The operator welcomes participants to the Q3 2023 NiSource Earnings Conference Call and introduces the speakers. The purpose of the call is to review NiSource's financial performance and provide an update on operations and growth drivers. The speakers remind listeners that some statements may be forward-looking and refer to non-GAAP measures. The call is then turned over to NiSource's CEO, Lloyd Yates, who will discuss the company's value proposition.

The company has a strong financial outlook, with $16.6 billion of rate base deployed and plans to invest another $16 billion over the next five years. They expect to achieve EPS growth of 8% in 2024 and have a long-term EPS growth guidance of 6-8%. Their regulatory and stakeholder foundation sets them apart from their competitors, as seen in recent approvals of rate cases in Indiana and Maryland. They have also filed a new gas general rate case in Indiana seeking recovery of $1.1 billion in investments.

The company's balance sheet flexibility allows them to optimize cost of capital for customers and returns for shareholders. They are currently experiencing a record investment cycle due to various factors and have a surplus of investment opportunities. They plan to invest $16 billion over the next five years, with a focus on high-risk adjusted returns. They have ongoing regulatory cases and are constantly communicating with key stakeholders to ensure timely recovery of their investments.

Columbia Gas, Pennsylvania has engaged in dialogue with stakeholders to improve long-term infrastructure and has received approval to replace infrastructure based on risks. This includes replacing first-generation assets and has led to an increase in customer count. The company has also been involved in economic development efforts, such as supporting a planned expansion of a titanium melting company. Operational excellence is a key focus for the company, with Project Apollo generating efficiencies and keeping O&M costs flat.

NiSource has made significant investments in technology to reduce risk and improve customer service. They are focusing on addressing large-volume leaks and prioritizing repairs to reduce methane emissions and improve efficiency. NIPSCO's generation transition is also progressing, with four renewable projects already in service and more expected to come online in the next few years. These projects will help retire all coal-fired generation by 2028 and keep customer bills in line with inflation. NiSource credits their dedicated employees for these achievements.

NIPSCO has filed a modification with the IURC for full ownership of two solar and storage projects, which will provide lower costs to customers and enhance their base plan. They are also evaluating the potential benefits of the Inflation Reduction Act for two other projects. NIPSCO has several other generation-related filings under review, including a CPCN for a gas peaker project. Their in-service renewable projects are performing well and have resulted in $19.9 million in savings for customers.

NiSource has identified additional capital expenditure opportunities beyond their base financial plan through 2028, including continued use of the IRA, long-term generation investments, gas infrastructure spending, and potential future opportunities for decarbonization. They are actively evaluating these opportunities to deliver safe, reliable, and cost-effective energy for their communities. As technology develops, they will incorporate clean energy investments into their plans in a customer-friendly way. They have already launched a hydrogen blending project to reduce emissions and enhance customer value.

Columbia Gas of Pennsylvania and EN Engineering have partnered to construct a skid at their training facility that allows for the controlled blending of hydrogen into their natural gas system. This project is one step in determining the viability of using hydrogen in other applications such as factories and power plants. The company has also issued their first sustainability report, highlighting their efforts to incorporate ESG policies throughout the organization. In the third quarter, non-GAAP net operating earnings were $84 million, in line with their year-to-date plan. Constructive regulatory outcomes and O&M initiatives support their guidance of EPS in the upper half of their previously provided range.

In the third quarter, Gas Distribution operating earnings increased by $21 million due to new rates and capital investment programs. Electric operating earnings also increased by $69 million, primarily due to new rates and improved customer usage. Corporate and Other contributed $5 million due to lower overall costs. The company's debt level was $13.3 billion, with $11 billion in long-term debt. Net available liquidity was $1 billion and all three credit agencies have affirmed the company's ratings and outlooks. The company remains committed to its investment-grade credit ratings and aims to achieve a 14% to 16% FFO to debt range by the end of 2023.

NiSource is extending their long-term EPS growth guidance and increasing their base capital plan to support annual rate base growth. They are also highlighting potential upside capital expenditure opportunities and will continue to update their annual capital expenditures plans. In terms of financing, they plan to remarket their equity units later this month and issue annual maintenance equity in the 2025 to 2028 period to maintain their capital structure.

In 2023, the company expects to strengthen its balance sheet and access its upside CapEx with minimal incremental equity. This financing plan is reflected in the company's projected growth rate and supports a 6-8% NOEPS growth rate and 14-16% FFO to debt annually. The company has been able to increase its capital plan by $1 billion without requiring much additional equity, thanks to higher expected deferred taxes and other factors. The company expects minimal changes to its financing plan when accessing investment opportunities within the upside plan. The company remains committed to maintaining a 14-16% FFO to debt ratio and is aware of the risks of high leverage.

The company has announced a refreshed long-term financial plan that takes into consideration the current volatile and expensive capital markets. They have also outperformed their NOEPS guidance and received approval for a $2.15 billion capital raise. They have also identified $2 billion of additional capital expenditures to improve their services. The company is committed to execution and growth and is open for questions from investors.

