At its Investor Day 2022, NiSource announced the results of its business review, an extension to its long-term growth plan and a 2040 net zero goal that puts it among the industry leaders.

To view other presentations, the full webcast, slides and other materials, visit our Investor Day 2022 page.

Investor Day 2022 Question and Answer Session 33:37

View Transcript

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

Thank you, Donald. Now, I'd like to take a few moments to sum up what we've heard today. Here we are, back on my favorite slide. There's a lot to like about this slide. We've laid out a de-risked, sustainable, long-term growth plan backed by strengthened balance sheet. We expect annual NOEPS growth of 6% to 8%, $30 billion of planned infrastructure investments over the next 10 years, and a projected 9% to 11% total shareholder return annually. This come from a utility with strong ESG performance, a leader in reducing emissions, a leader in the energy transition, a leader in safety and a company focused on keeping customer bills affordable. We believe this is what a premium utility looks like.

So what we'd like to do now is take about a 10-minute break so that the -- they can get the stage set up. And then Donald, Shawn and I will be back to take questions. So there are some refreshments left and we'll give the technology team a chance to set up for Q&A. Thanks.

.....................................................................................................................................................................................................................................................................

QUESTION AND ANSWER SECTION

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

So Donald, Shawn and I will take Q&A now. [Operator Instructions] Who's picking the questions? Am I doing that, too? Okay. Julien, we'll start with you.

Q

Julien Dumoulin-Smith

Analyst, BofA Securities, Inc.

Julien Dumoulin-Smith, Bank of America. Thank you, guys. The team, nice update. Just want to come back a little bit to some of the things you said. So first off, just how do you square the updated guidance relative to [ph] 7% to 9% (01:06:11) and specifically around the 2024 year-over-year comparison, right? I get that there's probably some amount of dilution that you're assuming sort of front-end loaded dilution given the minority interest and how that impacts 2024. But can you talk a little bit about the dynamics there? And then what about the equity beyond 2025, right? Talk a little bit more about that piece of it. And then also a little bit about what drove the decision here with the IURC in Indiana specifically to slow down spending across, like what's the delta in consumer impact that we're talking about here as well?

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

So let me take that head on and you guys feel free to join. I think that 6% to 8%, 7% to 9% is a big question. Let me -- part of this review, I personally went around and talked to regulators from every jurisdiction that NiSource serves.

Couple of themes came up. One is customer affordability. Two is, they wanted to make sure we were continuing to modernize the grid whether it's gas or electric. When you think so, let's go back to Indiana. Our 7% to 9% -- a big part of our 7% to 9% growth rate is we filed a rate case in Indiana in September and we said we put rates in effect in the fall of 2023, then again in the winter, coming out of March of 2024 with the timing associated with that. But if you think about higher interest rates and high commodity prices in Indiana, our gas -- our electric customers are also our gas customers. So if you started thinking about the rate increase in the fall, one into the winter, high gas prices and higher interest rates [indiscernible] (01:07:51) same customers and then coming out of

that winter with another increase going into the summer, listen to the regulators I did not believe that was a palatable strategy longer term.

So the thought process was that second tranche of renewables as we go on to the rate case, being able to push that back up two or three months to give those customers some relief. Now, gas prices go to $3 and that comes in earlier. That's the good thing. We'll be at top of those ranges, but I don't want to go in assuming something that we don't believe is realistic. So I think the way we did that, we de-risked the plan, we lowered it a little bit. But when you think about customer affordability going into that period, I thought we did a good job of de-risking the plan. That's really what the delta is between at 6% to 9%, and 6% to 8%, and 7% to 9% in 2024.

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

Yeah. And just adding that, and that goes into the intentionality by reducing the rate base growth from 10% to

12% to 8% to 10%. Thinking about customer affordability and making sure this is a long-term, sustainable plan. So we've got, as we said, $30 billion of investments over the next 10 years and we've got a plan now that allows -

- that's taking some of the risk out from a regulatory standpoint and a capital market standpoint that gives us confidence in achieving that.

Q

Julien Dumoulin-Smith

Analyst, BofA Securities, Inc.

