NiSource Inc (NI) 2003 Q4 法說會逐字稿

Good morning. My name is Carol and I will be your conference facilitator today. At this time, I would like to welcome everyone to the NiSource Incorporated fourth quarter and year-end results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. If you would like to ask a question during this time, simply press star then the number one on your telephone key pad. If you would like to withdraw your question, press star then the number two on your telephone key pad. Thank you.

I will now turn the call over to Mr. Dennis Senchak, Vice President of Investor Relations. Sir, you may begin.

Thank you and Carol and good morning, everyone. On behalf of the NiSource, I would like to welcome you, all of you to our year end 2003 analyst call and we really appreciate the opportunity to be with you today.

Joining me this morning are Gary Neale, Chairman, President and Chief Executive Officer and Mike O'Donnell, Executive Vice President and Chief Financial Officer. As you know, the focus of today's conference call is to review our 2003 financial performance. The format is to briefly discuss our results and then open the call to your questions. We expect this call to last about one hour.

I would like to remind all of that you some of the statements made on this conference call will be forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Federal Securities laws. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Information concerning factors that could cause actual results to differ materially is included in the management's discussion and analysis section of our periodic reports filed with the S.E.C.

And now at this time, I am pleased to turn this call over to Gary Neale.

Thanks, Dennis. Good morning. We appreciate your being with us today and are pleased to share with you the results of our 2003 financial performance.

First, let me say that we accomplished what we set out to do in 2003 and we delivered on our commitments to our investors. I'm pleased to report that we earned $1.64 per share from continuing operations and more importantly, we produced a 50% total return on investment to our shareholders in 2003.

Now, let me highlight some of our major accomplishments of the year. First, we completed the announced divestiture of our major remaining non core assets. These included the sale of our gas exploration and production unit, the sale of primary energy steel-related co generation assets and our telecommunication assets. These divestitures improved our business risk profile. We now have a portfolio of strategically located core gas and electric businesses that are virtually 100% regulated.

The sale of these assets were roughly $305 million, in after tax proceeds, plus the reduction of approximately $274 million of debt, that was assumed by the buyers helped us to strengthen our balance sheet and enhance our cash flow. We have now reduced debt by more than $2 billion since the end of 2000 which was the date of the merger with Columbia.

We have also made difficult decisions, made a difficult decision last July to reduce our dividend by 20%, beginning with the November payment. We have always been proud of our dividend history and understand the importance to our shareholders of this dividend. However, we believe our current payout ratio which is in the 55% range, is in the best long-term interest of our shareholders and will allow us to further strengthen our balance sheet and grow our business. As a result of all of these actions, all three credit rating agencies affirmed our investment grade ratings with a stable outlook. This is clearly a significant event during 2003. In addition, our employees continued to hold the line on operating and maintenance expenses, while focusing on meeting customer expectations.

Baseline O&M expenses as you can see on our financial statements were essentially flat. We also were able to capitalize on a very favorable interest rate environment during the year and you will notice a significant reduction in interest expense in 2003.

During 2003, we also implemented a new corporate structure that targets revenues and growth opportunities within our regulated utility and pipeline businesses, while maintaining our highest priority of providing solid customer service and reliability. As you can see from our release, we have met the challenges in 2003 and believe we have a strong platform that positions us for 2004.

Before I discuss our outlook for 2004, I would like to ask Mike O'Donnell to provide you with a more detailed review of our 2003 financial highlights.

Thanks, Gary. As Gary said, I'm going to provide an overview of our 2003 financial results and discuss in greater detail some of the accomplishments that Gary touched upon in his opening remarks. I will also discuss our current liquidity and capital expenditures for 2003 and 2004.

As I'm sure you've seen in our earnings release this morning, income from continuing operations was $425.7 million for 2003, up $27.6 million or 7% over the $398.1 million earned in 2002. This is $1.64 per basic share compared to $1.89 per basic share for 2002. Note that there were 48.6 million more average shares outstanding during 2003, compared with 2002.

Note also that both 2002, and 2003 have been restated to reflect the discontinued operations EMP and the primary energy steel related co generation projects. Taking into consideration the loss from the sale of the discontinued operations of $331.7 million, net income for 2003 was $85.2 million, or 33 cents per share, compared with $372.5 million, or $1.77 per share in 2002.

