Randy G. Hulen - Vice President of Investor Relations Robert C. Skaggs - Chief Executive Officer of CPP GP LLC and Director of CPP GP LLC Stephen P.

Smith - Chief Financial Officer of CPP GP LLC, Chief Accounting Officer of CPP GP LLC and Director of CPP GP LLC Joseph Hamrock - Executive Vice President and Group Chief Executive Officer of Gas Distribution Segment.

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division Steven I. Fleishman - Wolfe Research, LLC Christopher P. Sighinolfi - Jefferies LLC, Research Division.

Good day, ladies and gentlemen, and welcome to the NiSource Q1 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Randy Hulen, VP of Investor Relations. Sir, please begin..

Thank you, and good morning. On behalf of NiSource and Columbia Pipeline Partners, I would like to welcome you to our quarterly analyst call. Joining me this morning are Bob Skaggs, Chief Executive Officer; Steve Smith, Chief Financial Officer; and Jo Hamrock, currently Executive Vice President and Group CEO.

Soon to be, Joe will be taking on the role of the NiSource CEO after our plant separation. As you know, the primary focus of today's call is to review NiSource's financial performance for the first quarter of 2015 as well as provide an overall business update.

Following the NiSource prepared remarks, we also will share a brief overview of the first quarter results for Columbia Pipeline Partners, which were also released this morning. We will then open the call to your questions. At times during the call, we will refer to the supplemental slides available on our website.

And finally, 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. With all those items out of the way, I'd like to now turn the call over to Bob Skaggs..

Thanks, Randy. Good morning, and thank you for joining us. We have a crisp agenda today. I'll touch on several key strategic takeaways. Steve will review our financial results, and then Joe and I will share key execution highlights for NiSource's utilities and CPG.

If you'll turn to Slide 3 in the supplemental deck that was posted online this morning, you'll see a few key takeaways for the quarter as well as an update of the separation of NiSource and Columbia Pipeline Group. For the quarter, results were solidly in line with our plan.

The NiSource team delivered $0.85 per share non-GAAP in the first quarter versus $0.82 per share in 2014. Our teams also continued to execute on core infrastructure investment plans at all of our businesses, and capital expenditures across our utility and pipeline segments remain on track.

As a reminder, for 2015, we expect a record spend of $2.4 billion. We also remain on track to complete the separation of NiSource and CPG, which we anticipate will happen on July 1, 2015. At the time of the separation, shareholders are expected to receive 1 share of Columbia Pipeline Group common stock for each share of NiSource common stock.

As you know, the transaction is expected to be tax free for shareholders and the company. In preparation for the separation, experienced leadership teams have been named for both companies, and just recently, the respective NiSource and CPG executive teams discussed their go-forward financial plans with the 3 major credit-rating agencies.

As we said when we announced the separation, we expect both companies will be investment grade. Current expectations are that CPG will be formally rated prior to its May debt recapitalization transaction. And the NiSource's credit ratings will be addressed at or about the time of separation.

With each step in the separation process, including the debt recapitalization process, we're positioning NiSource and CPG to be ranked among the leaders in their respective business segments.

We expect both will be well capitalized and have robust and transparent, long-term growth plans, growing dividends and solid leadership and the capacity and focus to deliver enhanced, long-term growth. To profile the business strategies and growth plans of the respective companies, we've scheduled 2 separate webcasts on Thursday, May 14.

First, Joe Hamrock and team will provide an overview of NiSource's pure play utility business, including its investment opportunities and its commitment to customers and the communities it serves. Following the NiSource call, CPG's executive team will host a similar call.

The team will highlight CPG's solid core business, its strategically located assets and its portfolio of transformational modernization and growth opportunities. The NiSource webcast will start at 9 a.m. and the CPG webcast will begin at 10:30 a.m., both Eastern Time. The event with the company presentations will be available at www.nisource.com.