Yeah. Hey, it's Julien again. Just to come back to the strategic question real quickly. Just first off, we've seen a lot of different moving pieces through the course of year. At this point, as far as the faces on stage right now and the [indiscernible] (01:09:30) management team, should we largely expect status quo at this point? Is it sort of -- are we resolved on that front? And then separately, can you go back a little bit to the evaluation in the process? And just with respect to the decision tree, not to sell the company outright, I understand all the dis-synergies and all the other moving pieces around the minority interest. Appreciate that. But why not -- you specifically addressed, hey we looked at the sale of the company outright, puts and takes around that. Thank you.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

I would say, and then Shawn weigh in here, we looked at every conceivable option, combination, OpCo and sell of a company that is -- that was possible. I would say to date, we haven't gotten what I would call a significant enough offer that would motivate us to sell NiSource at this point. And I'll stay at that level. And we've talked to a lot of people.

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

Yeah. I think when we reviewed the business, we saw enough opportunity to further maximize what the value

proposition is near-term and maybe accelerate some of that realization for our shareholders with the monetization around NIPSCO that allows us then to better support a continued growth through the planned horizon. Those steps position us while we retain all of our strategic flexibility to realize both near-term and long term value for our shareholders, as well as to continue to invest in the business at 1x rate base at a fairly accelerated rate with $15 billion over five years. It's a significant opportunity for us to do a little bit of both and realize that value near-term and realize it also long term into the plan.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

[ph] Andy (01:11:11)?

Q

Okay. Hey. It's [indiscernible] (01:11:20). And I got a couple of questions. First, just to follow up on what you just answered. So, are you saying that you got an offer and rejected it? Is that what you're saying, because I – that's what it sounds like.

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

Are you asking that question to me, Andy? Did...

Q

To anyone on the stage. I mean, it sounds like you were -- the price wasn't right. Is that what you're saying?

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

I don't think it'd be appropriate for us to go through every step of the transaction review process in all of the different details that we had with potential counterparties. Clearly, some of those could have been made in confidence.

Q

Okay. Then I guess just to follow up on the strategic, then I have actually some number of questions. Okay. So we're doing this 20% stake. We probably would have preferred to see a full spin of NIPSCO. So maybe you can address that and why that was not on the table or what that was not decided on. But more importantly, going forward, because decisions have been made, are you open to further strategic evaluations whether it's the sale of the whole company if the price is right, whether it's maybe a full spin of NIPSCO or other things that strategically could enhance the value of the company?

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

I think first and foremost, we're always open to ideas that are going to help enhance long-term shareholder value. And those ideas will continue to evaluate on an ongoing basis. I think we've always done that. The strategic business review process itself put enhanced rigor and structure into that process. However, that won't conclude just as a result of the next steps that we plan to take with the minority interest of sale of NIPSCO.

I think the next piece I'd say is NiSource stakeholders, both our customers as well as our shareholders, benefit from the scale that we enjoyed today, and we have opportunities to improve that and deepen that value creation for all of those stakeholders. And the step we're taking with NIPSCO gives us that opportunity to both realize that shareholder value as well as drive greater benefits back to our customers and other stakeholders across our company. And we believe that's the appropriate next step forward.

Q

And so a spin, I guess, wouldn't accomplish that? A spin...

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

I'm sorry that...

Q

A spin of either the gas LDCs or NIPSCO that wouldn't accomplish that?

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

As you can appreciate, we evaluated a range of opportunities. We evaluated multiple different scenarios that we think could enhance value for all of our stakeholders. We evaluated just about everything we can conceivably think about in an exhaustive fashion. And the pathway forward that we selected, the NIPSCO minority sell-down, we think, on a risk adjusted basis, maximizes a value creation that we can provide to all of our stakeholders.

Q

Okay. And then just a few number questions as well. The 14% to 16% on the FFO, when do you guys achieve that?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

We'll exceed that with the closing of the sale of NIPSCO.

