NiSource Q1 2025 Earnings Report

NiSource EPS Results

• Actual EPS: $0.98
• Consensus EPS: $0.90
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: $0.85

NiSource Revenue Results

• Actual Revenue: $2.03 billion
• Expected Revenue: $2.32 billion
• Beat/Miss: Missed by -$299.07 million
• YoY Revenue Growth: N/A

NiSource Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 11:00AM ET

NiSource (NYSE:NI), an energy holding company, operates as a regulated natural gas and electric utility company in the United States. It operates in two segments, Gas Distribution Operations and Electric Operations. The company distributes natural gas to approximately 3.3 million customers through approximately 55,000 miles of distribution main pipeline and the associated individual customer service lines; and 1,000 miles of transmission main pipeline in northern Indiana, Ohio, Pennsylvania, Virginia, Kentucky, and Maryland. It also generates, transmits, and distributes electricity to approximately 0.5 million customers in various counties in the northern part of Indiana, as well as engages in wholesale electric and transmission transactions. It owns and operates coal-fired electric generating stations in Wheatfield and Michigan City; combined cycle gas turbine in West Terre Haute; natural gas generating units in Wheatfield; hydro generating plants in Carroll County and White County; wind generating units in White County, Indiana; and solar generating units in Jasper County and White County. The company was formerly known as NIPSCO Industries, Inc. and changed its name to NiSource Inc. in April 1999. NiSource Inc. was founded in 1847 and is headquartered in Merrillville, Indiana.

NiSource Q1 2025 Earnings Call Transcript

Presentation

[Operator]

morning, ladies and gentlemen. Thank you for standing by, and welcome to the NiSource First Quarter twenty twenty five Earnings Conference Call. Please note that all lines have been placed on mute to prevent any background noise. After today's presentation, there will be an opportunity to ask questions. I will now turn the conference over to Dave Brow, Communications.

[Operator]

Please go ahead.

[Dave Rau, Manager - Content Production at NiSource]

Good morning, and welcome to the NiSource first quarter twenty twenty five investor call. Joining me today are President and Chief Executive Officer, Lloyd Yates Executive Vice President and Chief Financial Officer, Sean Anderson, executive vice president of technology customer and chief commercial officer, Michael Lures, and executive vice president and group president, NiSource Utilities, Melody Birmingham. Today, we will review NiSource's financial performance for the first quarter and provide an update on operations and growth drivers. We'll open the call to your questions following prepared remarks. Slides for today's call are available in the Investor Relations section of our website.

[Dave Rau, Manager - Content Production at NiSource]

Some statements made during this presentation will be forward looking. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning such risks and uncertainties is included in the risk factors and MD and A sections of our periodic SEC filings. Additionally, some statements made on this call relate to non GAAP earnings measures. Please refer to the supplemental slides, segment information, and full financial schedules for information on the most directly comparable GAAP measure and a reconciliation of these measures.

[Dave Rau, Manager - Content Production at NiSource]

Now I'll turn the call over to Lloyd.

[Lloyd Yates, President & CEO at NiSource]

Thank you, Dave, and good morning, everyone. I'll begin on slide three. The NiSource strategy is simple.

[Lloyd Yates, President & CEO at NiSource]

We are committed to delivering safe, reliable, and affordable energy to our customers. We execute this strategy through efficient deployment of capital, safe asset operations, and constructive regulatory mechanisms. These are converted into a reasonable return on invested capital, enhancements to our balance sheet position, and offer a dependable and growing dividend. These are the foundation of the NiSource business plan, which continues to offer compelling value to stakeholders, driven by regulate regulated utility operations across premium jurisdictions with diversification across geography and fuel type and disciplined capital allocation. Advancing to slide four, we will step through our key priorities, Collaborative regulatory and stakeholder relationships and operating with excellence paves the way for NiSource to execute on its financial commitments.

[Lloyd Yates, President & CEO at NiSource]

NiSource continues to work alongside stakeholders through regulatory processes to ensure resources are available for critical investments in safety, reliability, and economic development. One example was a recent Ohio legislative proposal to modernize natural gas rate making. If passed, senate bill one zero three would shorten the time between capital outlay and recovery. This minimizes regulatory lag and maximizes the value of the investments for our communities. It also creates a special contract approval process to facilitate attracting new large load customers.

[Lloyd Yates, President & CEO at NiSource]

This promotes economic development, greater job creation to enhance local tax base, and would make Ohio more competitive with its surrounding states. Our dedication to operational excellence continues to advance as we leverage AI in our operations to revolutionize our company in how we deliver service to our communities while driving greater efficiency and enhancing the reliability of our business for our customers. Today, we reported first quarter two thousand twenty five adjusted EPS of 98¢, which is 15% above the same quarter of 85¢ reported one year ago. We are reaffirming 02/2025 adjusted EPS guidance of a dollar 85 to a dollar 89 as well as reaffirming annual 02/2025 to 02/1929 guidance for adjusted EPS of six to 8%, rate rate base of eight to 10%, and targeting 14 to 16% FFO to debt in all years of the plan. Our plan remains resilient and executable in the current macroeconomic environment.

[Lloyd Yates, President & CEO at NiSource]

The stability of our regulatory foundation and intentional capital deployment is fundamental to the NiSource business plan. Additionally, we are continuing commercial negotiations to support data center build out in Northern Indiana. While these negotiations continue, we have also advanced our pending application to the IURC to establish NIPSCO Genco and support mega load customers. Our testimony in this process supports four key goals. First, it protects existing system customers by separating cost.

[Lloyd Yates, President & CEO at NiSource]

The JENCO strategy shows existing customers from the financial impact of new capacity investments. Second, it allows us to construct the generation resources necessary to serve this customer class with the speed and flexibility that meets their needs. Third, it maintains NIPSCO's financial integrity. As with all investments, we give thoughtful consideration to the risk profile of new investments and how those drive value and ensure long term cash flow quality for our business. Last, we're preserving flexibility in our business model by creating another tool within our portfolio to meet the evolving needs of our customers.

