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    NiSource Inc (NI)

    Business Description

    NiSource Inc. is an energy holding company that operates through two primary segments: Gas Distribution Operations and Electric Operations. The company provides natural gas distribution services to approximately 3.3 million customers across six states, including Ohio, Pennsylvania, Virginia, Kentucky, Maryland, and northern Indiana, through subsidiaries like NiSource Gas Distribution Group, Inc. and NIPSCO . NiSource also focuses on generating power and transitioning its generation portfolio to include renewable energy and energy efficiency technologies . The company's strategy emphasizes safe and reliable service through rate-regulated utilities, infrastructure investment, and regulatory initiatives to enhance customer experience and reduce emissions .

    1. Gas Distribution Operations - Distributes natural gas to residential, commercial, and industrial customers across six states, operating approximately 55,000 miles of distribution main pipeline and 1,000 miles of transmission main pipeline .
    2. Electric Operations - Generates power at central station power plants and is transitioning to include renewable energy, distributed generation, energy storage, and energy efficiency technologies, with regulatory mechanisms for fuel cost recovery .

    Q2 2024 Summary

    Initial Price$27.70April 1, 2024
    Final Price$28.70July 1, 2024
    Price Change$1.00
    % Change+3.61%

    What went well

    • Significant Growth Opportunities in Data Center Development: NiSource is experiencing "a lot of interest" from data center developers in Northern Indiana due to favorable policies like the 2019 sales tax exemption for data centers, excellent infrastructure, and supportive stakeholders . This presents "a significant opportunity to grow the company" .
    • Potential for Substantial Load Growth: In their Integrated Resource Plan (IRP), NiSource is considering scenarios with incremental load growth of 2.6 GW to 8.6 GW by 2035, representing up to a "100% increase to our peak load system" . This load growth is driven by data center and economic development opportunities .
    • Earnings Growth Above Current Guidance: NiSource has a "real strong plan" to "grow 6% to 8%" and has "executed that growth over the past 3 years" . The data center opportunities are considered "upside to that plan," potentially leading to earnings growth above current guidance .

    What went wrong

    • Reliance on Potential Load Growth that May Not Materialize: NiSource's growth projections include significant potential load growth from data centers and economic development, with scenarios adding up to 8.6 gigawatts by 2035, representing a 100% increase to current peak load. This reliance on uncertain future load growth poses risks to achieving projected growth.
    • Unanticipated Capital Expenditures Could Pressure Financials: Preliminary engineering on MISO long-range transmission projects indicates higher costs exceeding original estimates. These additional capital expenditures are not included in the $16.4 billion base capital plan, potentially leading to financial pressure.
    • Delay in Incorporating Data Center Opportunities into Plans: Management has indicated they need more time before embedding data center opportunities into financial plans, planning to provide more clarity at EEI or later in the year. This delay could impact the growth outlook.

    Q&A Summary

    1. Data Center Opportunities
      Q: When will data center opportunities be included in plans?
      A: CEO Lloyd Yates expressed excitement about significant data center opportunities in Northern Indiana due to its attractive location and infrastructure. They are in conversations with stakeholders and expect to provide more clarity by EEI or later this year. They are ensuring data centers benefit shareholders, work for current customers without increasing their risks, and maintain reliability.

    2. Load Growth and 2024 Guidance
      Q: Is 2025-2026 growth above 7% achievable given current trends?
      A: CFO Shawn Anderson acknowledged tailwinds like 5% load growth in the quarter but cited headwinds such as capital market volatility and financing costs. They plan to maintain 6%-8% annual growth, focusing on thoughtful financing and regulatory outcomes to offset uncertainties.

    3. Financing Plans and Equity Issuance
      Q: Will additional capital require more equity financing?
      A: Shawn Anderson stated there's no rule of thumb due to varying project cash flows. They aim to maintain 14%-16% equity in all years of the plan. The $500 million junior subordinated debt issued in May is incremental to the $600 million ATM equity planned for 2024, enhancing their equity cushion amid headwinds like lower cash receipts due to warm weather.

    4. Impact of Load Growth on Bill Growth
      Q: How will increased load affect customer bills?
      A: Shawn Anderson noted they haven't yet incorporated data center load growth into financial plans but are committed to keeping residential bill increases at or below 4%. Data centers could provide upside by sharing system costs, potentially offsetting costs and aiding affordability.

