Q4 2024 Earnings Call Transcript

Thank you for standing by. My name is Janine, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Q4 2024 NiSource Inc.'s earnings conference call. All lines have been placed on mute to prevent any background noise.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star one on your touch-tone phone. And to withdraw your question, you may press star one again. I will now turn the call over to Chris Turnure, Head of Investor Relations.

Chris, go ahead.

Good morning, and welcome to the NiSource Inc. fourth quarter 2024 investor call. Joining me today are President and Chief Executive Officer, Lloyd Yates; Executive Vice President and Chief Financial Officer, Shawn Anderson; Executive Vice President of Strategy and Risk and Chief Commercial Officer, Michael Luhrs; and Executive Vice President and Group President, NiSource Utilities, Melody Birmingham. The purpose of this presentation is to review NiSource Inc.'s financial performance for the fourth quarter of 2024 as well as provide an update on our operations and growth drivers. Following our prepared remarks, we'll open the call to your questions.

Slides for today's call are available in the Investor Relations section of our website. We would like to remind you that some of the 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&A sections of our periodic SEC filings.

Additionally, some of the statements made on this call relate to non-GAAP measures. Please refer to the supplemental slides, segment information, and full financial schedules for information on the most directly comparable GAAP measure. A reconciliation of these measures. I'd now like to turn the call over to Lloyd.

Thank you, Chris. And good morning, everyone. I'll begin on slide three. The NiSource Inc. investment thesis is simple.

We serve our customers by delivering safe and reliable energy at an affordable value. Affordable energy requires efficient capital deployment, safe asset operations, and constructive regulatory recovery mechanisms. These fundamentals generate competitive returns while enhancing our balance sheet position. Importantly, these are the foundation of the NiSource Inc. business plan which continues to offer compelling value to stakeholders.

Driven by regulated utility operations, across six highly constructive jurisdictions, offering diversification across fuel type, and regulatory location. Before we cover our standard business updates, I wanted to begin this call by recapping a tremendously successful year for the NiSource Inc. team. We often talk about the key principles to our success, namely building a constructive regulatory foundation. Operating with excellence across our six jurisdictions, executing and delivering on the financial commitments we make, in growing our investment proposition, by investing in capital expenditures, which enhance value for our communities.

As I look back across 2024, I'm proud to share that the NiSource Inc. team has delivered on its business plan with these principles top of mind as we focus on enhancing our value proposition, for customers and shareholders alike. Being a trusted energy partner, the priority, and we believe differentiates us from our peer regulated utilities. We remain engaged with stakeholders in our communities to recover costs associated with capital expenditures deployed to deliver safe, and reliable energy services to our region. We build credibility through rate case and tracker filings by utilizing a stakeholder-focused mindset as we approach these processes.

Over the last twenty-four months, the NiSource Inc. team has invested $6.9 billion in capex across the six-state region to support the reliability of its systems, and maintain alignment with compliance expectations of our regulators. Our regulatory processes approve recovery of $340 million in revenue. 2024 to return the capital associated with these investments. But critically, the stakeholder outreach to match the recovery of these revenues with the investments being made were developed years prior as our teams are active with stakeholders to detail the changes to the energy landscape, and underpin the investment thesis for these capital plans.

Melody will touch on some key highlights to these plans from the fourth quarter. However, for our team at NiSource Inc., this never stops in our relentless pursuit of delivering safe, reliable energy to our customers. Speaking of reliability, throughout 2024, we advanced our operational excellence mission. I intentionally focus on risk reduction and value-enhancing activities across the organization.

Our safety metrics continue to improve through our industry-recognized safety management system framework. A new initiative utilizing artificial intelligence launched by our data and nano analytics team is reducing early wins to drive efficiency and enhance the way we work to support our customers. Supporting our regulatory and stakeholder relationships and operating with excellence for our communities paves the way for the NiSource Inc. team to deliver on the financial results we have committed to our shareholders. I am proud to report our adjusted EPS result of $1.75 per share for 2024, exceeding the top end of both our original and updated guideline ranges.

This results in a year-over-year increase in adjusted EPS for 2024 of 9.4% versus 2023. Further, the nature of our business plan enables these returns to flow through all subsequent years as we base each year off a 6% to 8% annual growth rate. This results in a raise of our 2025 adjusted EPS guidance to $1.85 to $1.89 per share consistent with a 6% to 8% growth outlook, off of the actual results achieved. But as I said, these results are not sustainable if we are not focused on business development well into the future. Our teams are hard at work at developing new prospects for investment to deliver greater value to our customers for the energy they consume.

