EXHIBIT 99.1
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NISOURCE
DOING WHAT WE DO BEST
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FOCUSING ON OUR REGULATED ASSETS
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* Strategic Location
- 30% population / 40% of U.S.
energy consumption
* Third Largest Gas Distribution
Company in the U.S.
- 3.2 million customers - 9 states
* Fourth Largest Gas Pipeline
Company in the U.S. [MAP OF EASTERN UNITED STATES
- Over 16,000 miles interstate DEPICTING ENERGY CORRIDOR]
pipelines
* One of the Largest Gas Storage
Networks in the U.S.
- Over 670 Bcf (Market Area)
* Mid Size Regional Electric Business
- Over 436,000 customers
- 3,400 MW generating capacity
* 98% of Operating Income from
from Regulated Operations
[NiSource logo]
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EXITING NON-CORE ACTIVITIES
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PRE-MERGER YEAR-END 2002
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Columbia LNG
Columbia Retail
Columbia Electric
Market Hub Partners =
Miller Pipeline =
Columbia Propane =
Columbia Petroleum ======= OVER $2 BILLION
Portland Natural Gas Transmission = IN NON-CORE
SM&P/UTI - Locating Business = ASSET SALES
IWC Resources - Water Utility =
TPC - Gas Trading
Energy USA Propane
E&P Joint Venture in New York State
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BALANCING OUR RISK
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2002 OPERATING INCOME
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$1.2 Billion
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[Pie graph depicting percentage of 2002 Operating Income]
Regulated Gas
Distribution 38%
Regulated Gas
Transmission 33%
Regulated Electric
Operations 27%
Other <2%
98% of Operating Income from Regulated Businesses.
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STRENGTHENING OUR GAS DISTRIBUTION
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* Industry-leading scale
* Diversification of customers
and states
* Favorable overall regulatory
[MAP OF NORTHEASTERN environment
UNITED STATES DEPICTING GAS - Customer choice
DISTRIBUTION SERVICE AREAS]
* Strong regulatory relationships
- Incentive opportunities
* Vertical integration with
transmission / storage
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INTEGRATING OUR
TRANSMISSION / STORAGE
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* One of the largest integrated
systems in U.S.
- Over 670 Bcf of storage
(Market Area)
* Majority of capacity sold to
LDCs
[MAP OF NORTHEASTERN
UNITED STATES DEPICTING * Competitive cost structure vs.
STORAGE FACILITIES AND other pipeline systems in the
VARIOUS PIPELINES WITH LEGEND] Mid-Atlantic region
* Unique web-like network
benefits from integrated
storage and access to supply
* Millennium Pipeline project to
supply gas to New York/New
England markets
[NiSource logo]
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CAPITALIZING ON OUR
ELECTRIC GATEWAY
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* Vertically integrated utility
- Near-term deregulation
unlikely
- Industrial customers
contributed less than 15% of
the electric LTM gross margin
* Low-cost portfolio of coal-
fired generation (3,400 MW)
* Rate settlement in place for
[MAP OF EASTERN UNITED STATES next 4 years
DEPICTING FLOW FROM NORTHERN
INDIANA TO THE MICHIGAN MARKET, * Interconnect with five
COMED HUB AND CINERGY HUB surrounding control areas
WITH LEGEND] - Net long position in shoulder
periods
- Sell excess energy into
neighboring Midwest markets
* Actively managing environmental
risk
- Received approval from Indiana
Regulators to recover pro-
jected NOx expense of approx-
imately $234 million over
the next three years
[NiSource logo]
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WHILE SEEKING OPPORTUNITIES TO
MONETIZE GAS E&P ASSETS
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* 1.1 Tcf proved reserves
- Over 3 million net developed
and undeveloped acres in the
US
- 1.2 million undeveloped
acres in Canada
* Long-lived Appalachian
reserves
[MAP OF NORTHEASTERN - 95% historical success rate -
UNITED STATES WITH LEGEND developmental drilling
DEPICTING OPERATION - Low finding and production
HEADQUARTERS, REGIONAL OFFICES, costs
U.S. OPERATING REGION AND * Sold interest in natural gas
CANADIAN JOINT VENTURES] E&P joint venture in New York
state for $95 million
- 39 Bcf of gas reserves: 3.5%
of total reserves
- 6 Bcf of production: 11% of
total 2002 production
* Company will no longer invest in
exploratory drilling
[NiSource logo]
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IMPROVING OUR PRODUCTIVITY
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STAFFING AT OUR CORE BUSINESSES(1)
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[Bar graph depicting staffing of Core Businesses]
1999 12,395
2000 10,528
2001 10,161
2002 8,734
(1) Core businesses reflect gas distribution, electric utility, and
gas transmission.
