NiSource Inc. (NI) Earnings

Management highlights

Key managerial messages include being disciplined and methodical in strategic negotiations in Indiana, actively engaged in Pennsylvania's regulatory response, discussing GENCO model for bespoke generation solutions, focus on reliability and speed to market in resource mix, and progress in regulatory processes like URC approval with timelines and considerations for various projects

Guidance

Strategic negotiations for three gigawatts are complex and take time, ATM has latitude for more deals as financing plan is contemplated in filed structure, timelines for URC approvals and construction phases mentioned with expectations in first half of 2026 and beyond

Segment performance

Not applicable as no specific product segment financial performance details provided

Risks & headwinds

Not explicitly discussed in the provided transcript

Analyst Q&A

• Q: Hey, good morning, team. Thank you guys very much for the time. I appreciate it. Nicely done yet again, I got to say. Good morning. Good morning, Lloyd. Maybe just to pick it up on the earnings composition question. I know I'm not keen to disclose too much on this 15, 18 cents move up and guide, but how do you think about bifurcating that between sort of the quote unquote rate base and own gen portion versus contracts? Then maybe the more critical question here is how do you think about the ability to own more of that gen over time? You talk here about this 800 megawatt pool. Is that something that over time you effectively would in-house, if that's the term? And is that kind of another element of compounding growth, maybe beyond the 2030 to 2033 period? How do you think about the evolution of your ability to own the related gen?

  A: I think that our, as Sean mentioned earlier, Now, we get more customers and build what I call provide bespoke generation solutions. Now, we will own some of that. We will own probably a significant amount of that generation generation. and try to provide the best solution to the customer as we negotiate these contracts. Michael, you want to add to that at all? Yeah, what I would add to it is it might be helpful to talk just a little bit more about when we talk about bespoke solutions. We ensured within the Genco model that we have the capability to serve 3,000 megawatt increments and also serve 300 megawatt increments. And in doing that, we've created the capacity to do those bespoke solutions that can meet those. The pool resources that we have, that is the mechanism by which we will own all these resources that are provided to NIPSCO to meet the resource adequacy. So our druthers and our focus has been to not have commodity risk or market exposure So when we go out, we are getting contracted generation capacity one way or the other. I would look at it as we own effectively all of it, you know, when we're doing it. We are bringing it into that portfolio to serve those customers in a holistic fashion with speed to market. Yeah, and the only piece I'd add to this, Julian, would be because it is not functioning directly off of a return on rate-based model, The accretion dilution that we guide to both short-term and long-term and how we think about the potential for value creation over time doesn't necessarily require us to own it. It really helps us best monetize the capacity attributes in a way that's attractive to stakeholders, both to our retail customers as we're exemplifying with the $1.4 billion in savings, as well as to our shareholders as we expect a really return on and of the cost of those assets over the life of the customer agreements and making sure that that financial stability maintains.

• Q: And then just to needle a little bit on this three gigawatt strategic negotiation here, how should we think about the gating items for conversion there? Is it dependent at this point on getting the approvals of Amazon and now Alphabet here? Is there some sort of you know, serial nature to just get putting this in front of the IORC, et cetera, or is it not necessarily precluded as far as you would set expectations? Obviously, you've delivered well against these targets, and it seems like you've still got a ways to go against that 3 gig watts, too.

  A: As I've said in the past, these are complex transactions, and these negotiations take time. I wouldn't limit these to just Amazon and Alphabet, I said earlier in the script, and Michael said it, that we're talking to multiple counterparties here, and I think it just takes time to get these things done and to get them done correctly. We've set our organization up and structured ourselves to execute more efficiently and more effectively, and that gives me a whole lot more confidence that we're going to get these done.

• Q: And just quickly on the ATM, how much latitude do you have for more deals now that you raise the ATM range? Or is that effectively utilized with the CapEx increase here? I suspect you have some latitude.

  A: Yeah, we absolutely have a lot of latitude. And our financing plan, the $400 to $600 million annually that we disclosed today is already contemplated in the filed ATM structure. Therefore, we've got the capacity to handle that type of volume without impact.

• Q: Hey, good morning. Just wanted to circle back a bit to the speed to market theme that was touched on earlier. Maybe within the context of the resource mix for the pooled strategy, you know, we've seen you use a mix thus far, but is there sort of a resource priority list that you have, you know, just in terms of executing that speed to market? And then maybe more broadly, do you have an update on where you are in terms of land and equipment acquired for those new assets that we're adding?

  A: Michael? What I would say on the speed to market aspect is other than we make sure that we are meeting our reliability, MISO accreditation, IURC requirements, and what we need to ensure that we're good stewards of the system and what we're doing for our customer base. We try to make sure we are deploying resources and capabilities across a broad spectrum of resources and bringing them into that pool and bringing them into that resource mix to do just what you said, which is to ensure speed to market and ensure the capability to be able to provide what the customers need and what our shareholders need in returns with those. So it's not a prioritization of assets within that asset pool. It's really making sure that they meet that reliability requirements. They meet the necessity for being able to have the time to market, speed to market with the customers and meeting the MISO and accreditation. And we are very active in that. We are very consistent in that. And I think what you're seeing here and how we're growing the portfolio from having CCGTs, having batteries, adding in additional contracted generation assets, being, you know, things that are, you know, confirming market capabilities and resources, is that continued mix will continue to grow and we will add to that.

