Q1 2026 Earnings Call Transcript

Hello, and welcome to NiSource Inc. First Quarter 2026 Earnings Conference Call. Please note that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to Durgesh Chopra, Head of Investor Relations. Please go ahead.

Good morning, and welcome to NiSource Inc.'s first quarter 2026 investor call. Joining me today are President and Chief Executive Officer, Lloyd M. Yates; Executive Vice President and Chief Financial Officer, Shawn Anderson; Executive Vice President of Technology, Customer, and Chief Commercial Officer, Michael S. Luhrs; and Executive Vice President and Group President of NiSource Utilities, Melody Birmingham.

Today, we will review NiSource Inc.’s financial performance for the first quarter and share updates on operations, strategy, and growth drivers. Then we will open the call for your questions. Slides for today’s call are available in the Investor Relations section of our website. 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. Information concerning such risks and uncertainties is included in the Risk Factors and MD&A sections of our periodic SEC filings. Additionally, some statements on this call relate to non-GAAP financial measures; please refer to the supplemental slides, segment information, and full financial schedules for information on the most directly comparable GAAP measures and reconciliations. With that, I will turn the call over to Lloyd.

Thank you, Durgesh, and good morning, everyone. We appreciate you joining us today. I will begin on slide 3. At NiSource Inc., our mission is to deliver safe, reliable, and competitive energy that drives value for our customers. Our disciplined capital deployment, operational excellence, and constructive regulatory frameworks remain the foundation of our business strategy. 2026 reflects continued execution of this strategy, supported by a robust regulatory foundation, ongoing operational improvements, and a commitment to our customers.

NiSource Inc.’s value proposition is anchored in regulated utility operations across six highly constructive jurisdictions, providing diversification in both asset mix and regulatory environment. As we continue to modernize our electric and gas infrastructure, we are delivering on our core objectives by advancing innovative solutions such as NIPSCO Genco, partnering with Amazon and now Alphabet, to recognize higher and faster savings to customers. In addition to the announcements made a few weeks ago, I am pleased to share another expansion: an incremental 400 megawatts of capacity serving Amazon.

Given the present inflationary climate, the value of these partnerships is tremendous, unlocking cost savings totaling approximately $1.4 billion for our existing customers over the next 15 years. Moving to slide 4, collaborative regulatory and stakeholder relationships, while operating with excellence, pave the way for NiSource Inc. to execute on its financial commitments. We continue to work alongside stakeholders through regulatory processes to ensure resources are available for critical investments to protect our system, serve our customers reliably, and grow local economies, all while balancing the impact these investments have on our customers.

Working collaboratively with stakeholders, we are able to support enhanced ratemaking practices in our jurisdictions and advance legislative priorities, such as Indiana House Bill 1002 and Ohio Senate Bill 103, to help ensure fair, balanced outcomes for our customers and our communities. A key tenet to our operating plan is to work efficiently and improve our systems and processes, leveraging AI and technological upgrades to improve both efficiency and reliability for our customers. Today, we reported first quarter 2026 consolidated adjusted EPS of $1.06, which accounts for 52% of our projected midpoint earnings guidance.

We are reaffirming our 2026 consolidated adjusted EPS guidance of $2.02 to $2.07 per share, and we are increasing our consolidated adjusted EPS CAGR by 100 basis points for 2023 to 2033 to 9% to 10%, with performance tracking toward the high end of that range through 2030, driven by the robust portfolio of investment opportunities supporting data centers. Turning to slide 5, safety remains our top priority and the foundation of operational excellence, and our first quarter results reflect the strength of that commitment. We delivered the safest first quarter on record for employee injuries dating back to 2016 through strong winter preparedness and disciplined field execution.

We also continue to advance our proactive risk reduction programs across the system, completing over 11 thousand miles of leak survey in the quarter, helping identify and mitigate 113 large-volume leaks, well above plan. We exceeded our targets for both electric pole inspections and replacements for the quarter and maintained strong execution in our cross-bore program, reinforcing the long-term resilience of our infrastructure. These results underscore the operational discipline of our teams and our continued commitment to delivering safe, reliable service across our footprint. The Apollo continuous improvement team is focused on boosting operational efficiency via programs like Fleet Focus to reduce idling and right-size fleets, streamlining IT applications, and using AI to improve permitting, invoicing, and locate screening.

AI and analytics are improving NiSource Inc.’s operations via the work management intelligence platform. Enhanced spend visibility in supply chain enables faster procurement, while AI contract tools have increased productivity over 20%. These solutions are expanding to customer and back-office functions for greater efficiency and service quality. We continue to engage proactively with stakeholders and regulators in all jurisdictions, as shown on slide 6. Our regulatory strategy is informed by thoughtful, careful consideration of customer affordability and cost pressures, ensuring we proceed in a manner that balances these concerns.