[Lloyd Yates, President & CEO at NiSource]

The declination filing request the commission to decline jurisdiction on a limited scope of activity related to Genco to support a data center design strategy. We are in active settlement negotiations. And while we cannot provide an update on this call, if there is any movement on this topic, notice of progress will be filed with the commission. This is an exciting opportunity to advance unprecedented development in Indiana, which could provide significant resource to communities and drive meaningful value to all stakeholders. We're very pleased with the progress we've made and continue to work with potential customers to make this development strategy a reality.

[Lloyd Yates, President & CEO at NiSource]

Moving on to slide five, our commitment to deliver operational excellence is evidenced from key initiatives to standardize work and enhance risk management. Last July, we launched our work management intelligence program at Columbia Gas of Ohio. Since then, productivity gains exceeded forty thousand hours across the service territory. We have extended our work management intelligence programs to Pennsylvania, Maryland, Kentucky, and Virginia. In these regions, we have observed consistent productivity gains averaging 16 and a half percent.

[Lloyd Yates, President & CEO at NiSource]

We are leveraging AI to revolutionize our company and its operations. To date, more than 17 operation centers use AI generated optimized schedules, resulting in over 60,000 of productivity improvement compared to the same period in 02/2023. And we have introduced real time analytical dashboards, enabling tracking and performance evaluation at every level from field operations to executive leadership. Continuous improvement is at the heart of the Project Apollo strategy, which targets sustainable cost savings by reducing inefficiency across our operations. In addition to leveraging AI, we further improve service and reduce waste through other key projects launched in 02/2025.

[Lloyd Yates, President & CEO at NiSource]

Meanwhile, 75% of initiatives launched in 02/2024 continue to provide efficiency in 02/2025. Moving to slide six, we will highlight progress made on our regulatory agenda. We are proactive on the regulatory front through general rate case and rider filings. A Maryland final order approved in April continues a constructive path of approval for critical safety, compliance, and reliability capital additions in the state, including nearly $11,000,000 in investments in 02/2024. The Virginia rate case remains on track with an order expected in the second quarter.

[Lloyd Yates, President & CEO at NiSource]

Our Pennsylvania team filed a new rate case to recover over $400,000,000 of anticipated investments necessary to deliver safe and reliable service to our customers. Pennsylvania has a track record of constructive regulation, and our team has achieved a settlement with stakeholder in 11 of the last 12 rate cases. The final order is anticipated in the fourth quarter. The NIPSCO electric rate case has $2,500,000,000 of incremental investments for our customers and communities in Northern Indiana. In February, we reached a settlement agreement making our seventh settlement in the last ten years across both the electric and gas businesses.

[Lloyd Yates, President & CEO at NiSource]

We expect the final order in third quarter. Our teams are continuously engaged with key stakeholders to deliver stable and predictable outcomes for our customers while ensuring safe and reliable service in our communities. I'll now turn things over to Sean.

[Shawn Anderson, Executive VP & CFO at NiSource]

Thank you, Lloyd. I'd like to start on Slide seven by highlighting the progress made in our capital expenditures program over the last quarter. In January, Dunsbridge '2 launched commercial operations, making the Dunsbridge complex one of the largest solar generation facilities in the country. Fairbanks and Gibson construction remains on track with in service expected this year. All panels were purchased in advance and are on-site reducing any inflationary risk associated with tariffs on renewable assets in our planning horizon.

[Shawn Anderson, Executive VP & CFO at NiSource]

Across NIPSCO, we continue to advance our energy transition strategy. To date, we've installed renewable nameplate capacity of 2,100 megawatts to support baseload generation for the region. The majority of these assets were negotiated at prices now approximately 50% lower than in today's renewable marketplace. This locks in the cost of our capital investments and positions our customers to access a low cost energy option for the life of these assets. Continuing on to capital investments on Slide eight, there is no change to our capital guidance for our current plan horizon.

[Shawn Anderson, Executive VP & CFO at NiSource]

The outlook projects over $19,000,000,000 of investment over the next five years with over $2,000,000,000 of identified upside opportunities for safety and reliability of our infrastructure and customer service offerings. Our capital plan is not susceptible to concentration risk or extended construction timelines. Investments are diversified across electric generation projects, gas and electric customer growth and transmission and distribution modernization and system hardening. We continue to assess and actively develop our base plan to include only those investments that meet our standards. We continue to assess the incremental investment opportunities shared on Slide nine, which include data center generation, electric transmission and gas system investments to support incremental demand, including distribution, transmission and other infrastructure to support growing communities, the onshoring of manufacturing and new technology across the region.

[Shawn Anderson, Executive VP & CFO at NiSource]

Finally, FERC regulated electric transmission projects and MISO's multiyear long range transmission planning initiative are opportunities to further develop across and beyond our planning horizon. These investments are unquantified and sit outside the base and upside plans, which our guidance supports today. Additional development of these strategies is required to meet our threshold to include in either the base or upside capital investment plans. However, we are strongly positioned to advance these strategies. And once we've hit key milestones, new projects will flow through our plans.

[Shawn Anderson, Executive VP & CFO at NiSource]

NiSource is able to be opportunistic in capital allocation decisions due to the strengthened financial profile of the company and enhanced balance sheet positioning. Now let's cover the first quarter financial results on slides ten and eleven. As Lloyd highlighted, adjusted EPS was $0.98 per share, a $0.13 per share increase versus the $0.85 reported in the same period last year and represents a 15% year over year growth, primarily driven by regulated revenues recovering capital investments from twenty twenty four's regulatory activity. These results strongly position NiSource to achieve our full year financial commitments. We have achieved over 52% of our projected midpoint earnings, which is an increase of 8% compared to the same period last year.