Q

Okay. And then one last question just on the rate base, because you're giving up, what, about $1 billion of rate base through the minority sale, is that right? About $1 billion of rate base through the minority sale is being given up like you lose that rate base, right, you get the cash and [indiscernible] (01:14:36) rate base. How quickly does that rate base continue to grow where you get back that $1 billion? So in a sense, I guess my impression is it'll grow very quickly and that $1 billion that is not lost but that's sold will be back into shareholders' pockets or however you may view it, because NIPSCO is growing very quickly.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

That's right. Maybe if you just look at the investment path we're on and the inventory we've got over time, we'll grow that base back without a premium. I don't know if we've calculated that number...

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

We have.

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

And even at that point I mean, we're still in the process of launching a transaction. We'll have more information and guidance specific to the transaction after we've concluded that or get to -- get further into the process. That said, as Donald already highlighted, all of the financial results that we've provided, the projections that we've provided are net of an anticipated outcome that believe we can achieve.

A

Christopher Turnure

Director-Investor Relations, NiSource, Inc.

Someone in the back here. Steve?

Q

Steve Fleishman

Analyst, Wolfe Research LLC

Yeah. Hi. Steve Fleishman, Wolfe Research. Thank you. [indiscernible] (01:15:47) your microphone. So first

question just on the earnings growth rate, the 6% to 8%, is it -- the CapEx is a little bit higher, 24%, 25%, should we kind of assume it follows the CapEx where you were a little below the range 22%, 23%, kind of higher in the range 24%, 25% and then moderates or just how should we think about the trajectory of that 6% to 8%?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah. So I don't want a guide within the 6% to 8%, but certainly recognizing that we've got those generation

investments near term. And if you think about our prior guidance of 7% to 9%, it certainly gives us the ability to hit the bottom end of that range of the old 7% to 9% because of those generation investments here in the near term.

Q

Steve Fleishman

Analyst, Wolfe Research LLC

Yeah. And then just maybe on the decision not to sell one of the one or any more of the gas LDCs, it sounds like that decision was mainly due to just the [ph] dis-synergies (01:17:02) and not kind of preferring to keep the scale. But just could you give us a sense of was it also maybe decided because of the valuations you were seeing in the private markets for gas LDCs? Was that part of it as well?

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

I think all of the above. I mean, you start thinking about our LDCs, you start looking at your small ones first and kind of work your way up the value chain. So one of them is you'd had to go up to one of our larger LDCs and it was dilutive. [indiscernible] (01:17:35) much more dilutive too is the valuations of gas LDCs were a little bit weaker. We believe that the NIPSCO gas electric 20% of that has a lot higher value than the gas LDCs. The other thing you mentioned is we had to deal with significant dis-synergies. That was an issue. And then selling multiple LDCs to achieve the same goal -- we were selling multiple LDCs to achieve the same goal that we've achieved by selling NIPSCO. There was more regulatory risk because you needed more jurisdictions to approve those things. Anything you want to add to that?

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

No, I think you covered it.

Q

Durgesh Chopra

Analyst, Evercore Group LLC

Yeah, Durgesh Chopra with Evercore ISI. Thank you for taking my question. Maybe just can I go back to the 20%, the decision to do 20%? I'm just curious why 20%, why not 30% [ph] in 2025 (01:18:32) eliminate the equity need to 2027, just if you could talk to that?

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

Yeah. I think the 20% is really up to 19.9%. It is the most tax-efficient transaction structure at 19.9% or less, and that was the main driver. We've also seen some industry precedents that have informed the analysis as that being a successful interest from multiple counterparties.

Q

Durgesh Chopra

Analyst, Evercore Group LLC

No, I can hold the microphone. Just on 2023 on the guidance front, Don, what are we assuming for NIPSCO? Is NIPSCO for the full year? And then maybe just – that's part one. And then what are we modeling for Ohio rate case in terms of effective date in the 2023 guidance. Thank you.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

I'm sorry, what was the second question?

Q

Durgesh Chopra

Analyst, Evercore Group LLC

The rate case in Ohio in terms of effective date as part of the guidance range. Thank you.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah. So rate case in Ohio, I'll take that first. We'll have – we expect to have new rates in early 2023, and then for the earnings guidance for 2023, and the timing of the transaction, certainly the second half, maybe the end of the year, but certainly by the end of the year 2023. But that's all included in our guidance, kind of our expectations of the sale of NIPSCO or the stake.