In addition to the May 14 webcast, we'll maintain regular communication regarding the separation process through our normal channels, including press releases and filings with the SEC. Now I'll turn the call over to Steve Smith to review our first quarter financial results highlighted on Page 4 of our supplemental slides..

Thanks, Bob, and good morning, everyone. As Bob mentioned, we delivered non-GAAP net operating earnings of about $268 million or $0.85 per share, which compares to about $258 million or $0.82 per share in the first quarter of 2014. On an operating earnings basis, NiSource was up about $20 million.

On a GAAP comparison, our income from continuing operations was about $268 million for the first quarter versus about $266 million for the same period in 2014. At the segment level, you will see in today's release that each of our 3 core business segments delivered financial results in line with our expectations during the first quarter.

CPG delivered operating earnings of about $163 million compared to about $159 million in 2014. CPG's net revenues, excluding the impact of trackers, were up about $22 million, primarily due to new growth projects placed into service and new firm capacity contracts.

NIPSCO's electric operations delivered about $67 million in operating earnings compared to about $74 million in the same period in 2014. Net revenues, again excluding trackers, were relatively flat, due primarily to lower off-system sales. And finally, our Gas Distribution business came in at about $306 million compared to about $280 million in 2014.

Net revenues, again excluding the impact of trackers, were up about $43 million. As the numbers attest, we continue to deliver solid financial results. Full details of our results are available in our earnings release issued and posted online this morning. Now turning to Slide 5. I'd like to briefly touch on our financing and liquidity position.

We retained a strong liquidity position with approximately $2 billion of net available capacity as of March 31. Of our $2.4 billion capital investment program planned for 2015 at NiSource and CPG, approximately 80% of these investments are focused on revenue-generating opportunities.

Our debt to capitalization remains solid at about 54% as of March 31. And as Bob mentioned, we remain on track with the NiSource, CPG separation, including establishing a strong financial foundation with expected investment-grade credit ratings. A CPG long-term debt offering of $2.75 billion and the NiSource tender transaction will begin soon.

As we've noted previously, the proceeds of CPG's debt offering will be used to fund a one-time cash distribution to NiSource prior to the separation. With that, I'll turn the call back to Bob and Joe to discuss a few execution highlights from our business segments..

Thanks, Steve. I'll start with highlights for CPG on Slide 6, and then Joe will cover highlights for NIPSCO and our gas utilities. The CPG team continues to advance the steady stream of transformational growth projects, which are in addition to its landmark modernization program.

The latest news on that front includes the completion of an open season for 2 major regulated transmission projects and the development of a new midstream project.

We're happy to report that we have a critical mass of firm customer commitments in place following the binding open season for the Mountaineer and Gulf XPress projects which concluded on April 23.

As a reminder, these 2 projects would involve an investment of approximately $2.6 billion and would add 2.7 billion cubic feet per day of transportation capacity on Columbia Gas Transmission and nearly 900 million cubic feet per day of transportation capacity on the Columbia Gulf System.

And on the midstream front, our team commenced discussions with a major producer on another dry gas gathering trunk line in southwestern Pennsylvania. Once we have all the details confirmed, we'll provide an update on this exciting new project. All of CPG's other in-progress modernization, growth and midstream projects remain on track.

You'll recall that CPG's targeted capital investment level for 2015 is approximately $1.1 billion. A full highlight of our in-flight growth projects can be found on Pages 13 and 14 of the supplemental deck. With that, let me welcome Joe Hamrock to the call.

Joe?.

Thanks, Bob, and good morning, everyone. Let's shift first to NIPSCO, our Indiana electric and natural gas business, summarized on Slide 7.

The NIPSCO team is continuing to deliver on our customer-focused strategy of investment opportunities approaching $10 billion for electric infrastructure and $5 billion for gas infrastructure over the next 20-plus years.

The FGD unit under construction at NIPSCO's Michigan City Generating Facility is on schedule to be placed in service by the end of 2015. Following the completion of the Michigan City unit and with those we placed in service over the past 2 years, all of NIPSCO's coal-burning facilities will be fully scrubbed.