As a strategic organization, we adapt to evolving sensitivities, ensuring we operate with both efficiency and effectiveness as we navigate new opportunities and challenges. We remain committed to engaging transparently throughout the regulatory process, providing timely updates to stakeholders on our investment plans and priorities only as they advance through proper channels. Leveraging riders, as consistently practiced in Ohio and other states, enables us to address affordability issues by minimizing the need for frequent rate cases and by better timing capital allocation and recovery. We also support legislation such as Indiana House Bill 1002 that adopts measures like levelized billing to protect customers from bill fluctuations caused by weather-related usage spikes.

In Pennsylvania, we have flexibility in our plan to address system modernization at a pace and method of recovery which reflects stakeholders’ feedback, while also ensuring service can be safely delivered. In March, NIPSCO received a second federal order requiring the continued operation of our Schahfer coal plant. Our plan incorporates flexibility to accommodate this directive, reflecting our commitment to full regulatory compliance, maintaining customer affordability, financial stability, and reliability. We are driving direct savings to our customers by entering into strategic partnerships with data center customers.

By leveraging the Genco regulatory model, our agreements with Alphabet and Amazon are expected to deliver annual savings up to $124 per year for residential customers, offering greater benefits on an accelerated timeline versus initial forecasts. Our priority is delivering sustainable solutions that fulfill present and future demands while maintaining our promise of value and excellence in service. With that, I will turn it over to Michael S. Luhrs to dive deeper into the data center strategy.

Thanks, Lloyd. I will begin on slide 7. Genco was designed for speed and flexibility to support growing energy demand in Northern Indiana while simultaneously achieving cost savings for existing customers and driving economic growth in the communities we serve. We have recently made several advances on this initiative that now total $1.4 billion in customer savings: a new energy infrastructure agreement with Alphabet, two expansions on the Amazon agreement to accelerate and increase our service, and the creation of the pooled resources approach, which enables both new and ongoing customer needs.

These developments highlight Genco’s unique, innovative approach to serving data centers by providing speed to market, shielding retail customers from investment costs while reducing their monthly bill, and strengthening shareholder value. Now on slide 8, we are launching a new partnership with Alphabet. By employing 340 megawatts of pooled resources, including advanced battery solutions and utilizing available market resources, we will begin service this summer and expect to achieve full ramp by 2030. This 15-year contract will provide faster access to energy than previously anticipated and accelerate savings benefits to customers.

Moving to slide 9, Amazon has continued to emphasize investing in the state of Indiana. We are pleased to report both an expanded collaboration with Amazon and an accelerated timeline to deliver energy to Amazon. Over 400 megawatts of contracted generation will serve enhancements to the existing Amazon data center strategy, helping our retail customers realize savings faster and ultimately grow their total bill savings up to $124 per customer per year. To support growing large-load demand, we are pursuing a pooled generation strategy that allows us to efficiently develop and manage a diversified portfolio of resources accessed through Genco, as shown on slide 10. The pool operates as an aggregation of assets, similar to a traditional utility portfolio, matching large-load customer demand with a flexible asset base.

As we add new data center customers, the asset pool scales accordingly. This initial pool of approximately 800 megawatts is sized to meet load requirements plus applicable reserve margins. Importantly, the structure ring-fences cost and risk so that the costs associated with these large loads are isolated from our broader retail customer base and are recovered through our bilateral contracts, while still allowing us to optimize resources, cost, and system reliability. The incremental and accelerated megawatts of these agreements will increase savings to existing customers.

These investments will also drive economic development by creating new jobs, expanding the tax base, and supporting the development of a skilled workforce in Indiana. We have a strong pipeline to serve new and existing customers, as shown on slide 11: approximately 3 gigawatts in strategic negotiations and line of sight to approximately 2 gigawatts of developing opportunities, even after securing approximately 800 megawatts of additional capacity for Alphabet and Amazon. Slide 12 shows our progress on regulatory and construction milestones. The original Amazon contract is pending commission approval, expected in June, ahead of civil site work later this year and load energization beginning in 2027. Upon IURC approval of the Amazon contract settlement, our new Alphabet and Amazon agreements will be subject to an expedited regulatory review process of 90 to 120 days for approval, resulting in anticipated orders later this year.

With that, I will turn the call over to Shawn.