Our 2025-2029 base capital plan is $19.4 billion increasing nominally due to increased economic development across our gas businesses. In Virginia and Indiana. Which Melody will highlight in a moment. These investments drive 8% to 10% rate base growth over the 2025 to 2029 period which fuels our ability to continue to increase our adjusted earnings per share growth rate by 6% to 8% annually.

Our work does not stop with the base capital plan. We are fortunate to have a robust portfolio of valuable customers that could be added to and extend far beyond our five-year plan horizon. Which Shawn will detail later. Our teams remain active in developing this portfolio of projects to meet our standards necessary to be included in our base plan.

This includes our near-term visible investments in the upside plan, which is now $2.2 billion an increase of $400 million since our third quarter call. But none of these plans include the important development work our team is engaged in upon to support economic development efforts by the state of Indiana to locate data center operations in the region. I previously highlighted the compelling fundamentals of Northern Indiana to potential data center customers. Access to critical infrastructure, including a robust transmission system and proximity to critical fire connections.

Predictable climate and weather with low natural catastrophe risk, and a constructive business climate including favorable tax structures, available land, and a supportive state government. Are all favorable factors in advancing. Our team remains actively engaged working with potential customers to develop data center solutions which is guided by four main principles. One, protect existing system customers.

Two, serve new customers with speed and flexibility. Three, maintain NIPSCO's financial integrity through thoughtful capital allocation and a reasonable return proposition. Four, preserve flexibility in our business. In January, NIPSCO filed a declination petition with the IURC related to the ownership and operation of energy facilities.

This administrative filing will set up NIPSCO Genco as a regulated entity as a step in NIPSCO's effort to set a framework to serve large load customers. The application requests the IURC to establish NIPSCO Genco as a regulated energy utility but to decline to exercise some of the IURC's jurisdiction, because NIPSCO Genco will not have retail customers and will instead enter into contracts to provide energy and capacity to NIPSCO who will then directly serve large load customers. Our teams are working to evaluate this build-out which could provide benefits to our existing system customers, enhance our communities and local tax base, and provide compelling investment opportunities for our shareholders.

Northern Indiana is the premier location for data centers to locate. Simply put, there's potential for substantial value creation for all stakeholders and checking all these boxes is important to NiSource Inc. Slide five provides more detail on our operational. Our data and analytics team began implementing early use cases in 2023 and have improved data transparency and democratized actionable insights throughout the organization.

Our work management intelligence process is one example. It is an ensemble of advanced AI models including forecasting shift availability, and work volume, a job duration predictive model, and schedule optimizer to automatically generate more accurate weekly schedules. Since implementing this process in the middle of the year in Ohio, work productivity has increased 16% versus the same period in 2023 measured through work hours achieved, less idle time, less rework, and an overall better plan to schedule. The Apollo Continuous Improvement Program closed out a second year with really strong results.

The team exceeded internal expectations with $77 million in O&M savings, along with many efficiency initiatives to reduce waste, and workforce constraints. For example, the locating risk model initiative originally implemented in 2023 safely reduced spend by $13 million through enhancing risk model marking and turn-back processes. The job site scouting initiative and standardized scheduling process eliminated unnecessary truck rolls in the field and improved efficiency. Allowing for an additional $6 million of fieldwork across both 2023 and 2024. In 2024, we once again significantly improved occupational safety performance, with an 8% year-over-year reduction in OSHA recordable incident rate and a nearly 10% year-over-year reduction in preventable vehicle collision rate.

Our electric system was hardened through the replacement of over fifty miles of poor-performing underground cable, over seventy thousand structure life extensions or replacements, and ten transmission and distribution substation rebuilds. Our teams are continuously working to de-risk our operations through many factors outside our control impact our business. State policy and regulation have been impactful and stability and consistency here have been a key differentiator of NiSource Inc. At the federal level, we have thrived through many cycles and our five-year plan is insulated from evolving policy mandates.

AGA and EEI leadership and NiSource Inc. have advocated for policies that allow retail customers to benefit from low-cost and reliable energy at both our electric and gas businesses. Before I turn the call over, I want to thank all our employees and contractors for their dedication to the NiSource Inc. values doing things safer, better, more efficient, and for less cost. Our customers and shareholders alike rely on you every day. I'll now turn things over to Melody.

Alright. Thank you, Lloyd. I'll begin on slide six. We remain active on the regulatory front with both general rate case and rider filings.

The NIPSCO electric rate case is driven by nearly two and a half billion dollars of incremental investment for our customers and communities in Northern Indiana. Last week, we were pleased to file a settlement agreement in the case marking our seventh settlement in the last ten years in the state. Across both electric and gas businesses. The case incorporates the planned 2025 retirements of units seventeen and eighteen at the Shaffer generating station.

