NiSource Inc. Q2 FY2025 earnings call

• Regulatory foundation: Received final orders in Virginia and Indiana this quarter, and ongoing work in Pennsylvania with a final order expected in the fourth quarter.
• AI initiatives: Rapidly advancing internal AI capabilities, with work management intelligence solution fully deployed across NIPSCO and Columbia operating companies, achieving up to 24% improvement in steel productivity; launching generative AI-powered analyst initiative in supply chain.
• Operational milestones: Completed 9,966 miles of leak survey in Q2, exceeding the goal; launched final phase of Work & Asset Management (WAM) program, converting over $500 million records and integrating data from 23 host systems.
• Strategic growth: NIPSCO supporting diverse new developments in advanced manufacturing, logistics, and technology, with projects like GI Tech's facility, Slate Automotive plant, and FedEx distribution center; revitalizing a delivery station in Virginia to support new industrial customers.
• Capital investment: $19.4 billion 5-year capital plan is diversified, with 48% of the base plan attributed to gas system hardening; active engagement to advance over $2 billion of identified upside projects.

Second quarter adjusted earnings per share was $0.22, which was $0.01 above the same period last year. Year-to-date, adjusted EPS was $1.19, up $0.13 from the same period last year. This growth is driven by strong performance in both the NIPSCO and Columbia segments, which continued to outperform expectations. The NIPSCO and Columbia segments contributed to the overall positive financial results, with the segments showing consistent and high-quality performance due to initiatives like Project Apollo and WAM.

• Narrowed 2025 adjusted EPS guidance to the upper half of the range $1.85 to $1.89.
• Reaffirmed long-term financial commitments: 6% to 8% annual adjusted EPS growth, 8% to 10% rate base growth, and 14% to 16% FFO to debt through 2029.
• Confidence in meeting financial commitments based on strong performance in segments, constructive regulatory execution, and disciplined capital deployment.

Some statements made are forward-looking and subject to risks and uncertainties that could cause actual results to differ materially from those expressed. Information concerning such risks and uncertainties is included in the Risk Factors and MDA sections of our periodic SEC filings.

Q: Given how fast the data center market is evolving and comments on Columbus metro area, how are you thinking about the data center opportunity in NIPSCO territory, and is the load forecast stale?

A: Lloyd M. Yates stated they're taking a thoughtful and disciplined approach, guided by 4 principles: protect existing customer base, serve new customers with speed and agility, earn appropriate return for shareholders, and maintain financial integrity. Shawn Anderson added there are inquiries for pipeline expansions to serve on-site generation for data centers in Ohio and Virginia.

Q: How do you think about the potential example transaction and timeline for larger loads related to GenCo?

A: Lloyd M. Yates said the GenCo declination process is moving down the path, confident of an order by the third quarter, and conversations with counterparties are ongoing. Michael S. Luhrs added they're working multiple parallel streams on equipment, regulatory, contractual, etc.

Q: How do the counterparty contract process and third quarter plan refresh juxtapose?

A: Shawn Anderson explained they're focused on refreshing plans whenever information is credible, with $19.4 billion 5-year capital plan diversified, and they'll flow in upside projects and incremental opportunities like data centers once concrete answers are available.

Q: Thinking about supply picture, turbine queue positions, and coal retirements' fit into supply picture?

A: Michael S. Luhrs said they're in a beneficial position with equipment queues to deliver on opportunities. Melody Birmingham mentioned working with the state on Schahfer plant retirement, but plan remains to retire Schahfer by end of year but will align with state direction.

Q: How does GenCo play into financing strategy and earnings impact?

A: Shawn Anderson said they see flexibility in GenCo structure and negotiations, with strength in balance sheet and outperformance of base business strengthening funds from operation and cash flow quality, retaining flexibility to evaluate GenCo financing.

Q: On GenCo declination filing and process, and impact if order is negative?

A: Lloyd M. Yates said the declination order is a tool for speed and flexibility, and if there's a negative order, there are other tools like House Bill 1007 in Indiana. Michael S. Luhrs added they're working multiple parallel streams on various items.

Q: Cost recovery attributes for Schahfer life extension under recent state policies?

A: Lloyd M. Yates stated conversations with the state and federal level on cost recovery mechanisms for Schahfer are ongoing, but House Bill 1007 isn't related to keeping Schahfer operating.

Q: Reminding on GenCo declination case process and timeline?

A: Lloyd M. Yates said final filings are due Friday, and they expect an order from the commission by the end of the third quarter. He also clarified they're on track to execute the data center opportunity in 2025.