NiSource Annual Report 2012

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FY2012 Annual Report · NiSource

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2012 NiSource
ANNUAL MESSAGE
TO STOCKHOLDERS

NISOURCE INC.
801 East 86th Avenue
Merrillville, IN 46410
www.nisource.com

NYSE: NI
50 Years
on the NYSE

NIPSCO
100-Year
Anniversary

On Wednesday, Aug. 1, 2012, a group of NiSource

employees journeyed to New York City to ring

The Closing Bell at the New York Stock

Exchange (NYSE). In addition to celebrating

50 years on the NYSE, NIPSCO commemorated its

100th anniversary.

NISOURCE
Stock Reached
a 10-Year High
in 2012

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2012 PERFORMANCE HIGHLIGHTS

• Non-GAAP* earnings per share of $1.46, an increase of 10.6 percent over 2011

• Total shareholder return of 8.5 percent, exceeding both the Dow Jones and

S&P utility indices for the fourth straight year

• Four percent Common Stock dividend increase, our first in more than a decade

• Executed on a record $1.6 billion capital investment program

• Reached a landmark agreement to modernize our gas transmission network

• Advanced programs for systematically modernizing our core energy

infrastructure

• Leveraged our strategic position in developing shale production areas

• Demonstrated ongoing financial and operational discipline, closing the year

with nearly $1 billion in net available liquidity

• Identified a long-term investment inventory of more than $25 billion in growth

and infrastructure modernization opportunities

• Added veteran energy industry executives Jim Stanley (NIPSCO) and

Joe Hamrock (NiSource Gas Distribution) to our senior leadership team

* For a reconciliation to GAAP, see Schedule 1 of NiSource’s Feb. 19, 2012 earnings release.

STOCK
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 “Risk Factors” and “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
December 31, 2012, NiSource had 28,823 registered common stockholders.

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Anticipated Dividend Record &
Payment Dates – NI Common Stock

Record Date
04-30-13
07-31-13
10-31-13
02-03-14

Payment Date
05-20-13
08-20-13
11-20-13
02-20-14

Common Stock Dividend Declared
The Board of Directors, effective January 25, 2013, has
declared a quarterly dividend of $0.24 per share, equivalent
to $0.96 per share on an annual basis.

Investor & Financial Information
Financial analysts and investment professionals should
direct written and telephone inquiries to NiSource Investor
Relations at 801 East 86th Avenue, 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.

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 Computershare at the following:

Computershare
P.O. Box 43006
Providence, RI 02940-3006
or
250 Royall Street
Canton, MA 02021

(888) 884-7790

TDD for Hearing Impaired
(800) 231-5469

Foreign Stockholders
(201) 680-6578

TDD Foreign Stockholders
(201) 680-6610

www.computershare.com/investor

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On June 6, 2012, 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, 2012.

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Stockholder
Inquiries

Analyst
Inquiries

Media
Inquiries

Computershare
Shareowner Services
(888) 884-7790

Investor Relations
(219) 647-6209

Communications
(219) 647-5581

A LETTER FROM NISOURCE’S PRESIDENT & CEO
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NYSE: NI

FELLOW SHAREHOLDERS:

I’m pleased to report that 2012 was another year of
consistent, disciplined execution across all facets of
NiSource’s well-established business strategy.

Anchored by a deep and growing inventory of
infrastructure-focused capital investments, our strategy
continues to produce value for our shareholders and
tangible benefits for customers and other key
stakeholders across our three core business units.

As you will see throughout this year’s annual report, 2012
was a year in which our Team added to its established
track record of delivering results:

• We successfully advanced a broad array of initiatives

to strengthen our energy infrastructure, improve
customer service and enhance environmental
sustainability;

• We generated annual earnings per share in line with

our guidance for the sixth consecutive year;

• We produced total shareholder returns that

outperformed utility indices for the fourth consecutive
year; and

• We increased our common stock dividend for the first

time in more than a decade.