Q

Jamieson Alexander Ward

Analyst, Guggenheim Securities LLC

Hi. Jamieson Ward from Guggenheim Partners. Thank you for taking my questions. I have a few here. So, the first is just since you're very clear on flat O&M 2022 through 2027 being just flat O&M, but for the sake of everyone out there, I just wanted to clarify. You mean actual reported off the financial statement 2022. Just hold that flat despite the inflationary environment, et cetera, or is that a reference to a core number?

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

That's correct.

Q

Jamieson Alexander Ward

Analyst, Guggenheim Securities LLC

Wow. Okay. Thank you. Thank you for clarifying.

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

Let me talk a little bit about that. I think...

Q

Jamieson Alexander Ward

Analyst, Guggenheim Securities LLC

Please.

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

...so let me go back to history here. I think with NiSource Next, Donald talked earlier about the transition. NiSource Next was about taking out our administrative costs, and that was done with people exiting the

organization and being much more effective administratively. When we talk about flat O&M moving forward, it's about changing our work processes and our technology to get more work done with the people we have. That's displacing contractors so that our workforce can do more of the capital work than they've done in the past.

And some examples might be relevant here. So we spend about – locates, [ph] I don't know if you know where (01:21:04) locates are, when someone calls in or a contractor to locate a pipe or a wire, we spend about $75 million a year doing that. When you look at details there, about 30% of that is rework. So we believe that we can take about 10% of rework out a year, which is somewhere around $8 million or $9 million of consistent O&M. So as we look at our process and look across this business, things like reduce – moving more customers to eBill takes postage out of the system, getting more hands on time, all those things allow us to keep O&M flat, but it's about behavioral changes in the workforce, getting more done with the resources we have, and really driving hands on productivity and doing less with contractors and more with the people.

Q

Jamieson Alexander Ward

Analyst, Guggenheim Securities LLC

Got it. Thank you for that. That helps a lot. What level – just before I ask the next question, what level of inflation do you have embedded in the plan over the period?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah, so what we're seeing depends on the category, but in some cases we're seeing the 7% or 8% that's

reported. But I think we've also benefited having contracts that are multi-year. And so you're not [ph] necessarily (01:22:24) seeing the 8% increases and it's more in that 2% to 3% range. As we think about our plan, it's to maintain flat. We need to identify somewhere in that $40 million to $50 million of savings every year to stay flat.

Q

Jamieson Alexander Ward

Analyst, Guggenheim Securities LLC

Okay, got it. So this is not predicated on an assumption of O&M cutting down, you have 7% to 8% in categories where that's happening, you have everything factored in as it exists. That's – got it. Thank you, very clear. To follow up on [ph] Andy Lewis' (01:22:55) question on the FFO to debt, you've raised your FFO to debt guidance,

right, to 14% to 16% versus 14% to 15% previously. And you mentioned that at the closing of minority interest sales, when you would be moving higher in the range. How should we think about where you're at presently and then where you would be at after that sale? Any high-level thoughts there?

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

Why don't you take that?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

So expect we'll be in the 13% to 14% range this year. And then, as I stated before, with the close of the sale, we'll be in the higher end of that 14% to 16% range. And that really does allow us to, over time, as we continue to invest, you can attrit down but want to stay in that range because we believe that gives us the flexibility to make these growth investments. And then over time, as we continue to grow at 8% to 10% rate base growth, we're going to have to issue equity through the ATM to maintain that range. But we think that's kind of an optimal way to have flexibility, so that we're not in the markets when we've got the high price and high volatility, and support our growth long term.

Q

Jamieson Alexander Ward

Analyst, Guggenheim Securities LLC

Got it. Thank you. And final question is, should we be assuming generally midpoint level growth, as is sort of the norm in the industry, with the incremental CapEx that you mentioned, the outer years driving you higher within the 6% to 8% range, or did you mean that the incremental CapEx, the 6% to 8% is based on the existing CapEx, and incremental CapEx would mean the potential for incremental growth above the 6% to 8% range? I just wanted to clarify.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah. What I'd say is, again, not going to guide through the range, but certainly have an opportunity in the middle part of our plan to earn at the higher end of that range because of those generation investments.

