NiSource

Commitment

2008 Annual Message to Stockholders

Our Aspiration

Become the premier company in our industry, with a strong financial profile, a wide range 
of investment-driven growth opportunities, robust and sustainable earnings and cash flow, 
top-tier safety, service and reliability metrics, and a solid foundation of engaged, aligned and 
safe employees.

Our Strategy

• Execute on regulatory initiatives and infrastructure programs at our utilities  
• Expand and grow our natural gas transmission and storage business
• Strengthen our financial foundation
• Enhance processes, performance, safety and reliability across our companies

Our Commitments

• Operate safely
• Deliver reliable service to our customers
• Execute on our balanced business plan
• Maintain our investment-grade credit ratings and dividend
• Generate long-term, investment-driven earnings growth
• Communicate in a transparent and timely manner

Dear Fellow Stockholders:

During 2008,
NiSource delivered 
on its commitments.

Across virtually every key dimension of our
business, NiSource teams made excellent
progress. 

• We hit our key financial and business

targets. 

• We strengthened our financial foundation. 

• We resolved legacy issues. 

• We continued building a foundation for
sustainable, investment-driven growth. 

These achievements are somewhat obscured
by the challenging economic and financial
conditions we and other companies have faced
of late and the extent to which those factors
have affected our share price performance.
However, as discussed below, I believe that –
by almost any measure – the progress our
team made in 2008 was truly exceptional.

Acknowledging Global Challenges,
Preserving Our Plan
Although we made significant strides forward
over the course of the last year, we fully
appreciate the challenges that lie ahead and
the need to continue to effectively navigate
the ongoing economic downturn and difficult
financial market conditions. To that end, our
management team and Board of Directors
have taken steps to preserve the core
elements of our business strategy while
maintaining financial flexibility and 
adequate liquidity.

As we move forward into 2009, our team is
equipped with a balanced, measured long-
term business plan and a proactive strategy
for addressing the near-term challenges that
face our company. It is my privilege to share
this update with you and explain why – today
more than ever – I am convinced we will
deliver on our commitments to enhance
shareholder value, deliver long-term earnings
growth and become North America’s
premier regulated energy company.

Delivering Results
As you know from our periodic updates,
NiSource’s financial performance for 2008 was

1

solid. For the year, we delivered net operating
earnings (non-GAAP) of $348.5 million, or
$1.27 per share. On a GAAP basis, income
from continuing operations was 
$369.8 million, or $1.35 per share. For the
second consecutive year, those results were in
line with our earnings
targets, and reflected
the collective effort
and commitment by
people across our
organization. 

On a business
segment basis, we
saw high-quality
execution on a
number of key
initiatives that are
central to our

balanced plan for delivering long-term growth.
As you will see in the segment profiles
featured in this year’s report, there were
significant accomplishments across each of our
three primary businesses during 2008: 

Northern Indiana Public Service Company
(NIPSCO) electric rate case.

• Our gas transmission and storage (NGT&S)
team continued to deliver on its strategy of
maximizing value from existing assets and
advancing growth projects that leverage our
unparalleled pipeline and storage footprint.

A Balanced,
100% 
Regulated
Portfolio

• Our gas distribution team advanced an

extensive array of landmark infrastructure
enhancement programs and complementary
regulatory and commercial initiatives.

• Our Indiana team made significant progress
in addressing near-term electric generating
capacity needs and advanced an aggressive
regulatory agenda, including the important

I would be remiss if I didn’t also point out that
our NiSource teams delivered these results
despite a daunting array of unprecedented
and, in some cases unimaginable, challenges.
These ranged from devastating storms and
hurricanes, to flooding, and – in the case of
our NGT&S team – the catastrophic
destruction of an entire mainline compressor
station by a tornado. 

Management Team

Robert C. Skaggs, Jr.
President & Chief Executive Officer

Stephen P. Smith
Executive Vice President & Chief Financial Officer

Carrie J. Hightman
Executive Vice President & Chief Legal Officer

Christopher A. Helms
Executive Vice President & Group CEO,
NI Gas Transmission & Storage

Eileen O’Neill Odum
Executive Vice President & Group CEO,
NI Indiana Business Unit

Jimmy Staton
Executive Vice President & Group CEO,
NI Gas Distribution

Michael W. O’Donnell
Executive Vice President

Robert D. Campbell
Senior Vice President, Human Resources

Glen L. Kettering
Senior Vice President, Corporate Affairs

Kathleen O’Leary
Senior Vice President, Performance Management

Violet G. Sistovaris
Senior Vice President & Chief Information Officer

Larry J. Francisco
Vice President, Audit

2

As we have come to expect – and by no means
take for granted – the response of NiSource
employees to these and other challenges was
remarkable. Our teams remained focused,
productive and safe. This is a key reason why
a solid foundation of engaged, aligned and
safe employees remains a key priority for 
our organization.