Thank you, Michael, and good morning, everyone. I will pick up with our data center business. The Genco business model offers differentiated flexibility to achieve speed to market for new customers, disciplined savings for our existing customers, and local economic development. As we pursue opportunities to serve data center customers, we have designed these strategies with multiple layers of risk protection to safeguard shareholders and existing customers.

Rate structures and contractual terms are designed to provide full cost recovery and achieve appropriate risk-adjusted returns. Revenue strategies such as minimum demand charges and long-term commitments help establish a secure revenue floor. Credit and counterparty risk is managed through credit support requirements and by diversifying exposure across highly rated counterparties. Contractual protections allocate construction, operating, and market risks to the parties best positioned to manage those.

We have embedded risk management into our framework for contracted capacity purchases while reducing reliance on future market volatility. Importantly, the structure is designed to ring-fence this activity from the core regulated business, preserving balance sheet strength and minimizing volatility, while enabling disciplined capital deployment into a strategic and growing plan. Now to slides 13 and 14 and our financial results. First quarter consolidated adjusted EPS was $1.06, an $0.08 per share increase versus the $0.98 reported in the same period last year, an 8% year-over-year increase primarily driven by regulatory execution across our base business recovering capital investments from 2025’s capital and regulatory plans.

By achieving 52% of our midpoint earnings guidance through Q1, NiSource Inc. is well positioned to achieve our full-year financial objectives. On slide 15, our five-year capital investment remains unchanged for our base business at $21 billion, which includes $2 billion in upside opportunities. Our consolidated plan is now enhanced by $7.6 billion in Genco and data center-related capital. We are actively advancing incremental investment opportunities shown on slide 16, which include electric generation, gas and electric transmission and system modernization, MISO long-range transmission projects, FEMA compliance, and advanced metering infrastructure.

These initiatives are not part of our base or upside plans, yet present significant potential for long-term value creation. Reviewing slide 17, the NIPSCO system continues to experience significant progress through consistent addition of generation capacity with a substantial pipeline underway, and an increased figure for signed Genco contracts. Turning to slide 18, we are reaffirming NiSource Inc.’s consolidated adjusted EPS guidance range for 2026 of $2.02 to $2.07 per share. We have increased our long-term guidance by 100 basis points and expect to deliver 9% to 10% consolidated adjusted EPS compound annual growth through 2033, with performance tracking toward the high end through 2030, supported by projected 9% to 11% rate base growth.

We have started 2026 strong and are confident in our plan. We are committed to keeping O&M costs steady during the planning period. Our plan remains highly executable, projecting modest customer demand of less than 1% across all customer classes and applying conservative financing assumptions through 2030. Looking ahead, slide 19 reflects our improved outlook for Genco, with increased 2030 Genco EPS of $0.25 to $0.35 per share and a 2033 outlook of $0.40 to $0.60 per share. Slide 20 highlights our five-year funding plans.

We are reaffirming 14% to 16% FFO to debt in all years of the plan. A balanced mix of cash from operations, new long-term debt, and $400 million to $600 million of equity each year is expected to further strengthen the balance sheet. This reflects a $600 million increase in our CapEx plan and a strengthening pipeline of investment opportunities. Finally, slide 21: we remain on track to achieve our 2026 financial targets.

With that, Operator, please open the line for questions.

We will now open the call for questions.

Your first question comes from the line of Shar Pourreza of Wells Fargo. Your line is now open.

Hi. Thank you. This is actually Andrew Kadavian for Shar. Thanks for taking my questions. Can you talk about what you are seeing in discussions with potential customers that has allowed you to firm the 1 to 3 gigawatts in your strategic negotiations bucket to 3 gigawatts?

Yes, Andrew. Today, we have signed approximately 4 gigawatts of capacity for data centers. When you couple that with our current engagement with multiple counterparties and strong demand, those facts support our confidence in advancing the 3 gigawatts of pipeline opportunities that are in active negotiations. The Genco model represents a compelling opportunity and competitive advantage to serve this large-scale growth while benefiting our existing customer base, so we are very confident in our ability to execute.

Thanks. And then with only $600 million of CapEx to serve the incremental 1 gigawatt of hyperscaler load, it is a pretty capital-light construct. With the market capacity you are making, how do you earn on those purchases? Can you give us some detail on how that flows through to earnings?

Shawn, do you want to address that?

Yes. We look at the total amount of capacity we will generate, what the cost is for that, and what an appropriate risk-adjusted return is. When you net those two, that is what creates the earnings per share. As you mentioned, some of that is through capacity purchases, and some will be through constructing assets. The net of that is what we guide to in the Genco guidance.

Thank you. I will leave it there.

Your next question comes from the line of Bill Apicelli of UBS. Your line is now open.