As well as the addition of four new solar and storage projects. Major investments such as these are examples of our continued partnership with state policymakers, regulators, and our customers. During the fourth quarter, we received rate case settlement approvals from the Pennsylvania Public Utility Commission, and the Kentucky Public Service Commission both in line with the original settlement term. Together, these requests supported over $300 million in incremental investment in these states since our last rate cases.

In Virginia, we reached a universal settlement with parties to our case in December. And are awaiting a final order. During the trailing twelve-month period ending December, our average residential gas customer bill declined 11% on a total bill basis. Affordability remains a key priority for both NIPSCO and the Columbia family of companies, and we continue to be thoughtful about this as we advance the critical safety compliance, and reliability work that's necessary.

For us to deliver safe and reliable energy to our customers. Our existing communities continue to benefit from economic development efforts at the state level. Helping spread fixed costs over a larger base. Early last quarter, a new food product co-storage facility was announced to be developed in Crown Point, Indiana.

Just outside of Chicago. NIPSCO will provide electric service to the twenty-six-acre three hundred twenty thousand square foot site expected to be in service in 2026. NIPSCO will serve two other new projects with various in-service dates. This year as well. A new concrete and aggregate producer will require NIPSCO to invest in both electric and gas infrastructure.

Additionally, a new EV battery plant in New Carlisle, Indiana will require additional NIPSCO gas and also, on the gas side of our business, one of our largest industrial customers in Virginia, is converting their remaining on-site boilers to natural gas from coal. This project will provide significant energy cost savings for the customers, and reduce carbon emissions from the facility. These projects are examples of how we remain engaged and supportive to develop and prosper the communities we serve. Economic development enhances our local tax base.

Offers new job opportunities, as well as mitigates the cost of our existing customer base and remains a priority. For all of our teams. Customer satisfaction remains a priority. And our nearly four million customers benefit from our operational excellence vision and capital investment plan.

In December, both our NIPSCO Electric and Columbia Gas of Virginia businesses were named number one in their regional customer service satisfaction surveys. Contributing to their scores were a combination of factors, including price, safety and reliability, billing and payment, corporate citizenship, communications, and customer care. We are very, very proud of these results. Also, in December, NiSource Inc. was named to the 2024 Dow Jones Sustainability Indices.

Marking the eleventh consecutive year the company has earned this recognition. As a company, our business strategy extends beyond delivering energy. It also purposefully includes a sustainability framework that allows NiSource Inc. to help drive economic development and inclusion opportunities in the communities that we are very happy and privileged to serve. I'll now turn things over to Shawn.

Thank you, Melody. Let's start on slide seven. I'll begin with an update on the progress achieved implementing the generation transition at NIPSCO. Transition to retire coal units is advancing as new renewable generation assets have come online and are supporting overall system reliability.

Already achieved in January, the Dunsbridge two solar project reached substantial completion. Meanwhile, Fairbanks and Gibson are far down the path to operations and are expected to be in service later this year with no changes to our development timelines. This continues NIPSCO's track record of steady execution since 2020 with eight wind and solar generating stations, now providing renewable power to customers in the Northern Indiana region. Leveraging the power of this generating fleet, look ahead through the changing energy landscape and slide eight provides an update on the progress made the 2024 integrated resource plan process.

Late in the fourth quarter, NIPSCO submitted its IRP to the IURC. The triennial plan was the product of extensive stakeholder collaboration over nine months and five public meetings. It projects forward a twenty-year period and details generation required to meet both new demand in the region and maintain compliance with federal and MISO regulatory requirements. All sources of generation technology were considered.

Including gas generation, solar, wind, battery, and long-duration storage. And small modular nuclear. Included in the analysis updates to the capacity construct. Including MISO's shift to a four-season evaluation and its new requirements under the direct loss of load market design.

These will have a substantial impact on generation requirements in the transmission organization's footprint. It revises resource accreditation now based on availability, when reliability risk is greatest, by utilizing historical and forward-looking risk assessments. The preferred portfolio highlights new generation additions to the NIPSCO fleet required to maintain existing reliability and meet the new accreditation requirements, a mix of incremental generation resources of approximately nine hundred megawatts of capacity is likely required by 2028 to meet energy and capacity needs in all scenarios developed before considering potential data center growth.

Our team is underway in the evaluation and commercialization of procuring solutions for our customers. While our team works through this process, we've increased the size of our upside CapEx plan by about $400 million to reflect the likely need for new generation capacity, to remain in compliance with these regional reliability regulations, as shown on slide nine. We will work through the project development, regulatory approvals, and commercial details and provide updates for the development of these assets. As Melody detailed earlier, we have also increased our base CapEx plans to reflect new economic development projects, our Indiana and Virginia businesses.

