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Northwest Natural Gas’ (NWN) CEO Gregg Kantor on Q4 2014 Results – Earnings Call Transcript

Northwest Natural Gas Co. (NYSE: NWN ) Q4 2014 Earnings Conference Call February 27, 2015 11:00 AM ET Executives Robert Hess – IR Gregg Kantor – President and CEO Steve Feltz – SVP and CFO Analysts Derek Walker – Bank of America Operator Good morning, and welcome to the Northwest Natural Gas Company’s Fourth Quarter Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Mr. Bob Hess. Please go ahead, Mr. Hess. Robert Hess Thank you, Dana. Good morning, everybody, and welcome to our fourth quarter and full year 2014 earnings call. As a reminder some of the things that will be said this morning contain forward-looking statements. They are based on management’s assumptions, which may or may not come true, and you should refer to the language at the end of our press release for the appropriate cautionary statements and also to our SEC filings for additional information. We do expect to file our 10-K later today. As mentioned, this teleconference is being recorded and will be available on our website following the call. Please note that these calls are designed for the financial community. If you are an individual investor and have questions, please contact me directly at area code 503-220-2388. Media please can contact, Melissa Moore at area code 503-220-2436. Speaking this morning are Gregg Kantor, President and Chief Executive Officer and Steve Feltz, Senior Vice President and Chief Financial Officer. Gregg and Steve have some opening remarks, and then will be available to answer your questions. Also joining us today are other members of our executive team, who will help answer any questions you may have. With that, let me turn it over to Gregg for his opening remarks. Gregg Kantor Thanks Bob. Good morning, everyone and welcome to fourth quarter and year-end review. I’ll begin today with an overview of 2014 and then turn it over to Steve to provide the financial details for the quarter and the year. I’ll wrap up the call with a look-forward. For Northwest Natural 2014 was a year of both opportunity and challenge. Last year our utility performance was solid, with improvements in customer growth and margin. However, those results were offset by losses associated with our gas cost sharing mechanism and the impact of natural gas prices. We also continued to see weakness in the California storage market hampering the financial returns from our Gill Ranch storage facility. In the midst to be varying factors, we delivered earnings of $2.16 per share and 2014 while providing a total shareholder return of approximately 22%. On the growth front, the Northwest economy made positive gains last year with Oregon’s employment rebounding to prerecession levels and unemployment rates continuing to fall. In 2014, we saw a healthy increase in commercial margins and an uptick in commercial new construction activity. The housing sector also improved with Portland home sales up nearly 4% and the average sale price up 7% last year compared to 2013. In addition, United Van Lines ranged Oregon its top moving destination last year, a positive indicator for future housing sector growth. And in Clark County in Washington, the fastest growing county in our service territory, home sales increased 8% with the average sale price increasing about 10%. These improvements help drive up our customer growth rate to 1.4% last year, and in the process we reached a new milestone adding our 700,000 customer. We believe last year’s healthy market improvements coupled with our substantial price advantage over electricity and oil put us in a strong position for additional customer growth going forward. In 2014 we made significant investments in safety and in reliability of our system. We completed several system reinforcement and facility upgrade projects and we continued our aggressive pipe replacement efforts. In fact we plan to remove the last three miles of bare steel pipe in 2015 making us one of the first utilities in the nation to eliminate both cast iron and bare steel pipe throughout our distribution system. In 2014, we reaped the advantages of having a more modern and robust system when extreme winter weather put us in the test. Last February we set a company record with a send out volume hitting 9 million firms in a 24 hour period. That’s almost double the normal send out for a typical winter day. And I’m pleased to report our pipeline system and storage facilities performed very well. I’m also pleased to report that for the fifth time in eight years we ranked first in the west in the annual J. D. Power Gas Utility Residential Customer Satisfaction Study. Last year also marks the seventh time in eight years that we were among the two highest scoring gas utilities in the nation. Now let me shift to the status of our regulatory agenda. Last year we continued to work through three remaining dockets carried over from our 2012 Oregon rate case. Just last week the OPUC issued its decision regarding how the Company’s environmental site remediation and recovery mechanism would be implemented. In the final order the commission found that all but $33,000 of the $114 million of environment remediation expenses incurred from 2003 through March of 2014 were proved. However due to the application of an earnings test from 2003 through 2012 the OPUC disallowed recovery of expenses totaling $15 million. At the same time the order specifies that insured settlements totaling over $150 million were entered into prudently by the Company. Steve will provide more details on how the mechanism works but let me just say that while the write down is disappointing we view our ability to fully recover future environmental cleanup cost as the key issue in a very complex and tough docket and we’re pleased the environmental spend and insurance settlements were deemed prudent. We do have some questions and implementation issues that we will be working on with the commission, but overall we believe the order provides us with a reasonable path forward. We expect the last two proceedings from our 2012 rate case to also be decided on this year. These are the interstate storage sharing and pension dockets. As you know, last year we amended our gas reserves agreement with Encana in response