Our operating results improved in 2003 due to 4% colder than normal weather during the heating season and lower interest expense of approximately $52 million. In addition, the maturity of the NiSource's PIES in February 2003 reduced fixed charges by another $18 million. The PIES were a series of mandatory redeemable preferred stock with a face value of $345 million.

For comparison purposes, weather in our natural gas markets was 7.9% colder overall in 2003, than it was in 2002 resulting in a 6.3% improvement in natural gas sales in our gas distribution business. The colder weather increased gas distribution revenues by about $60 million.

This strong performance in the gas distribution segment was somewhat offset by a cool summer. Our electric business in northern Indiana had 44% fewer cooling degree days in 2003 compared with 2002, resulting in a decline in net revenues in our electric business of about $21.9 million.

Turning to the balance sheet, during the year, we took several steps to reduce debt and to refinance debt. We retired $1.28 billion in debt during the year at an average rate of 7%, and issued $1.35 billion of new debt, that had an average rate of 4.5%. We also retired the $345 million of PIES which I discussed above and downsized our revolving credit facility by $500 million.

In addition, as Gary mentioned, our employees continue to do a good job of holding the line on operating and maintenance expenses. This was a major focus in 2003. Baseline O&M expenses were essentially flat for the year in spite of significant increases in pension, insurance and uncollectibles expense.

Operating income for the year was $1,116,000,000, down $35.9 million compared to 2002. There were really two parts to this; net revenue was down $10.6 billion and operating expenses, not O&M, but operating expense, were up $26 million and I will go into that a little bit here.

Net revenues decreased $10.6 million due to several factors' including lower interruptible transmission service revenues, $9.3 million, higher cost to meet customer demand during a period of sustained cold weather in the northeast market areas, $10.4 million and credits issued to electric customers in Indiana under terms of the 2002 rate review settlement with the Indiana Utility Regulatory Commission. This was a $24 million increase from 2002, since 2003 was the first full year that the settlement was in effect. These factors were partially offset by increased sales and delivery of natural gas due to colder weather during the first quarter of 2003, that was about $60 million.

Operating expenses were up $26 million due to higher gross receipts taxes, and higher property taxes and higher depreciation expense. As I mentioned, O&M expenses were essentially flat period to period.

Now, I would like to review the highlights of our results by segment. Gas distribution operating income in 2003 was $506.4 million, compared to $459.1 million in 2002, an increase of $47.3 million. The improvement was a result of higher net revenues from increased sales and deliveries of natural gas due to the colder weather during the first quarter of 2003, partially offset by increased operating expenses.

Gas transmission and storage operations had operating income of $398.8 million, compared with $398.3 million in 2002. Reduced administrative and employee-related expenses and a reversal of our litigation reserve related to a lawsuit that was settled in the second quarter of 2003, essentially offset the lower interruptible transmission revenues and higher costs to meet customer demand experienced during the period of sustained cold weather in 2003.

Electric operations had operating income of $267.5 million, a decrease of $54.8 million compared to 2002. The decrease resulted from the impact of the unfavorable weather during the summer cooling season that I discussed, lower revenues due to credits issued to electric customers under the terms of the 2002 rate review settlement, increased pension expense and increased property tax expense. These factors were partially offset by decreased administrative and employee-related expenses and lower uncollectible expense.

The other segment had an operating loss of $43.8 million, relatively flat compared to 2002. Both periods included losses associated with the Whiting Clean Energy Project. The operating loss from Whiting during 2003 was $30.6 million, compared to $21.4 million in 2002. The 2003 period included a gain on the sale of NiSource's interest in MidTex Gas Storage and a reversal of a litigation reserve related to a lawsuit that was settled in the fourth quarter of 2003.

In 2002, operating expenses were improved by a reduction in estimated sales taxes related to previous sales of natural gas to customers of a subsidiary that was previously engaged in the retail and wholesale gas marketing business. In addition, the 2002 period was negatively impacted by expenses associated with the 2002 sale of a portfolio of Energy USA/TPC gas marketing contracts, basically that was our exit from the gas marketing business.