[Shawn Anderson, Executive VP & CFO at NiSource]

All planned regulated revenue increases necessary to achieve our 2025 guidance have been put into rates or pending approval. We're ahead of schedule on our financing plan and have secured at least half of our forecasted 2025 equity issuances and issued $750,000,000 of long term debt. Lloyd mentioned the resiliency of our business plans relative to the changing tariff landscape. I'll offer a few additional thoughts on this. Productivity enhancements like AI efficiency and Project Apollo reduced time and reliance on materials subject to tariff implications.

[Shawn Anderson, Executive VP & CFO at NiSource]

Approximately 85% of our O and M and capital costs are labor and not subject to tariffs. In addition, approximately 97% of our procurement is through domestic Tier one suppliers, and our teams have already secured a significant portion of critical equipment to support our operations and capital plans for the five year horizon. Finally, we operated in a regulated framework that reduces the impact of rising product costs on our business. It is important to note that tariffs have the potential to drive onshoring and manufacturing expansion in The U. S.

[Shawn Anderson, Executive VP & CFO at NiSource]

We believe our service territory is attractive for location of facilities due to the constructive business climate, the proximity to and availability of low cost energy for manufacturing services and a skilled labor force across our region. These fundamentals underpin an attractive opportunity for economic development, providing investment and increased margin into our base plan. Moving to Slide 12, we are reaffirming our long term financial commitments. We are confident we will achieve 2025 guidance and sustain long term growth throughout the planned horizon. Greater transparency in capital returns supported by constructive regulatory frameworks and effective recovery mechanisms provides clearer insight into the financial projections for 2026 and beyond.

[Shawn Anderson, Executive VP & CFO at NiSource]

Our internal forecasts reflect the use of established capital trackers across nearly all jurisdictions and are built on realistic assumptions for load growth, financing costs, regulatory outcomes, commodity prices and other external factors. The forecasts also include a highly visible inventory of required capital investments necessary to ensure safe and reliable energy delivery for our customers. Beyond that, we maintained upside and incremental investment opportunities not captured in our existing financial commitments, including the potential for data center development. We have built flexibility into our plans in advance of potential headwinds and derisk execution through our balanced and diversified business plan across six constructive operating companies. We've significantly strengthened our balance sheet and have enhanced our visibility into how the investments we make convert into earnings through reduced regulatory lag and efficient financing plans.

[Shawn Anderson, Executive VP & CFO at NiSource]

Slide 13 highlights those five year funding plans. We are reaffirming 14% to 16% FFO to debt in all years of the plan as well as our guided annual equity needs through 2029, a balanced mix of cash from operations, new long term debt and 200,000,000 to $300,000,000 of equity each year enables us to maintain our capital structure and strong balance sheet position. In addition to traditional sources of funding, the potential use of hybrid securities and senior unsecured debt enhance flexibility and diversification, enabling us to grow without sacrificing credit quality. And finally, on Slide 14, you can see we are on track to meet our 2025 financial commitments and build stability into 2026. We are confident in our ability to achieve near term and long term guidance given our strong business fundamentals.

[Shawn Anderson, Executive VP & CFO at NiSource]

NiSource offers investors a diversified and fully regulated utility with the opportunity to invest in programmatic gas infrastructure and long term energy transition for a fully integrated electric business. This emerging opportunity to support unprecedented energy development and power demand resulting from robust economic development, onshoring as well as new data center development truly differentiates the value proposition relative to many alternatives in the marketplace today. I'd now like to turn the call over to the operator for Q and A.

[Operator]

Thank you. Our first question comes from the line of Shar Pourreza from Guggenheim Partners. Please go ahead.

[Lloyd Yates, President & CEO at NiSource]

Good morning, Shar. You there?

[Shahriar Pourreza, Senior Managing Director - Head of Energy/Power/Utilities at Guggenheim Securities]

There you go. Gotta love the mute function. Hey, Lloyd. Good morning. Morning.

[Lloyd Yates, President & CEO at NiSource]

Morning.

[Shahriar Pourreza, Senior Managing Director - Head of Energy/Power/Utilities at Guggenheim Securities]

Just on the NIPSCO, Jenco filing, I mean, obviously, understanding it's still ongoing. Do you need to receive an outcome in the proceeding before you announce a signed agreement, or can a deal be announced prior? I guess, in other words, do you have a customer you could announce with the approval of the new structure?

[Lloyd Yates, President & CEO at NiSource]

Michael, you wanna handle that one?

[Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer at NiSource]

Hello, Shar. Yeah. We could go ahead and proceed with a special contract and announce a special contract without having the Genco completed. The key of the Genco is that it provides the flexibility that Lloyd mentioned, really providing the significant protection of the existing customer base and allowing for the speed and flexibility that we know the large load customer needs while enabling, you know, the protections that are that would facilitate a special contract execution.

[Shahriar Pourreza, Senior Managing Director - Head of Energy/Power/Utilities at Guggenheim Securities]

Got it. Just just remind us on the PPAs. Obviously, the structure is still you're still working through the structure. But under if the pricing of the PPAs are above what you're afforded from a regulatory perspective, just remind us how do we think about that?

[Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer at NiSource]

So one of the nice components of the Genco structure is it really allows the flexibility to respond to multiple stakeholder needs. And those stakeholder needs, including if there are specific resources that would enable the speed to market, the ramp that would be needed, and or the resource mix that would be needed in order to meet their goals. So the point of that is is we would do that, and then NIPSCO will still be the resource adequacy provider to the market. The IRP and the flow through of the resource adequacy would go through NIPSCO, and at which time we would file a PPA between Genco and NIPSCO, which would be approved by the commission and follow through. So in other words, it's not a matter of if the PPA is pricing relative to our existing system, it's relative to the special contract which we would file for execution.

