Q2 2024 Earnings Summary
- 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 .
- 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.
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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. -
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. -
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. -
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. -
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. -
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. -
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. -
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.