NISOURCE INC. Q3 FY2024 earnings call

• Regulatory activity: Settlements in Pennsylvania and Kentucky rate cases, approvals for Indiana generation and technology investments. In Indiana, received approvals for Solar CPCN amendments and a gas peaking facility, and an upgraded work and asset management system using AI went live for electric operations with gas operations to follow next summer.
• Generation investments: Progress made with generation projects like Gibson and Fairbanks gaining full ownership, Cavalry Solar and Dunns Bridge II solar projects in service or coming online, and Templeton Wind Energy Center moving from upside to base plan.
• Capital plan: Refreshed 5-year plan outlook with a base capital plan of $19.3 billion, $2.9 billion larger than prior base plan, driven by increased generation, gas compliance, system hardening, and IT modernization; upside plan at $1.8 billion for electric modernization, PHMSA compliance, etc.
• Customer affordability: Average residential gas bill declined 16% on a total bill basis last 12 months, and NIPSCO filed an electric general rate case driven by $2.5 billion in incremental investment.

Third quarter adjusted EPS was $0.20 per share, an increase of $0.01 versus the same period one year ago. Higher rate base investments drove $61 million in incremental revenue, net financing benefits of approximately $26 million were realized year-over-year, and customer count and usage added $2.6 million across electric and gas businesses versus last year, with total growth over $28 million for the year. No detailed breakdown by product segments as focus is on utility operations.

• Reaffirmed 2024 adjusted EPS guidance of $1.70 to $1.74, expecting to achieve upper half of range.
• Initiated 2025 adjusted EPS guidance of $1.84 to $1.88, consistent with 6% to 8% annual growth commitment.
• Refreshed 5-year plan outlook with $19.3 billion base capital plan, driving 8% to 10% rate base growth 2025-2029, and reaffirmed 14% to 16% FFO to debt target.
• Revised base plan includes new investments meeting stakeholder, compliance, and safety requirements at affordable value.

• Utility industry faces potential challenges like natural disasters, interest rate environment, inflationary pressures on cost structures, and evolving uncertainties. Risk management is central to NiSource's values, with teams implementing proactive solutions to de-risk execution.

Q: Nick Campanella asked about catalysts for data center opportunities, timing, and if additional equity financing is needed.

A: Lloyd Yates and Michael Luhrs said data center activity is primarily 2025 activity, disciplined and methodical; Shawn Anderson noted $1.8 billion upside CapEx may require modest equity based on project cash flows.

Q: Julien Dumoulin-Smith asked about data center details, IRP, and initial observations.

A: Michael Luhrs said IRP has 2,600 megawatts imputing generation assets, with multiple scenarios including an upside case; Lloyd Yates and Michael Luhrs noted it's a 2025 activity with no specific ownership views yet.

Q: Richard Sunderland asked about Templeton Wind in base plan, equity financing with capital increase, and flat O&M.

A: Lloyd Yates confirmed Templeton moved to base plan; Shawn Anderson said $19.3 billion plan is financed, upside CapEx may need modest equity; Lloyd Yates said flat O&M expected due to efficiency gains from AI and asset management.

Q: Durgesh Chopra asked about Templeton in base plan, equity financing with capital increase, and flat O&M.

A: Lloyd Yates confirmed Templeton in base plan; Shawn Anderson said efficient capital allocation minimizes regulatory lag; Lloyd Yates said flat O&M due to efficiency from AI and asset management.

Q: Ross Fowler asked about MISO capacity auction, data center demand timing, and capacity prices.

A: Michael Luhrs said vertically integrated model helps mitigate capacity risk; Lloyd Yates and Michael Luhrs said data center demand is worked through methodically; Michael Luhrs said vertically integrated model helps balance supply-demand.

Q: Travis Miller asked about data center infrastructure needs and gas demand.

A: Lloyd Yates and Michael Luhrs said data centers need generation and transmission; Shawn Anderson said gas demand growth seen in Virginia, Central Ohio, with net 1% customer growth and economic development demand.

Q: Gabriel Moreen asked about Columbia CapEx step change and gas forward curve.

A: Shawn Anderson said gas system hardening includes Bersteel replacement, AMI investment, etc.; gas forward curve reflects 43% increase next year and 12% subsequent year.

Q: Ryan Levine asked about NiSource/NIPSCO steps for critical gas infrastructure and CapEx change drivers.

A: Michael Luhrs said appropriately planning infrastructure; Shawn Anderson said additional work for compliance and regulation drives capital allocation increase.