[Shahriar Pourreza, Senior Managing Director - Head of Energy/Power/Utilities at Guggenheim Securities]

Got it. Okay. That's helpful. And then just lastly, the 2,200,000,000.0, that's currently outside of the base plan, should you get a signed agreement? Do you see an opportunity to accelerate the 2.2?

[Shahriar Pourreza, Senior Managing Director - Head of Energy/Power/Utilities at Guggenheim Securities]

So I guess in other words, is there other large load customers embedded in that assumption, or would that be incremental to the 2.2? Thanks.

[Lloyd Yates, President & CEO at NiSource]

So the 2.2 upside does not include any data center development or economic development capital. The 2.2 upside are other projects in the regulated utility that that are, that could be potential upside, like AMI, pipeline integrity, and transmission. There's no data center capital there. Any data center capital would be incremental to the plan.

[Shahriar Pourreza, Senior Managing Director - Head of Energy/Power/Utilities at Guggenheim Securities]

Perfect. Thank you, guys. Fantastic execution, Lloyd. Appreciate it. See you soon.

[Lloyd Yates, President & CEO at NiSource]

Alright. Thank you.

[Operator]

Our next question comes from the line of Jameson Ward from Jefferies. Please go ahead.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

Hey, guys. It's actually Julien here. Thank you guys very much. Appreciate it. Maybe just to follow-up on a couple hey.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

Good morning to you, guys. Pleasure. If if I could follow-up on a couple nuances here. You know, there's been a lot of talk in the state around co retirement, you know, and federally for that matter. I'd love to hear how you guys are thinking about that juxtaposed against your plan.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

And specifically, how you think about, you know, potentially extending the lives of your assets and to what extent that that would or could impact your CapEx? Because it's not obvious even if you did hold open your assets if that would change us to say your your your current spending plans and or your future spending plans predicated on some of this incremental data center load.

[Lloyd Yates, President & CEO at NiSource]

Yeah. So so, Jordan, we are currently in the middle of assessing the impact of those executive orders. You know, today in our plan, you know, we are still on track to retire Schafer at the February in Michigan City at the at the February. Understanding that and taking a look at the executive orders, we're assessing what what it would take to extend those, and we'll work with various federal and state regulators to do what's best for our customers and various stakeholders and other stakeholders. But we're the the important point is we're in the middle and deep assessment on those.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

Got it. Okay. So not ready to say yet about what that the net impact would be. And and then maybe just if excellent. Thank you.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

And then keeping it in the same realm here legislatively, I understand the state recently passed some updated CPCN procedures and and procedural timeline requirements with that. Can you speak to how that might provide a further avenue for your data center filings, especially the extent to which that your your novel declination effort may or may not go through? I mean, does it provide you a further expedited effort to get a a timely outcome? If if you will, it seems a third way.

[Lloyd Yates, President & CEO at NiSource]

I think you're talking about senate bill one zero zero seven. No. So the declaration filing is separate from one zero zero seven. One zero zero seven just gives you another path to for large load customers. I mean, we're so we're pursuing that the declination filing.

[Lloyd Yates, President & CEO at NiSource]

Remember, we said in the past, that's only one of the mechanism we have to deal with the this this counterparty is load opportunities. Tenant bill one zero zero seven just gives us a second or even a third path.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

Right. Indeed. And and just does that make it more likely? I mean, when you think about the the the pathways here and what you're seeing in fact, let me just ask you directly here. I mean, with respect to Genco, is your expectation here that you would you know, given that you've now seen very clearly where parties stand, that have a pathway to potentially settle this out, or or at what point do you kind of elect to pursue this expedited CPCN process, especially given how timely some of this generation may need to be moving forward?

[Lloyd Yates, President & CEO at NiSource]

So

[Lloyd Yates, President & CEO at NiSource]

let me say a couple things. One is we're in the midst of settlement discussions, so I can't talk in detail about those because they have not been concluded. I think in terms of following this, Jenco, we think it's a really good path in terms of dealing with the counterparties. It meets the four pillars I talked about in my prepared remarks. Good for customers, good for our financial integrity, you know, gives us speed and flexibility we need, and we're optimistic about, you know, completing that process.

[Lloyd Yates, President & CEO at NiSource]

But we're also looking at senate bill one zero zero seven as another path, and we'll evaluate that if genco doesn't pan out for us. Melody, you wanna comment on that?

[Melody Birmingham, Executive VP of NiSource & Group President of NiSource Utilities at NiSource]

Sure. Julian, good good morning, and thanks for your question. So to Lloyd's point, House Bill, one zero zero seven, it it really didn't change any current available options, for utilities to serve large load customers. And also to Lloyd's point, what it did do was add those additional options. So expediting the generation resource planning process as well as it provides for a hundred and fifty day review of an application for utility to serve the load.

[Melody Birmingham, Executive VP of NiSource & Group President of NiSource Utilities at NiSource]

So our strategy remains the same, so it really doesn't change any of the options that are available for us to serve large load customers.

[Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies]

Excellent, guys. Thank you so much. Appreciate it.

[Operator]

Thank you. Our next question comes from the line of Richard Sutterland from JPMorgan. Please go ahead.

[Richard Sunderland, Equity Research - North American Utilities & Power at JP Morgan]

Hi, good morning. Thank you for the time today.

[Lloyd Yates, President & CEO at NiSource]

Good morning, Richard.

[Richard Sunderland, Equity Research - North American Utilities & Power at JP Morgan]

Appreciate discussions are still ongoing, but could you just offer any thoughts on sort of the pace and engagement with your large load prospective large load counterparties maybe relative to 4Q or last fall? Has certainly been a lot of attention here broadly on sort of hyperscaler CapEx reaffirmations, what have you. Are you seeing that following through on your end in talks?

