NiSource Inc. Q3 FY2025 earnings call

Key Points - Executed premier business plan, advanced data center development in Indiana and refreshed long-term business outlook. - Through ~$7 billion of GenCo investments, generated ~$1 billion in savings to flow back to existing customers. - AI and digital strategy driving efficiency, with AI work management intelligence delivering over 20% field productivity uplifts. - Made progress on regulatory agenda, advancing tracker programs in Ohio and Indiana, Pennsylvania rate case on track for year-end final order. - Columbia Gas of Virginia's partnership with Eli Lilly's $5 billion manufacturing facility showcases economic development efforts. - Secured data center contract in Indiana, constructing 2 combined-cycle gas turbine power plants and 400 MW battery storage capacity, with $6 billion to $7 billion capital investment.

NiSource reported third quarter adjusted EPS of $0.19, bringing year-to-date total to $1.38. Reaffirmed the upper half of 2025 adjusted EPS guidance of $1.85 to $1.89. Announced 2026 consolidated EPS guidance of $2.02 to $2.07. Base business aims for 6% to 8% annual adjusted EPS growth through 2030, while consolidated business targets 8% to 9% adjusted EPS compound annual growth rate through 2033. GenCo investments of approximately $7 billion, with 5-year consolidated capital expenditures totaling $28 billion.

Guidance - Reaffirmed 2025 adjusted EPS guidance of $1.85 to $1.89, expecting results in the upper half. - Announced 2026 consolidated adjusted EPS guidance of $2.02 to $2.07, with $0.01 to $0.02 per share from GenCo-related assets. - Base business aims for 6% to 8% annual adjusted EPS growth through 2030. - Consolidated business targets 8% to 9% adjusted EPS compound annual growth rate through 2033. - GenCo investments of approximately $7 billion, 5-year consolidated capital expenditures totaling $28 billion.

Risks - Statements made are forward-looking, subject to risks and uncertainties that could cause actual results to differ materially, as detailed in SEC filings' Risk Factors and MD&A sections. - Some statements relate to non-GAAP earnings measures; need to refer to supplemental slides, segment information, and full financial schedules for GAAP comparisons and reconciliations.

Q: Just without going into specific names, can you speak to the quality of the customer behind the agreement and the broader pipeline?

A: It's a very large investment-grade data center customer. We have a pipeline of 1 to 3 gigawatts in negotiations, and the team is focused on executing and aligning to capture growth opportunities.

Q: Can you talk about the $0.25 versus the $0.45 range and the 3 gigawatts in strategic negotiations?

A: The $0.25 to $0.45 range contemplates multiple customers at the top end. Our full strategic negotiation pipeline of 1 to 3 gigawatts could outperform the top end, depending on customer preferences, technology choice, and timeline.

Q: What is the contribution from the NiSource side from an equity perspective regarding GenCo?

A: All earnings guidance reflects total cost of financing including all equity, debt, and minority interest. The $300 million to $500 million equity annually from NiSource supports the $28 billion capital expenditures.

Q: Can you elaborate on the $0.25 to $0.45 range and the 3 gigawatts upside?

A: The $6 billion to $7 billion CapEx supports GenCo development, including the announced customer and strategic negotiations. The $0.25 to $0.45 range is reflective of the announced customer and additional negotiations could push to the higher end.

Q: What are the risk protections in the initial contracting?

A: Built protections include cost-sharing provisions, fixed rate structure to mitigate risks, and termination protections to safeguard financial integrity.

Q: Talk about the timing of GenCo CapEx and earnings realization?

A: Majority of CapEx occurs between 2025 and 2030, with additional work outside 5-year plan horizon. Fixed rate structure provides stable earnings, and acceleration of customer ramp can pull forward upside.

Q: Is there a rule of thumb for EPS accretion per gigawatt?

A: No incremental guidance on earnings per share per gigawatt as customer technology choice and timeline impact it.

Q: About the EPC contract for GenCo?

A: Partnership with Quanta and Zachry allows upsizing of subsequent projects for agile execution.

Q: Regarding affordability and government pitch?

A: Objective is to flow back savings to retail customers as new customers utilize the grid, helping with affordability.

Q: Cash flow profile of GenCo contract?

A: Contract structured to prioritize cash flow for construction, with cash inflow before customer full ramp, and financing evaluated for lowest cost.

Q: Why battery in GenCo?

A: Batteries provide system reliability, capacity, and quick response, contributing to diverse asset mix for grid strength.

Q:细分资本支出中GenCo和NIPSCO的部分？ A: For guidance, capital is segmented into GenCo, with actual spending including both GenCo and NIPSCO, but specific breakdown within GenCo's $7 billion is not guided on.

Q:关于GenCo回报分享机制？ A: Submit contract for customer by end of year, with flowback mechanism to retail customers, and no sharing of returns above NIPSCO's allowed return on equity.

Q:关于保留Blackstone作为GenCo股东的考虑？ A: Blackstone is strong long-term partner, reduces financing needs, reinforces balance sheet, lowers cost of capital, and provides diversification.

Q:关于基础资本计划更新中2029年的情况？ A: 2029 sees investments related to MISO D-LOL compliance, PHMSA compliance in Ohio, and MISO long-range transmission, with natural gas investment making up about 50% of CapEx portfolio.