The corporate segment had an operating loss of $12.6 million, compared to operating income of $15.6 million in 2002. The decrease was primarily due to the gain on the sale in 2002 of NiSource's former SM&P utility line locating business.

Income taxes were $234.2 million in 2003, compared to $218.9 million in 2002. This increase was caused by the increased amount of pretax income, the effective tax rate was about 35.5% in both periods.

2003 was the first year showing the full impact of our common equity offering in November of 2002 and the conversion of the PIES to 13.1 million common shares in February, 2003. As a result, during 2003, NiSource had 259.6 million average common shares outstanding, compared to 211 million in 2002.

Now, I would like to talk about our current liquidity profile. We ended the year with $685.5 million of short term debt outstanding, compared with $913.1 million outstanding at the end of 2002, and $1.85 billion outstanding at the end of 2001. This reduction illustrates that we've made significant improvements to our balance sheet. This improvement in turn, is a key contributory the reduction in interest expense that I discussed earlier.

We presently maintain bank credit facilities totaling $1.25 billion. At the end of 2003, we had available liquidity under this credit facility of about $443 million. Our short term debt balance is about $400 million as we speak, and I expect our short-term debt to be completely paid off in April of this year and then to increase during the year as gas inventories refilled and financed with short term debt. At the low point in April, our debt ratio will be in the 58% range. As you may have noticed, it was 60.2% at year-end.

We are in the process of renewing our bank facility. After renewal, we expect to have a total of $1.25 billion facility outstanding, with part under a 364-day agreement and part under a three-year agreement. We expect the terms and covenants to be essentially the same as what we have now, thanks to a much improved bank market.

We ended 2003 with total debt of $6,797,000,000, or 60.2% of total capitalization. This compares to total debt of $6,988,000,000 at the end of 2002, and $8,331,000,000 at the end of 2001. The reduction in total debt outstanding in 2003 was about $190 million and about $1.3 billion in 2002. The reduction in 2003 would have been much greater if it were not for higher working capital requirements that increased over $300 million during the year, primarily due to higher gas costs.

As mentioned, interest expense for the year was down $52 million. About $29 million of that decrease was caused by the reduction in the average debt balance and about $23 million was caused by the reduced cost of the debt outstanding. Lastly, capital expenditures in 2003 were approximately $570 million. Our budget for 2002 is approximately, or rather for 2004 is approximately $520 million. Most of the reduction is in the electric segments, NOX program, somewhat offset by increases in gas transmission, gas distribution, and electric expenditures for system improvements.

Now, I will turn it back to Gary for his wrapup.

Thanks, Mike. As you can see from Mike's statistics, we believe 2003 was really an outstanding year. Before we open up the call to your questions, I would like to make a few remarks about our strategies and expectations for 2004.

As you know by now, January has been a cold month with strong natural gas sales. In fact, today as we sit here, it is minus eight degrees. This gives us a good start for the year. We believe that for 2004, we've built a strong business plan around our new organization structure.

Bob Skaggs, who heads up our newly created regulatory revenue team, is working across all NiSource markets to develop innovative regulatory strategies to benefit both our customers and our shareholders. Sam Miller, our Chief Operating Officer, will focus his term on our 3.7 million gas and electric customers, as well as our gas transmission and storage business. He also is working to develop new projects and partnerships to better utilize our assets.

Under this new structure, our employees are building a coordinated and integrated strategy for all of our businesses. An example of success in these areas would be during the fourth quarter of last year, we received approval from the Ohio Public Utility Commission for a debt -- bad debt tracker that allows us for the recovery of previously uncollected accounts receivable. This tracker mechanism is a concept similar to the environmental tracker that we received in Indiana in 2002, which allowed us to recover certain operating expenses and capital expenses associated with environmental compliance equipment in our electric business.

In Pennsylvania, we received an approval on an affordable payment plan for low income gas customers with long term bill payment problems. These are examples of where we need to go together to work with our customers, our regulators and provide something for our shareholders.

Looking to the future, let me now provide you with a brief update on the proposed Ohio Regulatory Compact, which I'm sure you've all been following. We are hopeful that the Public Utility Service Commission will continue with the customer choice program which has provided lower cost gas and competition which gives customers options for managing their own gas costs. We anticipate a decision on this proposal shortly.