A number of key achievements fueled this performance,
including strong execution of our industry-leading
infrastructure modernization programs at our gas
utilities, solid progress on significant environmental
investments in our Indiana electric business, and the
completion of a number of growth projects at our natural
gas pipeline unit.

Our momentum from these achievements and others has
continued to build in 2013. Of particular significance is
the approval and initial implementation of a landmark
infrastructure modernization program developed in 2012

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Robert C. Skaggs, Jr.
President & CEO

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NISOURCE

BUILDING LONG-TERM SUSTAINABLE GROWTH
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STOCK PRICE
PERFORMANCE

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$200

$150

$100

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NiSource

S&P 500

DJ Utilities

$50

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
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2

S&P
500

DJ
Utilities

2012

173.60

108.56

96.93

2011

159.96

93.60

99.41

2010

113.07

91.67

85.43

2009

93.23

79.67

81.19

2008

61.41

63.01

72.16

2007

100.0

by our largest gas pipeline, Columbia Gas Transmission.
Another indication of our continuing progress is that
NiSource’s stock price reached a 10-year high in 2012,
and continues to remain solid in early 2013.

DELIVERING ON AN
ENHANCED INVESTMENT
STRATEGY

As I noted above, the foundation of NiSource’s success
over the last several years has been our Team’s
demonstrated ability to execute on a broad and growing
inventory of infrastructure-focused capital investment
opportunities. In 2012, those capital investments reached
nearly $1.6 billion.

Throughout this report, you’ll see how we are continuing
to enhance and expand that investment portfolio, leading
to our record capital investment program of about
$1.8 billion in 2013.

And, our investment opportunities extend well into the
future. We have identified an inventory of accretive
infrastructure investments spanning the next two
decades that total $25 billion to $30 billion.

Our Team is intently focused on executing on these
opportunities in a thoughtful, disciplined and transparent
fashion. As we do so, we expect to achieve:

• An annual capital investment run-rate targeting

$1.5 billion to $1.8 billion;

• Sustained annual earnings growth of 5 to

7 percent; and

• An annual dividend growth rate of 3 to 5 percent.

AN ESTABLISHED TRACK RECORD OF EXECUTION
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NYSE: NI

LANDMARK PIPELINE
MODERNIZATION PROGRAM

Our natural gas transmission modernization settlement –
and its subsequent approval by the Federal Energy
Regulatory Commission – was a signature achievement
for Executive Vice President and Group CEO Jimmy
Staton and the Team at Columbia Pipeline Group (CPG) –
formerly NiSource Gas Transmission & Storage.

The settlement, the first of its kind in the interstate
pipeline industry, establishes a clear path forward for
enhancing the ongoing safety, reliability and flexibility of
the Columbia Gas Transmission pipeline system. It
provides an identified project stream under the
modernization program, as well as a balanced and
transparent recovery mechanism for our investments,
which are ultimately expected to exceed $4 billion.

We believe this investment opportunity is a classic win-
win for our customers, the company and our other key
constituencies. Look for additional information about our
modernization program elsewhere in this report.

SUPPLY- & MARKET-DRIVEN
GROWTH

Our CPG Team also is hard at work developing and
executing on a wide range of supply- and market-driven
growth opportunities – many of which are driven by our
strategic asset position in the developing Utica and
Marcellus Shale production areas.

By investing in new pipeline and compression facilities –
and in some cases modifying our existing facilities –
we’re adding additional system capacity and flexibility to
enable competitively priced shale supplies to reach
existing and new markets. In fact, during 2012, we had
more than $500 million of these projects either
completed or in-progress.

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DOING THE RIGHT THING

NiSource’s modernization
programs are particularly
important given the growing public
focus on pipeline safety. Although
our companies have strong and
well-established safety records,
several recent industry incidents –
including one involving our
Columbia Gas of Massachusetts
utility and one involving a Columbia
Gas Transmission pipeline in West
Virginia – serve to underscore
the critical importance of
pipeline safety and validate
NiSource’s infrastructure
modernization strategy.