Q

Jamieson Alexander Ward

Analyst, Guggenheim Securities LLC

Got it. Okay. So in the range there, very clear. Thanks, guys, and congrats again.

Q

Richard W. Sunderland

Analyst, JPMorgan Securities LLC

Hi. Thank you. Rich Sunderland, JPMorgan. [ph] Maybe just (01:25:10) going back to the capital question, curious if you could speak a little bit more to the commodity backdrop, how the customer bill environment impacted your plan. And if those assumptions change over time, is sort of the right run rate of capital investment in your system something you would look to address again in, say, two to three years?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Absolutely. I think you always have to take into account what's customer bill impacts. Whenever we update our long-range plan, one of the criteria we're looking at is total bill impact over that five-year period. And so, we

recognize that. And so we certainly can moderate that or accelerate capital spend and other spending to make sure that you're making the – from a regulatory standpoint, you're reducing the risk and always managing customer affordability.

Q

Richard W. Sunderland

Analyst, JPMorgan Securities LLC

And then just taking that one step further, so if capital investment goes up down the road, is the NIPSCO structure, as you see it now around a minority interest sale, something you would look to tap again? Should

financing needs increase? How would you think about that incremental call? Would you look elsewhere? Is that a preferred vehicle? Just any high-level thoughts would be great.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

I think it's too early to speculate on what that would be. We'll continue to look, and whatever drives the highest shareholder value in terms of how we finance the plan, that's what we do.

Q

Julien Dumoulin-Smith

Analyst, BofA Securities, Inc.

Julien, BofA again. Sorry, guys, a super quick direct question here. Just around the 2024 year-over-year growth, is that above the 8% here just on that specific year, given a lot – all these different moving pieces? I know in the past, that had obviously been the recovery year. And I get that there's a dilutive element here, but is that within the 6% and 8%? Is that at the top end? Is that above on that specific year? Again, I know that you've given us 2023, now we're asking you for 2024, right, but...

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

I'm not going to give 2024 guidance. And so our commitment is 6% to 8% annual growth. And as I said earlier, I think we had the opportunity to get to the higher end of that range because of the investments we're making. But I'm not giving any guidance on 2024 at this point.

Q

Julien Dumoulin-Smith

Analyst, BofA Securities, Inc.

So 6% to 8%, off 2023, within the range, that's the starting point for now. Thank you, guys.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah.

Q

Ross Fowler

Analyst, UBS Securities LLC

Hi, Ross Fowler, UBS. Just going back to the customer bill equation here that you laid out on slide 27, I think you said that embeds natural gas back down to $4.50 to $5.50 in MMBtu. What happens to this equation if gas stays high? And do you have more O&M flex in the plan to keep those down?

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

Yeah. I think that's a key question to watch is what is the impact of commodity across the board? I think we balance that with the demand for increased safety enhancements and infrastructure to be developed. So I think there's a number of different factors that can play in there. Customer growth is another piece of this and how we can scale that and structure that. Having the benefit of six different jurisdictions to structure things across from a rate-making standpoint also gives us some flexibility. But I think it's a key thing to watch. I mean, Lloyd highlighted on his threat slide for a reason we are geographically positioned in a way that can help us tamp that down, and I think it's something we've got to continue to go after.

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

Let me add a little bit to that. I mean, commodity prices have been high in the past and we're not new at this. I

think for short durations, and I'm saying a year or two, we've been through this, you have – you can work with the regulators and get flexibility to help your customers manage to through that. The regulators understand that their bills are going to be higher. What they want from you, the company, is that you're going to be flexible with those customers, you're going to come with efficiency programs, payment arrangements. You're going to be driving your costs down to help those customers ride through that. So this is not new. We've been through this years ago and we can manage and we can manage through that. And I think the industry knows how to get through that. But we've seen high gas prices before. Steve? We have a mic on the floor.

Q

Christopher Giroux DeNunzio

Analyst, Cohen & Steers Capital Management, Inc.