Hey, good morning. Along similar lines, thinking about the incremental needs to service what could be part of the additional megawatts to come under strategic negotiations, how should we think about the resource mix in terms of additional generation to be built versus purchases? And related, how should we think about the incremental earnings benefit? Is this more linear, or does the accretion improve as you scale Genco?

Shawn?

I do not think it is linear. It is project-specific and largely driven by what a customer needs and when they need it. From there, we find the most attractive resource that is appropriate to serve that demand, both short term and long term, at the most reasonable cost on a long-term risk-adjusted basis.

So you will update as you announce, and it will be bespoke for each deal in terms of the earnings benefit?

That is correct. The Genco model allows us to provide bespoke solutions to our counterparties. As we add to that pool, we will make it clear that we are adding capacity and how we are serving that customer.

Under the framework of affordability, you have increased customer benefits today. How is that resonating with the customer base and stakeholders on the political and regulatory front?

We believe it is being well received by customers and regulators. We are providing $1.4 billion of benefits back to customers, which is $124 per year of real money going back to customers. At the same time, we are building in Indiana, creating jobs, and benefiting the communities we serve. We think this model is a competitive advantage, compelling, and well received by our stakeholders.

Your next question comes from the line of Steven Isaac Fleishman of Wolfe Research. Your line is now open.

Good morning. With these two recent deals, you are providing time-to-power availability, which is hard to find and people pay for. How much more time-to-power access in the next few years could you feasibly do? Because that clearly is something customers want.

And then, on the 9 gigawatt total, is that some kind of limit on the opportunity in the region or on your transmission system, or could it be larger over time? Also, switching gears, on the recent governor letter to utilities in Pennsylvania, how are you interpreting that and what does it mean for your future rate case strategy and investment in Pennsylvania, if anything?

We have not disclosed the exact amounts we could do, but we continue to be very active in the commercial supply chain, focused on speed to power. We ensure the capabilities, resources, and constructs are there, from site development through execution. We are focused on executing effectively on current commitments and continuing to provide speed to power in the near term, which underpins our confidence in the 3 gigawatts in strategic negotiations. On the 9 gigawatts, I would not view it as a limit.

We are disciplined and methodical in progressing our pipeline and negotiations. Indiana is a very strong territory for developing opportunities given the geography, proximity to Chicago, the 345 kV transmission backbone with redundancy, and gas supply. The 9 gigawatts is our current focus, not the ultimate opportunity.

Regarding Pennsylvania, we are actively engaged with all stakeholders as we develop a response to Governor Shapiro’s letter. Last December we had a constructive regulatory outcome for our rate case, and we are evaluating future regulatory mechanisms, including trackers, to support capital investments. Our five-year financial plan is built with flexibility to adapt to opportunities and challenges. We will continue to emphasize safety and compliance with federal and state requirements, invest to operate the system reliably, and maintain a strong balance sheet to support critical investments.

Your next question comes from the line of Julien Patrick Dumoulin-Smith of Jefferies. Your line is now open.

Good morning, team, and nicely done yet again. On the earnings composition, how do you think about bifurcating the $0.15 to $0.18 move up in guide between rate base and owned generation versus contracts? More critically, what is the ability to own more of that generation over time? You talk about an 800 megawatt pool—would you in-house that over time, and is that another element of compounding growth beyond 2030 to 2033?

As we add customers and provide bespoke generation solutions, we will own some of that generation—likely a significant amount—while providing the best solution to the customer as we negotiate contracts.

When we say bespoke solutions, we ensure within the Genco model that we have the capability to serve 3 thousand megawatt increments and also 300 megawatt increments. The pooled resources are the mechanism by which we will own the resources provided to NIPSCO to meet resource adequacy. Our focus has been to avoid commodity risk or market exposure. We secure contracted generation capacity one way or another and bring it into the portfolio to serve customers holistically with speed to market.

Because it is not functioning directly off a return-on-rate-base model, the accretion we guide to—short term and long term—and the potential for value creation do not require us to own all assets. We monetize capacity attributes in a way that is attractive to stakeholders—exemplified by the $1.4 billion in savings to retail customers—and to shareholders, with expected return on and of the cost of those assets over the life of the customer agreements.

On the 3 gigawatts in strategic negotiations, what are the gating items for conversion? Is it dependent on getting approvals for Amazon and Alphabet, and is there a serial nature to putting this in front of the IURC? Also, on the ATM, how much latitude do you have for more deals now that you raised the ATM range, or is that effectively utilized with the CapEx increase?

These are complex transactions and negotiations take time. I would not limit this to Amazon and Alphabet—we are talking to multiple counterparties. We have structured our organization to execute more efficiently and effectively, which gives me confidence we will get these done.