From our day-to-day focus on
regulatory compliance, to our
long-term commitment to invest
in and maintain system integrity,
we are firmly committed to doing
the right thing to ensure the
safety and reliability of our
facilities and systems.

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NISOURCE

A GROUNDBREAKING PIPELINE MODERNIZATION PROGRAM
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LONG-TERM INFRASTRUCTURE
ENHANCEMENTS

During 2012, Columbia Gas Transmission
advanced a long-term plan to
systematically enhance the safety,
reliability and flexibility of its
12,000-mile system.

This landmark program includes an
inventory of projects spanning up to
15 years and requiring an overall
investment of more than $4 billion.
Earlier this year, the Federal Energy
Regulatory Commission approved a
customer settlement outlining the
initial five years of the program –
encompassing $1.5 billion in investments.
This is in addition to approximately
$100 million in annual ongoing
maintenance investments.

In total, this groundbreaking program
will:

• Replace about 1,000 miles of natural

gas transmission pipeline

• Replace or modernize more than 50

critical compressor units

• Increase system reliability by uprating
or looping systems to support critical
markets

• Improve the company’s ability to

perform state-of-the-art maintenance
and in-line inspections

• Spur job creation and economic

development, including the direct
creation of more than 7,000
modernization-related jobs

• Help assure the continued safe,

reliable and efficient operation of the
company’s pipeline system for
generations to come

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In April 2012, U.S.

Secretary of

Transportation Ray

LaHood recognized

NiSource’s pipeline

infrastructure

modernization and

replacement investment

plans at an event in

Pittsburgh, Pa.

SOLID OPERATIONAL & FINANCIAL PERFORMANCE
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NYSE: NI

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In 2013, NiSource Gas Transmission
& Storage rebranded itself as
the Columbia Pipeline Group. The
change leverages the historic
strength of our Columbia Gas
Transmission and Columbia
Gulf brands, and the tradition
of service and reliability
they represent.

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A prime example of the game-changing nature of
emerging shale gas supplies are CPG’s East Side
Expansion and West Side Expansion projects, which
together represent about $400 million in total
investments providing about 800,000 dekatherms per day
in new transportation capacity.

The East Side Expansion will reconfigure existing
pipeline and compressor facilities to add about
300,000 dekatherms per day of capacity to serve
Northeast and Mid-Atlantic markets. The West Side
Expansion will reverse the flow of one leg of our
Columbia Gulf system stretching from the Gulf Coast to
Appalachia. This will enable shale gas supplies to reach
growing Southeast markets and supports potential Gulf
Coast liquefied natural gas (LNG) export opportunities.

MINERALS & MIDSTREAM
OPPORTUNITIES

As a complement to our core pipeline growth and
modernization strategy, we also are executing on a
number of midstream pipeline and gas processing
investments that leverage our production-area asset
position.

One of these projects, the Big Pine Gathering System,
leverages existing rights-of-way to provide new
midstream transportation service to an underserved,
hydrocarbon-rich area of the Marcellus Shale in
western Pennsylvania. Anchored by a long-term
agreement with XTO Energy Inc., the $160 million project
commenced an initial phase of service in late 2012 and
will eventually provide up to 425 million cubic feet per
day of capacity, with interconnections to multiple
interstate pipeline markets.

Another significant midstream project launched in 2012
involves Pennant Midstream LLC, a joint venture with
affiliates of Hilcorp Energy Company to develop pipeline
and processing facilities in the Utica Shale region of

NISOURCE

MARKET- & SUPPLY-DRIVEN PROJECTS
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northeast Ohio and western Pennsylvania. NiSource is
responsible for about $150 million of the project’s first
investment phase, which will provide about 400 million
cubic feet per day of additional gathering capacity and
200 million cubic feet per day in processing capacity.
The project is expected to be in service in the second
half of 2013, with future expansions anticipated as
producer activity in the area develops.