to their sale of the Jonah field. While the new arrangement ended the original drilling program, it also increased our working interest in Jonah and allows us to continue to invest in the field on a well by well basis. Under the new agreement, in 2014 we invested in seven wells and yesterday we filed with the OPUC to recover those costs as part of our utility hedge portfolio. A final important regulatory milestone last year was the filing of our integrated resource plan in Oregon and Washington. The plan covers a variety of issues associated with our ability to serve customers, including the need for additional system investments in Clark County, Washington and at our Newport LNG plant in Oregon. Just a few days ago we received acknowledgement on the IRP from the Oregon commission and we expect to receive notification from the Washington commission by this summer. With that let me turn it over to Steve. Steve Feltz Thank you, Gregg and good morning everyone. In 2014 we made significant progress on a number of fronts, including operational improvements and some important long term growth initiatives in both the utility and gas storage businesses. Additionally as you’ve heard earlier we received an order from the OPUC on how we would recover future environmental costs, which was a significant financial issue carried over from our last rate case in 2012. I’ll talk more about the financial implications of that order later on. But first let me turn your attention to 2014 results. Earnings for the fourth quarter were $1.04 per share on net income of $28.5 million. That was down slightly from $1.07 per share on $29 million a year ago. Results for the quarter reflect an increase in utility earnings largely due to higher margin and lower operating and maintenance expense. The utility increase was more than offset by a decrease from our gas storage segment which was driven by the re-contracting of Gill Ranch capacity at lower prices due to the depressed market conditions in California. The utility realized margin gains despite significantly warmer weather and lower customer usage. During the quarter, temperatures were 25% warmer than average and delivered volumes were down 13% compared to a year ago. The steady margin gains from our utility reflect our consistent customer growth and the effectiveness of our weather normalization and decoupling mechanisms. Now turning to full year results, consolidated earnings were $2.16 per share on net income of $58.7 million in 2014, as compared to $2.24 per share on $60.5 million a year ago. From the utility, net income for 2014 was $58.6 million, up from $54.9 million a year ago. A $12 million increase in margin was driven by customer growth, incremental use by commercial customers on higher margin rate schedules and added rate base recovery from new investments. These margin gains more than offset the impact of weather, a $2.1 million loss from our regulatory gas cost incentive sharing mechanism in Oregon and a $3.2 million increase in depreciation expense. From an operational standpoint, total gas delivery by the utility decreased 5% to 1.09 billion terms. The decrease was largely driven by 13% warmer than average weather and by declining average use for the customer. Despite the 5% decrease in volumes, utility margin increased by more than 3% over last year, including adjustments totaling $19 million from our weather normalization and decoupling mechanisms in Oregon. From our gas storage segment, net income in 2014 was a loss of $400,000, as compared to a gain of $5.6 million a year ago. The $6 million decrease in storage net income primarily reflect an $8.9 million decrease in operating revenues and a $1.8 million increase in operating expenses. As mentioned earlier, the decline in storage revenues was largely tied to lower prices at our Gill Ranch facility in California. Meanwhile, operating expenses at that facility increased, partly due to higher power cost for storage resale following significant withdrawals from last year and higher repair cost. Recently we’ve seen some improvement in summer-winter spreads for the upcoming storage year and because we have short-term contracts for a majority for our capacity, we should realize slightly higher prices in California this year compared to last year. But despite this improvement, we expect continuing challenges in 2015 as current storage values remain lower than the pricing on our original multi-year contract. With regard to operating expenses, for the quarter our O&M costs were 8% or $3.1 million lower than the same period last year. On a full year basis, O&M increased by less than 1% compared to a year ago. The year-over-year increase was mostly attributed to the previously mentioned higher power and repair cost at Gill Ranch, but that was largely offset by lower payroll and other cost savings at the utility. Cash provided by operations during 2014 was $216 million, up from $176 million in 2013. The main differences from year ago were the receipt of $103 million from insurance proceeds partly offset by increases in the deferred gas cost due to higher prices and other changes to working capital accounts. The insurance proceeds in particular helped to improve our liquidity position. With respect to our gas reserves program, we invested $27 million in 2014. Of that total $10 million was under the new amended ownership agreement with Jonah Energy, which we refer to as our post carry well. We recently filed with the OPUC a request to recover the revenue requirement associated with the post carry wells, thereby adding these gas reserves to our utility gas hedge portfolio. Our investment in gas reserves, both from the original contract with Encana and under the new agreement with Jonah Energy totaled $187 million since inception. Before providing earnings guidance for 2015, I’d like to explain some of the financial impacts of the recently issued regulatory order on the recovery of past and future environmental costs. First, the order results in an immediate onetime $15 million pre-tax charge for past environmental costs which we’ll record in the first quarter of 2015. The Oregon commission disallowed this amount based on its determination of how an earnings test should apply to past years from 2003 through 2012. As part of its review, the commission ruled that all but $33,000 