Chris DeNunzio with Cohen & Steers. Just the modest ATM, can you quantify that?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

I think it's too early to quantify that. If you think about our financing plan, first, it's minority sell is going to have an impact on what are the net cash proceeds that come from that. Earlier I talked about the extinguishment of our tax NOLs. So the timing of that matters. Again, we expect it's going to be some nominal amount post-2025, but it does depend on some other items. And that's really to keep us in that 14% to 16% range.

Q

Christopher Giroux DeNunzio

Analyst, Cohen & Steers Capital Management, Inc.

Okay. And then just on O&M benchmarking, where do you guys see yourself relative to peers throughout the plan, are you third quartile, second quartile?

A

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

We're third and fourth quartile now. I like to see us be in second, somewhere between second and first quartile in most of our metrics over a five-year period. It takes that long to get there. But I think it is achievable. And a lot of it the timing takes, the technology changes and the systems, we need to change out our work management systems, our customer system, our scheduling system, and have the commensurate process changes and the behavioral changes. By about the fifth year, we should be moving to second and first quartile on those metrics.

Q

Steve Fleishman

Analyst, Wolfe Research LLC

Thanks. Steve Fleishman. Just some follow-up. So just on the ATM equity again question, you have a slide that kind of scales it roughly in here and I think you can kind of figure it out from that. So I just want to make sure that this slide kind of is roughly the scale of how to think about the size of the equity.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah. Again, I think the two items that move around it will be, if you think about our CapEx plan in the range of dollars invested there, that minority interest sell, ultimately that's going to be a determinant on what that ATM financing is.

Q

Steve Fleishman

Analyst, Wolfe Research LLC

Okay. And then just a question on renewables. I guess maybe for Sean, the increase in the cost of renewables that's occurred for the projects you already had, do you need to seek any new regulatory approvals for that or does that just go through the rate cases and the like?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah, we would need to seek approval either through the CPCN process using the clean energy statute, which we've used historically or if it's in conjunction with the rate case, you could do it at that time, although the preference is likely to focus on each project and address it through the CPCN statute.

Q

Steve Fleishman

Analyst, Wolfe Research LLC

Okay. And then when you look at the – I assume one of the things to look at is the bids that you mentioned you just got for this last one and you mentioned are a lot higher. Could you give us a sense of on average the price change for the bid you've recently gotten versus the prior ones?

A

Shawn Anderson

Senior Vice President-Strategy & Chief Risk Officer, NiSource, Inc.

Yeah, for sure. It obviously varies depending upon the technology, as you can imagine. But I would say solar bids were in the 25% to 50% higher range on an all deal structure when it was owned or PPAs. The larger increase we saw through storage, which was in excess of 50% to 75% higher than the last bid process we saw. That's correct. Yeah, that's reflective of the IRA and the tax credits that developers would be able to realize through it.

I made a comment in my remarks that there is a potential that some of the supply chain delays are still being realized through the supplier and the developer pipeline that could have played a part in it. However, for what we are really looking for, we need capacity advantage resources. The solar impact really won't help that portfolio mix in the winter, which is really the gap we're trying to solve for in that RFP. So for us, looking hard at storage, maybe some wind coming into play, but the gas peaking unit is going to become a pretty critical resource for that portfolio mix.

Q

Thank you. Hi. It's [ph] Andy Levy again from Hive Hedge (01:33:45). So you guys talk about improving on O&M. I get that. you guys talk about that your systems are – you didn't use the word antiquated but need to be upgraded.

The balance sheet needs to improve and obviously the focus is on the customer as it should be. I guess what I'm just a little afterwards confused but why wouldn't – whether it was an infrastructure fund or whoever who has deeper pockets and easier access to financing at a cheaper rate, why wouldn't that be better for the customer based on all the things that you need to accomplish versus selling a 20% stake in your best utility you have?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

I think the diversification of capital raising it is an important part of our story. I appreciate you picked up on that as it moves forward into the next wave of capital opportunity at NiSource. The $15 billion that we've identified over the next five years, this will play a critical part of helping to support that at a really extremely attractive price and cost to capital relative to alternatives. And we'll continue down the path to evaluate the best way we can maximize long-term shareholder value with the best cost of capital that we can attract to help fund that growth plan.