This moves our five-year base CapEx plan up to $19.4 billion. Onshoring and manufacturing expansion continues in our Midwest region, and this is just one example of why our gas utilities are driving over 60% of our five-year CapEx plan. Our teams continue to focus on safety and reliability of operations, making investments in pipeline replacement, system modernization, and new leak detection technology. We began our work to install advanced metering infrastructure in 2024 with $36 million of NIPSCO gas investment, this work continues in future years.

Meanwhile, prudent capital allocation is top of mind as we have aligned our base capital investments with recovery mechanisms in our regulated businesses, to help minimize lag and recovery and reduce carrying charges. Eighty-one percent of the investments made our base five-year plan expect to begin recovery inside twelve months of investment. Beyond the portfolio of base and upside CapEx plans, our teams continue to progress the development of incremental investment opportunities shared on Slide ten. The most recent developments here relate to MISO's long-range transmission planning process and the development of tranche two projects recently awarded to NIPSCO.

MISO released details last month following approval by its Board of Directors in December. The package seeks to develop a three thousand six hundred mile transmission backbone and related projects to ensure future system reliability, in the 2030s and beyond. As Lloyd mentioned, we are evaluating these results and will incorporate these projects into our base capex plan once we've completed the scope and estimation work necessary to launch those projects. Another incremental investment opportunity not yet reflected in the base or upside capital expenditures plan is the investment necessary to support data center development across our six states and in particular at NIPSCO.

We continue to make excellent progress advancing data center strategies across our region which represent a compelling opportunity for NiSource Inc. Additional development of these strategies is required to meet our threshold to include in either the base or the upside capex plan. With that said, the company is strongly positioned to advance these strategies and once we've hit these milestones, we will flow those through our plans. Continued execution on our financial commitments has strengthened the financial profile of the company including its balance sheet positioning, which enables NiSource Inc. to be opportunistic in capital allocation decisions.

The constructive regulatory backdrop in Indiana supports a utility-centric regulatory compact and the vertical integration of the business model minimizes complexity for customers and regulators. While providing flexibility around cash flow recovery. NiSource Inc. has deep access to capital markets, and maintains flexibility to efficiently finance data center opportunities. NiSource Inc. also has a longstanding history of supporting large load customers in the steel industry and has experience working with large customers to develop value for all stakeholders.

Let's move into the financial results shared on slide eleven. As Lloyd already highlighted, 2024 was a strong financial year for NiSource Inc. Achieving $1.75 per share, an increase of $0.15 per share. Higher rate base investments drove $367 million in incremental revenue.

This was partly offset by increased O&M, depreciation, and non-controlling interest. In the fourth quarter, we reported adjusted EPS of $0.49 per share, a decrease of $0.04 per share. Versus last year. The decline was driven by non-controlling interest, increased depreciation and other taxes, and partly offset by increased rate base investment.

Increased customer additions and expanded customer usage contributed $36 million in revenues. Across our electric and gas businesses for the year. On slide thirteen, you'll see a summary of our financial commitment. Today, we are raising 2025 adjusted EPS guidance to $1.85 to $1.89, up one penny versus prior guidance introduced at third quarter earnings.

This is consistent with our practice of guiding off of actual results achieved and reflects 6% to 8% growth, of the $1.75 achieved in 2024. This is the third year in a row we have announced an increase to our annual adjusted EPS guidance on our fourth quarter earnings call after establishing initial guidance on our third quarter call. Our financial commitments are fueled by a $19.4 billion base five-year CapEx plan. Which drives rate base growth across 2025 through 2029 of 8% to 10% and delivers an annual adjusted EPS growth of 6% to 8%. This does not include any impacts from the upside CapEx plan or incremental investment opportunities.

Assumptions around key externalities in our plan continue to be de-risked. For example, customer growth continues to be strong. However, our plan only assumes zero to one-half percent growth per year across all customer classes. Additionally, our plan continues to assume realistic interest rate assumptions through 2029 despite the recent rise in rates and the previous Fed activity to cut short-term rates.

We remain confident in achieving our long-term growth rate in all years of the plan. In particular, continued execution on the regulatory front has increased visibility into 2025 results with substantively all regulated revenue increases in rates or settled, based on our activities in 2024 and 2025. Our forecasts incorporate continued use of long-established capital trackers in nearly all our jurisdictions and are based on what we believe are realistic regulatory outcomes. I'd note, we remain focused on minimizing the financial impact that our safety, reliability, and compliance work has across our customer base.