of the $114 million in total cost through March 2014 or were deemed to be prudently incurred. Second, the commission ordered that the insurance proceeds received by the Company which amount to about $150 million in total be allocated to past and future costs with one-third of the total supplied for the recovery of past costs through December 2012. The remaining two-thirds would be placed into a secure account earning interest with those amount supplied for the recovery of future cost. In the order, the commission also concluded that all insurance settlement entered into by the Company through March of 2014 for were deemed prudent. After applying roughly $50 million of insurance proceeds towards past costs and deducting the $15 million disallowance, the commission order allows for full recovery of the remaining balance of past cost through 2012, which amount to roughly $30 million. The $30 million of past cost will go into the recovery mechanism which allows for these costs to be collected from customers over a rolling five year amortization period beginning this year. In addition to recovery in our past cost from customers and insurance, the commission also ordered the full recovery of future environmental cost as follows. First, the company will recover the first $5 million each year from customers through a tariff writer effective 2013. The Company will then apply an additional $5 million from the insurance account plus interest accrued on the account during the year to the next portion of environmental cost also effective 2013. If our environmental costs are less than $10 million plus interest, then any unused insurance will roll forward into the next year. If however our annual environment costs exceed the $10 million plus any insurance roll forward from the prior year then the excess will be fully revered through the environmental recovery mechanism. However if the Company earns above its authorized ROE, then the Company would be required to use the amount of earnings above its ROE to cover environmental expenses greater than the $10 million plus any insurance roll forward. In effect the company is provided full recovery of its environmental cost going forward. Today the Company is initiating its 2015 earnings guidance in the range of $1.77 to $1.97 per share for 2015. After adjusting for the one-time $15 million pretax charge previously discussed our earnings guidance for 2015 is $2.10 to $2.30 per share. The Company’s 2015 guidance assumes customer growth from our Utility segment, average weather conditions, slow recovery of the gas storage market in California and no significant changes in prevailing legislative and regulatory policies or outcomes. With that I’ll turn the call back over to Gregg for his concluding remarks. Gregg Kantor Thanks Steve. In 2014 our utility performance was solid with improvements in customer growth and added rate based returns on gas reserves and other system investments. We also made progress on our other growth initiatives. Earlier this month we received approval from Portland General Electric to move forward with the permitting demand acquisition work required for a potential expansion project at Mist, our underground gas storage facility. The project would be designed to provide no notice storage services to PGE’s natural gas bio-generating plants at Port Westward in Oregon. The potential expansion would include a new reservoir providing up to 2.5 billion cubic feet of available storage, an additional compressor station with design capacity of 120,000 dekatherms of gas per day and a 13 mile pipeline to connect the PGE’s gas plants at Port Westward. In 2015 our team will be working to obtain all the required permits and certain property rights and assuming successful completion of those necessary elements the current estimated cost of the expansion is approximately $125,000 million with a potential in service date in the 2018, 2019 winter season, depending on I should say the permitting process in construction schedule. As you may recall Oregon passed a bill effective last year that allows the OPUC to incent natural gas utilities to undertake projects that will reduce greenhouse gas emissions. We view this legislation as an exciting opportunity to make a positive environmental impact while potentially serving our customers and communities in new ways. In 2014 we worked through a rulemaking effort with the OPUC staff and customer advocates rules for what we are referring to as the carbon solutions program were then passed by the Oregon Commission this past December. In parallel to that rulemaking effort last year we began assessing a number of possible projects spanning several areas. Examples of potential projects involve reducing methane emissions during pipeline maintenance and repair, residential oil conversion program and distributed generation projects that use natural gas to increase energy efficiency. At this point, we are refining concepts and meeting with interested stakeholders to discuss our ideas, including the OPUC staff, customer advocates and energy efficiency groups. Our goal this year is to file several projects with the Oregon Commission to consider and hopefully to approve. In my view the carbon solutions program offers an excellent opportunity for us to demonstrate our spirit of innovation to showcase the important role natural gas can play in helping our region meet its environmental goals and add to the Company’s bottom line. In the months ahead we intend to make progress in a number of areas as I’ve said, continuing to grow our utility customer base, completing the last two remaining dockets from our 2012 rate case proceedings, advancing the north Mist expansion project, and doing all of this while continuing to provide safe and reliable service to our customers. Thanks again for joining us this morning and now I’d be happy to open it up for questions. Question-and-Answer Session Operator We will now begin the question-and-answer session (Operator Instructions). Gregg Kantor It’s hard to believe we were that clear on all of this stuff, but it doesn’t appear there are any questions. We’ll wait another few seconds here. Operator Our first question is from Derek Walker of Bank of America. Mr. Walker? Derek Walker Just I appreciate the color going through the order on the environmental piece