Sharpening Our Focus,
Strenthening Our Foundation
In addition to our business unit
accomplishments, we took several key steps
during 2008 to strengthen our balance sheet,
sharpen our corporate focus and eliminate
distracting legacy issues. In particular, 
I would highlight:

• The sale of Northern Utilities and 

Granite State Gas Transmission to Unitil
Corp. for about $200 million, including
working capital.

• The sale of non-strategic Columbia Gulf

Transmission assets in the Gulf of Mexico to
Tennessee Gas Pipe Line for $7.5 million.

• The successful completion of the sale of the

Whiting Clean Energy facility to BP
Alternative Energy North America for
approximately $217 million, including
working capital.

• Resolution of the Tawney class action
litigation, which involved natural gas
royalty claims against Columbia Natural
Resources, a former NiSource subsidiary.

We also took steps throughout the year to
secure financing and strengthen NiSource’s
liquidity position. During the second quarter,
we successfully issued $700 million of senior
unsecured debt at favorable rates. We later
successfully refinanced about $250 million in
NIPSCO Pollution Control Bonds and
supplemented our $1.5 billion revolving credit
facility that extends to July 2011 with a new,
six-month $500 million credit facility. That
facility helped ensure ample liquidity to
accommodate the company’s seasonal cash
flow requirements and to provide near-term

Gas Distribution
Executing on regulatory initiatives &
infrastructure enhancement programs

During 2008, NiSource’s natural gas distribution
businesses advanced an array of infrastructure
enhancement programs and complementary regulatory
and commercial initiatives:

• Columbia Gas of Pennsylvania reached a unanimous

$41.5 million rate case settlement with regulatory
stakeholders – closely linked to the company’s 
$1.4 billion, 20-year distribution system 
replacement program.

• Columbia Gas of Ohio received approval of a landmark

rate case settlement that provides an additional 
$47.1 million in annual base revenues and establishes
an enhanced rate structure and new demand side
management and low income customer support
programs. The settlement contains a tracking
mechanism closely synchronized with the company’s 
$2 billion long-term infrastructure enhancement and
replacement program.

• Advanced other regulatory and commercial initiatives,

including the filing of a $3.7 million rate case at
Columbia Gas of Maryland, preparations for rate case
filings at Columbia Gas of Kentucky and Bay State Gas,
and securing an agreement for Columbia Gas of
Virginia to serve the planned 580-megawatt Bear
Garden generating station in Buckingham County, Va. 

3

Gas Transmission 
& Storage
Maximizing growth and value 

During 2008, NiSource’s Gas Transmission & Storage
(NGT&S) business continued its strategy of developing a
portfolio of growth projects while maximizing value from
its existing asset base.

• Successfully launched the 182-mile Millennium

Pipeline, jointly owned by units of NiSource, National
Grid, and DTE Energy.

• Increased overall revenues and throughput from the
first full year of Hardy Storage operations and new
system interconnects along the Columbia Gulf
Transmission and Columbia Gas Transmission 
pipeline systems.

• Continued construction on the fully-subscribed 

Eastern Market Expansion to add 97,000 dekatherms
(Dth) per day of storage and transportation deliverability
this year.

• Received approval to construct the fully subscribed

Appalachian Expansion project, adding 100,000 Dth per
day of transportation capacity by late this year.

• Advanced other near-term growth opportunities,

including those linked to the company’s unparalleled
pipeline and storage footprint in the Appalachian
Basin’s Marcellus Shale development areas.

funding flexibility related to the Tawney
settlement. As of the end of 2008,
approximately $750 million of aggregate credit
capacity was available to NiSource under
these facilities. 

Given the substantial progress made in
advancing our business plan during 2008,
under normal circumstances, we would have
been delighted with our prospects as we
entered 2009. However, for us and countless
other businesses across the globe,
circumstances are anything but normal.

Taking a Thoughtful, 
Proactive Approach
From the outset of the global financial and
economic crisis, NiSource’s executive team and
Board of Directors have been actively engaged
in assessing potential impacts on our
businesses and developing plans to effectively
manage through this period. 

