This Annual Report on Form 10-K contains “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Investors and prospective investors should understand that many factors govern whether any forward-looking statement contained herein will be or can be realized. Any one of those factors could cause actual results to differ materially from those projected. These forward-looking statements include, but are not limited to, statements concerning NiSource’sour plans, strategies, objectives, expected performance, expenditures, recovery of expenditures through rates, stated on either a consolidated or segment basis, and any and all underlying assumptions and other statements that are other than statements of historical fact. All forward-looking statements are based on assumptions that management believes to be reasonable; however, there can be no assurance that actual results will not differ materially.

NiSource Inc. is an energy holding company under the Public Utility Holding Company Act of 2005 whose subsidiaries are fully regulated natural gas and electric utility companies serving approximately 3.94.0 million customers in seven states. NiSource is the successor to an Indiana corporation organized in 1987 under the name of NIPSCO Industries, Inc., which changed its name to NiSource on April 14, 1999.

NiSource is one of the nation’s largest natural gas distribution companies, as measured by number of customers. NiSource’s principal subsidiaries include NiSource Gas Distribution Group, Inc., a natural gas distribution holding company, and NIPSCO, a gas and electric company. NiSource derives substantially all of its revenues and earnings from the operating results of these rate-regulated businesses.

NiSource’s reportable segments are: Gas Distribution Operations and Electric Operations. The following is a summary of the business for each reporting segment. Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 22, "Segments of Business," in the Notes to Consolidated Financial Statements for additional information for each segment.

NiSource generates, transmitsWe generate, transmit and distributesdistribute electricity through itsour subsidiary NIPSCO to approximately 466,000472,000 customers in 20 counties in the northern part of Indiana and engagesengage in wholesale and transmission transactions. NIPSCO owns and operates threetwo coal-fired electric generating stations.stations: four units at R.M. Schahfer located in Wheatfield, IN and one unit at Michigan City located in Michigan City, IN. The threetwo operating facilities have a net capabilitygenerating capacity of 2,540 mw.2,080 MW. NIPSCO also owns and operates Sugar Creek, a CCGT plant located in West Terre Haute, IN with net capabilitygenerating capacity of 535 mw,571 MW, three gas-fired generating units located at NIPSCO’s coal-fired electric generating stations with a net capabilitygenerating capacity of 196 mw186 MW and two hydroelectric generating plants with a net capabilitygenerating capacity of 10 mw.16 MW: Oakdale located at Lake Freeman in Carroll County, IN and Norway located at Lake Schahfer in White County, IN. These facilities provide for a total system operating net capabilitygenerating capacity of 3,281 mw. 2,853 MW.

NIPSCO’s transmission system, with voltages from 69,000 to 345,000765,000 volts, consists of 2,8052,963 circuit miles. NIPSCO is interconnected with five neighboring electric utilities. During the year ended December 31, 2016,2018, NIPSCO generated 66.4%69.4% and purchased 33.6%30.6% of its electric requirements.

The regulatory frameworks applicable to NiSource’sour operations, at both the state and federal levels, continue to evolve. These changes have had and will continue to have an impact on NiSource’sour operations, structure and profitability. Management continually seeks new ways to be more competitive and profitable in this environment.

The Gas Distribution Operations companies have pursued non-traditional revenue sources within the evolving natural gas marketplace. These efforts include the sale of products and services upstream of the companies’ service territory, the sale of products and services in the companies’ service territories, and gas supply cost incentive mechanisms for service to their core