• Q: maybe just thinking about the upcoming URC approval process. I know you have a very helpful slide in your deck walking through some timeline milestones, but can you just kind of provide increased color on what the next steps are procedurally in the timeline for some of the review coming up? And maybe just to add on to that, I know there's been some discussion of development in LaPorte County where Microsoft has been active so those those have come out in the irurc filings as well any color there would be helpful

  A: go ahead mike so what i would say is slide 12 i think is a good representative slide of the progression and the progress that we have made through our regulatory process and and how we're really executing on this in a defined sustainable and and methodical manner And you can see that as we've gone through it, it includes everything from like the zoning application approval in February, the, you know, the acceleration amendment, you know, filed with the IURC. As we mentioned before, if the settlement is approved, that that would lead to an expedited approval process of these special contracts, which is 90 to 120 days, which just highlights another advantage of how we've structured this GENCO model and the capabilities around it. But we feel, you know, we have a great regulatory team. That regulatory team is working these through. We feel confident relative to these approvals and moving them through the process. And we will just continue to execute on that. And you can see the dates associated with. We expect those by first half of 2026 and then moving into the actual construction phases.

• Q: Hey, good morning, guys. How's everyone? A couple of quick questions for me. Given kind of the timelines, and I think you guys might have just touched upon it, but I just want to kind of clarify. Just given the timelines, and we kind of have the data center pipeline through 2035, I guess, and then the – it seems like there's – the expedited approval process could aid this, but I just want to be clear. When we think about those up to two gigawatts of developing opportunities kind of later days, like, what – how quickly would we need to see those be brought into the fold of the pipeline or into kind of actually, like, signed capacity for them to actually be COD'd by 2035.

  A: I think that those are those two gigawatts are what we call developing opportunities. I think that how quickly they get bought into strategic negotiations kind of remains to be seen. What I'll tell you is there's significant demand in the Indiana region for hyperscalers and data centers. I think as we think about more more developmental opportunities up there we'll study things like that so there's no real timeline for how quickly they get bought in we have a long queue and we have a lot of work to do that demand is high and i will we'll get to it as our resources and equipment and things allow us to

• Q: And as we've mentioned earlier, we'll continue that discipline methodology. And as we discussed with the strategic negotiations, and as was mentioned in the question prior around Microsoft and the fact that that land in LaPorte, we continue to work those opportunities in just a very methodical manner. And as we do, we will continue to update like which gigawatts are in which portion of that pipeline of the portfolio. Got it. Thanks. And then just wanted to clarify, too, so there's no, in the increasing guidance, there's no consideration of the three gigawatts in strategic negotiations embedded within that, correct? It's just that that is purely up.

  A: That is correct. Great. Thanks, guys.

• Q: Thanks. Great update. I guess my question is, I'd like to maybe better understand the role of Schaefer generation potentially under a PPA in that 800 megawatt pool. And do you have sort of the ability to shift the operating costs that are now being picked up by retail customers to to the data center customers. So today, the way we look at the Schaefer, as I mentioned in my script, the second 202 order, and we consider the Schaefer units part of our retail customer capacity. Our goal here is to continue to recover costs through the FERC process. And has there been no real consideration today of shifting that over into a PPA?

  A: Okay, so the pool of resources doesn't include any surplus generation that you're now getting from the Schaefer plants. That is correct. Shaper is not a Genco asset. Shaper is a NIPSCO asset. So it is not part of the pool and it is not part of those resources. It's a regulated asset. And there's no PPA connection either to Genco. That's right. There are no NIPSCO-based assets that are serving our existing base customers that are within the pool or PPA to the pool.

• Q: And I guess my next question is how long would it take to supply generation to prospective new customers? And I guess that would include these two customers or the expansion of AWS and Alphabet.

  A: Remember, as part of the Genco model, every solution is a bespoke solution. and they have bespoke ramp rates, and all those things go into consideration of timing and kind of generation we provide.

• Q: And I guess since Genco is growing as a percent of your total contribution, when can we sort of expect to see separate financials?

  A: Yeah, but we'll break that out once we get to a place where GENCO is a more material contribution to NYSource's ongoing financial results.

• Q: Thank you. Fortunately or unfortunately, I'm going to follow on here a couple lines of questions in your comments earlier. The pool strategy, do you need approval from the IURC for any new assets or any contracts outside of approval for just the data center contract? Essentially, are you able to serve that data center contract with any assets and purchases without regulatory approval?

  A: So the existing process that we have with the IERC, as GENCO is a regulated entity, is we file the special contracts with the IERC for approval. As we file those special contracts with the IERC for approval, we do provide them with information relative to what assets are being added to the system. the special contract is approved, that information on what assets are being added is typically within the special contract, but does not require like a separate CPC and approval with it. So the pool strategy is a mechanism by which that we're able to effectuate through GENCO in directly, and that comes out as special contracts with counterparties that the IURC will approve, if that makes sense.

• Q: Yeah, absolutely. Okay. Sounds good. One other quick clarifying. You might have answered this earlier, but just to clarify, the 9% to 10% growth includes only the existing Amazon, Amazon expansion, and the alphabet, right?

  A: That's correct. The 9% to 10% growth only includes signed customer contracts, no strategic negotiation.

• Q: And then? The mechanism for flowing savings back to customers. I wonder if you could talk a little bit about that in terms of the $1.4 billion number, how that actually gets back to NIPSCO customers.

  A: So that $1.4 billion is a defined mechanism within each special contract that distinctly lays out how those funds will be accreted and then provided back to the NIPSCO base And in the end, it is a credit against the bills of those retail customers and of those customers that are on the electric generation side for NIPSCO. So it is not a volumetric reduction. It is a credit to those customers from what we're doing within these contracts.