NiSource has reported net operating earnings of $170.2 million, or 62 cents per share, for the first quarter of 2009, compared with the net operating earnings of $189.4 million, or 69 cents per share, in the year-ago quarter. Operating earnings were $369.4 million, compared to $394.8 million for the same period in 2008.

On a GAAP basis, the company has reported income from continuing operations for the first quarter of 2009 of $159.3 million, or 58 cents per share, compared with income from continuing operations of $189.5 million, or 69 cents per share, in the year-ago quarter. Operating income was $348.3 million for the first quarter of 2009, compared with $394.9 million in the year-ago quarter.

NiSource president and chief executive officer Robert C. Skaggs, Jr. noted that, as anticipated, the most significant impact on NiSource’s first quarter earnings results was an increased pension expense of $25 million (or about 6 cents per share) related to the deterioration in global securities markets in 2008.

Despite challenging economic conditions, NiSource produced another solid quarter of core earnings, while continuing to execute key financial, regulatory and infrastructure enhancement initiatives, Skaggs said. Our first quarter earnings are consistent with the company’s previously announced net operating earnings outlook of $1.00 to $1.10 per share for 2009, and our year-to-date accomplishments serve to underscore our continued commitment to preserving – and executing on – the core elements of our business strategy.

Skaggs highlighted several of NiSource’s important recent accomplishments:

Enhancing a Solid Liquidity Position

During the past several months, the company has successfully accomplished against its earlier announced financing and liquidity plan:

— On April 9, 2009 the company’s finance subsidiary, NiSource Finance Corp., closed on a senior unsecured term loan under attractive terms with a syndicate of lenders. The initial February closing of the term loan was at $265 million, and the company was successful in expanding the loan to $385 million at final closing in April 2009 under an accordion feature in the financing agreement.

— On March 9, NiSource Finance Corp. issued $600 million of senior unsecured notes in an underwritten offering. NiSource will use the proceeds from the issuance to complete the refinancing of outstanding debt intended to mature in November 2009 and for general corporate purposes, which includes refinancing a portion of outstanding debt scheduled to mature in November 2010

— On April 28, 2009 NiSource Finance Corp. announced results of a tender offer for up to $300 million aggregate principal amount of its outstanding notes due in 2010. The aggregate principal amount of notes tendered was about $250 million, which will decrease the company’s interest expense through November 2010 by about $30 million.

— On March 30, 2009 Northern Indiana Public Service Company (NIPSCO) filed an amended petition with the Indiana utility regulatory commission (IURC) seeking permission to issue $120 million of long-term debt to finance the Sugar Creek electric generating facility, which was acquired last year. A hearing before the IURC is scheduled for June 30, 2009. NiSource is continuing to assess financing opportunities at other operating subsidiaries.

— Also during the quarter, the company’s business units undertook a number of efforts to manage spending and optimize funds from operations. Regarding these efforts, NiSource Gas Transmission & Storage, on February 27, 2009 declared a restructuring plan to better focus on core business activities and increase efficiency, while maintaining safe and reliable service to its customers.

NiSource’s overall liquidity strategy, including our recent financial and optimization initiatives, not only fully addresses the company’s 2009 debt refinancing requirements but also places us well on our way toward meeting our remaining 2010 refinancing needs of about $690 million, Skaggs said. In light of the steps we have taken and are continuing to take, I am confident NiSource will maintain a solid liquidity position going forward.

Skaggs also noted that, on March 5, 2009 credit rating agency Standard & Poor’s announced that it had affirmed NiSource’s BBB- investment grade corporate credit rating and, notably, revised its outlook to stable from negative. We appreciate this recognition that NiSource is executing on its comprehensive strategy to maintain financial flexibility and delivering on our core business commitments, Skaggs said.

Growth, Infrastructure Investments and Regulatory Initiatives Continue to Progress

The company’s business units also continued to advance key growth and infrastructure enhancement programs, synchronized with complementary regulatory and commercial initiatives:

— NIPSCO received a favorable regulatory order on February 18, 2009 related to its actions to raise its electric generating capacity and advance its electric rate case. Acting on a settlement reached among NIPSCO and its regulatory stakeholders, the IURC ruled that NIPSCO’s Sugar Creek electric generating plant was in service for ratemaking purposes as of December 1, 2008. The IURC also accepted the deferral of depreciation expenses and carrying costs related with the $330 million Sugar Creek investment until such time as the IURC recognizes the plant in NiSource’s rate base through revised rates.

— Progress also continued on NIPSCO’s electric base rate case – NiSource first in 20 years. Initial hearings were held in the proceeding in January 2009, and a public hearing on the case was conducted in March. Intervening parties have until May 8, 2009 to file testimony. A final round of evidentiary hearings is scheduled for this summer, with the case anticipated to be resolved, and new electric rates effective, by late 2009 or during the first quarter of 2010.

Successful resolution of the NIPSCO rate case remains a very high priority for NIPSCO chief executive officer Eileen O’Neill Odum and the entire NIPSCO team this year, Skaggs said. While much work remains ahead of us, I am pleased with the progress we are making to establish a solid foundation for NIPSCO and position it to contribute to NiSource’s growth going forward.

At NiSource’s Gas Transmission & Storage (NGT&S) unit, work also continued on the expansion of new growth projects and the maximization of value from the company’s existing asset base.

— In southwestern Pennsylvania, NGT&S unit Columbia Gas Transmission started raising its transportation capabilities to provide market access for an additional 150,000 dekatherms per day (Dth/d) of gas from the Marcellus shale production area. Particularly, Columbia gas transmission is modifying its Waynesburg Compressor station and parts of its line 1570 in Allegheny and Washington counties to facilitate it to transport further natural gas supplies to market. The initial phase of firm transportation service started in the third quarter of 2008, with additional increments planned to be placed in service through mid-2010.

— In conjunction with a March 2009 open season, NGT&S unit Columbia Gulf Transmission concluded the addition of 95,000 Dth/d of contracted capacity for delivery to the Florida gas transmission system near Lafayette, La. The new capacity is in addition to 145,000 Dth/d of capacity already subscribed for delivery to Florida Gas Transmission.

— On March 25, the federal energy regulatory commission (FERC) issued a certificate authorizing Columbia gas transmission to increase its Ohio storage facilities to meet growing demand for natural gas storage and transportation services in NiSource’s Mid-Atlantic markets. The Ohio storage expansion project will raise Columbia Gas.