[Lloyd Yates, President & CEO at NiSource]

Yeah. Let let me address that. You if you go back to the February and then in February 2025, you know, what I said was that, you know, hyperscalers, large load growth would be a 02/2025 activity. We'd really be focused on 02/2025. What I'll say to you is we're making excellent progress.

[Lloyd Yates, President & CEO at NiSource]

But what's really important to understand is these are complex and complicated transactions, and they may require a lot of time, and I'll say management attention. But, you know, we wanna make sure we get this right. You know? I'll I'll go back to my four pillars and getting it right is good for customers, good for financial integrity, meets the speed and flexibility of our counterparties, and protects our business model. And I say we're walking down that path.

[Lloyd Yates, President & CEO at NiSource]

We're excited about this opportunity. We think it's, really good for NiSource and good for all of our stakeholders. And, as soon as we have more information or more news, we will, you know, communicate that out to the street as fast as possible. I think if you take a look at, with some of the hyperscalers or developers that talked about in terms of their capital plans, they continue to be, they continue to actively invest in building and developing data centers. I think that'll give you a signal on, you know, how robust the network of people who are interested in that.

[Lloyd Yates, President & CEO at NiSource]

If you look at what we talked about in terms of Indiana being a great place to invest, I will tell you that we have a lot of opportunity, but we wanna make sure we get this right.

[Richard Sunderland, Equity Research - North American Utilities & Power at JP Morgan]

Great. Appreciate the color there. And then circling back on the gen code discussion, what would the regulatory cap structure look like for that entity? I think there is a peer recently filed a tariff that specifies a higher ROE and equity layer for this type of activity. So would this would you pursue something separate versus what NIPSCO has authorized?

[Richard Sunderland, Equity Research - North American Utilities & Power at JP Morgan]

Is that something we could see in the settlement? Or do you need a separate contract or rate case to decide? Any thought there would be helpful.

[Lloyd Yates, President & CEO at NiSource]

Michael?

[Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer at NiSource]

So we haven't discussed or disclosed anything associated with the financing structure with Genco. We are continuing working through and focusing on completing the special contracts with customers and working through that development of those activities.

[Richard Sunderland, Equity Research - North American Utilities & Power at JP Morgan]

Understood. Thanks for the time.

[Operator]

Thank you. Our next question comes from the line of Nick Campanella from Barclays. Please go ahead.

[Nicholas Campanella, Director at Barclays]

Hey, everyone. Thanks for taking the questions.

[Lloyd Yates, President & CEO at NiSource]

Good morning, Nick.

[Nicholas Campanella, Director at Barclays]

So I just Hey. Good morning.

[Nicholas Campanella, Director at Barclays]

I just wanted to follow-up quickly on the the settlement discussions. Just do you anticipate hearings to still kick off, at the end of this week here, if if a settlement is coming?

[Lloyd Yates, President & CEO at NiSource]

Again, as as I mentioned, we are in a midst of settlement discussions. When we have detail on those, we'll let you know as soon as possible, but we can't comment

[Lloyd Yates, President & CEO at NiSource]

on

[Lloyd Yates, President & CEO at NiSource]

specific discussions or timing with respect to those right now.

[Nicholas Campanella, Director at Barclays]

Okay. No no problem. And, and I just wanted to confirm a, you know, as you think about getting to commercial agreement with any any customer, that is not explicitly tied to the timeline, of these proceedings or the potential settlement?

[Lloyd Yates, President & CEO at NiSource]

That is correct.

[Nicholas Campanella, Director at Barclays]

Okay. Great. And then, you know, just on the assessment on the coal, just going back

[Nicholas Campanella, Director at Barclays]

to Julian's question, you know,

[Nicholas Campanella, Director at Barclays]

you have this NIPSCO IRP out there. It's calling for long term resource solutions. That's you know, I would say that's probably likely well beyond the current time frame for how long the coal could stay online for us. Just do you see that truly impacting your long term procurement strategy at this point, just to supplement the generation needs and the load growth that was detailed in the NISCO IRP?

[Lloyd Yates, President & CEO at NiSource]

Michael?

[Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer at NiSource]

So when we look at

[Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer at NiSource]

the IRP and we look at the extended plan with the IRP, we will need additional resources for the IRP despite all alternatives in evaluating the executive orders. As you look at MISO's direct loss of load rules and the changes associated with resources and the accreditation of resources, we know we're gonna need additional capacity on the system in order to facilitate the reliability and resiliency of the system.

[Nicholas Campanella, Director at Barclays]

Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Bill Atticelli from UBS. Please go ahead.

[Bill Appicelli, Executive Director, Head of North America Power & Utilities Research at UBS Group]

Hi, good morning. Just another question on the Genco. I guess, it's clear that you can make the special contract filing concurrently or separately from resolution of the declination filing. But given some of the complexities that you've outlined, is it prudent or is it a preferred outcome to have sort of visibility on the declination filing before filing a special contract given that some of the the framework would likely need to be embedded within the terms of the contract?

[Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer at NiSource]

So we feel the declination filing provides a very strong capability to meet the core pillars that we've discussed previously. Obviously, we would we look forward to the declination filing moving forward. But when we think about protecting the existing customer base, providing the resource alternatives, we can do that through multiple mechanisms regardless of the declination filing. However, the declination filing and the results of that, we feel provides a very strong capability to meet stakeholders, large load customer needs and protect our existing customer base. So when we look at the alternatives with 01/2007 or we look at other alternatives that are available to us, we have multiple paths by which to get to the solution.

[Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer at NiSource]

However, the declination filing is, we feel like, the best alternative by which to meet all stakeholders' needs.

[Bill Appicelli, Executive Director, Head of North America Power & Utilities Research at UBS Group]

Okay. All right. Great. And then can you just speak to some of the federal level, some of the policy changes that have materialized here around tariffs? And then maybe speak to exposure around any potential changes to IRA as it relates to renewable tax credits and transferability?