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WITHOUT COMPROMISING
CUSTOMER SATISFACTION(1)
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FIELD CONTACT TELEPHONE CONTACT
SATISFACTION SATISFACTION
2002 2002
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90% 94% 90% 91%
TARGET 12-MONTH TARGET 12-MONTH
AVERAGE AVERAGE
(1) Based on survey of gas and electric distribution customers.
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DEMONSTRATING CAPITAL
DISCIPLINE
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CAPITAL EXPENDITURES
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[Bar graph depicting Capital Expenditures by
Pre-Merger and Post-Merger ($ in Millions)]
PRE-MERGER POST-MERGER
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1998 $658 2001 $679
1999 $851 2002E $650
2000 $863
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WHILE PROVIDING FOR GROWTH
FROM INTERNAL SOURCES
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2002E CAPITAL EXPENDITURES
$650 MM
[Pie graph depicting
percentage of estimated 2002 $274 Million Growth Capex
capital expenditures] -------------------------
E&P 14% * 32% Gas Distribution
Gas Distribution 28% * 24% Gas Transmission
Gas Transmission 21% * 33% E&P
Electric Operations 31% * 7% Electric
Other 6% * 4% Other
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PROTECTING THE DIVIDEND
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DIVIDEND PAYOUT RATIO
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[Bar graph depicting payout ratio percentages by year]
Year Percentage
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1997 58%
1998 60%
1999 79%
2000 96%
2001 110%
2002 65%
2003E 69%
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DELIVERING ON OUR COMMITMENTS
2002 MAJOR ACCOMPLISHMENTS
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* New Operating Management Team to further consolidate/integrate
Business Operations
* $150 MM of annual savings from Operational Excellence and
Delayering programs
* NIPSCO electric rate review settled for $55 MM annual credit
* Sold TPC gas trading book and exited gas trading activities
* Completed Equity Offering of 41.4 million shares or $735
million
* Reducing business risk profile - monetize E&P assets
* Stronger Balance Sheet - Approx. $1.4 B debt reduction
[NiSource logo]
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AND BUILDING FOR THE FUTURE
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* Focusing on our core regulated asset based businesses
- Exited the telecommunications business
* Continue savings initiatives and earnings improvements
* Recover NOx costs through a newly approved Environmental Tracker
* Further strengthen the balance sheet
* Maintain investment grade credit ratings with stable outlook
* Protect the dividend
* Maintain adequate liquidity
[NiSource logo]
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STRONGER 2002 FINANCIAL
PERFORMANCE
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* Despite warmer than normal weather in our gas business:
- Earnings from continuing operations for 2002 were $425.7
million or $2.02 per share
* Significant reduction in expenses
- $71.9 MM of lower interest expense
- $150 MM of lower O&M expenses
- $93.1 MM of goodwill amortization eliminated (FASB)
* Debt to capital ratio improved from 68.7% to 60.9% by year-end
despite bringing $576 million of synthetic leases on balance
sheet in 2Q 2002
* Fully compliant with all financial covenants - Deloitte &
Touche re-audited the last three years without incident
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POSITIONING NISOURCE FOR SOLID
2003 EARNINGS
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[Bar graph depicting net income and earnings per share]
Net Income
Year ($ in millions) EPS
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2001 $216 $1.05
2002 $372.5 $1.77
2003E(1) + 5% Increase $1.67
in Net Income
(1) Excludes E&P. Assumes normal weather.