With regard to our Whiting Clean Energy Plant, we are actively working to determine the best strategy to minimize the effects of the poor market for wholesale power and we are developing options that will further reduce the losses associated with this plant in 2004.

Now, let me turn our attention to the business objectives for 2004. During 2004, we will continue to standardize our operations to provide better service for our customers at a lower cost. We will focus on our regulated revenue growth opportunities in all of our properties. We intend to move to best in class process to help meet our customers and our regulators expectations. We will employ capital effectively to foster disciplined growth in our regulated businesses and, of course, continue to reduce O&M expenses across all of our business lines and even at corporate. We intend to grow our nontraditional revenues by offering value-added services to our 3.7 million customers and we will continue to improve our balance sheet throughout 2004.

And last but not least, we will ensure compliance with Sarbanes-Oxley, ensure the integrity of our financial statements and provide full disclosure of our financial reports to our shareholders. With all these objectives in mind, we believe we are well positioned to deliver earnings per share for 2004 in the range of $1.65 to $1.70. This assumes normal weather and a conservative set of assumptions of our customers' usage pattern consistent with current gas prices.

As I said earlier, with the cold weather sustained across all of our markets, from the Midwest to New England, we are well on our way to a great start in 2004. Now, let me turn it over to you for questions.

Thank you sir. At this time I would like to remind everyone, if you would like to ask a question, please press star then the number one on your telephone key pad. We will pause for just a moment to compile the Q&A roster . Sir, our first question will come from Andrew Levy with Bear Wagner.

I'm the lucky one. Just a couple of questions, guys. O&M was down a lot in the fourth quarter, should that trend continue in 2004?

Yes.

Okay. Any type of bench mark you can give us as far as percent decrease or what your goals are?

Well, our goal, Andy, is to keep our O&M flat. Obviously, every year, have you some costs that go up and we are trimming O&M expenses in other areas by what we're standardizing and what we're doing, so our goal is to keep O&M flat year over year.

And Mike or Gary, can you just give us the other assumptions for '04, the other big type of stuff, whether it is weather or sales growth, other line items that we should kind of measure you against?

Andy, we always forecast the coming year based on normal wether.

Okay. Anything else as far as depreciation, O&M, interest expenses, share delusion, anything like that, any other things that you can give us, as far as assumptions in those numbers?

Just a couple of things Andy. On the devaluation dilution, the average number of shares you can just continue the calculation of the PIE, two more months of that in 2004 and and the end of the year, the sales will convert into common stock and you will have two months of that that at the end of the year but otherwise that should give you what you need to calculate the average number of shares. On usage we have a conservative estimate of usage and the only thing we're pointing out there is a caveat is that gas costs change a lot. You could get a distortion of the recent pattern that we've seen. But if it stays -- gas costs stay where they are right now we feel pretty comfortable with our usage assumption and generally the decline from conservation is almost offset by new customers added.

Just one other thing on your question on the fourth quarter, the fourth quarter was a little lumpy because the Ohio bad debt tracker came through in that quarter and that reduced O&M expense.

Okay. How much was that, do you know?

I don't have it off the top of my head but we can get that you.

Okay and two other questions and I will let somebody else go. I, just kind of on M&A kind of Gary's thoughts on. That obviously you guys have been aggressive in the past. Now this deal has been somewhat digested, just curious where you are there? And then I have one other question.

Andy, we're very happy with where we're at. We have -- we're not involved in any negotiations or any discussions with anyone from an M&A standpoint and we're not out looking for any.

So you're not looking to get bigger. And I guess I am actually forgetting my fourth question but I will come back. Thank you.

Thanks, Andy.

Our next question will come from David Macarrone with Goldman Sachs.

Thank you. Gary, I was wondering if you could amplify on what your specific strategies are in terms of regulated revenue growth and what you expect specifically to grow, where, and from what sort of developments?

Well, David, you know, I don't want to sit here and lay out each item entity by entity. Obviously anything we're doing in a regulated environment requires approval by commissions and so it requires filings. What we're looking for, though is fair treatment in each one of the states in which we operate on all of our areas. Bad debt trackers is a good example. We just got the bad debt trackers in Ohio and Pennsylvania and we think this is a fair thing to have done. Obviously, looking for bare steel trackers where we can replace pipe in the ground, and get immediate relief for that, for the safety safety of our system, and for the better service of our customers.

