Q4 2024 NiSource Inc Earnings Call
Thank you for standing by my name is Janine and I will be.
Speaker Change: Conference operator for today.
Speaker Change: This time I would like to welcome everyone to the Q4 'twenty 'twenty for Nisource earnings Conference call. All lines have been placed on mute to prevent any background nice after today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May press star one on your touched on fun.
Chris: To withdraw your question you May press Star one again I will now turn the call over to Chris <unk> head of Investor Relations. Sir. Please go ahead.
Speaker Change: Good morning, and welcome to the Nisource fourth quarter of 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 Lewis and Executive Vice President and.
Melody Birmingham: Group, President Nisource utilities melody Birmingham.
Melody Birmingham: The purpose of this presentation is to review <unk> 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.
Melody Birmingham: 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.
Melody Birmingham: Information concerning such risks and uncertainties is included in the risk factors and MD&A sections of our periodic SEC filings.
Melody Birmingham: 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 and a reconciliation of these measures.
Lloyd Yates: Now I'd like to turn the call over to Lloyd.
Lloyd Yates: Thank you, Chris and good morning, everyone.
Lloyd Yates: I'll begin on slide three.
Lloyd Yates: The nice source of investment thesis is simple.
Lloyd Yates: Serve our customers by delivering safe and reliable energy at an affordable value.
Lloyd Yates: Affordable energy requires efficient capital deployment.
Lloyd Yates: Safe asset operations and constructive regulatory recovery mechanisms.
Lloyd Yates: These fundamentals generate competitive returns, while enhancing our balance sheet position.
Lloyd Yates: Importantly, these are the foundation of the Nisource business plan, which continues to offer compelling value to stakeholders.
Lloyd Yates: Driven by regulated utility operations across six highly constructive jurisdictions.
Lloyd Yates: Offering diversification across fuel type and regulatory location.
Lloyd Yates: Okay.
Lloyd Yates: Before we cover our standard business update I wanted to begin this call by recapping a tremendously successful year for the Nisource team.
Lloyd Yates: We often talk about the key principles to our success named.
Lloyd Yates: Namely.
Lloyd Yates: Building, a constructive regulatory foundation.
Lloyd Yates: Operating with excellence across our six jurisdictions.
Lloyd Yates: Executing and delivering on the financial commitments, we make.
Lloyd Yates: And growing our investment proposition by investing in capital expenditures, which enhanced value for our communities.
Lloyd Yates: Okay.
Lloyd Yates: As I look back across 2024.
Lloyd Yates: I'm proud to share that the Nisource 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.
Lloyd Yates: Being a trusted energy partner their priority and we believe differentiates us from our peer regulated utilities.
Lloyd Yates: We remain engaged with stakeholders in our communities to recover cost associated with capital expenditures deployed to deliver safe and reliable energy services to our region.
Lloyd Yates: We build credibility through rate case, and tracker filings by utilizing a stakeholder focused mindset as we approach these processes.
Over the last 24 months.
Lloyd Yates: The Nisource team has invested $6 9 billion and capex across its fixed state region to support reliability of it systems and maintain alignment with compliance expectations of our regulators.
Lloyd Yates: Our regulatory processes approve recovery of $340 million in revenue in 2024 to return of capital associated with these investments.
Lloyd Yates: But critically.
Lloyd Yates: The stakeholder outreach to match the recovery of these revenues with the with the investments being made were developed years. Prior as our teams are active with stakeholders to detail the changes to the energy landscape.
Lloyd Yates: And underpin the investment thesis for these capital plans.
Lloyd Yates: Melody will touch on some key highlights to these plans from fourth quarter. However.
Lloyd Yates: However for our team at nice source this never stops and our relentless pursuit of delivering safe.
Lloyd Yates: <unk> energy to our customers.
Lloyd Yates: Speaking of reliability.
Lloyd Yates: Throughout 2024, we advanced our operational excellence mission by intentionally focused on risk reduction and value enhancing activities across the organization.
Lloyd Yates: Our safety metrics continue to improve through our industry recognized safety management system framework.
Lloyd Yates: A new initiative utilizing artificial intelligence launched by our data and now and then.
Lloyd Yates: <unk> team is producing early wins to drive efficiency and enhance the way we work to support our customers.
Lloyd Yates: Supporting our regulatory and stakeholder relationships and operating with excellence for our communities paves the way for the Nisource team to deliver on the financial results, we are committed to our shareholders.
Lloyd Yates: 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 guidelines ranges.
Lloyd Yates: This resulted in a year over year increase in adjusted EPS for 2024 of nine 4% versus 2023.
Lloyd Yates: Further.
Lloyd Yates: The nature of our business plan enables these returns to flow through all subsequent years.
Lloyd Yates: As we base each year of a 6% to 8% annual growth rate.