    5. Potential Large Load Increases and IRP Scenarios
      Q: What load growth is expected through partnerships?
      A: In their Integrated Resource Plan (IRP), they project an incremental 2,600 MW load growth by 2035, representing a 100% increase to peak load. They are also considering scenarios with an additional 6,000 MW based on data center interest and economic development.

    6. MISO Projects and Investment
      Q: How much of MISO's tranche 2 is relevant to you?
      A: For tranche 1, they estimate around $300 million in projects but expect it may require more investment to execute safely. Tranche 2 estimates are still early; updates are expected in their November capital plan refresh. Most tranche 2 projects have service dates in the early 2030s.

    7. Pennsylvania Rate Case Status
      Q: What's the outlook for the Pennsylvania rate case?
      A: Melody Birmingham said they are engaging with stakeholders and working toward settlement discussions. They aim for win-win outcomes for customers and shareholders but do not yet know if a settlement is possible.

    8. Gas Business Opportunities with Data Centers
      Q: Are you seeing more gas demand from data centers?
      A: Lloyd Yates acknowledged opportunities to build more gas infrastructure to support data centers, especially in Ohio and Virginia. Supplying gas to data centers, like the Digital Dallas project in Virginia, is an opportunity not currently reflected in their capital plan.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024
    Gas Distribution Operations695.9531.51,000.93,732.7956.9487.4531.0-
    - Residential122.8176.0134.7583.9143.8156.9197.9-
    - Commercial130.1156.6140.5578.1142.9154.4172.7-
    - Industrial112.6115.9111.4474.1115.9119.7124.8-
    - Off-system22.99.810.760.612.810.67.1-
    - Wholesale---32.06.311.215.0-
    - Miscellaneous13.329.2-26.621.43.24.72.7-
    Electric Operations397.1499.1424.11,785.0752.7597.2515.1-
    - Public Authority---11.52.11.92.0-
    Columbia Pipeline Group Operations--------
    Corporate and Other123.0121.9142.8504.6140.1139.130.2-
    - Unaffiliated0.20.20.20.80.20.10.3-
    - Intersegment122.8121.7142.6503.8139.9139.0145.6-
    Eliminations(126.0)(125.1)-(516.9)(143.4)-(149.2)-
    Total Revenue1,090.01,027.41,4225,505.41,706.31,084.71,076.3-
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024
    Columbia Operations----956.9---
    - Unaffiliated Revenue----0.2---
    - Intersegment Revenue----139.9---
    NIPSCO Operations----752.7---
    Corporate and Other----140.1---
    Eliminations-----143.4---
    Total Revenue---5,505.41,706.3-1,076.3-
    KPIs - Metric [Unit]FY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024
    **Heating Degree Days [Days]**51841--2,28434728-
    **% Warmer than Normal HDD [%]**(5)%32%--17%(19%)47%-
    **Nameplate Capacity [MW]**1,2692,7801,950-1,9501,9501,685-
    **Storage Capacity [MW]**165135135-13513556.25-
    **Cooling Degree Days [Days]**206475--326326556-
    **% Warmer than Normal CDD [%]**31%----31%(6)%-
    **Columbia Operations Customers [Customers]**----2,413,7242,397,5612,390,272-