here. Just a quick follow-up and there was a lot of nuances to it about conditions associated with it, but I think in general in the past or at least at times you’ve been able to achieve little bit above sort of allowed ROE, but does this new mechanism effectively to limit your ability to go slightly above that, the 9.5%? Gregg Kantor It does in those instances where we spend more than what is in the in the tariff writer and the insurance. So we’re spending more than that amount, which is $10 million, it will limit going above our allowed return on equity. Derek Walker And as far as the — just given on the commodity backdrop, as far as additional wells being drilled is there — I guess what you’re seeing on that development side? Gregg Kantor Well, as I said in the remarks we do have the ability to drill on a well-by-well basis. But the way that works though is that Jonah Energy Inc. proposes wells to us and then we get to evaluate and make a decision about on a well-by-well basis whether we’re going to proceed with those wells. Right now there haven’t been any proposed to us, not exactly certain if there will be this year and again we take them on a well-by-well basis. I don’t expect that there will be — even if they do propose wells that they will be large. Again last year there were 10 that were proposed to us. So I don’t think that’s going to be a very large amount if there are wells proposed. The other part of it is that we continue to look at a second overall gas reserve deal as part of a discussion we’re having with the commission on what’s the right amount of gas reserves to have. We call that our hedging docket which was — is going to be open this year and hopefully completed this year and that will tell us whether we’ve got the right amount of gas reserves in our portfolio or not and hopefully we’ll get through that this year and it will give us some direction on a future deal. Maybe just a little bit more follow-up on the first part of your question Derek, which was about over earning, it does in most cases where we’re as I said spending more than $10 million, prevent us from over earning in those years. But I would also say that the important part of this docket I kind of want to underscore was the costs of this are large for the company in the future and our goal here was to make sure we got full recovery and the order does do that and we really believe that this is a very reasonable path forward for us. Operator (Operator Instructions). Gregg Kantor Well, if there are no other questions, thank you all for joining us this morning. We really appreciate your interest in our Company and look forward to seeing you down the road. Thanks. Operator The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. 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NiSource’s (NI) CEO Bob Skaggs on Q4 2014 Results — Earnings Call Transcript

NiSource, Inc (NYSE: NI ) Q4 2014 Earnings Conference Call February 18, 2015 09:00 ET Executives Randy Hulen – VP, IR Bob Skaggs – CEO Steve Smith – CFO Analysts John Barta – KeyBanc Carl Kirst – BMO Capital Chris Sighinolfi – Jefferies Becca Followill – U.S. Capital Advisors Charles Fishman – Morningstar Operator Welcome to the NiSource Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the call over to Randy Hulen, Vice President of Investor Relations. Please go ahead. Randy Hulen Thank you and good morning everyone. 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 and Steve Smith, Chief Financial Officer. As you know, the primary focus of today’s call is to review NiSource’s financial performance for the full year and fourth quarter of 2014 as well as provide an overall business update. Following our NiSource prepared remarks, we will also share a brief overview of the predecessor results for Columbia Pipeline Partners which were 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. 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 section of our periodic SEC filings. With all those items out of the way, the call is now yours, Bob. Bob Skaggs Thanks, Randy. Good morning and thank you for joining us. 2014 was a watershed year for NiSource. It was anchored by focused execution of a record infrastructure investment program and the initiation of strategic and transformational growth plans. Those notably included the creation of Columbia Pipeline Partners and the announcement of the Columbia Pipeline Group spinoff. If you will turn to slide 3 in the supplemental deck that was posted online this morning, you will see a few of the year’s highlights. The NiSource team delivered yet another year of solid operational performance and industry-leading financial results. In 2014, we generated net operating earnings from continuing operations, non-GAAP of $1.72 per share, exceeding our guidance range of $1.61 to $1.71 per share and up nearly 9% from 2013 and we delivered total returns to our shareholders of 32%, which outperformed the major utility indices for the sixth consecutive year. Our team executed on a record $2.2 billion capital investment program, made significant progress on various regulatory and legislative programs and originated several transformational growth projects at CPG. These initiatives synched closely with our company-wide modernization initiatives, delivered significant value to our customers by facilitating the development of significant shale resources and providing more modern, safe, efficient and environmentally friendly infrastructure. They also benefit our communities through job creation and economic development and our shareholders through sustainable long-term returns. During the year, we also expanded our projected long-term inventory of infrastructure investments which is now targeted at $12 billion to $15 billion at CPG over the next 10 years and $30 billion at NiSource’s utilities over 20 plus years. As I noted at the top of the call, 2014 marked the launch of two important strategic initiatives; the separation of CPG and the creation of Columbia Pipeline Partners. On that note, our team was pleased with Columbia Pipeline Partners’ $1.2 billion initial public offering in early February. The Partnership’s offering was enthusiastically received by investors. Steve will provide a brief update on the partnership as part of this morning’s call. We remain on track with the NiSource CPG separation