We're looking for other areas where people have had other companies in other states and other jurisdictions are getting relief from usage patterns, declining customer usage patterns and some -- and some regulated areas, we're going to be filing for rate increases because we believe our returns aren't adequate in those areas, so we're going to be working for particular projects that improve shareholder return but we're also looking for projects with the regulators that share with the customers the benefits of the actions that we're taking.

Can you just provide a little more prospective on the bare steel tracker item and give us a sense for where you think the NiSource distribution companies stand versus the industry and how much catchup you might have to do?

It varies state by state, David. For instance, in Indiana, we have virtually no bare steel left. In most of -- in some of our areas like Virginia where these are entirely new systems, we have none. In some of the older industrial systems, like Pennsylvania and Ohio, we've got some catching up to do. Ohio, granted, there's synergy at bare steel tracker, if you will recall in the last year, so commissions have been doing this, and we will be looking for those kinds of opportunities.

Okay. And then specifically on Bay State Gas, as far as I can tell, that is one that has been notably under earning on a regulatory basis. How soon could you file for rate relief there?

Well, we have an agreement, a merger agreement that expires this year on rate relief or any regulatory filings. So we will be looking at that actively this year.

And for Mike, I just was wondering if you could quantify the accounts receivable recovery, the litigation reserve reversal and the gain on sale in the fourth quarter?

The mid tax was $7.5 million. The accounts receivable, you mean the sales tax?

I meant the recovery of the bad debt expense.

The recovery of the bad debt expense, that was $25 million. In the fourth quarter.

$25 million in the fourth quarter.

That answers Andy's question as well.

Okay.

The $7.5 million was the mid tax reserve and what was the other one, David?

The litigation reversal.

That was also $7 million.

Okay. And weather through January to date, how has that been in your service territories?

Obviously it varies as you know. It has been significantly colder than norm in New England and I haven't seen the numbers this morning, but Mike has, go ahead Mike.

5% colder than normal so far in the month.

Great.

That kind of nets out -- it was warm early in the month but very cold the last 10 days or so.

Thanks, Mike.

Your next question will come from Paul Dubas with Value Line.

I have a couple of questions. First, could you please go over what your expectations are for Whiting and some of the options that you spoke of to reduce that loss? And also, do you have any financing plans and if you're not going to need financing, how much debt reduction are you targeting this year?

Well, Paul, let me, I will take the Whiting thing and I will turn it over to Mike on the financing side. We're working on a number of issues with Whiting, as it relates to the steam-loaded Whiting with BP and what their take will be on the steam load, what their take will be on the electricity load and then, you know, where we can go in the markets with longer-term contracts as opposed to shorter term why with these.. Mike, you want to cover financing?

Yes, the current maturities for this year are less than $120 million and we expect to have free cash flow to pay down debt in the 2 to $300 million range, and the big variable there is working capital, which way that goes. That 2 to $300 million assumes essentially we're flat on working capital. So if that all pans out, we wouldn't do any long term financing this year. Although the market is very attractive, so we continue to look at it and maybe prefinance some things down the road.

Okay. And as far as Whiting goes, are you expecting a lesser loss in than that 165 to 170?

It is about the same in 2004 as it was in 2003.

And that's based in the numbers that we provided you.

Thank you.

Your next question will come from Paul Ridzon with McDonald Investments.

Good morning, can you hear me?

Yeah, we can, Paul.

I know there's been some changes in tax law in Indiana, just wondering if you could talk about the impact of that? And then I got one more question after that.

The impact of the tax changes really most of it came through in 2002 and '03. The gross receipts tax went up considerably and that's being collected in rates. Property taxes are really the issue right now. They're supposed to be going down but there's reassessments going on over all over the state and I think it is too close to call what is going to happen with that and as you know the Indiana state income tax went up in 2003 as well and that's reflected in the numbers that we're presenting here.

Would it be fair to characterize that maybe there's going to be some call back on the lower property taxes in light of budgetary concerns?