Concurrent with our Pennant project, we entered into a
separate joint arrangement with Hilcorp to develop the
hydrocarbon potential on more than 100,000 combined
acres in the Utica/Point Pleasant Shale formation.
NiSource will invest alongside Hilcorp in the
development of the acreage, owning both a working and
overriding royalty interest. Notably, all of the
Hilcorp/NiSource acreage is dedicated to the Pennant
Midstream project.

Hilcorp completed several test wells in the combined
acreage area during 2012, with encouraging early
indications consistent with other active wells in the
area. We anticipate additional drilling in the area during
2013, subject to continued scientific analysis and
delineation of the northeast Utica Shale play.

As you can see, our CPG Team is maintaining a sharp
focus on core growth and modernization projects while
pursuing a number of value-adding midstream projects.
This measured approach is designed to meet the
evolving needs of the marketplace – ensuring the
reliability, integrity and modernization of our
infrastructure – while leveraging our assets and
minerals position in the shale basins.

A DEEP INVENTORY OF INVESTMENT OPPORTUNITIES
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NYSE: NI

MARKING 100 YEARS OF
PROGRESS AT NIPSCO

For Northern Indiana Public Service Co. (NIPSCO),
2012 marked the company’s 100th anniversary and
another year of solid progress on the company’s plan to
deliver on core customer, reliability and environmental
initiatives, while maintaining a sharp focus on long-term
investment and growth.

Under the direction of new Executive Vice President and
Group CEO Jim Stanley, NIPSCO continued to produce
strong operating performance, including reaching an all-
time record peak electric load of more than
3,700 megawatts on June 28, 2012. NIPSCO also
continued to introduce new customer programs,
including an air-conditioning cycling program, a green
power rate program and new incentives for customers
who drive electric vehicles.

Most notably, NIPSCO remains on track with significant
multi-year environmental investments at our electric
generation facilities. The company’s more than
$500 million flue gas desulfurization (FGD) project at its
Schahfer Generating Station remains on budget and on
schedule to be placed into service in 2014. NIPSCO also
has begun work on a $250 million FGD project at its
Michigan City Generating Station. These investments
help promote cleaner air and long-term environmental
compliance, and generate hundreds of local jobs and
other economic benefits in NIPSCO’s service area.

NIPSCO also is actively developing two significant
electric transmission projects. These projects, slated for
development later this decade, will reduce system
congestion and strengthen the Midwest’s electrical
infrastructure. With investments totaling about
$500 million, these projects likewise will generate
hundreds of construction jobs and other economic
benefits for Indiana.

Looking ahead, NIPSCO is advancing a long-term
strategy – with corresponding regulatory and legislative

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SUPPORTING
NEIGHBORS IN NEED

While Superstorm Sandy battered
the East Coast with 80-mph winds
and 13-foot ocean surges in late
October 2012, some Columbia Gas
and NIPSCO employees knew they
would soon be headed east in
support of utilities hit by Sandy.

Eighty NIPSCO employees and
more than 40 Columbia Gas
employees helped restore
electricity and natural gas
service. Linemen, construction
coordinators, service technicians
and others volunteered despite
knowing days would be long,
conditions tough and holiday
activities with family and friends
would be put on hold.

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NISOURCE

ELECTRIC TRANSMISSION INFRASTRUCTURE ENHANCEMENTS
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IMPROVING INDIANA’S ELECTRIC SYSTEM

NIPSCO’s electric service territory and assets are
strategically located on the seam between two
major electric transmission operating areas – The
Midwest Independent Transmission Service
Organization (MISO) and the PJM Interconnection
(PJMI). Based on the significant and growing need
to move electricity from west to east, there is an
increased demand for an electric transmission
superhighway.