Increased efficiency of natural gas appliances and improvements in home building codes and standards has contributed to a long-term trend of declining average use per customer. UsageResidential usage for the year ended December 31, 2016 decreased from the same period last year2018 increased primarily due to warmercolder weather in the Company'sour operating area compared to the prior year. While historically rate design at the distribution level has been structured such that a large portion of cost recovery is based upon throughput rather than in a fixed charge, operating costs are largely incurred on a fixed basis and do not fluctuate due to changes in customer usage. As a result, Gas Distribution Operations have pursued changes in rate design to more effectively match recoveries with costs incurred. Each of the states in which Gas Distribution Operations operate has different requirements regarding the procedure for establishing changes to rate design. Columbia of Ohio restructured its rate design through a base rate proceeding and has adopted a “de-coupled” rate design which more closely links the recovery of fixed costs with fixed charges. Columbia of Massachusetts received regulatory approval of a decoupling mechanism which adjusts revenues to an approved benchmark level through a volumetric adjustment factor. Columbia of Maryland and Columbia of Virginia have received regulatory approval to implementfor a revenue normalization adjustment for certain customer classes, a decoupling mechanism whereby monthly revenues that exceed or fall short of approved levels are reconciled in subsequent months. In a prior base rate proceeding, Columbia of Pennsylvania implemented a pilot residential weather normalization adjustment. Columbia of Maryland, Columbia of Virginia and Columbia of Kentucky hashave had approval for a weather normalization adjustment for many years. In a prior base rate proceeding, NIPSCO implemented a higher fixed customer charge for residential and small customer classes moving toward full straight fixed variable rate design.

Gas Distribution Operations competes with investor-owned, municipal, and cooperative electric utilities throughout its service areas as well as other regulated and unregulated natural gas intra and interstate pipelines and other alternate fuels, such as propane

and fuel oil. Gas Distribution Operations continues to be a strong competitor in the energy market as a result of strong customer preference for natural gas. Competition with providers of electricity has traditionally been the strongest in the residential and commercial markets of Kentucky, southern Ohio, central Pennsylvania and western Virginia due to comparatively low electric rates. Natural gas competes with fuel oil and propane in the Massachusetts market mainly due to the installed base of fuel oil and propane-based heating which has comprised a declining percentage of the overall market over the last few years. However, fuel oil and propane are more viable in today’s oil market.

Electric Competition.    Indiana electric utilities generally have exclusive service areas under Indiana regulations, and retail electric customers in Indiana do not have the ability to choose their electric supplier. NIPSCO faces non-utility competition from other energy sources, such as self-generation by large industrial customers and other distributed energy sources. 

NiSource’s customer base is broadly diversified,We generate, transmit and distribute electricity through our subsidiary NIPSCO to approximately 472,000 customers in 20 counties in the northern part of Indiana and engage in wholesale and transmission transactions. NIPSCO owns and operates two coal-fired electric generating stations: four units at R.M. Schahfer located in Wheatfield, IN and one unit at Michigan City located in Michigan City, IN. The two operating facilities have a generating capacity of 2,080 MW. NIPSCO also owns and operates Sugar Creek, a CCGT plant located in West Terre Haute, IN with no single customer accountinggenerating capacity of 571 MW, three gas-fired generating units located at NIPSCO’s coal-fired electric generating stations with a generating capacity of 186 MW and two hydroelectric generating plants with a generating capacity of 16 MW: Oakdale located at Lake Freeman in Carroll County, IN and Norway located at Lake Schahfer in White County, IN. These facilities provide for a significant portiontotal system operating generating capacity of revenues.2,853 MW.

The regulatory frameworks applicable to our operations, at both the state and financial results are subjectfederal levels, continue to various risksevolve. These changes have had and uncertainties, including those described below, that could adversely affectwill continue to have an impact on our operations, structure and profitability. Management continually seeks new ways to be more competitive and profitable in this environment.

The Gas Distribution Operations companies have pursued non-traditional revenue sources within the Company’s business, financial condition, resultsevolving natural gas marketplace. These efforts include the sale of operations, cash flows,products and the trading priceservices upstream of the Company’s common stock.companies’ service territory, the sale of products and services in the companies’ service territories, and gas supply cost incentive mechanisms for service to their core markets. The upstream products are made up of transactions that occur between an individual Gas Distribution Operations company and a buyer for the sales of unbundled or rebundled gas supply and capacity. The on-system services are offered by us to customers and include products such as the transportation and balancing of gas on the Gas Distribution Operations company system. The incentive mechanisms give the Gas Distribution Operations companies an opportunity to share in the savings created from such situations as gas purchase prices paid below an agreed upon benchmark and their ability to reduce pipeline capacity charges with their customers.