That's what we're hoping will happen, that the whole package in total would be neutral but where we've got our numbers so far, we're being a little bit cautious on that.

Gary, I know you indicated that you're not looking to get bigger, but are there still some assets that don't fit the strategy at this point that you could shed?

No, Paul, we believe we are exactly where we want to be right now. We have no assets that we're contemplating selling or that we would want to sell.

And I did have to jump off the call for a minute so if you talked about this, I will just go back and look at the transcript, but did you give an update on Ohio?

Yes, I did. I gave you the only update I can give you, which just said that we expect a decision in a reasonable period now, in the next couple of months.

Thank you very much.

Our next question will come from David Bremner with Copia Capital.

Good morning, guys. A couple questions for you. Last year, obviously in the first quarter, you had some problems with interruptibles and some of the gas coming out of storage. Given the high gas prices this year and the cold weather, are we likely to see that again or do you feel like you have that well under control?

We believe we have it well under control. Remember, what happened last year, is that we had a cave-in on the pipe at the beginning of the season and we had to repair pipe and so on. So there were some issues like that. Our system to date is operating extremely well under a very severe conditions, we've made it through and we believe we will continue the rest of the winter this way.

Okay. Mike, the one timers that you had given to David Macarrone, were those pretax or after tax?

They were all pretax.

Those were all pretax, okay. In terms of the bad debt, obviously you had the track in Ohio. Can you give us what that debt was for the with and without the tracker and sort of what you're looking at for '04?

I can. Just give me a minute here.

Why don't we take another question and as soon as Mike has that, we will announce it.

Okay. That's all for me.

Thanks.

Our next question will come from Brad Davis with A.G. Edwards.

Yes, thanks for the call this morning. Can you confirm the total restructuring charge in the prior years fourth quarter? I think I had around 28 million. Is that correct?

That sounds about right but I want to check the exact number. There's a couple of different pieces to it. Part of it was in distribution and part of it was in corporate. Give me a minute on that.

Okay.

On the question on the uncollectibles expense, in 2004, after the -- 2003, rather, after the tracker, it came in just around $40 million and actually, that's a decrease from 2002. Reflecting the tracker, a decrease of about $20 million improvement for the whole year but for the fourth quarter as you know most of it came through in the fourth quarter.

Can we get the next question and we will come back with that? Mike will dig for that one, too.

The next question will come from Teresa Hogue with Salomon Brothers Asset Management. Thank you.

I only have one question, it relates to the Ohio regulatory situation. Just I guess responding to your comment, you know, I'm looking at the time line and I guess you had set a deadline of, you know, initially December 31st. I guess that was not really met and so there was another deadline that was set at January 31st. And now, I guess your expectation is for a couple of months. I just want to get your thoughts on sort of the change in timing and also, you know, how should we look at that? Is this something that you're -- it is just working out or is this getting to be a bit more difficult than you initially thought?

Well, no, I think that using the word deadline is a little too harsh, Teresa. It is, you know, it is our filing and expectations that the Commission will act. If you will remember, there are a few other things that have intervened on the Commission's part like first energy and other things so the Ohio Commission has been extremely busy so, I don't think that we have not changed deadlines. All we tried to do is issue time period when we hope that the Commission would in fact act, but understand that the commission is extremely busy with other issues besides just ours. This filing is -- the other thing to remember is that this whole compact isn't up until the end of 2004, so we are really trying to do something early here.

The good news is that as we wait, we've got more and more people coming on board, in support of this filing, the numbers keep growing every day, so we are even more optimistic, I think today, than we were in December.

Okay. Well, thank you.

On the restructuring charge, in 2002, it was a total of about $20.4 million and there are really two parts of that; $14.5 million were restructuring costs, mostly labor-related, severance-type things and then, $5.9 million related to the reserve taken for an office building that is being closed.

Your next question will come from Douglas Lee with UBS.

Hi there, good morning, guys. Nice job on the year.

Thanks, Doug.

Two questions related to the capital structure. The first is, can you please remind us what happened to the 345 trust preferreds in '03?

I can do that. It was -- February 2003 was the maturity of that. So the forward equity part of it was converted into 13.1 million shares of common stock and the debt part of it was remarketed and eventually wound up as a 6.15% 10 or 11-year note.