Although NIPSCO does not plan to build the
superhighway, we are well on our way to build
the necessary on-ramps, off-ramps and loops for
that system. This opportunity will serve to reduce
congestion and provide increased access to
various sources of electric generation, including
renewables. We believe this transmission investment
could reach up to $1 billion for NIPSCO over the
next decade.

In 2012 NIPSCO outlined two approved electric
transmission projects that are part of the MISO
Multi-Value Initiative – a multi-state effort to
strengthen the electric transmission system
serving the Midwest. The two projects, involving
an investment of more than $500 million over the
next five-to-seven years will create jobs, enhance
system reliability, offer environmental benefits
and improve access to lower cost electricity.

REYNOLDS TO TOPEKA PROJECT
• 100-mile, 345-KV transmission project
• Approximately a $270 million investment
• Public outreach and route selection: 2013
• Construction to begin: 2015
• Projected in service: 2018

REYNOLDS TO GREENTOWN PROJECT
• 50/50 joint project
• 66-mile, 765-KV transmission project
• $300 – $400 million investment
(NI Portion: $150 – $200 million)

• Projected in service: latter portion of decade

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A GROWING INFRASTRUCTURE INVESTMENT INVENTORY
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NYSE: NI

initiatives – to modernize the company’s core electric
transmission and distribution infrastructure. This effort is
designed to support the accelerated replacement of
transformers, poles, lines and other equipment. On the
legislative front, the NIPSCO Team – together with other
state utilities – is working tirelessly to advance
legislation that would improve the efficiency of the
regulatory process, as well as the framework for
recovering costs associated with these ongoing
infrastructure investments.

All told, 2012 represented another outstanding year of
progress that positions NIPSCO to be a strong and
vibrant partner in northern Indiana’s progress for
generations to come.

INDUSTRY-LEADING GAS
UTILITY MODERNIZATION
PROGRAMS

Under the direction of new Executive Vice President and
Group CEO Joe Hamrock, our NiSource Gas Distribution
(NGD) unit continues to deliver strong results from a
well-established strategy of aligning long-term
infrastructure modernization programs with
complementary customer programs and regulatory
initiatives.

In total, we invested nearly $400 million in these
infrastructure programs during 2012. And these
investments were in addition to about $250 million in
distribution system growth and maintenance
investments. Over time, we expect the inventory of gas
distribution modernization projects across our NGD
service territory to total more than $10 billion.

Utility investments on this scale call for efficient and
innovative regulatory approaches. And on that front, our
NGD Team continues to make solid progress.

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MORE ACCURATE
METER READING

Automated Meter Reading (AMR)
devices enable our utilities to
obtain accurate meter readings
remotely. Through a wireless
transmission, we are able to read
meters and transmit the data
directly to our billing system.

NiSource Gas Distribution
companies have been replacing
manual-read meters with AMR
devices throughout the last five
years. As of the end of 2012, AMR
devices were installed in
approximately 70 percent of our
gas customers’ meters.

In 2012, NIPSCO will begin to pilot
AMR devices. A $90 million
investment, the devices will be
installed on all 900,000 gas and
electric meters by 2016. The
technology will allow a meter
reader to collect approximately
6,300 readings in four hours,
compared to 300 readings now.

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NISOURCE

SOLID LONG-TERM TRAJECTORY TO GROW EARNINGS
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For example, the Columbia Gas of Virginia Team played a
key role in advancing that state’s Natural Gas
Infrastructure Expansion for Economic Development – or
NEED – legislation during 2012, as well as legislation
enacted early this year permitting gas utilities to defer
costs associated with system integrity programs for
recovery in future rate cases.

In Maryland, the Team helped advance legislation that
will permit gas utilities to file a pipeline modernization
plan to recover costs associated with projected
infrastructure replacement projects through a surcharge
on customer bills. The new legislation is expected to
take effect June 1, 2013.

