Sign in

    NiSource Inc (NI)

    Q4 2023 Earnings Summary

    Reported on Jan 10, 2025 (Before Market Open)
    Pre-Earnings Price$26.02Last close (Feb 20, 2024)
    Post-Earnings Price$26.01Open (Feb 21, 2024)
    Price Change
    $-0.01(-0.04%)

    What went well

    • NiSource plans to invest $16 billion in its organic growth plan with a potential upside of $2 billion, demonstrating a strong commitment to future growth and value creation.
    • The company raised its 2024 guidance, implying a 7.5% year-over-year growth rate, reflecting confidence in achieving the higher end of its 6% to 8% growth target.
    • NiSource's subsidiary NIPSCO's generation transition remains on track, with progress in renewable projects like full ownership of Cavalry and Dunns Bridge II solar facilities, advancing towards the goal of net zero by 2040 and delivering benefits to customers through efficient monetization of tax credits.

    What went wrong

    • Potential dilution due to planned equity issuances of up to $600 million in 2024 and $200–$300 million annually from 2025 to 2028, which could suppress earnings per share growth and shareholder value.
    • Uncertainty regarding the financing and timing of renewable projects, with possible additional equity financing needed to fund $1–$2 billion in upside capital expenditures, posing risks to the company's capital structure and potentially leading to further dilution.
    • Higher interest expenses and increased debt levels, as evidenced by a $128 million increase in interest expense in 2023, could pressure earnings and constrain financial flexibility in a high cost of capital environment ,.

    Q&A Summary

    1. Equity Financing Plans
      Q: Have you executed any of the $600 million ATM equity program, and can you explain the potential for private placements?
      A: Shawn Anderson stated they have not executed any of the up to $600 million ATM program anticipated for 2024, as the previous program expired at the end of 2023, and they plan to file a new one soon. He mentioned they may consider potential bilateral or discrete agreements within the ATM, allowing investors to transact directly with sales agents, which would then be placed under the ATM.

    2. Earnings Growth Guidance
      Q: Are you comfortable with your position within the 6%-8% growth guidance range?
      A: Lloyd Yates indicated they raised guidance based on strong 2023 performance, targeting $1.70 to $1.74 EPS for 2024, which implies a 7.5% growth. They are comfortable with these guidance ranges but are not specifying where they fall within the 6%-8% range at this point.

    3. Renewables Investment Timing
      Q: How are you thinking about the timing of layering the renewables investment and ownership upside into the plan, and can you sequence cash flows without additional equity financing?
      A: Michael Luhrs explained they are methodically evaluating projects like Gibson and Fairbanks, which are part of a $2 billion CapEx upside, and expect to provide a full update in Q2. Shawn Anderson added that financing these projects may involve evaluating cash flow profiles and could potentially require a modest increase associated with the ATM to maintain the capital structure when accessing the upside CapEx plan.

    4. Gas CapEx Allocation
      Q: How much of your gas CapEx plan is attributed to base spending versus new expansion opportunities?
      A: Shawn Anderson noted that nearly all gas CapEx is for safety, reliability, and compliance work, supporting regulatory requirements. They don't plan significant future expansion costs into the CapEx guidance since such projects are often supported by incoming revenues.

    5. Asset Optimization Opportunities
      Q: Are there opportunities to optimize assets to fund growth, similar to recent industry transactions?
      A: Lloyd Yates stated they are always reviewing options to enhance shareholder value but are currently focused on their organic plan of investing $16 billion with a potential upside of $2 billion. While they like the scale and diversification of their six operating companies, they are open to more efficient capital-raising opportunities but remain focused on the organic plan.

    6. NIPSCO Electric Rate Case Timing
      Q: What is the status of the next NIPSCO electric rate case, and how much renewable spending will be captured?
      A: Lloyd Yates mentioned they have not filed an electric case yet but plan to align it with the completion of renewable projects to keep the gap small. Currently, the renewable projects are on schedule, and they'll provide updates when possible.

    7. Pennsylvania Rate Case Filing
      Q: Are you still planning to file a rate case in Pennsylvania this year?
      A: Management confirmed they filed a notice of intent for Pennsylvania and are working through the details of when to file.

    Related Publications