[Lloyd Yates, President & CEO at NiSource]

Sean, you want to take that one?

[Shawn Anderson, Executive VP & CFO at NiSource]

Sure thing. On tax transferability and IRA, PTC and ITC, most of our renewable projects plan to be online by the end of this year. It leaves a limited window for direct PTC, ITC challenges that are not retroactive. Really, Templeton is the only base plan asset really that's beyond the horizon here in 2027. So the plan assumes an ongoing PTC transferability twenty twenty six, twenty seven and '28 of about 40 to 60 basis points.

[Shawn Anderson, Executive VP & CFO at NiSource]

We're pro tax credits of benefiting customers and helping existing customers today realize those tax credits. That's helpful to keep energy costs down for customers today. But as we think about the financing plan implications and what the IRA brings to the existing plan itself, We believe our existing plan, the strengthening we've done in the balance sheet, the cushion above our downgrade threshold, I wouldn't suspect a change to our financing plan as a result of potential appeal of tax transferability. I think we noted this in my prepared remarks on the implications associated with tariffs. We're in a really strong position both from a standpoint of labor activities, a high degree of domestic content in our supply chains, continuous improvements such as Project Apollo.

[Shawn Anderson, Executive VP & CFO at NiSource]

We think that those can help us face the potential changes associated with tariffs. A fully regulated compact itself helps us get line of sight to where things could reset themselves. We've built the track record of being thoughtful around long term energy costs for our customers and evaluating those overall impacts, delivering flat O and M really for an extended period of time amidst a range of economic conditions, we'll be able to right size our plans to ensure that we can path this forward and face whatever comes our way from tariffs without any changes to our existing financial commitments.

[Bill Appicelli, Executive Director, Head of North America Power & Utilities Research at UBS Group]

Okay, great. All right. Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Travis Miller from Morningstar. Please go ahead.

[Travis Miller, Analyst at Morningstar]

Good morning. Thank you.

[Lloyd Yates, President & CEO at NiSource]

Good morning, Travis.

[Travis Miller, Analyst at Morningstar]

One more on Genco, if you don't mind. As you're talking either through the settlement and official discussions or just outside of the official discussion, are there any parties that are strictly opposed to this? Or is it just a matter of devil's in the details, getting all those aligned?

[Lloyd Yates, President & CEO at NiSource]

Again, Travis, we can't we can't comment. Since we're in the middle of active settlement discussions on the gen code, we can't comment on the position of any specific party right now.

[Travis Miller, Analyst at Morningstar]

Okay. No. That that's fair. Other topic, transmission. I think as Sean mentioned, milestones in terms of other projects.

[Travis Miller, Analyst at Morningstar]

I wonder if you could characterize what some of those milestones are, what you're waiting to see or hear transpire before you add some of those

[Shawn Anderson, Executive VP & CFO at NiSource]

Sure thing, Travis. So when we think about MISO long range transmission projects, both the executability from an operational standpoint, the construction and making sure that we understand what the costs are going to be to install those assets and operationalize those assets. And then juxtapose that with the regulatory compact itself, making sure that we understand the mechanisms that will pick up those costs. Once we reach that degree of certainty around those two elements, you'll see those flow into our base plan. As a reminder, we do have a nominal amount of MISO tranche one projects in our base plan, as well as some in our upside plan, which Lloyd highlighted earlier.

[Shawn Anderson, Executive VP & CFO at NiSource]

We do not have MISO long range transmission tranche two projects in either the base plan or really in the upside plan as it mostly persists outside our existing financial plan horizon. But we do expect the tranche two projects to start to come into fruition towards the latter part of this plan horizon. And we think that could be additive to the upside plan once we've gone through the work to commercialize and develop our plans to operationalize those assets.

[Travis Miller, Analyst at Morningstar]

Okay. Great. When you mean plan horizon, you're talking 2029 and beyond or 02/1930

[Shawn Anderson, Executive VP & CFO at NiSource]

and Yep. That's correct.

[Shawn Anderson, Executive VP & CFO at NiSource]

Yep.

[Travis Miller, Analyst at Morningstar]

Okay. Very good. Appreciate it. That's all I have.

[Operator]

Thank you. Our next question comes from the line of Wolfe Research. Please go ahead.

[Steve Fleishman, Managing Director and Senior Analyst at Wolfe Research LLC]

Yes. Hi, it's Steve Fleishman.

[Lloyd Yates, President & CEO at NiSource]

Good morning,

[Lloyd Yates, President & CEO at NiSource]

Steve.

[Steve Fleishman, Managing Director and Senior Analyst at Wolfe Research LLC]

Just I'm going to avoid asking about Indiana. But the in your kind of bullet about data centers, you said to support data center strategies across Indiana, Ohio and Virginia. Could you I might have missed some of this, but just could you talk a little more on what you're doing in Ohio and Virginia, related there and opportunities for you? Well,

[Lloyd Yates, President & CEO at NiSource]

I'll throw it to Michael or Melody. You guys which one? Go ahead, Melody.

[Melody Birmingham, Executive VP of NiSource & Group President of NiSource Utilities at NiSource]

Hi, Steve. Thanks for asking the question. So we do talk a lot about Indiana being right for data centers, Northwest Indiana, but we're seeing activity in Ohio as well. And so our teams, are working with the local and state entities to look at what these data center needs are and how and if we can support them. And so I'll just say that we're staying engaged with the local and state economic development entities, to look in how we can serve those customers those potential customers.

[Lloyd Yates, President & CEO at NiSource]

Yeah. To to Melody's point, most of that investment for us is natural gas infrastructure pipeline. So if you think about Virginia and Ohio, as the developers come, they're gonna need energy. So that allows us to invest capital to put in gas pipeline to support data center activity.