In terms of rate case activity, in late 2012, Columbia Gas
of Massachusetts received a base rate case order
resulting in an annual revenue increase of about
$8 million. And most recently, Columbia Gas of
Pennsylvania filed a unanimous settlement with the
parties in its 2012 base rate case. The settlement,
pending Pennsylvania Public Utility Commission
approval, increases annual revenues by about
$55 million. Notably, the case includes a simplified
residential rate design that includes a weather
normalization adjustment and full recovery of safety-
related expenditures. Columbia Gas of Pennsylvania
is the first utility in the state to establish rates based
on investments and expenses as reflected in a fully
forecasted test year, consistent with Pennsylvania’s
recently enacted Act 11.

Again, our NGD game plan is well-established,
straightforward and clear – sustained growth through
long-term infrastructure investments supported by
customer programs and progressive regulatory models.

CONTINUED GROWTH IN 2013
AND BEYOND

Based on the demonstrated strength of NiSource’s
business strategy – and the continued solid execution of
that plan by our Teams – we are committed to long-term
earnings growth in the range of 5 to 7 percent per year.

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GAS DISTRIBUTION
MODERNIZATION

Infrastructure modernization
projects across much of the NGD
territory continue to generate
value for stakeholders and
sustainable earnings growth.
Supported by regulatory initiatives
integrated with customer programs
designed to reduce energy
consumption and lower overall
bills, NiSource invested nearly
$400 million in these
infrastructure programs in 2012.

This more than $10 billion long-
term program includes replacing
aging pipelines with more
corrosion-resistant materials,
including coated steel and plastic.

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NISOURCE: A COMPELLING INVESTMENT
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NYSE: NI

As I noted earlier, fueling this growth will be our record
$1.8 billion capital investment program, nearly three-
fourths of which is comprised of value-adding growth
and modernization investments. While the plan reflects a
fairly significant increase over 2012, the largest increase
for 2013 relates to the modernization and growth
initiatives at our pipeline group – adding to a foundation
of growth and environmental investments at our other
two business units. We are convinced that these
investments will enhance and strengthen the long-term
value of our assets.

As we continue to execute our investment-driven
business strategy, I can assure you that we will remain
balanced, disciplined and transparent in our approach,
including the means by which we fund our capital
requirements. A key part of that approach remains an
unequivocal commitment to maintain NiSource’s
investment-grade credit ratings.

Before I close, I want to recognize the significant
service and wise counsel of our Board Chairman Ian
Rolland, who after 35 years of service is retiring from the
NiSource Board of Directors. Ian has provided our
Board with unwavering leadership, a strong moral
compass and a balanced, long-term focus on the
interests of our shareholders and other key
constituencies. I deeply appreciate Ian’s service, his
guidance and his continued friendship.

With the full support of our Board, I am convinced that
we have a compelling game plan, and the resources and
capabilities to continue to deliver on our commitments.

Thank you for your continued interest in NiSource. We
value your support and remain committed to delivering
continuing value for your investment.

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

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MANAGEMENT TEAM

ROBERT C. SKAGGS, JR.

President & CEO

STEPHEN P. SMITH

Executive Vice President & CFO

CARRIE J. HIGHTMAN

Executive Vice President & CLO

JOSEPH HAMROCK

Executive Vice President & Group CEO

Gas Distribution

JIM L. STANLEY

Executive Vice President & Group CEO

NIPSCO

JIMMY D. STATON

Executive Vice President & Group CEO

Columbia Pipeline Group

ROBERT D. CAMPBELL

Senior Vice President, Human Resources

GLEN L. KETTERING

Senior Vice President, Corporate Affairs

VIOLET G. SISTOVARIS

Senior Vice President & CIO

LARRY J. FRANCISCO

Vice President, Audit

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NISOURCE

IAN ROLLAND’S ENDURING COMMITMENT TO NISOURCE
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Ian Rolland, NiSource Chairman, announced
his plans to retire from NiSource’s Board of
Directors, effective May 14, 2013. A member of
the Board since 1978, Ian has served as
NiSource’s Chairman since Nov. 2006.