Lloyd Yates: This results in a raise of our 2025 adjusted EPS guidance to $1 85.
Lloyd Yates: Two $1 85 to $1 89 per share consistent with the 6% to 8% growth outlook of the actual results achieved.
Lloyd Yates: But as I said these.
Lloyd Yates: These results are not sustainable if we are not focused on business development well into the future.
Lloyd Yates: Our teams are hard at work at developing new prospects for investment to deliver greater value to our customers for the energy they consume.
Lloyd Yates: Our 2025 to 2029 base capital plan is $19 $4 billion increase in nominally due to increased economic development across our gas businesses in Virginia and Indiana.
Melanie: Which melanie will highlight in a moment.
Melanie: 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.
Melanie: Our work does not stop with the base capital plan.
Melanie: We are fortunate to have a robust portfolio of valuable customer investments, which could be added to and extends far beyond our five year planning horizon, which John will detail later.
Melanie: Our teams remained active in developing this portfolio of projects.
Melanie: To meet our standards necessary to be included in our base plan.
Melanie: This includes our near term visible investments and the upside plan, which is now $2 2 billion, an increase of $400 million since our third quarter call.
Melanie: But none of these plans include the important development work our team is engaged in.
Melanie: PON to support economic development efforts by the state of Indiana to locate data center operations in the region.
Melanie: I previously highlighted the compelling fundamentals of northern Indiana, which are attractive to potential data center customers.
Access to critical infrastructure, including a robust transmission system and proximity to critical fiber connections.
Melanie: Predictable climate and weather with low natural catastrophe risk.
Speaker Change: And a constructive business climate.
Melanie: Including favorable tax structures available land.
Speaker Change: And a supportive state government.
Speaker Change: Are all favorable factor in advancing development of data centers in the region.
Speaker Change: Our team remains actively engaged in working with potential customers to develop data center solutions, which is guided by four main principles.
Speaker Change: One protect existing system customers.
Speaker Change: Two.
Speaker Change: Serve new customers with speed and flexibility.
Speaker Change: Three maintain NIPSCO financial integrity through thoughtful capital allocation and a reasonable return proposition.
Speaker Change: For preserve flexibility in our business.
Speaker Change: In January NIPSCO filed a declination petition with the <unk> related to the ownership and operation of LNG facilities.
Speaker Change: This administrative filing will setup NIPSCO genco as a regulated entity and is a step in NIPSCO effort set a framework to serve large load customers.
Speaker Change: The application requests the IRC to establish NIPSCO genco as a regulated energy utility.
Speaker Change: Bud to declined to exercise some of the <unk> jurisdiction, because NIPSCO genco will not have retail customers and will instead entered into contracts to provide energy and capacity to NIPSCO.
Speaker Change: We'll then directly serve large load customers.
Speaker Change: Our teams are working to evaluate this build out which could provide benefits to our existing system customers.
Speaker Change: Hence our communities and local tax space and provide compelling investment opportunities for our shareholders.
Speaker Change: Northern Indiana as the Premier location for data centers are located.
Speaker Change: Simply put.
Speaker Change: There is potential for substantial value creation for all stakeholders and checking all these boxes is important to nice source.
Speaker Change: Slide five provides more detail on our operational excellent vision.
Speaker Change: Our data and analytics team began implementing early use cases in 2023.
Speaker Change: Improved data transparency and democratized actionable insights throughout the organization.
Speaker Change: Our work management intelligent process as one example.
Speaker Change: It is an ensemble of advanced AI models that include forecasting shift availability and work volume.
Speaker Change: Job duration predictive model.
Speaker Change: <unk> optimizer to automatically generate more accurate weekly schedule.
Speaker Change: Since implementing this process in the middle of the year in Ohio work productivity has increased 16%.
Speaker Change: As the same period in 2023 measures do work hours achieved.
Speaker Change: Less idle time, less rework and an overall better plan and schedule.
Speaker Change: The Apollo continuous improvement program closed out its second year with really strong results.
Speaker Change: The team exceeded internal expectations with 70 $677 million in O&M savings, along with many efficiency initiatives to reduce waste and workforce constraints.
Speaker Change: For example, the locating risk model initiatives originally implemented in 2023 safely reduce spend by $13 million.
Speaker Change: Through enhancing risk model marketing and turn back processes.
Speaker Change: But jeff sites gathering initiatives and standardized scheduling process eliminated unnecessary truck rolls in the field and improve efficiency at.
Speaker Change: Allowing for an additional $6 million of field work across both 2023.
Speaker Change: In 2024.
Speaker Change: In 2024, we once again significantly improve occupational safety performance.
Speaker Change: With an 8% year over year reduction in Osha recordable incident rate.
Speaker Change: And a nearly 10% year over year reduction and preventable vehicle collision rate.