Cost savings initiatives like Project Apollo detailed by Lloyd and efficiencies resulting from capital investments moderate the impact on customers. Our revised plan projects less than 5% average annual bill increases across NiSource Inc. Moving to slide fourteen, let's focus on the balance sheet strength of the business. In the fourth quarter, we executed the last $100 million of our forward ATM program, completing the pricing and execution of the full $600 million guided for the year.

Along with the issuance of $1 billion of junior subordinated notes, during 2024, we've continued to strengthen the balance sheet positioning of the company. FFO to debt for 2024 was 14.6% up from 14.1% in 2023. Reflected in these results for both years is approximately fifty basis points reduction from unfavorable weather versus normal. Our balance sheet has moved steadily in the right direction since 2022. We are well within our FFO to debt range. We continue to target 14% to 16% in all years of our plan, using a balanced mix of cash from operations, new long-term debt, $200 million to $300 million of annual maintenance equity to maintain our capital structure through the use of our at-the-market program.

In January, the annualized dividend target was increased from $1.06 to $1.12 per share. This continues each year that the NiSource Inc.'s dividend has increased since the separation with Columbia Pipeline Group and represents a payout ratio of approximately 60% which is at the low end of our 60% to 70% payout ratio guidance. We will continue to be thoughtful about capital allocation in the high cost of capital environment while also prioritizing infrastructure investments for our customers. As we share on slide fifteen, consistent execution of the business plan drives sustainable growth and financial results.

In each year of the plan, NiSource Inc. has achieved the upper half of the guidance range or better. Each time we've executed this. We've rebased future adjusted EPS guidance upwards off these actual results. This represents differentiated value creation for our shareholders.

We've accomplished this now four years in a row. The value of this compounds as future years grow and reflect the outperformance achieved. For example, 2025's implied midpoint is now 6% higher than originally forecasted in 2022 reflecting one full fiscal year of increased earnings power, since our strategic business review in 2022. This is differentiated in our sector which has delivered 5.9% at the median in adjusted EPS, since 2021 compared to the 8.5% achieved by NiSource Inc. The underlying business plan.

Supported by strong regulatory constructs, in NiSource Inc. jurisdictions, coupled with responsible investments in identifiable regulatory programs enable a reasonable return on and of investment over our plan. The confidence in these investments enables the rebasing of the annual growth rate which supports this higher adjusted EPS range as we execute the plan. I'll conclude with highlights of our growing track record on slide sixteen. Our financial commitments have been achieved for 2024 and are on track for 2025. We remain confident our near-term and long-term guidance remains resilient to market conditions and other forces outside our control, and are based on realistic and executable assumptions.

We continue to execute the recovery of critical investments to ensure safety and reliability of our systems. Regulatory progress made over the last quarter across Pennsylvania, Kentucky, Virginia, and at NIPSCO. Provide a foundation for thoughtful capital allocation to enhance service to our customers and deliver predictable financial results and return capital to our shareholders. The financing plan continues to be reasonable and highly executable. 2024 activity was completed as projected.

And ATM execution coupled with the diversification utilized in the junior subordinated debt marketplace demonstrate our balance sheet flexibility while also fortifying our balance sheet positioning. Finally, our base and upside CapEx plans. Demonstrate both programmatic investment plans and accelerated investment opportunities for customers and investors. To reiterate, our rate base and adjusted EPS guidance do not include upside CapEx or incremental investment opportunities such as data center investments or load growth and are built upon the known and socialized regulatory programs which have contributed to the 8.5% adjusted EPS growth rate we've executed since 2021. The value proposition is diversified and regulated utility assets with the opportunity to invest in both programmatic gas infrastructure and the long-term energy transition story of a fully integrated and regulated electric business.

These elements have been core to our story for some time. But the emerging opportunity to support economic development, onshoring, and new data center development truly differentiates our value proposition relative to many alternatives in the market today. I'd now like to call turn the call over to the operator for Q&A.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. I would like to remind everyone for one question, one follow-up. Should you have a question, please press star one on your touch-tone phone, and you will hear a prompt that your hand has been raised.

Should you wish to withdraw, please press star one again. If you're using a speakerphone, please lift the handset before pressing any keys. Our first question comes from the line of Julien Dumoulin-Smith from Jefferies. Please go ahead.

