily to higher employee and administrative costs and higher electric generation costs. And finally, earnings for the quarter at our Gas Distribution business unit came in at about $1 million compared with a loss of about $1 million for 2013.

Net revenues, again excluding the impact of trackers were up by nearly $17 million, primarily due to increases in regulatory and service programs.

Operating expenses, excluding the impact of trackers, increased by about $15 million due primarily to increased employee and administrative costs and higher depreciation as a result of increased capital spending. These increases were partially offset by lower environmental costs.

Overall, it was another solid quarter for the NiSource team and full details are available in our earnings release posted online this morning. Now turning to Slide 5. I'd like to quickly touch on our financing and liquidity highlights.

As you can see, we retained a strong liquidity position with approximately $900 million of net available liquidity at the end of the third quarter. I'm also pleased to reiterate that our capital program for 2014 remains on track at about $2.2 billion.

And with that, I'll turn the call back to Bob for an update on key initiatives in each of our business units.

Bob?.

Yes. Thanks, Steve. Before opening the call to your questions, I'll touch on a few key execution highlights, starting with CPG on Slide 6.

As we outlined at Investor Day, CPG expects to invest up to $15 billion in modernization and growth projects over the next 10 years, with most major projects currently in execution or in advanced stages of development. Earlier this month, CPG placed in service ahead of schedule and on budget, fully subscribed West Side Expansion project.

With completion of this $200 million project, a portion of the Columbia Gulf System is now fully bidirectional in transporting Marcellus gas south to Gulf Coast and Southeast. CPG also placed in service the approximately $25 million Giles County project. This project supports conversion of a large end-user's coal boilers to natural gas.

Meanwhile, CPG teams are in full execution mode on several transformational growth projects. First and foremost, work is underway on the $1.75 billion Leach and Rayne XPress projects.

These projects will create a major new pathway for delivering about 1.5 billion cubic feet per day of shale production via the Columbia Transmission system, and 1 billion cubic feet per day via Columbia Gulf. Both projects are expected to be in service by the end of 2017.

The team is also advancing the WB XPress project, which is expected to provide another major pathway for delivering shale gas to market.

As we outlined at Investor Day, the WB XPress is an approximately $870 million project to transport about 1.3 billion cubic feet of shale gas on the Columbia Transmission system to pipeline interconnects in the East Coast markets. The project includes capacity to support the Cove Point LNG terminal.

We expect to clear the last remaining condition prior to year's end. We're also quite encouraged by strong customer interest following the nonbinding open season for the Mountaineer XPress project. The project scope is currently being refined, and discussions with potential shippers are on a fast track.

I'd also note that CPG continues to execute on its landmark system modernization program. By the end of the year, the company will file with the FERC to recover costs for the second year of modernization investments.

CPG will place about $330 million in system improvements in service by October 31 and anticipates cost recovery to begin in February 2015. On the midstream front, the team is continuing to capitalize on CPG's strong asset position in the Marcellus and Utica regions. Our team started work on the $120 million Washington County Gathering project.

The project will consist of gathering pipelines and compression facilities in Western Pennsylvania with an in-service date of late 2015. The midstream team also is expanding and optimizing it's Big Pine Gathering System to support Marcellus Shale production in Western Pennsylvania.

We're on track to invest about $65 million in enhancements, which will translate into about 175 million cubic feet per day of added capacity by the third quarter of 2015. So as you can see on all fronts, the CPG team is actively executing against a truly impressive and, indeed, transformational growth agenda.

And speaking of strong execution, let's shift next to our utility businesses starting with NIPSCO, our Indiana electric and natural gas business, summarized on Slide 7.

NIPSCO is continuing to deliver on its business strategy with an inventory of investment opportunities approaching $10 billion for electric infrastructure and $5 billion for gas infrastructure over the next 20-plus years.

During the third quarter, NIPSCO launched its 7-year natural gas modernization program, which is now expected to reach an investment level of $860 million, which complements the company's ongoing $1.1 billion electric system modernization program.

Progress also continued on 2 major NIPSCO electric transmission projects designed to enhance region-wide system flexibility and reliability. Right-of-way acquisition and permitting are underway for both projects.

You'll recall these projects involve an investment of about $0.5 billion from NIPSCO and are anticipated to be in service by the end of 2018. And last but not least, as we shared with you previously, NIPSCO is on plan with its 2 remain electric generating station scrubber projects.

The second scrubber unit at Schahfer Station will be in service by the end of this year, and our Michigan City scrubber is on pace for completion by the end of 2015. These 2 projects are part of more than $850 million in environmental investments recently completed or planned in NIPSCO's generating facilities.

Turning to our gas distribution operations on Slide 8. You can see a similar story of large-scale infrastructure investment paired with complementary regulatory and customer program initiatives. Touching on a few highlights from the quarter. In Pennsylvania, parties to our pending CPA rate case jointly submitted a settlement on September 5.

The proposed settlement provides for recovery of infrastructure modernization investments and would increase annual revenues by about $33 million. Earlier this month, the administrative law judge issued a favorable recommendation to approve the settlement, notably without modification.