NiSourceIncreased efficiency of natural gas appliances and improvements in home building codes and standards has substantial indebtedness which could adversely affect its financial condition.

Gas Distribution Operations competes with investor-owned, municipal, and for the physical purchase or sale of power. As of December 31, 2016, the collateral requirement that would be required in the event of a downgrade below the ratings trigger levels would amount to approximately $35.4 million. In addition to agreements with ratings triggers, there arecooperative electric utilities throughout its service areas as well as other agreements that contain “adequate assurance” or “material adverse change” provisions that could necessitate additional credit supportregulated and unregulated natural gas intra and interstate pipelines and other alternate fuels, such as letters of credit and cash collateral to transact business.

Refer to Item 1, "Business - Electric Operations" of this report for further information on Electric Operations properties.

NiSource ownsWe own the Southlake Complex, itsour 325,000 square foot headquarters building located in Merrillville, Indiana, and other residential and development property.Indiana.

Not applicable.

NiSource’s common stock is listed and traded on the New York Stock Exchange under the symbol “NI.” The table below indicates the high and low sales prices of NiSource’s common stock, and dividends per share declared, during the periods indicated.

Holders of shares of NiSource’s common stock are entitled to receive dividends if and when declared by NiSource’s Board out of funds legally available.available, subject to the prior dividend rights of holders of our preferred stock or the depositary shares representing such preferred stock outstanding, and if full dividends have not been declared and paid on all outstanding shares of preferred stock in any dividend period, no dividend may be declared or paid or set aside for payment on our common stock. The policy of the Board has been to declare cash dividends on a quarterly basis payable on or about the 20th day of February, May, August, and November. At its January 27, 2017,February 1, 2019 meeting, the Board declared a quarterly common dividend of $0.175$0.20 per share, payable on February 17, 201720, 2019 to holders of record on February 10, 2017.11, 2019.

Although the Board currently intends to continue the payment of regular quarterly cash dividends on common shares, the timing and amount of future dividends will depend on the earnings of NiSource’s subsidiaries, their financial condition, cash requirements, regulatory restrictions, any restrictions in financing agreements and other factors deemed relevant by the Board. There can be no assurance that weNiSource will continue to pay such dividends or the amount of such dividends.

As of February 14, 2017,12, 2019, NiSource had 22,48520,064 common stockholders of record and 323,445,821372,494,365 shares outstanding.

The graph below compares the cumulative total shareholder return of NiSource’s common stock for the last five years with the cumulative total return for the same period of the S&P 500 and the Dow Jones Utility indices. On July 1, 2015, NiSource completed the Separation. Following the Separation, NiSource retained no ownership interest in CPG. The Separation is treated as a special dividend for purposes of calculating the total shareholder return, with the then-current market value of the distributed shares being deemed to have been reinvested on the Separation date in shares of NiSource common stock. A vertical line is included on the graph below to identify the periods before and after the Separation.

The foregoing performance graph is being furnished as part of this annual report solely in accordance with the requirement under Rule 14a-3(b)(9) to furnish our stockholders with such information, and therefore, shall not be deemed to be filed or incorporated by reference into any filings by NiSource under the Securities Act or the Exchange Act.

The weighted average total shareholder return for NiSource common stock and the two indices is calculated from an assumed initial investment of $100 and assumes dividend reinvestment, including the impact of the distribution of CPG common stock in the Separation.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (Management’s Discussion) analyzes theour financial condition, results of operations and cash flows and those of NiSource and itsour subsidiaries. It also includes management’s analysis of past financial results and certain potential factors that may affect future results, potential future risks and approaches that may be used to manage those risks. See "Note regarding forward-looking statements" at the beginning of this report for a list of factors that may cause results to differ materially.