Julien Dumoulin-Smith: Hey. Good morning, team. Thank you guys very much for the time, and congratulations on your continued successes here. Good morning. Seriously. Morning. So maybe just to kick things off, I mean, with this Genco filing's gotten a good degree of attention here as sort of a novel concept in the sector. Can you speak to how you imagine and have potentially negotiated some of these risk-sharing considerations here, as you think about this being potentially somewhat adjacent to NIPSCO, how do you think about the traditional concepts of rate base that otherwise are implicit in most investments? Are those effectively replicated as you foresee these commercial arrangements? And then maybe you know, while we're at it, just for good form, can you speak to the timing of some of these commercial arrangements which I know you all are working diligently on, in the intro? So let me start, and I'll turn this over to Michael. For some details. I mentioned several times that data centers all the files we're making with respect to data centers, is a 2025 event for us. And I think I'm optimistic about our path in terms of I'll use our methodical path in terms of pursuit of this opportunity. If you remember, if you go back to our four pillars, we said we want to protect our existing customers, our existing system customers, we want to be able to serve these new customers with speed, agility, and flexibility because we thought that speed to market would be an advantage for us. We want to maintain NIPSCO's financial integrity and preserve our flexibility in the business. And we think we have a great base business want to make sure that we continue to focus on that base business and have this be total upside. So with that this Genco deck this declaration filing with the IURC was I'd say, an important step in terms of how we pursue this opportunity. And I'll turn it over to Michael to talk about the details of that.

Morning, Julien. So Lloyd hit on the primary points. Really, what the declination filing allows us to do, it is a regulated entity. Think of it just like you would as a regulated utility.

But it allows us to encapsulate what we're doing for these large load customers to protect the existing customer base and maintain that cost within it to segregate to truly protect existing customers with it. And at the same time, negotiate the provisions in the agreements to be able to provide the benefits to our shareholders, protect those customers, and I would say benefit those customers and maintain the flexibility that we need in order to meet their needs in a very timely and expeditious fashion. So it is a mechanism that is simply, to Lloyd's points, it protects the existing system customers, it helps us serve those new customers with speed and flexibility.

It maintains NIPSCO's financial integrity. And it helps us ensure that our base plan, the strong base plan that we have is not impacted by the ability to bring in large load customers. And Shawn may want to speak a little bit to the financial aspects of that.

Yeah. And, Julien, I think the other part of your question was as we think about whether it's traditional rate making or otherwise, what are the advantages potentially that are coming from this? And a couple of things I'd highlight. Number one, as you think about the potential development for power generation solutions to serve these customers, the declination filing where the project we're making progress we're making there can allow us to move through rate making at the speed necessary to serve that customer based on the capital projects when those are being deployed and as those projects start to power and generalize when they're going to start to create cash flows coming back in for our shareholders.

That may be a different time horizon than the traditional rate case model that NIPSCO's been following, which inherently has been just about every other year following a rate case. So this allows us to better line those cash flows up as well as to get a return a reasonable return through a time period that we can continue to afford to advance the construction. So I think that's one key point to highlight. The second piece, I think, we've done a lot to progress the balance sheet strength.

I just covered a lot of that in my prepared remarks. But over $2 billion of balance sheet improvement equity positioning in 2023, over $1 billion net in 2024 coupled with growing cash from operations that are producing outperformance relative to the base financing plan. Just from a sheer financability standpoint, that's positioned NiSource Inc. to have much more flexibility be able to address and afford construction to support these. Potential larger consumers.

Julien Dumoulin-Smith: Awesome. And just a quick follow-up there. Can you speak to just your latest updated load forecast around data center prospects. Right? Whether that's expansion of phases that folks are initially talking to you about, I mean, obviously, you've made these regulatory filings over the course of the last eight months that have been of incorrectly updated. But where do you stand today in terms of the scope of the total opportunity in front of you? Obviously, I understand that's on a projected basis. Michael, you wanna take that. Period.

Sure. So we haven't updated anything beyond our IRP at this point. As we include in the IRP, we had the reference case of 2,600 megawatts. Then an upside case that was 8,000 megawatts.

I would say that the discussions have been extremely positive and beneficial and they continue to be accretive to what our objectives are. And as we proceed through time, we will definitely give updates and include those in the plans as they pass certain thresholds as was mentioned earlier. But I will comment that the negotiations and the discussions have been very.

Julien Dumoulin-Smith: Wonderful, guys. Thank you. Speak to you soon.

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

Hey, guys. Hey, Lloyd. Hey, Shawn. Good morning, Asia.

Morning.

Just let me follow-up on Julien's question on sort of the data center stuff. I mean, obviously, the governor talked about four of them coming media reports have talked about, you know, several coming as well to Northern Indiana. Lloyd, in your prepared remarks, you talked about still 2025 as an opportunity. Can we just fine-tune just get a sense of timing there, where in the discussions you're at, how soon can a deal be signed, is this a one h opportunity, is it two h Thanks.