    Executive Team

    NamePositionStart DateShort Bio
    Lloyd M. YatesPresident and Chief Executive OfficerFebruary 2022Lloyd M. Yates has been serving as the President and CEO of NiSource Inc. since February 2022. He has over 40 years of experience in the energy industry .
    Shawn AndersonExecutive Vice President and Chief Financial OfficerMarch 2023Shawn Anderson is the Executive Vice President and CFO of NiSource, having assumed this role in March 2023. He previously served as the Senior Vice President and Chief Strategy and Risk Officer .
    Melody BirminghamExecutive Vice President and President, NiSource UtilitiesMarch 2023Melody Birmingham has held the position of Executive Vice President and President, NiSource Utilities since March 2023. She was previously the Executive Vice President and Chief Innovation Officer .
    Donald E. BrownExecutive Vice President and Chief Innovation OfficerMarch 2023Donald E. Brown has been serving as the Executive Vice President and Chief Innovation Officer since March 2023. He was formerly the Executive Vice President and CFO of NiSource .
    William Jefferson, Jr.Executive Vice President, Operations and Chief Safety OfficerJuly 2022William Jefferson, Jr. has been serving as the Executive Vice President, Operations and Chief Safety Officer since July 2022. He was previously the Station Director and Plant General Manager at STPNOC .
    Michael S. LuhrsExecutive Vice President, Strategy and Risk Chief Commercial OfficerMarch 2023Michael S. Luhrs has been serving as the Executive Vice President, Strategy and Risk Chief Commercial Officer since March 2023. He was previously a Senior Vice President at Alliant Energy .
    Kimberly S. CucciaSenior Vice President, General Counsel and Corporate SecretaryApril 2022Kimberly S. Cuccia has been serving as the Senior Vice President, General Counsel, and Corporate Secretary since April 2022. She has held various positions within NiSource, including Vice President and Interim General Counsel .
    Melanie B. BermanSenior Vice President and Chief Human Resources OfficerJune 2021Melanie B. Berman has been serving as the Senior Vice President and Chief Human Resources Officer since June 2021. She was previously the Executive Vice President and Chief Human Resources Officer of The Michaels Companies, Inc. .
    Michael W. HooperSenior Vice President and President, NIPSCOMay 2020Michael W. Hooper has been serving as the Senior Vice President and President of NIPSCO since May 2020. He was previously the Senior Vice President of Regulatory, Legislative Affairs and Strategy at NIPSCO .
    Gunnar J. GodeVice President, Chief Accounting Officer and ControllerJuly 2020Gunnar J. Gode has been serving as the Vice President, Chief Accounting Officer, and Controller since July 2020. He was previously the Vice President and Controller of Washington Gas .

    Questions to Ask Management

    1. Given the recent issuance of $500 million in junior subordinated debt with 50% equity credit, how does this impact your planned $600 million ATM equity issuance for 2024, and should we consider this debt as incremental to your equity needs?

    2. With your peer utility receiving a lower ROE in their recent Pennsylvania rate case decision, can you provide more color on how this might impact your own rate case proceedings in the state, and what potential outcomes you foresee regarding settlement and timeline?

    3. Considering the increasing interest in data center development within your Northwest Indiana service area, can you elaborate on the potential challenges to your infrastructure and how you plan to manage the risks associated with accommodating significant new load growth?

    4. You mentioned that preliminary engineering on MISO LRTP tranche 1 projects indicates higher costs exceeding original estimates. How might these potential cost overruns impact your base financial plan, and what strategies do you have to mitigate these risks?

    5. Given your commitment to ESG initiatives, including reducing methane emissions and achieving a top AAA ESG rating, how are you balancing the investments required for ESG initiatives with the need to maintain affordable energy prices for customers, and what challenges do you anticipate in achieving both goals?

    Past Guidance

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Non-GAAP Net Operating Earnings Per Share (NOEPS): $1.70 to $1.74, representing a 7.5% year-over-year growth rate from 2023 actual results .
      2. Annual EPS Growth Rate: 6% to 8% from 2023 through 2028 .
      3. Annual Rate Base Growth: 8% to 10% over the 2023 to 2028 period .
      4. Capital Expenditures: $16 billion over a 5-year period through 2028 .
      5. Dividend: 6% increase, positioning the annual dividend at the bottom half of the targeted payout ratio of 60% to 70% .
      6. FFO to Debt Ratio: 14% to 16% through 2028 .
      7. Equity Issuance: Up to $600 million in ATM equity in 2024 and $200 million to $300 million annually from 2025 to 2028 .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Adjusted EPS: $1.70 to $1.74 for 2024 .
      2. 5-Year Adjusted EPS Growth Rate: 6% to 8% from 2023 to 2028 .
      3. Rate Base Growth: 8% to 10% annually from 2023 to 2028 .
      4. FFO-to-Debt Ratio: 14% to 16% in all years of the plan .
      5. Base Capital Plan: $16.4 billion through 2028 .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Adjusted EPS Guidance for 2024: $1.70 to $1.74, expecting to achieve the upper half of this range .
      2. Adjusted EPS Growth Rate: 6% to 8% for 2023 to 2028 .
      3. Rate Base Growth: 8% to 10% .
      4. FFO to Debt: 14% to 16% in all years of the plan .
      5. Equity Issuance: Up to $600 million of equity in 2024 through ATM program and $200 million to $300 million annually thereafter .
      6. Capital Expenditure Plan: $16.4 billion of investments, excluding upside CapEx or any data center load or investment .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: N/A
    • Guidance: The documents do not contain information from the Q3 2024 earnings call for NiSource, so the guidance metrics and period are not available.