We absolutely have a lot of latitude in our financing plan. The $400 million to $600 million annually that we disclosed today is already contemplated in the filed ATM structure. We have the capacity to handle that volume without impact.

Your next question comes from the line of Eli Johnson of JPMorgan. Your line is now open.

Good morning. On speed to market within the resource mix for the pool strategy, is there a resource priority list to execute that speed to market? And more broadly, do you have an update on where you are in terms of land and equipment acquired for the new assets? Also, can you provide more color on next procedural steps with the IURC and the timeline for review, and any color on development in La Porte County?

On speed to market, beyond meeting reliability, MISO accreditation, and IURC requirements, we deploy resources across a broad spectrum—CCGTs, batteries, contracted generation, and confirming market capabilities—bringing them into the pool to ensure speed and reliability. It is not a prioritization of any single asset type; it is ensuring they meet reliability and accreditation and that they can meet customer timelines. We are very active and consistent in growing that mix. On process and timeline, slide 12 is a good representation of progression through the regulatory process, including zoning approvals, the acceleration amendment filed with the IURC, and the potential for expedited approval of special contracts within 90 to 120 days following settlement approval.

We have confidence in the approvals and will continue to execute. We will provide updates as projects move into construction phases beginning in 2026.

Your next question comes from the line of Nicholas Amicucci of Evercore ISI. Your line is now open.

Good morning. Given timelines and the data center horizon through 2035, and the expedited approval process, when we think about up to 2 gigawatts of developing opportunities that are later-dated, how quickly would those need to be brought into the fold to be COD by 2035? Also, to clarify, in the increased guidance, there is no consideration of the 3 gigawatts in strategic negotiations embedded, correct?

Those 2 gigawatts are developing opportunities. How quickly they move into strategic negotiations remains to be seen. Demand in Indiana for hyperscalers and data centers is significant. We will continue to work opportunities methodically as resources and equipment allow and will update the pipeline as projects progress.

As noted, we will continue the disciplined methodology and update which gigawatts are in which portion of the pipeline as negotiations advance.

That is correct—our increased guidance includes only signed customer contracts, not strategic negotiations.

Your next question comes from the line of Paul Fremont of Ladenburg. Your line is now open.

Thanks. I would like to better understand the role of Schahfer generation potentially under a PPA in that 800 megawatt pool. Do you have the ability to shift operating costs that are now being picked up by retail customers to the data center customers? Also, how long would it take to supply generation to prospective new customers, including the expansion for AWS and Alphabet?

And since Genco is growing as a percent of your total contribution, when can we expect to see separate financials?

Regarding Schahfer, as I mentioned, we received a second federal order, and we consider the Schahfer units part of our retail customer capacity. Our goal is to continue to recover costs through the FERC process. There has been no consideration of shifting that into a PPA.

That is correct. Schahfer is not a Genco asset; it is a NIPSCO regulated asset, not part of the pool and not contracted to the pool.

On timing, every Genco solution is bespoke with defined ramp rates, and those considerations drive timing and the type of generation we provide.

We will break out Genco once it represents a more material contribution to NiSource Inc.’s ongoing financial results.

Your next question comes from the line of Travis Miller of Morningstar. Your line is now open.

Thank you. On the pool strategy, do you need approval from the IURC for any new assets or any contracts outside of approval for just the data center contracts? Essentially, are you able to serve that data center contract with any assets and purchases without separate regulatory approval? Also, to clarify, the 9% to 10% growth includes only the existing Amazon, Amazon expansion, and Alphabet—none of the pipeline, right?

And finally, the mechanism for flowing savings back to customers—the $1.4 billion—how does that actually get back to NIPSCO customers?

Under the existing process, Genco files special contracts with the IURC for approval. In those filings, we provide information on what assets are being added to the system to serve the contract. The special contract is approved, and those asset details are typically within the special contract; separate CPCN approvals are not required for those pooled resources. The pool strategy is effectuated through Genco’s special contracts that the IURC approves.

Correct—the 9% to 10% EPS growth includes only signed customer contracts and not any projects in strategic negotiations.

The $1.4 billion of savings is defined within each special contract and distinctly lays out how funds are accrued and then provided back to the NIPSCO base. It is a credit against the bills of those retail electric generation customers—not a volumetric reduction—applied as a credit from the contractual mechanisms.

Thank you. I would now like to hand the call back to Lloyd M. Yates for closing remarks.

I want to thank all of you for your questions and your continued interest in NiSource Inc. We appreciate it. Have a great day.

Thank you for attending today’s call. You may now disconnect. Goodbye.