NIPSCO's 2 major electric transmission projects are also progressing as planned. Right-of-way acquisition and permitting are underway for both projects, and preliminary construction began on a 345-kv Reynolds-Topeka line.

You'll recall these projects involve an investment of about $500 million for NIPSCO and are anticipated to be in service by the end of 2018. We remain on track and committed to our Indiana electric and gas modernization programs. As set forth in our TEDUS [ph] plan, we have about $190 million in planned spend this year.

These investments help ensure continued safe, reliable and affordable service to customers. And as you likely saw earlier this month, the Indiana Court of Appeals issued a ruling regarding some of the elements of the approved electric modernization plan.

The court upheld key components of the commission's order, and one item related to the level of investment detail within the order will need to be revisited as part of the regulatory and legal process. As the first utility to file a plan under the TEDUS [ph] Statute, we recognized the potential for temporary delay.

We're evaluating the rule and remain committed to our modernization investments, which are essential to our ongoing plan for upgrading our system to serve [indiscernible] now and into the future.

NIPSCO's agenda remains focused on customer service and high-value targeted programs that enhance the reliability and environmental performance of its systems. Investments in our electric infrastructure are expected to reach nearly $400 million in 2015. 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 programs. Touching on a few regulatory highlights in recent months.

In March, Columbia Gas of Pennsylvania filed a rate case with the Pennsylvania PUC to support continuation of our well-established infrastructure modernization and safety programs. If approved as filed, the case would increase annual revenues by approximately $46 million. We expect a decision in that case later this year.

Columbia Gas of Massachusetts filed a rate case on April 16 with the Massachusetts Department of Public utilities, seeking an annual revenue increase of approximately $49 million. The filing reflects the company's commitment to maintain natural gas safety, customer service and reliability.

A decision is expected in the first quarter of 2016 in that case. Also in Massachusetts, later today, we expect the decision from the DPU for our 2015 Gas System Enhancement Plan. Cost recovery associated with the 2015 investments outlined in the plan would begin tomorrow and increase annual revenues by approximately $2.6 million.

And Columbia Gas Virginia settled rate case remains pending before the commission. A final order on the $25 million revenue increase is expected later this year. In more recent news, just last week, the Public Utilities Commission of Ohio approved Columbia Gas of Ohio's annual infrastructure replacements and demand side management rider.

The rider provides for recovery of its well-established pipeline replacement program and energy efficiency program investments. So overall, we expect to invest approximately $900 million during 2015 across our company's Gas Distribution businesses.

These investments help improve reliability and safety for our customers and communities, provide additional customer access to natural gas service and reduce emissions. Through well-established recovering mechanisms in all 7 states, these investments are expected to generate incremental revenue and sustainable returns for shareholders.

So in summary, NiSource gas and electric utilities are in full execution mode on all fronts and very well positioned for the future. Thanks, again, Bob. And I'll hand things back to you..

Thanks, Joe. As you can see, continued solid performance on a strong, well-established growth strategy. Before briefly discussing the results of Columbia Pipeline Partners and opening the call to your questions, let me reiterate several key points. We remain focused on and are on track with our current business and customer plans.

We remain on track with the CPG separation scheduled for July 1. We expect both companies will be well financed and very well positioned to execute on their distinct strategies. And now, a couple of dates and actions related to the separation that I should highlight once again.

We expect to receive our CPG credit ratings in a matter of days, and after securing these ratings, we'll initiate the debt recapitalization process, including CPG issuing its own long-term debt and a separate tender offer for NiSource debt.

On May 14, as I mentioned earlier, NiSource and CPG will host separate webcast to outline a respective growth strategies and associated infrastructure investment opportunities. In early June, we anticipate that we'll confirm the distribution record date, the effectiveness of the Form 10 and the so-called when issued trading period.

