NiSource Inc. Earnings Call Nuggets: Westside/Eastside Projects, Utica

On Tuesday, NiSource Inc. (NYSE:NI) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Westside/Eastside Projects

Paul Ridzon – KeyBanc: It looks like the Westside project is a (goal) that’s 220 of capital that we’re taking up incrementally on this call, right?

Robert C. Skaggs Jr. – President and CEO: That’s correct, in-service late 2014, Paul.

A Closer Look: NiSource Earnings Cheat Sheet>>

Paul Ridzon – KeyBanc: I know it’s early but can we expect the Eastside project to be a similar capital magnitude?

Robert C. Skaggs Jr. – President and CEO: It will be in that area code. We’re sizing the project as we talk with potential counterparties and there’s a possibility that it could come in north of that number.

Paul Ridzon – KeyBanc: It sounds like you’re pretty deep in discussions with your JV partner. There is one player in the Utica who has been in the news lately for not good reasons. Can you comment as to whether that could be a partner?

Robert C. Skaggs Jr. – President and CEO: That is not the counterparty that we are working with. We are working with someone that is widely recognized, widely respected, and I believe that you will see that counterparty quite well.

Paul Ridzon – KeyBanc: Then lastly, what’s your latest expectation of when you’ll tap your forward equity sale?

Glen L. Kettering – SVP, Corporate Affairs: We are looking to do that in the second half of year, Paul. So, we issued that in September of 2010, so we will tap that before that date.

Paul Ridzon – KeyBanc: Before September 12th?

Glen L. Kettering – SVP, Corporate Affairs: Yeah.


Stephen Maresca – Morgan Stanley: Just to follow-up on the potential project in Utica – liquids rich portion of the Utica. So, I guess, there is one counterparty you are working with is it something what you are looking or would potentially get a long-term commitment and can talk about sort of types of return you would potentially see on the project and the orientation of revenues is it going to be more fee based or is it something where you’d be willing to take a little bit of commodity exposure?

Robert C. Skaggs Jr. – President and CEO: Just to maybe begin at the back end of your questions. It would certainly be fee-based. The construction that we anticipate would be supported by a dedication of upwards of 100,000 acres. The investment would be made over period of time as the production ramps up. The returns – Steve just gave me a (clue) here on the return, you may recall that we’ve topped between 12% and 15% pre-tax ROIC sorts of hurdle rates. Again, we would anticipate that this project will be consistent with that return profile.

Stephen Maresca – Morgan Stanley: Generally, a little color on how you see the landscape right now in that region in terms of competitiveness for projects for labor for materials?

Robert C. Skaggs Jr. – President and CEO: I would say that we still see an elevated level of activity throughout that wet window of the Utica. We also see a very competitive landscape in that area. We feel like our competitive edge is the acreage position that we bring to the table in the wet portion, as well as our pipeline right away position in the area. For contractor suppliers and like it too is competitive but we’ve not seen what I would characterize as unreasonable spikes in costs.

Stephen Maresca – Morgan Stanley: Then in terms of financing this, would you anticipate any other additional financing these other than what capacity you have on for liquidity and obviously the forward equity sale?

Robert C. Skaggs Jr. – President and CEO: We feel like that will hold us for the foreseeable period.

Stephen P. Smith – EVP and CFO: Yes and we’re also planning to do $500 million debt issuance in the latter half of 2012, which we spoke of on our Annual Call on February 1. So with that, the $500 million long term debt issuance in the equity forward, we’re in good shape.

Robert C. Skaggs Jr. – President and CEO: Steve, you just round out that answer, you may want to also mentioned that we have maturities that we get at the end of this year and early next year, so…

Stephen P. Smith – EVP and CFO: Right, we have a $315 million maturity in November and approximately $480 million maturity in February of 2013. So, with the $500 million long-term debt issuance in the second half of the year, the equity draw which we spoke of earlier by September 2012 and the residual benefits of bonus depreciation will be in good shape from a financing perspective.

Stephen Maresca – Morgan Stanley: Final on this, would you expect to be issuing a press release upon timing? Is that how we’ll find out about this?

Robert C. Skaggs Jr. – President and CEO: That’s correct.

Stephen Maresca – Morgan Stanley: Last question from me, just update on customer discussions for the modernization project, how the discussions are going, what customers are saying and any sort of color there? That’s it from me.

Robert C. Skaggs Jr. – President and CEO: I would just repeat what I said in the prepared remarks that we’re fully engaged in a series of discussions with a large stakeholder group. Those discussions are ongoing. As you can appreciate, I’m not in a position to provide color on those discussions. These are confidential negotiations, it’s a process. We appreciate all the stakeholders’ involvement, their good faith efforts to reach new agreement. So at this point, all I can talk to is process, it’s ongoing, and again, the hope would be that we’d be in a position to file an agreement with the FERC by mid-year and we’d have FERC approval by year’s end.