process. A couple of weeks ago, we filed our initial form 10 registration statement with the SEC, have announced key expected board members and the majority of executive team members for both companies. Following the separation, both companies are expected to move forward as independent, investment grade pure play entities with experienced teams focusing on executing and elevating well-established platforms for growth. As we look ahead to NiSource and CPG operating, independent companies, I wanted to briefly highlight their growth expectations. As we first announced in our 2014 investor day, NiSource as a pure play utility expects its average annual long-term earnings and dividend to grow at 4% to 6% over the long term. As a pure play pipeline company with an MLP, CPG is targeting its annual adjusted EBITDA growth in the mid- to upper teens over the next several years. Its annual dividend growth is expected to be commensurate with this robust EBITDA growth. With these very strong growth rates and deep investment inventories, both companies will be positioned in the top tier of their peer groups. As the separation date gets closer, both NiSource and CPG will conduct roadshows to provide additional details on their projected performance profiles. And just to expand on the growth for one moment, we wanted to be absolutely clear on the fundamental baseline commitments of each company. Therefore, we provided earnings and dividend outlooks as well as capital expenditure outlooks. We wanted to be clear on what long-term drivers are for each of the businesses. We wanted to be helpful versus academic. And as you know, 2015 will be a split year for NiSource and CPG with significant developments unfolding during the first half of the year, including the IPO of CPPL, the recapitalization of CPG and NiSource, as well as the separation itself and the ongoing development of Mountaineer XPress and Gulf XPress. Again, we wanted to provide what was helpful, what was most constructive, therefore our key commitments are key fundamental drivers. As we mentioned, roadshows will occur prior to separation to provide additional detail on 2015, 2016 and the long term. Now with that, let me turn the call over to Steve Smith to review our 2014 financial results highlighted on page 4 of our supplemental slides. Steve Smith Good morning, everyone. As Bob mentioned, we’ve exceeded our guidance range for the year by generating non-GAAP net operating earnings of about $545 million or $1.72 per share, which compares to about $495 million or $1.58 per share in 2013. On an operating earnings basis, NiSource was up about $125 million. By GAAP comparison, our income to continuing operations was about $530 million for 2014 versus about $490 million for 2013. At the segment level, you will see in today’s release that each of our three core business units delivered solid financial results. CPG delivered operating earnings of about $491 million compared to about $441 million in 2013. CPG’s net revenues excluding the impact of trackers were up about $80 million. NIPSCO’s electric operations delivered about $288 million in operating earnings compared to about $265 million for the prior year. Net revenues excluding trackers were up about $47 million. And finally, our Gas Distribution business unit came in at about $517 million, compared to about $449 million in 2013. Net revenues, again excluding the impact of trackers, were up about $126 million. As our numbers attest, it was another strong year for the NiSource team. Full details of our results are available on our earnings release issued and posted online this morning. Now turning to slide 5, I would like to briefly touch on our financing and liquidity positions. We retained a strong liquidity position with approximately $720 million of net available liquidity at the end of the year. Of our record $2.2 billion capital investment program, approximately 76% of these investments were focused on revenue-generating opportunities. Our debt to capitalization came in at about 62% of the end of the year. And as Bob mentioned, we remain on track with the NiSource CPG separation. In that regard, we have taken several key steps to establish a strong financial foundation for both companies. The first step was to secure two separate credit facilities that will become effective at the separation. We entered into two $1.5 billion five-year credit facilities, one for NiSource and the other for CPG. These facilities will replace NiSource’s existing $2 billion agreement. At the same time we entered these agreements, we also entered into a $500 million five-year facility at Columbia Pipeline Partners which went into effect at the time of the IPO. The next major step in this process is the recapitalization, which is on schedule to commence in the second quarter. We will provide additional updates on this process in our first quarter earnings update and through other public announcements. With that, I will turn the call back to Bob to discuss a few execution highlights from each of our business units. Bob Skaggs Thanks, Steve. Let’s start with CPG highlights on slide 6. The CPG team continues to advance a steady stream of transformational growth and modernization projects. As I noted earlier, CPG expects to invest up to $15 billion in growth capital over the next 10 years, with most major projects currently in execution or in advanced stages of development. During 2014, CPG placed more than $300 million in system expansion projects and service, adding approximately $1.1 billion cubic feet of system capacity. An additional $200 million in midstream projects were put in service during the year and CPG’s modernization work approached $320 million. So in total for 2014, we added more than $800 million in new revenue-generating assets in service all on time and on budget. Meanwhile, the CPG team is in full execution mode on several ongoing and transformational growth projects. In December, the FERC approved the construction of the East Side expansion project which will provide approximately 315 million cubic feet per day of additional capacity for Marcellus supplies to reach growing mid-Atlantic markets. This $275 million project is expected to be placed in service later this year. In addition to the East Side expansion, CPG has more than $3 billion of growth projects in