[Steve Fleishman, Managing Director and Senior Analyst at Wolfe Research LLC]

Understood. Separate topic, just the MISO auction outcome that we just had. I know it's for kind of more of a near term year, but just any kind of broader thoughts from that because, obviously, a big uptick in pricing and how it impacts your plans.

[Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer at NiSource]

Yes. We've seen the MISO auction, and we are evaluating its results. And we look through the IRP consistently to make sure that we have the resource adequacy we need. But when we look at MISO auction right now, we're well positioned within the current plans we filed from the IRP.

[Steve Fleishman, Managing Director and Senior Analyst at Wolfe Research LLC]

Thank you.

[Operator]

Thank you. Our next question comes from the line of the company, Ladenburg. Please go ahead.

[Analyst]

Thank you very much. I guess a procedural question. If you wanted to delay the start of hearings on Friday, you would have to file a notification either today or tomorrow. Is that is that correct?

[Lloyd Yates, President & CEO at NiSource]

That is correct.

[Analyst]

Great. And then the other question I have is beyond sort of what you're seeing with data centers, are you seeing any activity with respect to onshoring or industrials announcing sort of major expansions in Ohio I mean, in Indiana.

[Lloyd Yates, President & CEO at NiSource]

Yeah. I I think so. Again, we're seeing recently for battery manufacturers. We're seeing some expansion. One of the things we're seeing, so the answer is yes.

[Lloyd Yates, President & CEO at NiSource]

Indiana is, I I'd say, very well positioned for onshore with one of the the opportunities being a battery manufacturer. But, in terms of economic development, our team up there is really busy, with manufacturing above and beyond data centers. Sean, you wanna weigh in on that?

[Shawn Anderson, Executive VP & CFO at NiSource]

Yeah. Just a couple more. I mean, the cold storage sector continues to grow in Indiana. We've seen a a couple food organizations come in with food manufacturing and cold storage providing, jobs and as well as $70,000,000 of capital investment into the region, 70,000,000 for their facilities not ours. But cold storage also in Crown Point also, continuing, the development in that theme.

[Shawn Anderson, Executive VP & CFO at NiSource]

So NIPSCO has continued to see a general increase on manufacturing projects across the year. Several international companies are exploring opportunities to establish, in Indiana, a plastics manufacturer, a biopharmaceutical firm, a recycling operation, each poised to deliver new job opportunities in Indiana and bring significant investments in the state and as well as EV battery manufacturers, which we've seen come up a couple of times. So Indiana continues to be robust, but we're also seeing it in Virginia. We're also seeing it in Ohio. You highlighted that one.

[Shawn Anderson, Executive VP & CFO at NiSource]

So we're seeing it across our service territory. All of this really precedes any of the changes from the tariff landscape, right? Most of this was already in pipelines working and our states do a great job of trying to attract global companies to come into our region.

[Analyst]

Great. Thank you very much.

[Operator]

Our next question comes the line of Ross Feller from Bank of America. Please go ahead.

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

Good morning, Lloyd. Good morning, Sean. How are you?

[Lloyd Yates, President & CEO at NiSource]

Hey, Ross.

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

So I'll be brave and ask another one about Indiana. So but I won't ask about the settlement process, Lloyd, because I'm not gonna make you answer that one. Just from, like, a 30,000 foot view, right, it seems like Genco sort of versus a straight large load tariff filing has added a little bit of regulatory process and complexity at the beginning. Can you kind of just in your mind frame from a very high level what you guys see as the advantage of the Genco structure? I mean you kind of touched on it with maybe it will do like pricing differences with large load customers, but are there other advantages as you see them?

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

And then the corollary of that question is you as you look to Steve's, question around Ohio and other segments. If you're successful with Genco in Indiana, do you see, like, a pipe co in Ohio or something like that to structure it similarly? Thank you.

[Lloyd Yates, President & CEO at NiSource]

So let let me let me go back to why we believe Genco is our preferred path to success. And I and I think it's it's a really good question. I think the fur the first one, maybe I talk about our current priorities. It protects our existing customers by allowing us to separate the cost separate cost. I think second, it gives us a faster speed to market.

[Lloyd Yates, President & CEO at NiSource]

Remember, we're asking the IURC to decline, you know, the the CPCN, which is typically a two hundred and forty day process. So that gives us a a faster speed to market and deliver the generating resources for, the counterparties. And if you listen to the counterparties and look at their capital needs and how fast they want to move, speed to market matters a lot. I think that negotiating a special contract, you know, with the counterparties gives us a lot of opportunity in terms of flexibility as we look at risk versus return in this. I mean, this is one of the complicated parts of the process, but it could give us more opportunity depending on the risk we're willing to take.

[Lloyd Yates, President & CEO at NiSource]

And I think that matters for us and lets us preserve the flexibility of our current business model.

[Lloyd Yates, President & CEO at NiSource]

You know?

[Lloyd Yates, President & CEO at NiSource]

If you

[Lloyd Yates, President & CEO at NiSource]

look at the last three years, I think our EPS CAGR has been eight and a half percent. So we have a really strong financial plan, and we wanna protect the integrity of that plan and then make sure that this opportunity goes above and beyond our current business financial plan. So we like it. We think it's a I mean, I'm biased, but we think it's a really good idea. We're excited about it.

[Lloyd Yates, President & CEO at NiSource]

We're excited about the opportunity.

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

That's that's great, Lloyd. And then you you touched on it. There's a there's a different sort of risk dynamic maybe connected with these large low customers. Doing the Genco structure allows you to think about return differently. And I know you haven't kind of fully decided the capital structure yet, but could you think about leverage differently as well?

[Lloyd Yates, President & CEO at NiSource]

Sean?

