The operator introduces the Q1 2024 NiSource Earnings Conference Call and hands it over to the Director of Investor Relations, Chris Turnure. Turnure welcomes everyone and introduces the other speakers. He reminds listeners that some statements made during the call may be forward-looking and that non-GAAP measures will be discussed. The CEO, Lloyd Yates, then takes over and begins by discussing the NiSource investment thesis.

The company serves its customers by providing safe and affordable energy through efficient capital deployment and constructive regulatory mechanisms. They have a $16.4 billion base CapEx plan for the next five years and a flexible balance sheet for sustainable investments. They prioritize return on investment and have a total rate base of $18.8 billion across six states, contributing to 14% of US GDP. They expect growth in their system due to data centers and manufacturing. Northern Indiana is a favorable location for data center development.

Over the past five years, NIPSCO and the Columbia Gas family of companies have contributed over $1.4 billion in property taxes to local communities, providing essential services and supporting the growth of these areas. The company remains committed to delivering safe, reliable, and cost-effective service to its customers, as shown in its first quarter 2024 adjusted EPS and reaffirmed guidance for future years. NIPSCO also has a strong regulatory and stakeholder foundation, as demonstrated by recent settlements and approvals for infrastructure projects. The company is also investing in upgrading outdated technology to improve reliability and efficiency.

NiSource's work and asset management program is focused on scheduling and managing work and assets, resulting in improved reliability and cost savings for customers. The company has requested a regulatory deferral mechanism to align rate making with long-term customer value. NiSource also prioritizes energy resiliency and has a diverse electric generation mix to mitigate risks. The company's safety journey since 2017 has seen significant improvements, with a focus on engineering design and process-based solutions. NiSource's safety management system has been reconfirmed for American Petroleum Institute recommended practice 1173, making the company one of only two utilities in the world to maintain this designation.

The company has completed a conformance assessment for standard 55,001 and is pursuing certification from ISO. They have made advancements in asset management and have implemented safety measures such as automatic shutoff valves and remote pressure monitoring. They have also significantly reduced the amount of priority pipe and have improved their mapping of gas service lines. The company has a strong safety culture and is committed to employee certification and training, knowledge transfer, technology utilization, and community engagement. They have a timeline of regulatory activity and have been able to employ capital trackers and forward-looking rate case test years for most of their capital expenditures. Recently, Columbia Gas of Ohio filed an annual infrastructure replacement program and NIPSCO's gas settlement was reached through a rigorous process involving multiple stakeholders.

The company has started their integrated resource plan process and is actively engaging with stakeholders to ensure transparency. They have confidence in their investments and are committed to economic development in their service territory. They have invested over $1.7 billion in capital expenditures and have seen a decrease in residential gas customer bills. They have a base capital plan of $16.4 billion through 2028 to maintain safe and reliable energy infrastructure.

The company's investments are diversified and low-risk, with a focus on renewable energy. The company has also identified additional investment opportunities to enhance service for their communities, including potential investments in generation, gas distribution, advance metering, and renewable natural gas. The long-term plan does not currently include any data center load growth assumptions or significant infrastructure investments and upgrades, but the company is receiving inquiries from potential customers looking to invest in their service territory.

The company is focused on developing profitable projects for all their utility companies. They have commenced a planning process for NIPSCO to determine future energy demand and generation requirements. There have been changes to the company's financial disclosures, including realigning segments and changing the name of their primary financial metric to adjusted EPS. First quarter results showed a 10% increase in adjusted EPS.

The NIPSCO minority interest transaction and redemption of preferred equity securities had little impact on interest expense and preferred interest. NiSource has adjusted GAAP net income and EPS to account for weather and has regulatory mechanisms in place to protect against customer bill volatility. Long-term financial guidance is reaffirmed, with a 6-8% annual growth rate and increased visibility into returns of capital. The company's internal forecasts are based on realistic regulatory outcomes and incorporate cost of capital assumptions from third quarter 2023.

The company is able to deliver its $16.4 billion investment plan to customers while keeping average annual residential total bill growth at or below 4% for the next five years. This is possible due to stable and low commodity prices in the region. The company's financing plan is reaffirmed, with a focus on maintaining a 14-16% FFO to debt ratio. The company's diverse funding sources and balance sheet flexibility allow for a balance between growth and credit quality. The addition of $400 million to the investment plan does not change the company's equity needs, thanks to the positive cash flow attributes of a substitute funding method. The company has met its financial commitments for the quarter and is on track to meet its 2024 EPS guidance.