Speaker Change: Our electric system was hardened through the replacement of over 50 miles of poor performing underground cable.
Over 70000 structure life extensions or replacements and.
Speaker Change: And 10 transmission distribution substation rebuilds.
Speaker Change: Okay.
Speaker Change: Our teams are continuously working to derisk, our operations through many factors outside our control impact our business.
Speaker Change: State policy and regulation has been impact has been impactful and stability and consistency here has been a key differentiator of nice source.
Speaker Change: At the federal level.
We have thrive through many cycles and our five year plan is insulated from evolving policy mandates.
Speaker Change: <unk> and <unk> leadership, and nice source have advocated for policies that allow our retail customers to benefit from low cost and reliable energy at both our electric and gas businesses.
Speaker Change: Before I turn the call over.
Speaker Change: I want to thank all our employees and contractors for their dedication to the nisource values Donlin.
Speaker Change: The only things safer better more efficient and for less cost or.
Speaker Change: Our customers and shareholders alike rely on us every day.
Melody Birmingham: I'll now turn things over to melody.
Melody Birmingham: Alright, Thank you alright.
Melody Birmingham: I'll begin on slide six.
Speaker Change: We remain active on the regulatory front with both general rate case and rider filings. The NIPSCO electric rate case is driven by nearly $2 5 billion of incremental investment for our customers and communities in Northern Indiana last week, we were pleased to file a settlement agreement in the K.
Speaker Change: <unk>, marking our seventh settlement in the last 10 years in the state across both electric and gas businesses.
Speaker Change: The case incorporates the planned 2025 retirements of units 17, and 18 at the shape for generating station as well as the addition of four new solar and storage project major investments such as these are examples of our continued partnership with state policymakers regulators and our customers.
Speaker Change: During the fourth quarter, we received raised rate case settlement approvals from the Pennsylvania Public utility Commission.
Speaker Change: The Kentucky Public Service Commission, both in line with the original settlement term.
Together these requests supported over $300 million and incremental investment in these states since our last rate cases.
Speaker Change: In Virginia, we reached a universal settlement with parties to our case in December and are awaiting a final order.
Speaker Change: During the trailing 12 month period, ending December our average residential gas customer Bill declined 11% on a total bill basis of <unk>.
Speaker Change: Portability 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 to clients and reliability work, it's necessary for us to deliver safe and reliable energy to our customers.
Speaker Change: 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 cold storage facility was announced to be developed and Crown point, Indiana just outside of Chicago.
Speaker Change: NIPSCO will provide electric service to the 26 acre 320000 square foot site expected to be in service in 2026.
Speaker Change: NIPSCO will serve two other new projects with various in service dates this year as well.
Speaker Change: Our new concrete and aggregate producer will require NIPSCO investment in both electric and gas infrastructure. Additionally.
Speaker Change: Additionally, our new EV battery plant and new Carlisle, Indiana will require additional NIPSCO gas investment.
Speaker Change: Also on the gas side of our business one of our largest industrial customers in Virginia is converting their remaining onsite boilers to natural gas from coal.
Speaker Change: This project will provide significant energy cost savings for the customers and reduce carbon emissions from the facility.
Speaker Change: These projects are examples of how we remain engaged and supportive to develop and prosper the communities we serve.
Speaker Change: Economic development enhances our local tax space offers new job opportunities as well as mitigate the cost of our existing customer base and remains a priority for all of our teams.
Speaker Change: Customer satisfaction remains a priority and our nearly 4 million customers benefit from our operational excellence vision and capital investment plan.
Speaker Change: In December both our NIPSCO electric and Columbia gas of Virginia businesses were named number one in their regional customer service satisfaction surveys contributing.
Speaker Change: Contributing to their scores, where a combination of factors including price.
Speaker Change: And reliability billing and payment corporate citizenship communications and customer care.
Speaker Change: We are very very proud of these results.
Speaker Change: Also in December 9th source was named to the 2020 for Dow Jones sustainability indices, marking the 11th consecutive year. The company has earned this recognition.
Speaker Change: As a company our business strategy extends beyond delivering energy.
Speaker Change: It also purposefully includes a sustainability framework that allows nice source to help drive economic development and inclusion opportunities in the communities that we are very happy and privileged to serve.
Shaun: I'll now turn things over to Shaun.
Shaun: Thank you melody, let's start on slide seven ill.
Shaun: Begin with an update on the progress achieved implementing the generation transition at NIPSCO the transition to retire coal units is advancing as new renewable generation assets have come online and are supporting overall system reliability.
Shaun: Already achieved in January the Dun's Bridge, two solar project reached substantial completion.
Shaun: While 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.
Shaun: This continues NIPSCO his 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.