Since Ian joined the Board more than three
decades ago, the company has experienced
significant change, opportunities and
challenges. During the most challenging
times, Ian served as a stable and strong
steward of customer, shareholder and
employee interests. Most recently, he and
the Board helped NiSource navigate the
nation’s difficult financial landscape and
position the company for sustainable, long-
term growth.

In April 2012, Indiana’s then Governor Mitch
Daniels bestowed Ian with the state’s highest
honor, the Sachem Award. The Governor
proclaimed that Ian is “one of the great
citizens in recent Indiana history: a superb
businessman who created jobs by the
thousands, a leader for civil rights and a
host of civic causes, a champion of the
environment and conservation, and always
an exemplar of the highest standards of
personal integrity.”

In addition to his role as Chairman with
NiSource, Ian sits on the boards of more
than a dozen non-profit and charitable
organizations. As a businessman, Ian has
created significant positive economic
impacts, and in his private life, he has been
active in community issues as wide-ranging as
school desegregation, historic preservation
and protecting the environment.

Until his retirement in 1998, Ian served as
Chairman and Chief Executive Officer of
Lincoln National Corporation, a provider of
financial products and services.

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In Nov. 2012, Ian spoke to a

group of more than

170 women leaders at

NiSource about the

importance of diversity in

a company’s success.

Inclusion and diversity

remain a strong priority of

Ian’s and of NiSource.

A LETTER FROM NISOURCE’S CHAIRMAN
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NYSE: NI

•••••••••••••••••••••••

“IAN PERSONIFIES WHAT IT
MEANS TO ‘DO THE RIGHT
THING,’ AND HE SERVES AS A
TOWERING EXAMPLE FOR ALL
OF US AT NISOURCE AS WE
ASPIRE TO EXCELLENCE,
INTEGRITY AND GENEROSITY IN
OUR PROFESSIONAL AND
PERSONAL LIVES. IT GOES
WITHOUT SAYING THAT HE WILL
LEAVE BIG SHOES TO FILL ON
THE NISOURCE BOARD. ON
BEHALF OF NISOURCE’S MORE
THAN 8,000 TEAM MEMBERS –
THANK YOU FOR YOUR SERVICE
AND ENDURING COMMITMENT
TO NISOURCE.”

Robert C. Skaggs, Jr.
President & CEO

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As Bob’s letter highlights, this was another solid year of
progress for NiSource, its shareholders and other key
stakeholders.

It also was a bittersweet year for me, as in May 2012,
I announced I would retire from NiSource’s Board of
Directors at the completion of my current term in
May 2013.

It has been my privilege to serve as a NiSource Board
member for many years. With the benefit of that
perspective, I can say without hesitation, that the
Company is in the best position it’s been in during my
tenure and that its future prospects are bright.

I’m leaving the Board in good hands under the direction
of incoming Chairman Richard Thompson, subject to his
reelection at the 2013 Annual Meeting of Stockholders.
Rich’s strong business and financial knowledge, his
unparalleled leadership integrity, and his deep
understanding of NiSource’s growth opportunities and
challenges make him an excellent choice to serve as
Chairman.

As I close out my formal role with NiSource, I am
particularly proud of several key accomplishments of the
Company and our Board during 2012, including:

• The Board’s action to increase the dividend for the first
time in more than 10 years, paired with its intention to
grow the dividend on a consistent basis going forward.
This, in combination with NiSource’s commitment to
sustainable earnings growth, reflects the Company’s
unwavering commitment to execute on its investment-
based business strategy and continue to create
shareholder value.

• Further development of an already-strong management
team, including among others, the addition of veteran
energy executives Joe Hamrock at NGD and Jim
Stanley at NIPSCO.