NiSource's NIPSCO gas settlement and continued employment of capital trackers demonstrate the company's strong regulatory and stakeholder foundation. The company's balance sheet flexibility allows for increased investment in base capital expenditure without the need for external equity. The revised base and upside CapEx figures highlight the long-term and programmatic nature of the company's plan. NiSource's value proposition is a diversified and fully regulated utility with opportunities for investment in both gas infrastructure and the energy transition story. The emerging opportunity to support energy development and power demand from robust economic development and new data center development sets NiSource apart from other alternatives in the market. During the Q&A session, the company was asked about the potential demand for data centers in Indiana, and they discussed the impact on their overall plan and the need for rate design considerations to balance the needs of residential customers and data center customers.

The speaker, Lloyd Yates, discusses the potential for data center development in Northern Indiana and how NIPSCO is currently in discussions with data center developers. They are working on ways to structure the opportunity to benefit all stakeholders, including customers, shareholders, and communities. They are optimistic about the potential for growth but do not have specific details yet. The speaker also mentions the possibility of using the ATM to cover any incremental equity needs for upside capital. The remaining $1.6 billion of upside capital will be used for projects that move into the base plan, and the funding source for this is still being determined.

Shar asked about the types of projects included in the upside CapEx plan. NiSource plans to include electric generation projects based on the results of the 2021 IRP and will launch the 2024 IRP process to determine how these projects fit into their investment timeline. Gas infrastructure work and electric T&D projects may also contribute to the upside plan, along with economic development, data center, and technology innovation projects. These projects will be evaluated based on their potential to deliver value and help NiSource and their communities grow. The company will consider financing options for these projects as they arise.

The company expects efficient financing for their projects due to their operations in regulatory jurisdictions with balanced mechanisms. They are committed to maintaining a balanced capital structure and credit quality. The data center market is evolving quickly and they are positioning themselves to be a fast-moving utility. In terms of regulatory items, the company is engaged with stakeholders in their Pennsylvania rate case and expects milestones and potential settlements in the second half of the year.

During a conference call, Lloyd Yates and Melody Birmingham discussed the progress of a Pennsylvania rate case and the NIPSCO gas rate case. They stated that the Pennsylvania rate case is going well and they are in ongoing discussions with stakeholders. They also expect to receive an order on the NIPSCO gas rate case in the summer, which should not have a negative impact on their financials due to a deferral mechanism. When asked about the $1.6 billion of upside, they mentioned that some of it comes from gas-related sources and did not specify which jurisdictions have the most upside.

The speaker discusses potential opportunities for capital investment in various jurisdictions, with Ohio, Indiana, and Pennsylvania having the biggest impact due to their size. There are also opportunities in smaller jurisdictions, such as Virginia, and the company is actively exploring these opportunities in order to reach the $1.6 billion upside. They will announce these projects once they have a high level of confidence in them.

The speaker, Shawn, emphasizes the importance of stakeholder alignment and the timing of implementing new rules in regards to their current CapEx plan. This could potentially extend the work into the early 2030s and will be dictated by stakeholder engagement and PHMSA. The mix of business in terms of gas and electric includes opportunities in manufacturing, such as reshoring and onshoring, outside of data centers. The company is focused on strengthening their economic development pipeline and taking advantage of incentives for job creation in the states they operate in.

During a conference call, a representative from UBS Securities asked about the technology capital deferral mechanism and how much capital could flow through it. The representative also inquired about the PHMSA rules and what would trigger additional capital opportunities. The company's CEO explained that they are actively involved in the rulemaking process and expect to see capital upside sometime in the middle of the plan. The representative also asked about the company's ATM issuance, to which the representative from the company responded that they have done approximately one third of the issuance to date.

The speaker, William Appicelli, thanks the operator and turns the call back over to management for closing remarks. Lloyd Yates expresses optimism about the NiSource plan and thanks the participants for their questions. The operator then concludes the call and thanks everyone for joining before disconnecting.

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