We expect the final ruling by the Pennsylvania Commission by year's end. In Virginia, we expect a decision during the first quarter of 2015 on Columbia Gas of Virginia's $25 million base rate case that was filed in April.

And Columbia Gas of Massachusetts remains on track to file a priority pipe replacement plan with the Massachusetts DPU on October 31. Legislation authorizing accelerated recovery of gas infrastructure modernization investments took effect in Massachusetts earlier this year.

Under its plan, CMA expects to begin recovery of 2015 infrastructure investments made under the program in May 2015. So as you can see, the NiSource gas distribution team continues to deliver steady solid progress on a $20 billion inventory of infrastructure opportunities spanning the next 20-plus years. Let me wrap up by reiterating a few key points.

First, we're steadily executing on our plan, and we're again reaffirming 2014 earnings in the upper half of our guidance range. Second, we have an unparalleled long-term infrastructure investment inventory, one that now approaches $45 billion.

And third, we're well on our way towards successfully completing our recently announced separation that will result in the creation of 2 pure-play, highly focused and well-capitalized companies, premier companies that will be better positioned to execute on their distinct strategies and deliver enhanced long-term growth.

Once again, thanks for participating today and for your ongoing interest in and support of NiSource. Michelle, we're ready to open the call to questions..

[Operator Instructions] First question we have comes from the line of Paul Ridzon from KeyBanc..

Just a couple of quick questions. You indicate you're waiting on a legal ruling before you proceed with the MLP.

Is that a PLR? Or is that more informal?.

No. Paul, this is Steve. We're just going through the process with the SEC at this point. We're not waiting for any legal ruling or PLR. We don't need one to proceed with the MLP. It's just part of the registration process that we're going through with the SEC at this point..

Got it.

And then secondly, at the risk of drawing a bread box illusion, can you maybe kind of put a capital number around Mountaineer?.

It could be sizable, Paul. I think you can look at the potential volumes capacity that we're looking at and maybe as a proxy, look at the Rayne Leach or the WB XPress and I think that you would be circling around the so-called bread box..

That's a pretty big bread box..

And I would say, again, we're encouraged but as these projects go, we need to get across the finish line. So the team continues to work hard and stay tuned for more details..

The next question we have comes from the line of Charles Fishman from Morningstar..

Bob or Steve, can you remind me, on the 2 transmission projects that MISO had approved, were those MVP projects where the ROE was pretty much already set?.

That's correct..

Well, then in the recent FERC Order here that FERC is going to hear the challenge to those ROEs, can that be modified? Are those set in stone? How does that work?.

Just a couple of observations. One, I believe that there is a notable decision on a PJM transmission ROE complaint, so we regard that as being instructive, not dispositive but instructive. And so we are now in process around the complaint that you refer to involving our projects.

And so that's going to be a process at the FERC, could be litigated, could be settled. And again, clearly, we got some information from PJM that may or may not be relevant. To your question about the impact on our projects, yes, there could be an impact.

I'm not practicing law here, but I believe that when the complaint -- the date of when the complaint filed is relevant and so there could be a reset back to that date and then going forward.

I'd also observe this, that if you look at the returns on the project the way we have currently conceived or if you looked at other returns that are out there in the electric transmission world, these projects are very, very valuable. They're accretive.

The economics work and so they're very attractive projects we think under virtually any reasonable circumstance..

The next question we have comes from the line of Faisel Khan from Citigroup..

Just a couple of questions. In terms of the West Side Expansion, when is that due to actually come online? I know it's fourth quarter but is that sort of reaching mechanical completion? Or....

It's online..

Is online now?.

Yes, yes..

Was that online as of, like, this month? Or was it -- that happened -- I guess I missed that. Was that August, September? Or was that....

It was midmonth. It was due to be put online under the agreements here at the end of the month versus next month. So again, we were ahead of schedule and on budget for this project..

Okay.

Is that flowing at a full 500 million cubic feet a day?.

We have to get back to you. I think it's on a ramp and will ramp up over a period of time. But we'll ask Randy to get you a sense of what's actually flowing..

Okay. That sounds good. On Rayne and Leach, so have you received all the permits required to begin construction on that? I thought that you had....

No, we're just beginning the process and time elapsed, it's going to take about 3 years, give or take, to get this project from when we contract it to in the ground. So we're just at the beginning or early stages of that process..

Okay. So there's no phasing of it. It's all -- it will all sort of light up at the same time in the fourth quarter of '17 and so....

I didn't really say that. Now there could be some phasing of transportation depending on what part we're talking about and when. So again, we can provide more color down the road when we get a little bit more detail on the project, but there could be opportunities for that..

Sir, you have no further questions at this time. [Operator Instructions] We have no further questions at this time. I would now like to turn the call over to Mr. Bob Skaggs for closing remarks..

Yes, thanks, Michelle. And to everyone, thanks again for your participation and interest. We look forward to seeing most, if not all of you, in a couple of weeks at EI [ph]. So again, thanks. Have a good day..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Please enjoy the rest of your day..