As you might expect, a focal point of our
initial efforts has been to ensure continued
access to credit markets on reasonable terms –
an essential requirement for a capital
intensive business such as ours. We also have
concentrated on the potential impacts of the
economic decline on the industrial and other
markets we serve, as well as on increases in
pension expense and funding requirements.
While these issues certainly are not unique to
NiSource, they represent a set of challenges
that we need to – and will – thoughtfully and
proactively manage.

With that in mind, we developed a plan to
address the issues created by current financial
and economic conditions without sacrificing
the core elements of our long-term growth
strategy. This balanced and measured
approach is designed to maintain our business
commitments while managing liquidity in a
prudent and disciplined fashion. Here are
some key elements of our plan, many of which
I am pleased to say have already been
accomplished or are well under way: 

• We reduced planned capital spending for
2009 from slightly more than $1 billion to

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$800 million – with 2009 investments split
evenly between growth (or revenue
generating) and maintenance projects.

• We have reduced working capital
requirements to generate at least 
$250 million in additional liquidity for 
2009, a reduction that, if anything, we
regard as conservative.

• We repurchased approximately $32 million
of the $450 million of debt scheduled to
mature in November 2009, as well as $68
million of debt scheduled to mature in
November 2010.

• We developed plans to adopt an expanded

dividend reinvestment plan, which is
expected to reduce cash requirements by
$15 to $20 million annually.

$1,307M

$1M

$330M

$222M

$384M

Gas Distribution
GT&S
Electric
Sugar Creek
Other

$800M

$2M

$176M

$290M

Capital
Expenditures

$370M

$332M

2008

2009

I would also note that NiSource’s near-term
liquidity profile will be enhanced by the
“bonus” tax depreciation provisions contained
in the American Recovery and Reinvestment
Act of 2009, enacted in February of this year.
Specifically, we estimate that the measure will
effectively generate $100 million in
incremental cash for NiSource in 2009.

In addition, we have undertaken a number of
initiatives that will help us further enhance
efficiency and reduce operating and
maintenance
expenses. These
include tightly
managing staffing,
freezing base
compensation for
senior executives and
postponing most
exempt employee pay
increases across all of
NiSource. Our
business units have
launched additional
efforts to generate
cash or better manage
costs – with activities tailored to the unique
circumstances of our companies. For example,
in response to the economic slowdown, our
NGT&S unit recently accelerated a planned
restructuring of its operations to better focus
on core business processes, increasing
efficiency and maintaining safe, reliable
customer service.

Ensuring Financial Flexibility 
and Liquidity
The combined effect of these initiatives has
been to reduce NiSource’s total projected 2009
financing requirements from nearly $1 billion
to less than $500 million. I am pleased to say
that, as of this writing, we have fully
addressed those 2009 financing requirements,
and we are well along in meeting our 2010
financing needs. 

In February we closed on a $265 million two-
year term loan under attractive terms, with
the opportunity to expand up to a total of 
$500 million in April under an accordion
feature in the financing agreement.
Additionally, in March, we issued $600 million
in senior unsecured notes in an underwritten
offering. The proceeds from that issuance will
allow us to complete the refinancing of
outstanding debt scheduled to mature in
November 2009 and for general corporate
purposes, including refinancing a portion of
outstanding debt scheduled to mature in
November 2010.

5

Suffice it to say, I am confident that our
comprehensive and proactive strategy will
enable us to successfully maintain NiSource’s
financial flexibility and solid liquidity 
going forward.

Navigating Though 
Earnings Headwinds
It’s worth noting that, if not for a few
unforeseen items, we would essentially be on
track to achieve NiSource’s three-year
earnings trajectory that we shared with you in
late 2007. Unfortunately, those items for 2009
are significant – starting with increased
pension expense.

Like many of our peers in the utility industry
and, indeed, large employers in general, we
are seeing a significant increase in pension
expense, due to the recent deterioration in
global securities markets. While over time we
expect to reflect increased pension expenses in
rates, this issue will have a negative impact
on earnings in the near term. In that regard,
for 2009, NiSource’s pension expense will be
about $100 million higher than it was in 2008,
reducing forecasted earnings by 24 cents 
per share. 

I would emphasize that our pension asset
performance historically has been quite strong
and that we entered 2008 in a fully funded
position. For 2008, our plan assumed asset
performance of 9 percent, while actual returns
– like those for many companies – were down
by approximately 30 percent. 

In addition, as a result of the Tawney
settlement payments and other factors, we
expect a year over year increase in interest
expense of approximately 12 cents per share.

Lastly, we expect that the economic downturn
will negatively affect 2009 earnings by about 
5 cents per share and that increased property
taxes and other costs will amount to about 
8 cents per share.