NISOURCE

• Continued strengthening of our Board with the addition

of Aristides Candris and Teresa Taylor to our ranks.
Aris and Teresa bring exceptional operational and
leadership experience to our Board, and I am confident
they will contribute to the Board’s effectiveness for
years to come.

• The Board’ s active engagement and support of the
Company’s record infrastructure investment plan,
helping assure that it is taking the right steps to provide
safe, reliable and improved service to its customers.

• Sustained recognition of NiSource’s contemporary
governance and industry-leading ethical practices,
capped with the Company being named, for the second
consecutive year, one of the World’s Most Ethical
Companies by The Ethisphere Institute.

I wish only the best to my colleagues at NiSource, and I
can assure you that my wife Mimi and I will watch with
great interest and pride as the Team continues to build
an even stronger Company.

Ian M. Rolland
Chairman of the Board
NiSource Inc.

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BOARD OF DIRECTORS

IAN M. ROLLAND

Chairman of the Board, NISource Inc.

RICHARD A. ABDOO

Retired President, R.A. Abdoo & Co. LLC

ARISTIDES S. CANDRIS

Retired President & CEO, Westinghouse

SIGMUND L. CORNELIUS

Retired Senior Vice President, Finance & CFO,

ConocoPhillips

MICHAEL E. JESANIS

Principal, Serrafix

MARTY P. KITTRELL

Retired Executive Vice President & CFO,

Dresser, Inc.

W. LEE NUTTER

Retired Chairman, President & CEO,

Rayonier, Inc.

DEBORAH S. PARKER

Senior Vice President, Quality &

Environmental, Health & Safety,

Alstom Power

ROBERT C. SKAGGS, JR.

President & CEO, NiSource Inc.

TERESA A. TAYLOR

Retired COO, Qwest Communications, Inc.

RICHARD L. THOMPSON

Chairman, Lennox International, Inc.

CAROLYN Y. WOO

President & CEO, Catholic Relief Services

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NYSE: NI
50 Years
on the NYSE

NIPSCO
100-Year
Anniversary

On Wednesday, Aug. 1, 2012, a group of NiSource

employees journeyed to New York City to ring

The Closing Bell at the New York Stock

Exchange (NYSE). In addition to celebrating

50 years on the NYSE, NIPSCO commemorated its

100th anniversary.

NISOURCE
Stock Reached
a 10-Year High
in 2012

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2012 PERFORMANCE HIGHLIGHTS

• Non-GAAP* earnings per share of $1.46, an increase of 10.6 percent over 2011

• Total shareholder return of 8.5 percent, exceeding both the Dow Jones and

S&P utility indices for the fourth straight year

• Four percent Common Stock dividend increase, our first in more than a decade

• Executed on a record $1.6 billion capital investment program

• Reached a landmark agreement to modernize our gas transmission network

• Advanced programs for systematically modernizing our core energy

infrastructure

• Leveraged our strategic position in developing shale production areas

• Demonstrated ongoing financial and operational discipline, closing the year

with nearly $1 billion in net available liquidity

• Identified a long-term investment inventory of more than $25 billion in growth

and infrastructure modernization opportunities

• Added veteran energy industry executives Jim Stanley (NIPSCO) and

Joe Hamrock (NiSource Gas Distribution) to our senior leadership team

* For a reconciliation to GAAP, see Schedule 1 of NiSource’s Feb. 19, 2012 earnings release.

STOCK
INFO

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Anticipated Dividend Record &
Payment Dates – NI Common Stock

Record Date
04-30-13
07-31-13
10-31-13
02-03-14

Payment Date
05-20-13
08-20-13
11-20-13
02-20-14

Common Stock Dividend Declared
The Board of Directors, effective January 25, 2013, has
declared a quarterly dividend of $0.24 per share, equivalent
to $0.96 per share on an annual basis.

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2012 NiSource
ANNUAL MESSAGE
TO STOCKHOLDERS

NISOURCE INC.
801 East 86th Avenue
Merrillville, IN 46410
www.nisource.com