[Shawn Anderson, Executive VP & CFO at NiSource]

This

[Shawn Anderson, Executive VP & CFO at NiSource]

just goes back to Lloyd's comment on flexibility. We've got a lot of different avenues that we could go to make this sufficient for our customers and for our shareholders. We're motivated to bring the lowest cost of financing into the marketplace that we possibly can. I think everyone is, in this particular case, and it'll help us advance the strategy quickly.

[Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America]

Perfect, Sean. I'll see you guys now in Florida soon. Take care.

[Lloyd Yates, President & CEO at NiSource]

Okay.

[Operator]

Thank you. Our next question comes from the line of Christopher Jeffrey from Mizuho. Please go ahead.

[Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities]

Hi. Thanks, everyone. Just one for me regarding O and M. It's kind of ticked higher in the last couple of quarters. And I think Sean you discussed some of the successes at Apollo and the flat O and M expectations.

[Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities]

But just to put a finer point on it, as far as the run rate from here, are you expecting Apollo to kind of have deflationary, impacts from here? Or how are you thinking about it?

[Lloyd Yates, President & CEO at NiSource]

Sean?

[Shawn Anderson, Executive VP & CFO at NiSource]

Over the course of

[Shawn Anderson, Executive VP & CFO at NiSource]

the year, we continue to to expect O and M to be flat year over year at around that $1,400,000,000 level that we've been able to maintain since 2016. Project Apollo helps drive that through an array of different opportunities, both efficiency as well as just identifying waste that can be one time in nature and reduce the overall cost profile of of the business. And our employees lead that each and every day. New ideas populate what fuels its mission and how we are able to obtain that flat O and M on a year over year basis, again, really since 02/2016. That said, we also need to invest in our system.

[Shawn Anderson, Executive VP & CFO at NiSource]

We make strategic investments to risk adjust the system on an ongoing basis. Things like vegetation management, leakage, they don't always track the same quarter over quarter, but they get to the right place at the end of each and every year. And we try and pick the opportunities that we have to ensure that we can be always risk adjusting the system to ensure reliability of our system at all times.

[Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities]

All right. Appreciate it. Thank you. That's it for me.

[Operator]

Thank you. Our last question comes from the line of Ryan Levine from Citi. Please go ahead.

[Ryan Levine, Analyst at Citigroup]

Hi, everybody, and thanks for squeezing me in. Good In terms of your labor contracts, can you remind us when those labor agreements expire and what the process of renegotiating labor rates is in here?

[Lloyd Yates, President & CEO at NiSource]

They they start well, Bill, I'll let Bill Jefferson answer this.

[William Jefferson, EVP, Chief Operating & Safety Officer at NiSource]

The NIPSCO contract ends, the March. The Pennsylvania contract, ends at the August. And I don't have the dates for the Ohio contracts, top of mind, but those are two of the biggest.

[Lloyd Yates, President & CEO at NiSource]

Possibly, everything gets renegotiated in 2016?

[William Jefferson, EVP, Chief Operating & Safety Officer at NiSource]

Everything gets renegotiated in 2026.

[Ryan Levine, Analyst at Citigroup]

Okay. Thank you. And then in terms of the EV or electric vehicle supply chain, what portion of your load, in Indiana and across your service territory is tied to to that industry, both historically and on a prospective basis?

[Lloyd Yates, President & CEO at NiSource]

Extremely minimal.

[Ryan Levine, Analyst at Citigroup]

Okay. So the EV batteries is is to the earlier comment is extremely minimal

[Ryan Levine, Analyst at Citigroup]

to the outlook despite the

[Shawn Anderson, Executive VP & CFO at NiSource]

Yeah. Ryan, when you think about what the yeah. Ryan, when you think about what the EV battery manufacturers need, ironically, it's natural gas. And the expansion of our natural gas network itself, and really with a high high capacity trunk line enables us to then market potentially to new communities that need the development of natural gas and extend the overall network itself. So it's actually pretty small on the electric system itself, larger on gas, but of course as you know the transport volume on gas isn't a significant revenue driver for us.

[Shawn Anderson, Executive VP & CFO at NiSource]

It's really getting the infrastructure deployed and then enabling us to potentially gain more customers with a lower cost fuel and a more reliable fuel at that.

[Ryan Levine, Analyst at Citigroup]

Great. Thanks for taking my questions.

[Lloyd Yates, President & CEO at NiSource]

Alright.

[Operator]

Thank you. There are no further questions at this time. I will turn the call back over to mister Light.

[Lloyd Yates, President & CEO at NiSource]

Yeah. So we thank you for your continued interest in NiSource and your questions, and we look forward to communicating with you in the future. Have a great day.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• Dave Rau, Manager - Content Production
• Lloyd Yates, President & CEO
• Shawn Anderson, Executive VP & CFO
• Michael Luhrs, EVP - Technology, Customer & Chief Commercial Officer
• Melody Birmingham, Executive VP of NiSource & Group President of NiSource Utilities
• William Jefferson, EVP, Chief Operating & Safety Officer

Analysts

• Shahriar Pourreza, Senior Managing Director - Head of Energy/Power/Utilities at Guggenheim Securities
• Julien Dumoulin-Smith, II-Ranked & 'Hall of Fame' Research Analyst covering Power, Utilities & Clean Energy at Jefferies
• Richard Sunderland, Equity Research - North American Utilities & Power at JP Morgan
• Nicholas Campanella, Director at Barclays
• Bill Appicelli, Executive Director, Head of North America Power & Utilities Research at UBS Group
• Travis Miller, Analyst at Morningstar
• Steve Fleishman, Managing Director and Senior Analyst at Wolfe Research LLC
• Analyst
• Ross Fowler, Head - North America Power & Utilities Equity Research at Bank of America
• Christopher Jeffrey, Equity Research Senior Associate at Mizuho Securities
• Ryan Levine, Analyst at Citigroup