Shaun: Leveraging the power of this generating fleet. We look ahead through the changing energy landscape and slide eight provides an update on the progress made in the 2024 integrated resource plan process.
Shaun: In the fourth quarter NIPSCO submitted its AARP to the IRC.
Shaun: The Triennial plan was the product of extensive stakeholder collaboration over nine months and five public meetings.
Shaun: A project forward, a 20 year period and details generation required to meet both new demand in the region and maintain compliance with federal and MISO regulatory requirements.
Shaun: All sources of generation technology were considered including gas generation solar wind battery and long duration storage and small modular nuclear.
Shaun: Included in the analysis were updates to the capacity construct including MISO shift to a four season evaluation and as new requirements under the under the direct loss of load market design.
Shaun: These will have a substantial impact on generation requirements in the transmission organizations footprint.
Shaun: It revises resource accreditation now based on availability and reliability risk is greatest by utilizing historical and forward looking risk assessments.
Shaun: The preferred portfolio highlights new generation additions to the NIPSCO fleet required to maintain existing reliability and meet the new accreditation requirements.
Shaun: A mix of incremental generation resources of approximately 900 megawatts of capacity is likely required by 2028 to meet energy and capacity needs in all scenarios developed before considering potential data center growth.
Shaun: Our team is underway in the evaluation and commercialization of procuring solutions for our customers.
Shaun: While our team works through this process, we've increased the size of our upside Capex plan.
Shaun: 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.
Shaun: We will work through the project development regulatory approvals and commercial details and provide updates for the development of these assets.
Shaun: As Melanie detailed earlier, we have also increased our base capex plans to reflect new economic development projects in our Indiana and Virginia businesses.
Shaun: This moves our five year base Capex plan up to $19 4 billion.
Shaun: On shoring 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.
Shaun: Our teams continue to focus on safety and reliability of operations, making investments in pipeline replacement system modernization and new leak detection technology.
Shaun: We began our work to install advanced metering infrastructure in 2024 with $36 million of NIPSCO gas investment. This work continues in future years.
Shaun: 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 in recovery and reduced carrying charges.
Shaun: 81% of the divestments made in our base five year plan and expect to begin recovery inside 12 months of investment.
Shaun: Beyond the portfolio of base and upside Capex plans. Our teams continue to progress the development of incremental investment opportunities shared on slide 10.
Shaun: The most recent developments here relate to MISO is long range transmission planning process and the development of tranche two projects recently awarded to NIPSCO.
Shaun: MISO released details last months following approval by our board of directors in December.
Shaun: Package seeks to develop a 3600 mile transmission backbone and related projects to ensure future system reliability, and the 2000 <unk> and beyond.
Lloyd Yates: As Lloyd mentioned, we are evaluating these results and will incorporate these projects into our base Capex plan. Once we have completed the scope and estimation work necessary to launch those projects.
Lloyd Yates: Another incremental investment opportunity not yet reflected in the base of our upside capital expenditures plan as the investment necessary to support a datacenter development across our six states and in particular at NIPSCO.
Lloyd Yates: We continue to make excellent progress advancing datacenter strategies across our region, which represent a compelling opportunity for nice source.
Lloyd Yates: Additional development of these strategies as required to meet our threshold to include in either the base or the upside Capex plan with.
Lloyd Yates: 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.
Lloyd Yates: Continued execution on our financial commitments has strengthened the financial profile of the company, including its balance sheet positioning, which enables <unk> to be opportunistic in capital allocation decisions.
Lloyd Yates: The constructive regulatory backdrop in Indiana supports the 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.
Lloyd Yates: <unk> has deep access to capital markets and maintain flexibility to efficiently finance datacenter opportunities.
Lloyd Yates: <unk> also has a long standing 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 11.
Lloyd Yates: As Lloyd already higher highlighted 2024 was a strong financial year for Nisource, achieving $1 75 per share an increase of <unk> 15 per share.
Lloyd Yates: Higher rate base investments drove $367 million in incremental revenue.
Lloyd Yates: This was partly offset by increased O&M depreciation and Noncontrolling interest.
Lloyd Yates: In the fourth quarter, we reported adjusted EPS of <unk> 49 per share a decrease of <unk> <unk> per share versus last year.
Lloyd Yates: The decline was driven by Noncontrolling interest increased depreciation and other taxes and partly offset by increased rate base investment.
Lloyd Yates: Increased customer additions and expanded customer usage contributed $36 million in revenues across our electric and gas businesses for the year.
Lloyd Yates: On slide 13, Youll see a summary of our financial commitments.
Lloyd Yates: 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.
Lloyd Yates: This is consistent with our practice of guiding off of actual results achieved and reflects 6% to 8% growth off the $1 75 achieved in 2024.
Lloyd Yates: 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.
Lloyd Yates: After establishing initial guidance on our third quarter call.