So, Lads, so not willing to narrow that down. I and I hear you about timing. I'm not willing I said I I'm gonna stick to my it's a 2025 opportunity issue. I what I'll say is we're optimistic. The conversations are progressing very well. And as soon as we have something signed, we're gonna get it out to you guys. But not before that.

Got it. That's helpful. I just wanted to get a sense, Lloyd, if you reiterated 2025 and you still feel comfortable. Just on financing, obviously, you know, there's a higher CapEx opportunity.

You have an ATM in place. But can you just talk a little about other potential avenues you can lean on to fund the incremental CapEx, especially as you roll more spending into the base plan from the upside opportunity bucket. Which can be obviously fairly material, especially if these discussions with data centers transpire. You guys did really well with that minority sale, or is kind of the ATM enough to fund the incremental CapEx beyond today's update?

Thanks.

Shawn?

Yeah. Well, I think the most efficient form of financing is outperformance on cash from operations, and that's where we'll look first. That's helped fuel the ability for us to move into incremental capex without having to issue new equity to do so. And that's where we'll go first.

We'll also look thoughtfully around the capital allocation and try and shorten regulatory lag that inherently does that to increase that cash from operations. So that's kinda position a. And then you know, we're successful, we believe, in the junior subordinated note marketplace in 2024. Our plan does not count on or need junior subordinated notes to achieve the 14% to 16% in all years of the plan. Therefore, that's another avenue for us as well.

So we've got a lot of options to be able to achieve incremental financing without the need for equity directly in the plan. To access the upside plan.

Got it. So you're comfortable with the current ATM program, internal cash as junior subordinating notes. In this scenario, even if the higher CapEx comes in plan beyond what you just disclosed today?

Absolutely.

Fantastic. Thank you, guys. Congrats to you. Thanks.

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

Good morning. Thank you for the time today. And maybe to hit a couple more of these data center questions first, you've laid out a lot of the drivers behind the Genco filing, do you need IURC approval of that before you can announce a deal? And then I guess I'm also curious how you think about the coal generation amid all this interest in generation both on the large low side and on the MISO changes.

Thank you.

Michael, what?

So to answer your questions, though, we do not need IURC approval in order to be able to announce the deal, but we do need IURC approval of the Genco declination and setting up that entity. But as speaking to the key point of speed and flexibility, that's one of the benefits of working through this entity is being able to do that in a concurrent path. With it. For large load customers, and talking about the opportunities associated with them, continue to progress well, and when we look at those opportunities, they would be included within that framework.

And that's what gives us the benefit of being able to do that on their timelines.

Got it. Understood. And then just a housekeeping question, and if I missed this in the script, apologies. But it looks like some of the NIPSCO and Columbia spend shifted across buckets. In your current base plan versus the three two plan. You walk through what the drivers of these changes were?

There were no material shifts in those allocations. We can walk you through if you'd like, Rich and does. Set things up, but there were no material changes there.

Great. Thank you. I'll leave it there.

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

Good morning, everyone. Thank you. Morning. I was wondering if you could give an update on the La Porte facility, the Microsoft or is is there still going on the ground, so to speak, or are you still in kind of contract negotiations or financing? I wonder what the status is of that project.

So with Latour, it's as with all the customers, we continue to work through the specific timelines and activities that would be necessary to meet their objectives. We do not have steel going into the ground in La Porte right now as we mentioned, we're, you know, finishing up the framework and the construct that we've laid out. But the negotiations and the discussions with multiple counterparties continue to progress well.

Okay. Great. And then one more, we've a couple of announcements, not necessarily in your region, but other places in the US about data centers and developers taking gas directly from particularly, midstream companies. But do you see an opportunity there to serve behind the meter or on the flight? Generation through your guests. System rather than through the electric system.

Yes. We absolutely see a benefit in being able to serve the customers from our gas system, and we have seen increased demand across our gas system in serving those customers. There is a need for them to be able to access energy markets whatever way they can. And the gas system is a very robust and reliable mechanism to do that.

It is beneficial, and that has benefited all of our you know, benefited multiple of our Columbia companies.

And we see an upside in some of our capital opportunities in mostly Virginia, and possibly in Ohio serving data center customers off of our gas infrastructure. We as another opportunity for the company. So we're excited about that also.

Okay. And you mentioned there the CapEx. So there is CapEx involved as well as but that's just flow demand.

Alright.

That's correct. Okay.

Good. Thanks so much.

Our next question comes from the line of Durgesh Chopra from Evercore ISI. Please go ahead.

Hey, team. Good morning. Thanks for giving me time. Hey.