progress that will add approximately 4 billion cubic feet of transportation capacity. These projects include the Leach and Rayne XPress projects, the WB XPress project and the Cameron Access project. The Rayne and Leach projects collectively involve about $1.8 billion in system expansion, creating a major new pathway for transporting shale production to attractive markets and liquid trading points. Both projects are expected to be in service by the end of 2017. WB XPress is almost a $900 million project to transport about 1.3 billion cubic feet of shale gas to East Coast markets and various pipeline interconnects including access to the go point LNG terminal and Cameron Access is a roughly $300 million investment that involves new pipeline facilities to connect with the Cameron LNG terminal in southern Louisiana. The project will offer initial capacity of up to 800 million cubic feet per day. Our Columbia midstream team also is continuing to capitalize on CPG’s strong asset position in the Marcellus and Utica regions. Midstream projects currently in progress include $120 million Washington County gathering project and the $65 million Big Pine expansion project. Big Pine in the first phase of Washington County will be placed in service before the end of the year. As you may recall during our prior discussions, we’ve outlined plans for the potential Mountaineer XPress project. We’re now in advance commercial discussions with customers on this major project, as well as a complementary project called Gulf XPress. If implemented, these projects would provide substantial transportation capacity out of the Marcellus and Utica shale regions. These two projects could involve an investment as large as $2 billion to $2.5 billion. We hope to complete commercial terms and clear all contractual outs by July. As you can see, on all fronts, the CPG team is executing against an impressive and indeed transformational growth agenda. In 2015, we’re targeting a capital investment level of approximately $1.1 billion of CPG. As you’ve heard us say before, our intent is to triple our net asset base over the next five years. With that, let’s now shift to our utility businesses starting with NIPSCO, our Indiana electric and natural gas business summarized on slide 7. NIPSCO is continuing to deliver on its commercial and customer strategy with an inventory of investment opportunities approaching $10 billion for electric infrastructure and $5 billion for gas infrastructure over the next 20 plus years. 2014 was a strong year for NIPSCO as well. In the first half of 2014, NIPSCO commenced its seven-year natural gas and electric infrastructure modernization programs now expected to reach an investment level of nearly $2 billion and completed approximately $120 million of projects in 2014. These investments will help improve reliability, maintain system safety for the next generation. On the environmental front, in December NIPSCO placed the final FGD new unit in service at Schahfer Generating Facility. This unit, like the one placed in service during the fourth quarter of 2013 was delivered on time and on budget. A third FGD unit at NIPSCO’s Michigan City Generation Facility is on schedule to be placed in service by the end of 2015. Following the completion of the Michigan City units, all of NIPSCO’s coal burning facilities will be fully scrubbed. On the growth side, progress also continued on two major NIPSCO electric transmission projects. Right of away, acquisition and permitting are underway for both projects and preliminary construction will begin on the 345 kV Reynolds to Topeka line in the first half of this year. If you recall, these projects involve an investment of about $0.5 billion for NIPSCO and are anticipated to be in service by the end of 2018. Finally, in addition to the continuation of NIPSCO’s electric energy efficiency programs, the IURC approved the extension of the green power rate program. NIPSCO also reached a settlement on the continuation of its feed-in tariff program. NIPSCO’s agenda in 2015 remains focused on enhancing the reliability and environmental performance of the systems through modernization and replacement investments. In addition to delivering customer programs that help reduce energy usage and manage bills, these investments expected to reach nearly $400 million in 2015 deliver significant economic development and job creation activity in northern Indiana, while at the same time delivering value to our investors. 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 initiatives. Touching on a few highlights from the year, in November, the Pennsylvania Commission approved the settlement in Columbia Gas of Pennsylvania’s base rate case. The case provides for recovery of CPA’s investments in its well-established infrastructure modernization program and will increase annual revenues by approximately $33 million. New rates went into effect in December. Also in December, Columbia Gas of Virginia reached a settlement with customers for its rate case, which if approved would increase base rates by about $25 million. Notably in January, the hearing examiner in the case recommended approval of the settlement. Final commission decision is expected by the end of the first quarter. These rate cases, along with one completed in Massachusetts, provide for continued recovery of investments related to our well-established infrastructure programs which are designed to maintain and improve the safety and reliability of our systems. Also in the fourth quarter, Columbia Gas of Massachusetts filed its 2015 system, gas system enhancement plan under new legislation authorizing accelerated recovery of gas infrastructure modernization investments. If approved as filed, cost recovery would increase annual revenues by approximately $2.6 million. Across the gas utilities, we expect to invest almost $900 million in 2015. Together, NiSource’s industry-leading platform for utility growth provides significant reliability, safety and environmental benefits to our existing and new customers while also delivering shareholder returns through transparent recovery mechanisms. Shifting to slide 9, our key takeaways for 2015, we plan to execute our current business and customer plans while at the same time delivering the CPG spinoff on schedule in mid-2015. We’re moving ahead with another