Lloyd Yates: Our financial commitments are fueled by a $19 4 billion dollar base five year Capex plan.
Lloyd Yates: Which drives rate base growth across 2025 through 2029 of the 8% to 10% and delivers an annual adjusted EPS growth of 6% to 8%.
Lloyd Yates: This does not include any impacts from the upside capex plan or incremental investment opportunities.
Lloyd Yates: Assumptions around key externalities and our plan continues to be de risked.
Lloyd Yates: For example, customer growth continues to be strong. However, our plan only assumes zero to one 5% growth per year across all customer classes.
Lloyd Yates: 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.
Lloyd Yates: We remain confident in achieving our long term growth rate in all years of the plan.
Lloyd Yates: 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.
Lloyd Yates: Our forecasts incorporate continued use of long established capital trackers and nearly all of our jurisdictions and are based on what we believe are realistic regulatory outcomes.
Lloyd Yates: I would note we remain focused on minimizing the financial impact that our safety reliability and compliance work has across our customer base.
Lloyd Yates: Cost savings initiatives like project, Apollo detailed by Lloyd and efficiencies, resulting from capital investments moderate the impact on customers.
Lloyd Yates: Our revised plan projects less than 5% average annual bill increases across Nisource.
Lloyd Yates: Moving to slide 14, let's focus on the balance sheet strength of the business.
Lloyd Yates: 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.
Lloyd Yates: <unk> for the year.
Lloyd Yates: 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.
Lloyd Yates: <unk> to debt for 2024 was 14, 6% up from 14, 1% in 2023.
Lloyd Yates: Reflected in these results for both years is approximately 50 basis points reduction from unfavorable weather versus normal.
Lloyd Yates: Our balance sheet has moved steadily in the right direction. Since 2022, we are well within our <unk>.
Lloyd Yates: <unk> to debt range.
Lloyd Yates: We continue to target, 2014% to 16% in all years of our plan using a balanced mix of cash from operations, new long term debt and $200 million to $300 million of annual maintenance equity to maintain our capital structure through the use of our at the market program.
Lloyd Yates: In January the annualized dividend target was increased from $1 six to $1 12 per share. This continues each year that the nisource 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%.
Lloyd Yates: Payout ratio guidance.
Lloyd Yates: We will continue to be thoughtful about capital allocation and the high cost of capital environment, While also prioritizing infrastructure investments for our customers.
Lloyd Yates: As we shared on slide 15, consistent execution of the business plan to drive sustainable growth and financial results.
Lloyd Yates: In each year of the plan <unk> has achieved the upper half of guidance range or better.
Lloyd Yates: Each time, we've executed this we've rebased future adjusted EPS guidance upwards off these actual results.
Lloyd Yates: This represents differentiated value creation for our shareholders. We've accomplished this now four years in a row the.
Lloyd Yates: The value of this compounds as future years grow and reflect the outperformance achieved.
Lloyd Yates: For example, 2020 fives 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.
Lloyd Yates: This is differentiated in our sector, which has delivered five 9% at the median and adjusted EPS since 2021 compared to the eight 5% achieved by nice source the underlying business plan.
Lloyd Yates: Supported by strong regulatory construct and nisource jurisdictions, coupled with responsible investments and identifiable regulatory programs enable a reasonable return on and of investment over our plan.
Lloyd Yates: Confidence in these investments enables the re basing of annual growth rate, which supports this higher adjusted EPS range as we execute the plan.
Lloyd Yates: I'll conclude with highlights of our growing track record on slide 16.
Lloyd Yates: Our financial commitments have been achieved for 2024 and are on track for 2025.
Lloyd Yates: We remain confident our near term and long term guidance remains resilient to market conditions and other forces outside our control.
Lloyd Yates: And are based on realistic and executable assumptions.
Lloyd Yates: We continue to execute the recovery of critical investments necessary to ensure safety and reliability of our systems regulatory.
Lloyd Yates: <unk> 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.
Lloyd Yates: The financing plan continues to be reasonable and highly executable.
Lloyd Yates: 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.
Lloyd Yates: Finally, our base and upside Capex plans demonstrate both programmatic investment plans and accelerated investment opportunities for customers and investors.
Lloyd Yates: To reiterate <unk>.
Lloyd Yates: 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 eight 5% adjusted EPS growth rate we've executed since <unk>.
Lloyd Yates: 'twenty one.
Lloyd Yates: The value proposition Nisource continues to offer investors is diversified and regulated utility assets with the opportunity to invest in both programmatic gas infrastructure in the long term energy transition story of a fully regulated fully integrated and regulated electric business.
Lloyd Yates: These elements have been core to our story for some time, but the emerging opportunity to support economic development Onshoring, and new datacenter development truly differentiate our value proposition relative to many alternatives in the market today.