On the positive side of the ledger, we expect
our 2009 earnings will be positively impacted
by a number of items, including increased

Electric Operations
Addressing capacity needs while
pursuing a robust regulatory agenda

NiSource’s Northern Indiana Public Service Company
(NIPSCO) took steps in 2008 to meet customers’ long-
term electric generation capacity needs, diversify its
electric supply portfolio and pursue an aggressive
regulatory agenda:

• Acquired the $330 million, 535 megawatt Sugar Creek

combined cycle electric generating facility. By
December 1, 2008, the plant was successfully
dispatched into the Midwest Independent Transmission
System Operator (MISO), allowing it to begin directly
serving NIPSCO’s 455,000 electric customers.

• Added wind-generated power to NIPSCO’s portfolio

beginning in 2009.

• Filed NIPSCO’s electric base rate case – its first in 

20 years – seeking a rate adjustment of approximately
9.8 percent, or about $85 million annually. The
proceeding is expected to be completed and new rates
placed into effect in late 2009 or early 2010.

• Continued a multi-year generation reliability investment
program and accelerated distribution system reliability
and outage response improvements. 

• Proposed expanded energy efficiency programs for

electric customers, such as direct load control
programs, energy efficiency rebates, and 
advanced metering.

6

Delivering on Our Commitments
In closing, I will revisit a point I made at the
beginning of this letter: Although somewhat
obscured by today’s financial and economic
conditions – and the headwinds they present
for the current year – 2008 was indeed a
strong year for NiSource. We executed against
an aggressive, highly visible plan, in a tough
economic environment. 

Going forward, we remain strongly committed
to maintaining a solid financial foundation
and to delivering on our fundamental 
promise of growing NiSource by investing in
our infrastructure and coupling that
investment with effective regulatory and
commercial actions. 

If we can do that – and I am confident we can
– we will generate long-term, sustainable
value for NiSource shareholders.

Thank you once again for your investment in
NiSource and for your continued interest 
and support.

Sincerely,

Robert C. Skaggs, Jr.
President and Chief Executive Officer
NiSource Inc.

revenue from customer growth and pipeline
projects (totaling 11 cents per share) and 
favorable regulatory outcomes in
Pennsylvania and Ohio (which are expected to
contribute about 16 cents per share).

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$200

$100

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NiSource
DJ Utilities
S&P 500

$0

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2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
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0
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NiSource DJ  Utilities

S&P 500

62.49

101.75

124.47

103.29

108.49

100.0

163.89

227.12

189.79

162.73

130.12

100.0

89.53

142.09

134.69

116.32

110.88

100.0

2008

2007

2006

2005

2004

2003

Stock 
Price
Performance

As a result of these factors, we expect
NiSource’s net operating earnings (non-GAAP)
for 2009 to fall within a range of $1.00 to
$1.10 per share. On a GAAP basis, the range
for basic earnings per share from continuing
operations is expected to be the same as net
operating earnings.

Although this decline in expected earnings
from 2008 to 2009 effectively resets our
earnings baseline, we remain firmly
committed to achieving long-term, sustainable
growth for our many stakeholders. Because
our core business remains sound and our
progress is real, I have confidence in our
ability to deliver on that commitment. If
anything, I am even more convinced that
NiSource’s portfolio of low risk, regulated
businesses can consistently deliver 
3 to 5 percent earnings growth over the 
long term.

7

 
 
Dear Fellow Stockholders:
On behalf of the Board of Directors, thank you
for your investment in and continued support of
NiSource.

As highlighted in President and CEO Bob
Skaggs’ letter, 2008 was a year of significant
progress for our company. In the face of a
number of stiff challenges, the NiSource team
delivered on its commitments and advanced the
company’s strategy of delivery long-term
sustainable growth.

Without question, the persisting downturn in
the economic and financial environment will
present NiSource – and virtually all companies
– with a continuing wave of challenges as we
move forward in 2009. While NiSource’s
portfolio of low-risk, regulated and resilient
businesses may be better positioned than many
to weather these turbulent times, the company’s
management and Board recognize that we too
must make adjustments and take the steps
necessary to prudently manage through this
period. I want to underscore to you that the
Board has been actively engaged and is very
supportive of management’s plan to move the
company forward in 2009, and is confident in
the ability of the NiSource team to execute on
that plan.

As a Board, we take seriously our role as
stewards of your investment in NiSource, and
we are firmly committed to principles of
integrity, transparency and independence.