Just Good morning. Go ahead. I wanna go back to the Jenco entity I think you guys mentioned, you know, cash flow to shareholders. One thing you can clarify I mean, I think you're you're pretty clear in your commentary to regulated entity.

As we think about returns, this should look like regulated returns. Right? Four or could this be high returns? First question.

And second, maybe just the timing of that cash flow. Is that you know, do you expect earnings, cash flow benefit from this entity in the 2025 to 2029? Period, or is it you know, beyond that? Those are my two questions.

Thank you.

So I think we as we talk about the NIPSCO Genco. I think you would we would think about this in a way that that that we would have maybe other than regulated returns. I did I think this allows us to operate in an area as we negotiate with our counterparties to get returns above and beyond what our potential regulated returns are.

Got it. Okay. So about Andean, clear. And then what about the timing? Like, when should we see earnings from these kind of opportunities start accumulating you know, as it relates to the financial plan? Is it in the twenty-five to twenty-ninth period, or could it go really, you know, end of the decade and then beyond?

As I said earlier, when at the beginning, this will be a 2025 event. And when we have signed contracts with counterparties, and have, you know, definitive information, we will get that out to you guys as soon as possible.

Okay. Sure. No. Thanks, Lloyd. Appreciate it.

Thank you. Again, should you have a question, please press star followed by the number one. Our last question comes from the line of Steve Fleishman from Wealth Research. Sir, please go ahead.

Yeah. Hi. Good morning. Congrats on the results. So apologizing for hitting some of the same topics. Here. But just on the declination filing, do we have do you know do we know where other parties are on this yet? There any kind of schedule?

Yes. Happy to provide some additional perspective on that. We do have information as to what different parties are asking questions on and thinking about that. We are working through that process now to make sure that we're providing feedback and answering those questions.

We would expect that that would be by Q3. In Q3, that we would have the ruling associated with the declination. The key component I'll add to it is again remembering that it is a regulated entity, and we see it as beneficial not only to large load customers, not only to NIPSCO, not only to our existing customer base, but also in enabling what we have done and continue to do is work in developing projects that we can bring in. And this allows us to do that in a timely fashion. So we see it as good for the community, or developers of projects for our existing customer base.

And for what we're doing associated with NIPSCO.

Okay. And just since it's a bit of a unique filing, is there going to be kind of a recommendations by parties, you know, it like, is there a process or you just are you in, like, talks or, like, settlement talks or I'm just trying to understand, like, the process of this case.

Yeah. It'll proceed through the normal IURC process. It'll go through the standard work of that being reviewed people intervening associated with us, us answering questions, from what we're getting on the declination. And then working with those individuals and groups to be able to proceed that through the normal IURC process.

It is not materially different in process than what we would do with our other filings. It's Melody.

No. I would just add on to what Michael said. It says standard procedural filing. And so we expect an order in ruling around Q3 of 2025. Just like any other standard order or standard filing, at any time, you could have individuals who choose to intervene but our team did a lot of work upfront working with or stakeholders to make sure they understood what it was.

And so socializing the benefit of the A Genco. So we feel fairly confident that the destination application and the strategy are consistent with Indiana law.

Okay. And I just wanted to clarify just Is this if you did set this structure up, would there be anything needed from kind of FERC to approve this, or can it all be done with just state approvals?

So we need the IURC approved first. And then at some point in the future, we will likely request some different approvals associated with work, but the primary approval that we need is with the IURC. The FERC approvals don't need to be sought on the beginning of the application or on what we're doing to what we're doing right now through the Awesome.

Okay. But to actually set it up and sign a contract, do you need FERC?

You do not. You do not. It is more of I don't wanna I would I don't wanna use the word administrative filing. But it is more of filings that we need to do to ensure that we are dotting all i's and crossing all t's, but it is not necessary in order to set up the entity, be able to move forward with data centers to be able to sign contracts to be able to progress work.

Got it. And then lastly, you kind of answered this, but just maybe more specifically, since you've been very active with these customers, subsequent to the Deepseek kind of event, the last few weeks. Did have you seen any change in tone from the customers on desire to move forward? Or changes in their We have not seen any change in tone.

Yeah. Yeah. Sorry. We do we have not seen any change in tone from customers.

I would say, if anything, we continue to see increased demand and increased opportunity. And I would say the opportunities for efficiency within this space are just beneficial to, I think, all customers in all aspects, but it has not impacted the demand in any way.

Okay. Great. Thank you very much. Appreciate it.

Bye. Thank you. That concludes our Q&A session. I will now turn the call back to our CEO, Lloyd Yates, for closing remarks.

Thank you for your questions. Thank you for your interest and investment in NiSource Inc. Have a great day.

That concludes our conference call for today. You may now disconnect.