The speaker asks about the remaining renewable projects at NIPSCO and the potential to replace tax equity with increased ownership. The response states that the remaining two projects could represent around $400 million in incremental capital and that there have not been significant supply chain issues for obtaining panels from the developers. The company feels confident in their in-service dates for the projects.

The speaker thanks the audience and expresses excitement for seeing them at the EI conference in a couple of weeks. The next question comes from Durgesh Chopra, who asks about the difference between tax equity and rate base ownership for two projects. The speaker explains that they chose rate base ownership because it provided more benefits for customers in the short and long term. There may be differences between projects in terms of capacity factors and the inclusion of storage, but they will continue to evaluate the remaining two projects under the tax transferability provision to determine the best course of action.

The speaker is discussing their plans for a methodical and disciplined approach to ensure the best benefit for all stakeholders. They address the question of remarketing and state that their guidance includes the assumption of remarketing in their EPS guidance for 2024. They also mention their flexibility in case the units are not remarketed, and their plan to raise equity in 2023.

The discussion is about the final decision on the Fairbanks and Gibson projects and the expected timeline for that decision. The gas price assumptions and the impact on customer bills are also discussed, with the company stating that they did not build the plan based on low gas prices and will continue to manage costs. The question is raised about potential incremental capital and whether it will be included in the plan in the coming quarters.

Paul Fremont asked a question about incremental capital opportunities and whether they would be additive or part of the base CapEx. Lloyd Yates responded that it would be both, as they would take advantage of quarterly opportunities and also refresh their capital plans annually to reflect these opportunities. Richard Sunderland asked a follow-up question about the NIPSCO transaction with Blackstone and the potential synergies and upside in the Indiana territory. Shawn Anderson, another participant, answered that the partnership with Blackstone has been very robust and they are looking at ways to benefit the state of Indiana, such as economic development and job creation.

In this paragraph, Paul Fremont congratulates the company on their additional capital spend and asks about the breakdown of the spending for specific projects. Lloyd Yates and Michael Luhrs explain that $500 million is associated with the acquisition of Calvary and Dunns Bridge, and the rest of the $1 billion is for various projects such as MISO transmission, gas modernization, and electric resiliency. There is also some delay in gas spending, which has been moved to 2027 to align with regulatory timelines.

The speakers discuss the possibility of a shift in investment thesis and the impact on workforce development. They also mention incremental investments and the percentage that would be supported by equity. They clarify that all incremental capital expenditures are 100% regulated investments and could benefit from favorable tax treatment. They also mention that there are no material incremental CapEx in 2024 and the financing plan is unchanged in all scenarios.

The speaker explains that the company's plan assumes no equity issued in 2024 and that all years of the plan are within the 14% to 16% FFO to debt range. They also mention that the 2028 growth rate is still expected to support the 8% to 10% annual rate base growth. Additionally, the company plans to stay within a 60% to 70% payout ratio and assume a flat PE throughout the plan.

The speaker discusses the company's financing plan and mentions that they do not currently plan to sell any of their LDCs. They believe in the scale of their assets and are considering adding storage to their other solar sites in the future.

During a conference call, Aditya Gandhi from Wolfe Research asks Lloyd Yates, Shawn Anderson, and Michael about their plans for the future. Shawn responds by explaining that their taxpayer status has changed, resulting in less cash utilization for tax payments and more capital assets. Aditya's second question is about their 6% to 8% long-term OEPS growth range, to which Shawn responds that there is no change to the plan and they still believe it is feasible due to their programmatic investments and regulatory mechanisms. The plan also incorporates updated guidance on interest rates.

The speaker discusses the timing of various incremental factors and their impact on the company's financials. They mention upcoming projects for conversion to tax credit transferability and updates on the IRP towards the end of the year, which will contribute to the $2 billion in expected revenue. They also mention a potential $400 million uplift in FFO due to a shift away from tax equity.

The speakers discuss the impact of FFO to debt on tax transferability and the ability to monetize FFO. They mention working through the IRP and potential upside opportunities, as well as updating the analysis for Fairbanks and Gibson. They also mention the IRP refresh in 2024 and incorporating batteries, storage, and additional generation. The FFO to debt impact is already factored into the 14% to 16% annual guidance rate, and any changes may be due to timing rather than long-term benefits.

The speaker discusses changes that have occurred through the concepts of full ownership and tax equity, which have allowed the company to retain tax attributes for certain projects. They mention that there will be updates on PHMSA next year and express confidence in their team and their executable plan.

The speaker discusses the retirement of Randy Hulen, Head of Investor Relations and Treasury at NiSource, after nearly three decades of service. They express gratitude for his leadership and announce the appointment of Tchapo Napoe as VP of Treasury and Corporate Finance and Chris Turnure as Head of Investor Relations. The call concludes with thanks to the participants.

This summary was generated with AI and may contain some inaccuracies.