Speaker Change: I would now like to call turn the call over to the operator for Q&A.
Lloyd Yates: Thank you.
Lloyd Yates: Ladies and gentlemen, we will now begin the question and answer session I would like to remind everyone. I have one question. One follow up should you have a question. Please press <unk>.
Lloyd Yates: One of your Touchtone phone and you'll hear a prompt that your hands has been raised should you wish to withdraw. Please press star one again, if you're using a speaker phone. Please lift the handset before pressing any case.
Speaker Change: Our first question comes from the line of Julien Dumoulin Smith from Jefferies. Please go ahead.
Speaker Change: Hey, good morning team. Thank you guys very much at the time and congratulations on your continued successes here.
Speaker Change: Good morning.
Speaker Change: Good morning, So maybe just to kick things off I mean, genco filing it's gotten a good degree of attention here is sort of a novel concept in the sector can you speak to how you imagine.
Speaker Change: Potentially negotiated some of these risk sharing consideration 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 investment or are those effectively replicated as you foresee these commercial arrangements and then maybe.
Speaker Change: 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 interim.
Michael Lewis: So let me start and I'll turn this over to Michael.
Michael Lewis: Tristan details.
Michael Lewis: I mentioned several times that data centers and all the files.
Michael Lewis: We are making with respect to data centers is a 2025.
Michael Lewis: And for Us and I think I'm optimistic about our past in terms of and I'll use our methodical path in terms of pursuit of this opportunity and if you remember if you go back to our four pillars now we said we want to protect our existing customers our existence as the customers.
Michael Lewis: We want to be able to serve these new customers with speed agility and flexibility because we thought the speed the market will be an advantage for us we want to maintain NIPSCO financial integrity and preserve our flexibility in the business and when we think we have a great base business and we wanted to make sure that we continue to focus on that base business.
Michael Lewis: And have this be total upside so with that.
Michael Lewis: Genco debt business declination of filing with the <unk> I would say an important step in terms of how we pursue this opportunity and I will turn it over to Michael is up but the details of that.
Michael Lewis: Good morning, Julien So Lloyd's hit on the primary points really what the declination filing allows us to it as a regulated entity think of it just like you would.
Michael Lewis: 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 and.
Michael Lewis: 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 expeditious fashion. So it is a mechanism that is simply to Lloyd's point.
Michael Lewis: It protects the existing system customers. It helps us serve those new customers with speed and flexibility. It maintains NIPSCO financial integrity and it helps us ensure that our base plan with strong base plan that we have is not impacted by the ability to bring in large load customers and Sean may want to speak a little bit to the final.
Sean: Aspects of that yes, Julian I think the other part of your question was as we think about whether it's traditional ratemaking or otherwise what are the advantages potentially that are coming from this in 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 or the.
Sean: Project, we're making progress we're making there can allow us to move through ratemaking 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 <unk>. When they are going to start to create cash flows coming back in for our shareholders that may be a different time horizon than the <unk>.
Sean: Traditional rate case model that NIPSCO has been following which inherently has been just about every other year filing a rate case. So this allows us to better align 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 thats one key point to highlight the second piece I think we.
Sean: 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 debase finance.
Sean: Plant just from a sheer finance ability standpoint, that's positioned <unk> to have much more flexibility to be able to address and afford construction to support these potential larger consumers.
Sean: And then just a quick follow up there can you speak to.
Sean: <unk> updated load forecast around data center prospects right, whether that's expansion of phases that folks are initially talking to you about.
Sean: You've made these regulatory filings over the course of the last eight months that have been sort of incrementally update, but where do you stand today in terms of the scope of the total opportunity in front of you obviously understand that's on a projected basis might be protracted period.
Sean: Sure. So we haven't updated anything beyond our RFP at this point is we included the RFP. We had the reference case of 2600 megawatts and then an upside case, though was 8000 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.
Sean: 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 positive.
Okay.
Speaker Change: Wonderful guys. Thank you speak to you soon.
Speaker Change: Thank you. Our next question comes from the line of Shar <unk> from Guggenheim Partners. Please go ahead.
Speaker Change: Okay.
Speaker Change: Hey, guys, Hey, Lloyd Hey, Sean.
Speaker Change: Good morning Shar.
Speaker Change: Good morning, just let me follow up on Julians question.
Speaker Change: On sort of the data center stuff I mean, obviously, the governor talked about four of them coming media reports have talked about.
Speaker Change: Several coming as well to northern Indiana Lloyd in your prepared remarks, you talked about still 25 as an opportunity can we just fine tune just get a sense on timing there. We're in the discussions you are at how soon can Adobe sign is this a one H opportunities to each opportunity.
Speaker Change: So not.
Speaker Change: I'm not willing to narrow that down and I hear you about timing and that will.
