TEXT-Fitch release on NiSource, subsidiaries

(The following statement was released by the ratings agency)

May 14 - Fitch Ratings has affirmed the outstanding ratings for NiSource
Inc (NI) and its subsidiaries as follows:
NI
--Issuer Default Rating (IDR) at 'BBB'.
NiSource Capital Markets, Inc. (NI Capital Markets)
--IDR at 'BBB';
--Senior unsecured debt at 'BBB'.
NiSource Finance Corp. (NI Finance)
--IDR at 'BBB';
--Senior unsecured debt at 'BBB';
--Short-term Issuer Default Rating (IDR) at 'F2';
--Commercial paper (CP) at 'F2'.
Northern Indiana Public Service Co. (NIPSCO)
--IDR at 'BBB';
--Senior unsecured debt at 'BBB+'.
Approximately $5.3 billion of outstanding long-term debt is affected. The
Rating Outlook for NI and its subsidiaries is Stable.

NI's ratings and Stable Outlook reflect the low business risk and stable
operating performance generated by its geographically diverse mix of regulated
operations. Virtually 100% of NI's earnings now come from its utility and
pipeline subsidiaries. With the anticipated sale of the Whiting Clean Energy
co-generation facility to BP Alternative Energy North America Inc., NI will
complete the divestiture of its higher risk and least profitable businesses.
Natural gas and electric utility operations serve 3.3 million customers across
nine states. Combined, the state regulated utilities will generate
approximately 60% of 2008 operating income. FERC regulated interstate pipelines
and storage will generate approximately 40% of 2008 operating income.
Regulatory mechanisms have generally provided timely cost recovery and resulted
in stable credit measures. Growth initiatives have modest risk and are
complementary to existing core operations. Capital expenditures are
manageable.

While much has been accomplished in recent years to refine the company's
operating focus, major challenges remain across its operations. Several
important regulatory issues are expected to be addressed over the next several
months. Of note, recent natural gas utility rate filings in Ohio and
Pennsylvania, NI's largest gas jurisdictions, have included requests for
recovery of substantial future infrastructure rehabilitation costs including
funding replacement of bare steel pipe. Given the materiality of the filings,
adverse regulatory rulings could lead to an erosion in consolidated financial
performance over time and contribute to a negative rating action. Also, NI
faces a large potential financial penalty related to a class action suit that
has been appealed to the West Virginia Supreme Court and is likely to be
resolved in 2009.

NIPSCO is expected to make an electric utility rate filing in Indiana this
summer as part of its ongoing power cost recovery proceedings. The filing will
follow recent actions taken by the company to define its long-term capacity
requirements and mitigate economic exposure to power purchase costs. Under an
integrated resource plan filed with the Indiana Utility Regulatory Commission
(IURC) in November 2007, NIPSCO identified a future generating capacity
short-fall of approximately 1,000 megawatts (mw). In January 2008, the IURC
approved a settlement to implement a benchmarking standard for recovery of
future power purchase costs. Utilizing the new benchmark, NIPSCO was required
to absorb $3.8 million in purchase power costs in Q1 2008. To help meet its
capacity shortfall, NIPSCO has signed an agreement to purchase the 535mw Sugar
Creek combined-cycle gas turbine from LS Power Group for $329 million and is
awaiting certification by Indiana regulators before completing the transaction.
Operation of the Sugar Creek facility will reduce the company's purchased power
requirements and limit the amount of costs it will absorb.

NI's consolidated credit measures generally fall within the middle-to-low
range for its 'BBB' utility parent company peer group. Given NI's current
business mix and the predictability provided by its regulatory schemes, Fitch
does not anticipate any material near-term change in its credit metrics, up or
down. Management has moved beyond quick fix solutions to increase NI's earnings
and is focused on improving operating results. Growth strategies are relatively
modest and make sense. Current pipeline and storage expansion projects have
favorable locational and contractual characteristics. Fitch views the planned
eventual dropdown of Columbia Gulf to a master limited partnership (MLP) as a
credit neutral event. However, the MLP provides management additional financial
and operating flexibility.
(New York Ratings Team)