During 2008, we welcomed two new Board
members – Richard A. Abdoo and 
Michael E. Jesanis – who come to NiSource with
a depth of corporate and energy industry
experience and valuable financial and
operational insight. Their commitment and
perspective, and that of the entire Board, are
very much appreciated.

As we move forward through 2009, I can assure
you that the Board will continue to maintain a
high level of engagement with Management
and, together with Bob and his team, will test
and validate the company’s strategies and plans
on an ongoing basis. Despite what promises to
be a challenging environment, we are confident
the company will continue to deliver on its
commitments to you and our other key
stakeholders.

Once again, thank you for your investment, and
for your continuing support of OUR company.

Sincerely,

Ian M. Rolland
Chairman of the Board
NiSource Inc. 

Board of Directors

Ian M. Rolland
Chairman of the Board
NiSource Inc.

Richard A. Abdoo
President
R.A. Abdoo & Co. LLC

Dr. Steven C. Beering
Chairman
National Science Board

Dennis E. Foster
Principal
Foster Thoroughbred Investments

Michael E. Jesanis
Principal
Serrafix

Marty Kittrell
EVP & CFO
Dresser, Inc.

W. Lee Nutter
Retired Chairman
President & CEO, Rayonier, Inc.

Deborah S. Parker
President & CEO

International Business Solutions, Inc.

Robert C. Skaggs, Jr.
President & CEO
NiSource Inc.

Richard L. Thompson
Chairman
Lennox International, Inc.

Dr. Carolyn Y. Woo
Martin J. Gillen Dean & Ray & Milann Siegfried 
Prof. of Entrepreneurial Studies
Mendoza College of Business 
University of Notre Dame 

8

Stockholder Info

This document contains “forward-looking statements.” For a discussion of factors that could cause actual results 
to differ materially from those contained in such statements, please see “Management’s Discussion and Analysis of 
Financial Condition and Results of Operations” in the NiSource Inc. annual report on Form 10-K included herein. 

NiSource Inc. common stock is listed and traded on the New York Stock Exchange under the symbol NI. The shares 
are listed in financial stock quotations as NISOURCE. As of Dec. 31, 2008, NiSource Inc. had 36,194 registered 
common stockholders.

Anticipated Dividend Record and Payment Dates

NiSource Common Stock

Record Date

Payment Date

04-30-09
07-31-09
10-30-09
01-29-10

05-20-09
08-20-09
11-20-09
02-19-10

Stockholder Services
Questions about stockholder accounts, stock 
certificates, transfer of shares, dividend payments, 
automatic dividend reinvestment and stock purchase
plan, and electronic deposit may be directed to Mellon
Investor Services at the following:

BNY Mellon Shareowner Services
P.O. Box 358015
Pittsburgh, PA 15252-8015

Common Stock Dividend Declared
The Board of Directors, effective January 9, 2009, has
declared a quarterly dividend of $0.23 per share, 
equivalent to $0.92 per share on an annual basis.

Investor and Financial Information
Financial analysts and investment professionals should
direct written and telephone inquiries to NiSource
Investor Relations at 801 E. 86th Ave., Merrillville, IN
46410 or (219) 647-6209.

Copies of NiSource’s financial reports are available by 
writing or calling the Investor Relations department at
the address or phone number listed above. The
materials are also available at www.nisource.com.

or

480 Washington Boulevard
Jersey City, NJ 07310-1900

(888) 884-7790

TDD for Hearing Impaired
(800) 231-5469

Foreign Stockholders
(201) 680-6578

TDD Foreign Stockholders
(201) 680-6610

www.bnymellon.com/shareowner/isd

On June 9, 2008, NiSource’s Chief Executive Officer submitted to the New York Stock Exchange (“NYSE”) an annual 
certification stating that as of that date he was not aware of any violation by the company of the New York Stock
Exchange’s corporate governance listing standards, as required by Section 303A.12(a) of the NYSE’s Listed
Company Manual. NiSource’s Chief Executive Officer and Chief Financial Officer have provided certifications to the
U.S. Securities and Exchange Commission as required by Section 302 of the Sarbanes-Oxley Act of 2002. These 
certifications are included as Exhibits 31.1 and 31.2 to the company’s 10-K for the year ended December 31, 2008.

Stockholder Inquiries
BNY Mellon 
Shareowner Services

Analyst Inquiries
Investor Relations

Media Inquiries
Communications

(888) 884-7790

(219) 647-6209

(219) 647-5581

NiSource Inc.
801 East 86th Avenue
Merrillville, IN 46410
www.nisource.com