All of these would culminate with the planned distribution of shares on July 1, 2015, and CPG trading on its own the following day. We look forward to diving deeper into these dates and actions during our May 14 webcast. With those highlights, Steve will now briefly discuss Columbia Pipeline Partners' results..

Thanks, again, Bob. As you know, we successfully completed CPPO's IPO in February, which raised approximately $1.2 billion. And just yesterday, we announced the prorated cash distribution of about $0.09 per unit to holders of record as of May 13. This distribution corresponds to the minimum quarterly distribution of $16.75 per unit, or $0.67 annually.

This morning, we issued a news release highlighting CPPL's results for the post-IPO period. As you know, the key drivers for the period mirror the key drivers of NiSource and CPG business segment. And our adjusted EBITDA's consistent with our expectations for the quarter.

These results are squarely on par with CPPI's strategy for delivering value to unit holders and remains consistence with our guidance for the year that was presented in our registration statement.

Bob?.

Thanks, Steve, and thank you all for participating today and for your ongoing interest in and support of NiSource and Columbia Pipeline Partners. Today, we're ready to open the call to questions..

[Operator Instructions] Our first question comes from the line of Paul Ridzon of KeyBanc..

How big was the gain last year on the mineral sale?.

This is Steve, Paul. It was approximately an aggregate $35 million or so..

That's pretax?.

Yes..

And this quarter, we saw off -system sales and industrial decline.

I imagine the industrial is steel related, what drove the off-systems sales decline?.

Yes, it was approximately $10 million lower quarter-over-quarter. And it's just lower opportunities to realize off-system sales. I think, industrials managed the winter months much better this quarter than they did last year at this time..

Paul, this is Joe. On the industrial side, you're right, some of it's steel, but a lot that was related to last year's Polar Vortex and some self-generation, of some of the industrial segment not running, so a little more opportunity for us in that segment last year.

So you'll see some flattishness in the industrial sector but nothing as significant relative to plan..

Can we have a little more color on the new project in southwest PA that you highlighted?.

Not a lot more color on it. It's a backbone-gathering system. The need for the system is driven by the robust results of Utica drilling in that region. It's going to be anchored by one key tenant, but likely to have additional folks requiring capacity. It could be as large as a bee a day.

So I think, it's again, just evidence that the gas is there, the demand for capacity to get the gas out of the region is there. So we're bullish..

Is this hundreds of millions of dollars of investment?.

Yes. Yes and this is very much a zip code sort of range, but $275 million to $300 million is the bracket we put on it at this point..

And then, I guess, for the past couple of years, May has been the time period when you looked at dividend increases.

It's kind of we look for something in conjunction with your webcasts?.

We're certainly going to be providing detailed on our approach, growth rates and the like on May 14. So yes, stay tuned..

Our next question comes from the line of Steven Fleishman of Wolfe Research..

So just on Mountaineer, it just sounds like everything is going well.

And when will you be more specific on full kind of cost of project and it's definitely going forward?.

Yes. We'll obviously provide additional details during the May 14 webcast. We expect board outs to clear at the end of June. So stay tuned shortly after June for much, much more detail, but certainly, May 14 will be instructive..

Okay. Maybe -- and pardon if this needs to wait till May 14.

But one thing that you guys seem to be different than maybe many other peer companies is just the extent of organic growth off your system with a huge amount of projects, it seems like you're doubling or tripling your size?.

Tripling the size..

Tripling the size.

How are you thinking of kind of addressing that relative to thinking about peer groups of other pipelines?.

Yes. On May 14, we're obviously going to draw the distinction in and around Columbia Pipeline Group. And we will be referencing a group of peers, and as you would expect, they are the usual big players in the space, but we'll certainly be making the point that -- who we think we comp against, how we comp.

And so you'll see that complete profile in the 14th..

And when you give visibility out, because in theory if you're looking today, you're a lot different today than you're going to be a few years from now.

So will you be able to give visibility out?.