year of record capital investments, targeted at $2.4 billion across our utilities and pipelines and a complementary regulatory and customer service agenda. As for the separation, we’re well on our way to standing up two premier companies, with an experienced slate of management and directors at both companies. CPG and NiSource will be well-financed and strongly positioned to execute on their distinct strategies and deliver enhanced long-term earnings and dividend growth. As I mentioned, both NiSource and CPG will conduct roadshows prior to separation to provide detailed business profiles. With those highlights for NiSource, we will now shift to slide 11 in the NiSource deck and Steve will discuss Columbia Pipeline Partners IPO and its predecessor results. Steve? Steve Smith Thanks, Bob. With the launch of CPPL, we’ve introduced a best in class MLP to the market. One with a strong supportive sponsor, stable and predictable cash flows that are virtually insensitive to fluctuations in commodity prices and volumes, a robust growth profile with a deep inventory of long-term infrastructure investments. The strategic footprint overlaying the Marcellus and Utica shale production areas. The financial strength and flexibility and a premier execution focused and experienced leadership team. Our offering was very well received and we’re very pleased with the continued positive response. Let’s quickly touch on our IPO and predecessor results on page 12. The offering of approximately 54 million units at $23 per share raised nearly $1.2 billion. The pricing offering on February 5 and subsequently began trading on the New York Stock Exchange under the symbol CPPL the following day. These units include the full [inaudible] allotment executed by the underwriters. And as I mentioned previously, our $500 million five-year revolving credit facility we entered into in December came effective upon the IPO. Now let’s turn to our predecessor results issued this morning for periods prior to the IPO. As we outlined during our earlier NiSource remarks, Columbia Pipeline Group executed on and placed into service a wide variety of high-value projects during the year. These projects recorded CPPL’s predecessor growth and will serve as the model for the partnerships growth in 2015 and beyond. The predecessor reported net income of about $269 million for 2014 compared to about $267 million for 2013. The increase is primarily a result of new growth projects placed in service, new firm contracts and higher mineral rights royalties. On an adjusted EBITDA basis, the predecessor reported about $599 million in 2014 versus about $543 million in 2013. These results provide us with a solid footing as we move forward with CPPL’s strategy. Bob? Bob Skaggs Thanks Steve and thank you for participating today and for your ongoing interest and support of NiSource and Columbia Pipeline Partners. With that Nicholas, we’re ready to open the call to questions. Question-and-Answer Session Operator [Operator Instructions]. Our first question comes from the line of John Barta with KeyBanc. Your line is now open. Please proceed with your question. John Barta Bob, thanks for the color on the Columbia kind of growth rates there. First off, are there any certain milestones we should be looking for regarding Mountaineer and Golf pipeline or did you say everything was going to be finalized in July? Bob Skaggs Yes, we mentioned we hope to clear all of our contractual outs by July. At the moment, we’re still working on agreements with the foundation shippers. One event that we would point you to is open seasons, both Mountaineer XPress and Gulf XPress. If you see those in the coming weeks, or so, that would be a positive sign that the projects continue to be moving forward. I would add those open seasons will be binding open seasons. That would be one guidepost. Operator Our next question comes from the line of Carl Kirst with BMO Capital. Your line is now open. Please proceed with your question. Carl Kirst If I could just maybe stay with Mountaineer and Gulf XPress for a second but perhaps ask it in a way to see if there has been any shift in tone in producer conversations and in particular, if you’ve seen any reticence or pulling back midstream versus pipeline? Certainly your enthusiasm for the pipelines to hopefully have contracts by July would indicate that they are staying pretty positive and constructive. But I just wanted to make sure I’m getting the right read here. Bob Skaggs Yes. You’ve hit the nail on the head. It remains positive, constructive. We have been in very, very close contact with our producer shipper customers both on the big work projects as well as the midstream projects. Carl Kirst Do you find a difference in the tenor of conversations between the midstream and the pipelines, or just given the exposure to the region, both are continuing to move forward? Bob Skaggs It’s the latter. There is not a material difference in tone. As you know, folks are being prudent with their CapEx for 2015. Having said that, they still remain fully committed to the Marcellus and Utica and they still focus on take away capacity particularly when you get into the 2017, 2018, 2019 timeframe. Carl Kirst And then maybe one last question on the larger pipes and recognizing hopefully we have a binding open season not too far away. I guess should we think about the risk to the project? Is this more of a — do you guys feel like you are in a competitive shootout with anybody, or is this just a matter of getting the producers comfortable with the economics and trying to get to the right region, but once they make that decision, you guys or these projects are the obvious choice? I just want to make sure I got a good sense of that. Bob Skaggs I wouldn’t go so far as to say obvious choice, but I would say that the focus tends to be on your latter point. That being the economics, the in service date and the like. Carl Kirst And then last question if I could and then maybe one for Steve. I know of very tiny thing, but I’m just curious given the difference of commodity prices, is there any way we should think about the delta or the change in mineral or royalties that you guys are getting from the upstream exposure between 2015 and 2014? Steve Smith This is Steve. I would say it’s immaterial to the overall results going