By KEVIN NEVERS

NiSource Inc. is reporting a net income of $331.4 million or $1.21 basic earnings per share for 2006, compared to $282.2 million or $1.03 basic earnings per share for 2006.

For the fourth quarter of 2007 NiSource is reporting a net income of $77 million or 28 cents basic earnings per share, compared to a net income of $62.5 million or 23 cents basic earnings per share in the year-ago period.

NiSource is also reporting income from continuing operations in 2007 of $322 million or $1.18 per share, compared to $313.5 million or $1.15 per share in 2006. “The increase in earnings was primarily due to increased revenues across all business segments, which includes favorable weather versus last year . . , partially offset by $33.5 million accrued for the purchase power settlement reached with regulatory stakeholders and large industrial customers relating to power purchased by NIPSCO to meet growing market conditions,” the company said in a statement released today.

For the fourth quarter of 2007 NiSource is reporting income from continuing operations of $74.9 million or 23 cents per share, compared to $92.4 million or 34 cents per share for the year-ago period. Fourth-quarter 2007 results include a $40.6 million loss on early extinguishment of $292.1 million of debt, the company said.

“During 2007, our core natural gas and regulated electric operations each produced higher revenues, while our Whiting Clean Energy facility delivered significantly improved performance,” NiSource President and CEO Robert Skaggs Jr. said. “In addition to delivering business results above our outlook for 2007, our teams made significant strides during the year to clear the decks of a number of distracting legacy issues and to reposition our company to deliver on our fundamental long-term growth initiatives. With that foundational work largely completed, each of our business segments is now poised to do what they do best—and that is to execute on the key elements of our Path Forward strategy to become North America’s premier regulated energy company.”

Some Comments

Last year both Moody’s and Standard & Poor’s confirmed investment grade ratings for NiSource of Baa3 and BBB respectively. “While obviously we would prefer to have retained our prior ratings levels, we nonetheless are encouraged by the favorable view of NiSource’s business profile expressed by the ratings agencies,” Skaggs said.

Skaggs did say that several initiatives begun in 2007 are likely to put pressure on earnings in 2008, including the planned acquisition by the Northern Indiana Public Service Company of the Whiting Clean Energy facility and the Sugar Creek Power Plant in Terre Haute for a total estimated cost of $539 million. “For example, our planned acquisition of new generating facilities will impact earnings prior to the effectiveness of our electric rate case. Having said that, with our electric and commercial initiatives firmly in queue, we are excited about the prospects for long-term earnings growth for NiSource.”

NiSource also took note of its restructured agreement with IBM, under which a host of corporate functions which had been outsourced to IBM are being returned to NiSource. “Going forward, NiSource will be in a position to more effectively manage its employee and administrative expenses, while ensuring delivery of services to meet the company’s needs,” the statement said.

NiSource is projecting the lower end of the range for basic earnings per share from continuing operations to be $1.23 per share “due to transition costs associated with the amended IBM agreement that are projected to impact 2008 by approximately 2 cents per share.”

“We believe that range reasonably reflects NiSource’s near-term earnings expectations as our Path Forward strategy unfolds over the course of the next few years,” Skaggs said. “Thereafter, we expect our ongoing capital investment program and our growth projects currently in the pipeline to begin producing meaningful and sustainable annual growth in earnings per share.”

By Segment

•Operating income from gas distribution operations in 2007 was $332.8 million, compared to $290 million in 2006. For the fourth quarter of 2007 it was 101.6, compared to $121.6 million in the year-ago period. NiSource attributed the improvement to customer growth and regulatory initiatives.

•Operating income from gas transmission and storage operations in 2007 was $362 million, compared to $340.8 million in 2006. For the fourth quarter of 2007 it was $112.5 million, compared to $82.6 million in the year-ago period. NiSource attributed the improvement to higher net revenues and equity earnings from unconsolidated affiliates.

•Operating income from electric operations in 2007 was $278.3 million, compared to $310.4 million in 2006. For the fourth quarter of 2007 it was $55.1 million, compared to $70.7 million in the year-ago period. NiSource attributed the decrease to several factors, including the purchased power settlement higher operating expenses, higher electric generation and maintenance expenses, and restoration costs associated with several severe storms.

•Operating income from other operations in 2007 was $8.1 million, compared to an operating loss of $40.2 million in 2006. For the fourth quarter of 2007 it was $7.4 million, compared to an operating loss of $26.4 million in the year-ago period. NiSource attributed the improvement primarily to improved results at the Whiting Clean Energy facility.

•NiSource reported an operating loss from corporate in 2007 of $32.4 million, compared to an operating loss of $21 million in 2006. For the fourth quarter of 2007 the operating loss was $18.6 million, compared to $32.4 million in the year-ago period.

Posted 1/30/2008