Yes, to that point, expect long-term visibility as you're suggesting in your question much of this growth peaks in '17, '18 and then we see cash flowing '19 and '20. So to appreciate the full CPG story, you really need to look at the company and its performance over that longer period of time. So clearly, we expect to do that. We will do that.

I think there will be plenty of granularity near term, long term, medium term, so the folks are going to have a good basis to assess the company and its growth..

Okay. That's great.

And just -- this might have been addressed, but the appeal in Indiana on the monetization program, just how does this kind of go from here after that court ruling and does it change anything that you're doing in the meantime?.

Steve, this is Joe. It doesn't change anything we're doing. We remain committed to the investments and are working with the stakeholders as we always do to evaluate the options for moving forward, but we see a number of potential options.

And we see this generally as a ruling that upholds the core of the statute in the quarter, the framework and just asked the commission to take a look at the long-term plan details to reaffirm the plan ultimately. So we see it as ultimately supportive and a temporary delay..

[Operator Instructions] Our next question comes from the line of Chris Sighinolfi of Jefferies..

I don't know if this is a question for you or for Steve or for Joe. But in terms of how we think about the debt recap. I know if I look at the balance sheets you guys put out this morning, and I think about what you've told us, I think at the Analyst Day, it was around a $3 billion debt recap.

I heard Steve correct it, it's more like $2.75 billion now, is that right?.

to pay an intercompany dividend of around $1.5 billion to NiSource, and then to pay off intercompany debt with NiSource in $1 billion range.

And NiSource is going to take that payment, both the dividend and the repayment of intercompany debt and use that to execute a tender offer for approximately $750 million or so of NiSource's debt over the next 30 days or so. So that's the high-level plan on the recapitalization front..

Okay.

And is that -- Steve, is that just driven by a sort of a targeted debt loan on a pro forma NiSource business as you see it, in conversations with the rating agencies, or what would sort of shape any deviation from that?.

Chris, I don't see a lot of deviation in that calculus. We've worked very diligently with the rating agencies as we always do on our long-term financial plans and feel that the size of this transaction adequately addresses; the balance sheets for both companies going forward and puts them in that solid investment-grade rating range going forward..

Okay, great. I'm sure we'll have more detail on all fronts on the 14th. So I'll hold a lot of my questions for that, but I do just have one question with regard to the CPPL release this morning.

Is the maintenance CapEx number that was reported for the first quarter, is that sort of pro forma for the time period in which CPPL was public, or was that the full quarterly number? And if it was the fourth full quarterly number, is there something -- I know you guys had guided, I think, 130 for the full year, so it looks like it's sort of a slower pace..

Yes, Chris, Bob. The 130 number for the year holds. That's correct number.

What about the quarter?.

On the quarter, well, I think, it's both the predecessor company and the post-IPO period. So those 2 pieces are cut into 2. We'll get you that exact number..

Yes, we'll follow up with you, Chris, to confirm..

We have a follow-up question from the line of Paul Ridzon of KeyBanc..

We've heard a lot about reduced activity in the Bakken and in other regions.

What are you seeing in your territories?.

Widely publicized that the producers in our neck of the wood have dialed back drilling activity in 2015, and you'll see numbers of 30%, 40%, you'll see some folks that have held the line, if not maybe increased marginally. But we have seen what we consider to be prudent dialing back off of drilling.

Having said that, Paul, I think Mountaineer XPress, Gulf Xpress, that new midstream project that we announced today affirms that the producers continue to be very, very bullish on the region, and they still expect production increase year-over-year, and certainly, increase in '17, '18, '19 and the balance of the decade.

So prudent dialing back, but still strong, strong commitment to the Marcellus and Utica region..

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Bob Skaggs for closing remarks..

Thanks so much. And to everybody on the call, again, we appreciate your participation and your support. And we certainly look forward to chatting with you on May 14, both at NiSource and Columbia Pipeline Group. So thanks. Have a good day. We appreciate it..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day..