forward. Operator Thank you. Our next question comes from the line of Chris Sighinolfi with Jefferies. Your line is now open. Please proceed with your question. Chris Sighinolfi I just wanted to follow-up on of couple things. I appreciate your color and comments on the CPG ex EBITDA and dividend growth profiles. I was just curious assuming that you’re not going to answer a question as to where the starting point is for 2015, if you could just help us frame as you think about it and the board thinks about it the policy considerations around the initial level. I get the growth rate, but as we think about where — the variables that might shape where you guys ultimately set the starting point upon which we’re going to grow at that mid to upper teens level. Can you just give us some additional color on that front? Bob Skaggs Yes. Two key considerations. Number one, as you know we’re very sensitive to credit. We’re fully committed to investment grade credit. We need to go through the credit rating process in the March timeframe as we prepare for recap. So that starting point quite frankly is somewhat sensitive, somewhat dependent on credit considerations. The other is that the huge CapEx needs we have and so it’s balancing credit, CapEx and financing coming out of the gate. Those are the key considerations for starting point. Chris Sighinolfi Okay. And so to dovetail on prior questions, if some of the projects that are currently in discussion, sounds like they are moving forward into execution, like Mountaineer and Gulf that could be significant capital deployment. I would imagine then that would be part of this conversation. Bob Skaggs Correct. As I pointed out in my prepared remarks that we do have the significant events as we come up to separation and that’s certainly a huge, huge variable as we look at the financials and the outlook for the business. Chris Sighinolfi Perfect. And I guess switching and perhaps this is a question for Steve. Given the IPO, I know priced 15% or so above the range and I’m imagining the full overallotment exercise. Does that change at all the amount you had talked previously about a $3 billion debt recap. Does that shape at all the expectations around that modestly or at all? Steve Smith Not to a large extent. I mean, it does help obviously from a credit perspective, so we’re very pleased with the outcome of the IPO. With respect to the recapitalization, it is not going to move the needle too dramatically either way. Bob Skaggs We suggest still thinking in terms of $3 billion. Chris Sighinolfi Okay. And that I imagine will be profiled out in various tranches the various duration. Am I incorrect in thinking that? Steve Smith That is correct. Our current debt portfolio has a weighted average life of approximately 13.5 years. We would shoot for something north of 10 years, weighted average life. So probably issue a basket of 5, 10 and 30s to achieve that. Chris Sighinolfi One final question for me, there was a slight uptick even if I exclude the transaction costs for the fourth quarter that you reported in your corporate segment. There was an uptick in the corporate line item. Is there anything specific that’s driving that or is that just a variance from year-to-year? Bob Skaggs That’s just a variance from year-to-year. We have a bit more outside services costs in there as well as a result of all the activities we have going on here currently with respect to the separations. Operator Our next question comes from the line of Becca Followill with U.S. Capital Advisors. Your line is now open. Please proceed with your question. Becca Followill The growth rate that you’ve outlined for CPG of mid- to upper-teens, over what time frame is that? Bob Skaggs Next three to five years. Becca Followill And are you willing to talk at this point about what type of payout ratio that assumes? Bob Skaggs Not at this point, Becca. Becca Followill Okay. I understand. And then the large CapEx program that you have at CPG, how do you finance that going forward? Bob Skaggs Well, the MLP is the sole source of equity through the period and we will be using it frequently to support that. Operator [Operator Instructions].Our next question comes from the line of Charles Fishman with Morningstar. Your line is open. Please proceed with your question. Charles Fishman I assume you will take a couple questions on NIPSCO. Slide 7, Bob, the $67 million of the electric modernization plan to be expected to be spent in 2015. 100% of that is covered by trackers? Bob Skaggs That’s correct. Charles Fishman And then I would assume if my math’s correct $1.1 billion over seven years, that’s probably likely going to accelerate that number in 2016 or is this thing backend loaded? Bob Skaggs It gradually steps up and you may have heard us say in prior calls, prior discussions, as we complete the scrubber program, the modernization program begins to tick up or step up. Charles Fishman Okay. And then last question on NIPSCO, the clean power plan, if you look at what the EPA is proposing for Indiana, a lot of coal plant heat rate improvement, a lot of renewables, a lot of efficiencies at the customer level. Not a lot of gas CCDTs, but have you had any initial discussions with Indiana about what, what would be expected of NIPSCO if this thing comes in even close to what they are proposing? Bob Skaggs Yes. We’re in constant communications with our stakeholders, with the state. At this point nothing definitive has really been exchanged or decided. But clearly we’re working day to day with all those folks. Charles Fishman Now in the CPP plan for Indiana, a lot of renewables, is that something that’s even on the radar screen as far as the electric utility or the NIPSCO that’s after the separation that that’s an investment opportunity that they might consider? Bob Skaggs Yes, it could be down the road, but I would say over the next few years, still continues to play a modest role in the portfolio. Operator Thank you. And with no further questions in the queue, I will now like to turn the call over to the speakers for any closing remarks. Bob Skaggs Thank you and thank you once again for your ongoing interest in NiSource and your ongoing support. We greatly appreciate it. Have a good, safe day. Thanks, everyone. Operator Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Have a good day, everyone.