Okay and then the second question is, total debt to cap of 60.2 at year end 2003, where do you expect leverage to be at year end 2004?

Well, if we're successful and pay down two to 300 million dollars of debt during the year and have a continuing increase in the common equity component from retained earnings, I think it should wind up at about 58%.

Okay. So you're assuming the use of all free cash flow to pay down that debt?

That's correct. Well I think if you go back, and look at the total cash flow from the company, subtract out the cap ex which we estimate at 520, subtract out the new dividend requirement which is about $243 million dollars, that gives you a number that's two to $300 million but it will be more or less than that depending on working capital.

Okay. Thanks.

Our next question will come from Andrew Levy with Bear Wagner.

Actually the question was asked. Thank you. You know what? Just back on this Ohio plan, you have to actually file for an extension or make public that there will be an extension at the end of this month, is that correct?

I don't think we have to file for any extension. I mean it is before the Commission.

It is before the Commission.

Right, but you had given a, I think someone was talk before a January 31st deadline,, right? So that has to be extended, is that correct, or am I mistaken on that?

The collaborative agreement would have to be extended, yes.

Okay.

That's not necessarily the filing but the collaborative agreement.

When do you think that will happen?

It will happen you know in the next short period of time. I don't have the exact date on it.

Are you guys going to issue a press release on that or -- ?

Probably not. I think everybody knows this thing is working. We're just waiting for the Commission and as I said we've got people'd added the collaborative agreement even the last two or three weeks so it is even stronger than it was in December, so we feel very comfortable where we're at so I don't think we're going to just keep, you know, issuing press releases on it.

Okay. Perfect. Thanks.

Our next question will come from Brad Davis with A.G. Edwards.

Just a couple of follow-ups I had. And also the docket with Ohio was filed on the 28th now extended to February so that's been done. But follow-up on the AGL situation in Virginia, has that problem been remedied? I know your response is due next week. Any comments there?

Well, it has not been remedied. We have tried to sit down with AGL, and negotiate this, for some reason, they've decided that they would rather go section five through FERC. We are -- once the section five is filed, it is very difficult to do any further negotiations with, so we will work our way through and believe we will win, even on section five.

Not necessarily the negotiations but has the system been upgraded to the point where it should operate as required?

The system is operating exactly as required.

Okay. And one last thing, what was the cash position at the end of the year Just so I can get a full feel for net debt?

Just a minute. We will get you that in a minute, Brad.

We will come back to that and why don't we take the next question?

Thanks.

The next question will come from Wiesel Cahn with CSFB.

I had a question on the cap ex on a go forward business for 2004 and looking at 2005. You still expect kind of in the same range of in 2003 of 552.

It will be down slightly to about 520 in 2004. Primarily because we're working our way through the NOX program. We are on the down side of our NOX expenditures for our large electric system.

And what about for the pipeline; there any cap ex projects need to be done to comply with the clean air act of '04, '05, and 06.

Not for clean air. The biggest issue is pipeline safety. The new rules on pipeline safety and pipeline inspections and that's built into the $520 million.

Thank you.

Back to Brad's question on the cash at the end of the year, it was about 50 million, 27 of that was about 23 million was restricted cash.

Our next question will come from Teresa Hogue with Salomon Brothers Asset Management.

Yes, I just had a follow up question I failed to ask this earlier, you mentioned that you have additional parties that are part of the collaborative. Could you elaborate on those parties?

I don't have the list in front of me, Teresa. We will get those for you. It has been public knowledge, as you go back to the filings on the collaborative, there's, even the additions are there but I don't have the names in front of me.

Okay. Thank you. I will just follow-up offline then.

Thanks.

I'm showing no further questions at this time.

All right. Thank you very much for attending the call. We look forward to talking to you again during 2004.

Ladies and gentlemen, to hear a replay of today's call, you may dial 1-800-642-1687 or 706-645-9291 and enter the conference I.D. number, 4977968. This conference will begin two hours after the call has ended and end on February 6th at midnight. Again, if you would like to hear a replay of today's call, please dial 1-800-642-1687 or 706-645-9291 and enter the conference I.D. number 4977968. This conclude's today's NiSource fourth quarter and year-end results teleconference. You may now disconnect.