Speaker Change: Im going to stick to my 25 opportunity issue.
Speaker Change: I will say is we're optimistic the conversations are progressing very well.
Speaker Change: And as soon as we have something signed we're going to get it out to you guys, but not before that.
Speaker Change: Got it that's helpful. I just wanted to get a sense for that if you reiterated 20 months, we still feel comfortable.
Speaker Change: Just on financing obviously.
Speaker Change: There is a higher capex opportunity of 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.
Speaker Change: Did really well with that minority sale or is kind of the ATM enough to fund the incremental capex beyond today's update thanks.
Speaker Change: So yes I.
Speaker Change: I think the most efficient form of financing and this 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 Thats, where we will go first we'll also look thoughtfully around the capital allocation and try and shorten regulatory lag that inherently does that to increase that.
Speaker Change: Cash from operations, so thats kind of positioning and then we were 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.
Speaker Change: We're able to achieve incremental financing without the need for equity directly in the plan to access the upside plan.
Speaker Change: Got it. So you are comfortable with the current ATM program internal cash flow of junior subordinated notes and the scenario, even if the higher capex comes into planned beyond what you just disclosed today.
Speaker Change: Absolutely.
Speaker Change: Fantastic. Thank you guys congrats here.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line.
Speaker Change: Et cetera.
Speaker Change: JP Morgan. Please go ahead Sir.
Speaker Change: Hey, good morning, Thanks for the time today.
Speaker Change: And maybe to hit a couple more of these data center questions first.
Speaker Change: You laid out a lot of the drivers behind the genco filing.
Speaker Change: You need <unk> 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 loan side and on the beiser changes. Thank you.
Speaker Change: Michael.
Speaker Change: So to answer your question, though we do not need <unk> approval in order to be able to announce a deal, but we do need <unk> approval of the genco declination in setting up the entity.
Speaker Change: 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. They continue to progress well and when we look at those opportunities that would be included within that framework and Thats what gives us the benefits of being able to do that on their time timelines.
Speaker Change: 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 and your current base plan versus the three two plan can you walk through what the drivers of those changes were.
There were no material shifts in those allocations, we could we can walk you through if you would like Rick and rich and to set things up but there were no material changes there.
Speaker Change: Great. Thank you I'll leave it there.
Speaker Change: Our next question comes from the line of Travis Miller from Morningstar. Please go ahead.
Travis Miller: Good morning, everyone and thank you.
Speaker Change: Good morning.
Speaker Change: I was wondering if you could give an update on the laporte facility the Microsoft or.
Speaker Change: Is there still going on the ground so to speak or are still in some kind of contract negotiations or financing under what the status is of that project.
Speaker Change: Yeah.
Speaker Change: So as with all of our customers. We continue to work through the specific timelines and activities that would be necessary to meet their objectives.
Speaker Change: We do not have steel going into the ground in Laporte right now as we mentioned were.
Finishing up the framework and the construct that we've laid out.
Speaker Change: The negotiations and the discussions with multiple Counterparties continues to progress well.
Speaker Change: Okay, Great and then one more we've seen a couple of announcements not necessarily in your region, but other places in the U S about datacenters and developers taking gas directly.
Speaker Change: Particularly midstream companies, but do you see an opportunity there to serve behind the meter or on site generation through your guests system rather than through the electric system.
Speaker Change: 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 and serving those customers. There is a need for them to be able to access the energy markets in whatever way they can and the gas system is very robust and reliable <unk>.
Speaker Change: To do that and is beneficial and that has benefited all of our.
Speaker Change: Benefited multiple of our Columbia companies, we've seen upside in some of our capital opportunities and mostly Virginia, and possibly in Ohio, Seven data center customers off of our gas infrastructure.
Speaker Change: At least as another opportunity for the company. So we're excited about that also.
Speaker Change: Okay, and you mentioned the Capex. So there is capex involved as well, but that's sort of just flow demand.
Speaker Change: Right.
Speaker Change: Thats correct, Okay great.
Speaker Change: Very good thanks, so much.
Speaker Change: Our next question comes from the line of <unk> Chopra from Evercore ISI. Please go ahead.
Speaker Change: Hey, Deane good morning, Thanks for giving me time, Hey, just good morning, I want to go back.
Speaker Change: Good morning, I want to go back to the Genco entity.
Speaker Change: And I think you guys mentioned.
Speaker Change: Cash flow to shareholders. One thing you can clarify.
Speaker Change: Our commentary, it's a regulated entity as we think about returns.
Speaker Change: This should look like regulated returns right or would this be.
Speaker Change: The high returns first.
Speaker Change: And then second maybe just the timing of that cash flow is that.
Speaker Change: Do you expect.
Speaker Change: The cash flow benefit from this entity in 2025 to 2029, Peter it or is it.