Management’s Discussion is designed to provide an understanding of our operations and financial performance and should be read in conjunction with the Company'sour Consolidated Financial Statements and the related Notes to Consolidated Financial Statements in this annual report.

Refer to the Business“Business” section under Item 1 of this annual report and Note 22, "Segments of Business," in the Notes to the Consolidated Financial Statements for further discussion of our regulated utility business segments.

On a consolidated basis, NiSource reported higher income from continuingOur operations are affected by the cost of $328.1 million or $1.02 per basic sharesales. Cost of sales for the twelve months ended December 31, 2016 comparedGas Distribution Operations segment is principally comprised of the cost of natural gas used while providing transportation and distribution services to $198.6 million or $0.63 per basic sharecustomers. Cost of sales for the same periodElectric Operations segment is comprised of the cost of coal, related handling costs, natural gas purchased for the internal generation of electricity at NIPSCO and the cost of power purchased from third-party generators of electricity.

The majority of the cost of sales are tracked costs that are passed through directly to the customer resulting in 2015.an equal and offsetting amount reflected in operating revenues. As a result, we believe net revenues, a non-GAAP financial measure defined as operating revenues less cost of sales (excluding depreciation and amortization), provides management and investors a useful measure to analyze profitability. The increase in income from continuing operations during 2016 was due primarilypresentation of net revenues herein is intended to increasedprovide supplemental information for investors regarding operating performance. Net revenues do not intend to represent operating income, the most comparable GAAP measure, as discussed below, along with a $97.2 million loss on early extinguishmentan indicator of long-term debt recorded as a result of the debt restructuring that occurred in 2015 as part of the Separation.

For the twelve months ended December 31, 2018, we reported operating income of $124.7 million compared to $921.2 million for the same period in 2017. The order included approvaldecreased operating income was primarily due to recover approximately $1.25 billionincreased operation and maintenance expenses related to the Greater Lawrence Incident, decreased net revenues resulting from TCJA impacts on revenue and increased depreciation due to capital expenditures placed in service. These increases were partially offset by higher rates from infrastructure replacement programs and base-rate proceedings, decreased outside service costs and employee and administrative expenses, as well as net favorable effects of investmentsyear-over-year weather variations, which increased revenue in 2018.

Other deductions, net reduced income by $355.3 million in 2018 compared to a reduction in income of $478.2 million in 2017. This change is primarily due to lower losses on early extinguishment of long-term debt in 2018 of $66.0 million, an interest rate swap settlement gain in 2018 of $46.2 million and higher actuarial investment returns resulting from pension contributions made through 2022. Per an IURC order received on January 25, 2017, NIPSCO began recovering on $45.5in 2017. These favorable variances were partially offset by charitable contributions of $20.7 million of these investments within 2018 related to the first billing cycle of February 2017.Greater Lawrence Incident.

In May 2018, NIPSCO completed the retirement of two coal-burning units (Units 7 and 8) at Bailly Generating Station, located in Chesterton, IN. These units had a generating capacity of approximately 460 MW. Refer to Note 10, "Income Taxes,18-E, "Other Matters," in the Notes to Consolidated Financial Statements for additional information on these retirements.

NIPSCO’s transmission system, with voltages from 69,000 to 765,000 volts, consists of 2,963 circuit miles. NIPSCO is interconnected with five neighboring electric utilities. During the year ended December 31, 2018, NIPSCO generated 69.4% and purchased 30.6% of its electric requirements.

The regulatory frameworks applicable to our operations, at both the state and federal levels, continue to evolve. These changes have had and will continue to have an impact on Income Taxes.our operations, structure and profitability. Management continually seeks new ways to be more competitive and profitable in this environment.