[NiSource logo]
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DESPITE HIGHER EXPENSES AND
OUTSTANDING SHARES FOR 2003
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NEW EXPENSES
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($ in millions)
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* Electric Rate Review Settlement(1) $55
* Increased Pension Expense $50
* Increased Insurance Expense $10
* Increased Taxes $15
* Whiting Clean Energy Expenses(1) $45
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$175
(1) Approximately 50% of these expenses already reflected in 2002.
[Bar graph depicting
outstanding average shares]
BASIC AVERAGE SHARES
OUTSTANDING
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Year (millions)
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2001 205.3
2002 211.0(1)
2003E 255.9(2)
(1) Reflects equity issued in November 2002.
(2) Reflects conversion of PIES in February 2003.
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WITH AN IMPROVING
CAPITAL STRUCTURE
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($ in millions)
12/31/01 12/31/02
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Short Term Debt $1,854 $ 913
Current Maturities of LT Debt 424 1,233
Long Term Debt 6,302 5,018
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Total Debt $8,580 $7,164
Preferred Securities 434 430
Shareholders' Equity 3,469 4,168
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Total Capitalization $12,483 $11,762
Debt / Capitalization 68.7% 60.9%
[NiSource logo]
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AND SOLID FUNDAMENTALS
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* Stable Base of Regulated Earnings
- 98% of operating income generated by low-risk regulated
businesses
- Regulated energy delivery service to nearly 3.7 million
customers across 9 states
- Target 5% earnings growth beyond 2003
* Stable and Sustainable Dividend Profile
- 6.5% yield at current stock price
- 60%-70% payout ratio
* Improving Liquidity and Credit Profile
- Continued balance sheet deleveraging
- Monetizing E&P assets reduces overall business risk/
improved credit profile
* Stock Trading below Net Asset Value
- Discount to estimated sum-of-the-parts valuation
- 12% discount to the S&P 500 Natural Gas Index
[NiSource logo]
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NISOURCE ENERGY MARKET
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* Strong Assets Located in Growth
Markets
* Low Business Risk Profile
- 98% Regulated
- 3.7 Million Distribution [MAP OF EASTERN UNITED STATES
Customers DEPICTING ENERGY CORRIDOR]
* Stronger/De-levered Balance Sheet
* Improved Liquidity Position
* Sustain Current Dividend Level
[NiSource logo]
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BUILDING SHAREHOLDER VALUE
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<s> <c> <c> <c> <c> <c> <c>
* * * * * * * * * * * * * * * *
* SHAREHOLDER VALUE *
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* * * * * * * * * * * * * * * * * * * * * * * * * * * *
* Maximize * * Focused * * *
* Utilization * * Strategic * * Environmental *
* of Assets * * Investments * * Stewardship *
* * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * Manage * * *
* Employee * * Customer * * Expenses/ * * Technology *
* Effectiveness * * Driven * * Margins * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* F I N A N C I A L S T R E N G T H *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
[NiSource logo]
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FORWARD-LOOKING STATEMENTS
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"SAFE HARBOR" STATEMENT
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This presentation includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those
statements include statements regarding the intent, belief or current
expectations of the Company and its management. Although NiSource
Inc. believes that its expectations are based on reasonable
assumptions, it can give no assurance that its goals will be achieved.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve a number of risks and
uncertainties, and that actual results could differ materially from
those indicated by such forward-looking statements. Important factors
that could cause actual results to differ materially from those
indicated by such forward-looking statements include, but are not
limited to, the following: increased competition in deregulated
energy markets, weather, fluctuations in supply and demand for energy
commodities, successful consummation of dispositions, growth
opportunities for NiSource's regulated and non-regulated businesses,
dealings with third parties over whom NiSource has no control, actual
operating experience of acquired assets, NiSource's ability to
integrate acquired operations into its operations, the regulatory
process, regulatory and legislative changes, changes in general
economic, capital and commodity market conditions, and counter-party
credit risk.
February, 2003 [NiSource logo]
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NISOURCE
DOING WHAT WE DO BEST
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