Beyond that those were my two questions. Thank you.
Speaker Change: Oh.
Speaker Change: So I think.
Speaker Change: As we talk about the.
Speaker Change: NIPSCO Genco I think you would we would think about this.
Speaker Change: <unk>.
Speaker Change: And we would have maybe other than regulated returns.
Speaker Change: I think this allows us to operate in areas, we negotiate with our counterparties to get returns above and beyond what are potential regulated returns are.
Speaker Change: Got it okay, so above and beyond there and then what about the timing like when should we see earnings.
Speaker Change: From these kind of opportunities start accumulating.
Speaker Change: As it relates to the finished line is it.
Speaker Change: 25, 2019, or no credit goal really end of the decade and beyond.
Speaker Change: As I said earlier at the beginning of this will be a 2025 events and when we have signed contracts with Counterparties and have definitive information, we will get that out to you guys as soon as possible.
Speaker Change: Okay.
Speaker Change: Fair enough. Thanks, Laurie I appreciate the color.
Speaker Change: Mhm.
Speaker Change: Thank you again should you have a question. Please press star followed by the number one.
Speaker Change: Okay.
Speaker Change: Our last question comes from the line of Steve Fleishman from Wolfe Research Sir. Please go ahead.
Steve Fleishman: Yeah, Hi, good morning Congrats.
Speaker Change: Congrats on the refining.
Steve Fleishman: Ah so.
Steve Fleishman: Apologizing.
Steve Fleishman: Apologizing for hitting some of the same topics.
But just on the declination filing do we have do you know do we know where other parties are on this yet is there any kind of schedule.
Steve Fleishman: So just any color on that.
Speaker Change: 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're working through that process now to make sure that we're providing feedback and answering those questions. We would expect that.
Speaker Change: 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 one.
Speaker Change: To our existing customer base, but also in enabling what we have done and continue to do which 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 communities where developers of projects for our existing customer base and four.
Speaker Change: 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.
Speaker Change: <unk> recommendations by parties.
Speaker Change: Uh huh.
Speaker Change: Like is there a process or are you just are you in talks with like settlement talks or.
Speaker Change: I'm just trying to understand like the process of this case.
Speaker Change: Yes. It will proceed through the normal <unk> process that will go through the standard work of being reviewed.
Speaker Change: 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.
Speaker Change: Perceive that through the normal <unk> process. It is not materially different in the process than what we would do with our other filings right.
Michael Lewis: No I would just add on to what Michael said, it's a standard procedural filing and so.
Michael Lewis: We expect an order in ruling around Q3 of 2025.
Michael Lewis: Just like any other standard order or standard filing.
Michael Lewis: Anytime it has individuals who choose to intervene but our team.
Michael Lewis: A lot of work.
Michael Lewis: Up front working with our stakeholders to make sure they understood what it was in socializing the benefit.
Michael Lewis: The genco.
Michael Lewis: So we feel fairly confident that the destination application in this strategy are consistent with Indiana law.
Michael Lewis: Okay.
Speaker Change: And I just wanted to clarify just is this if you did set this struck her up.
Michael Lewis: Would there be anything needed from kind of FERC too.
Michael Lewis: Prove this or can it all be done with just state approvals.
So we need to IRC approved first and then at some point in the future we will likely request some different approvals associated with FERC, but the primary approval that we need is what the IRC. The FERC approvals don't need to be soft on the beginning of the application or all.
Michael Lewis: And what we're doing what we're doing right now through the process.
Speaker Change: Okay, but to actually set it up and sign a contract.
Michael Lewis: Do need FERC.
Michael Lewis: You do not you do not it is more of a.
Michael Lewis: Don't want.
Michael Lewis: Don't want to use the word administrative filings, but it is more of filings that we need to do to ensure that we are starting all i's and crossing our 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.
Speaker Change: Got it and then lastly, you've kind of answered this but just maybe more specifically since you've been very active with these customers.
Speaker Change: Subsequent to the deep seek kind of event. The last few weeks have you seen any.
Speaker Change: Change in tone from our customers on desire to move forward.
Speaker Change: Our changes in there we have not seen any change.
Speaker Change: Yes, yes, sorry, 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 with in this space.
Speaker Change: Our just beneficial to I think all customers in all aspects, but it has not impacted demand in anyway.
Speaker Change: Okay.
Speaker Change: Great. Thank you very much I appreciate it.
Speaker Change: Alright.
Speaker Change: Thank you that concludes our Q&A session I will now turn the call back to our CEO.
Speaker Change: For closing remarks.
Speaker Change: Okay.
Speaker Change: Thank you for your questions. Thank you for your interest and investment in nice source.
Speaker Change: Have a great day.
Speaker Change: That concludes our conference call for today, you may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.