Q

Hi, guys. [ph] James Mortigan, (01:35:15) Guggenheim Partners. Just a quick follow -up on Julian's question on 2024. Understood that you're not giving 2024 guidance today. However, you do obviously have the number out there previously of the 7% to 9% off of 21%. The reason I'm asking is you chose to base the 6% to 8% that you have today also off of 2021, which implies that it's a CAGR rather than a year-over-year growth rate. So I just really wanted to hone in on whether when we think about next year or I guess in this case two years out, in any future year, are we supposed to be growing off of the prior year or is it a base of 2021 with that CAGR extending out, and the reason is the difference would be 168 if we're growing off of 2021, but only 164 if we're growing off of 2023 guidance, which you did issue today. So just wanted to clarify what you meant there.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah, our growth rate is off 2021, so that's 6% to 8%, and you're right, it would imply a CAGR. What we're trying to also communicate today is our 6% to 8% is it's an annual commitment. Our business when you look at the investments and the consistency of cash flows and earnings that come off those investments gives us confidence around their annual earnings growth commitment, but wanted to also route it back in 2021 because of the execution we've had the last couple of years and show that there's this long-term opportunity of 6% to 8%.

Q

Okay. So just a final question on it here, when we're thinking about your guidance throughout the planning period, we should be using 2021 as the starting point.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

That's right.

Q

We should keep that CAGR at 6% to 8% throughout the period and that is the guidance...

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

That's right.

Q

...that's the end period. Understood. Thank you very much.

Q

Hi. It's [ph] Bill Opus (01:37:16) from UBS. Just going back to the customer bill numbers, so if rate base is growing at 8% to 10%, can you just maybe give us the pieces of how that walks back down to only a 3% sort of net impact to the customers? I know if you're taking $40 million to $50 million of cost out a year, let's call it $300 million of capital, right, with rates being flat. But also, what was the underlying maybe customer growth or other pieces that are sort of bridging that delta?

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah, if you think about a customer bill, part of the customer bill is the commodity portion. Part of the bill is the distribution charges. So bill, typical bills, probably 50/50 between that commodity and your distribution charges, in some states it's a little higher where the distribution might be more than 50%. And that's really the difference that kind of walks you down. So if you're keeping your O&M flat, the commodity charges are now reverting back to a

$5 range, which we've seen here over the last couple of months. So the only charge increase that customers are getting is on that distribution bill going at 8% to 10%, but it's only a portion of the total bill.

Q

All right. So there's not an assumption of a growing customer base that spread the fixed cost of...

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

No.

Q

Okay.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Well, about 0.5%. 0.5% net customer growth.

Q

All right. Thank you.

A

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Yeah.

Operator: I think that looks like it exhausts the questions. Lloyd, if you have anything final to say?

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

No. Thank you for your participation. We appreciate you being here. We're excited about the NiSource story. We believe we were set for success, we're set to execute. Our executive leadership team is here and these are the faces you'll see and look for us to be at EEI. Is it next week?

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Next week.

Lloyd M. Yates

President, Chief Executive Officer & Director, NiSource, Inc.

At next week. Thanks a lot.

Donald Eugene Brown

Executive Vice President & Chief Financial Officer, NiSource, Inc.

Thank you.

CORPORATE HEADQUARTERS

801 E. 86th Avenue
Merrillville, IN 46410 Map

Q&A Session

View Transcript

Lloyd M. Yates

QUESTION AND ANSWER SECTION

A Lloyd M. Yates

Q Julien Dumoulin-Smith

A Lloyd M. Yates

A Shawn Anderson

Q Julien Dumoulin-Smith

A Donald Eugene Brown

A Shawn Anderson

A Donald Eugene Brown

Q

A Shawn Anderson

Q

A Shawn Anderson

Q

A Shawn Anderson

Q

A Shawn Anderson

Q

A Shawn Anderson

Q

A Donald Eugene Brown

Q

A Donald Eugene Brown

A Lloyd M. Yates

A Shawn Anderson

A Christopher Turnure

Q Steve Fleishman

A Donald Eugene Brown

Q Steve Fleishman

A Lloyd M. Yates

A Shawn Anderson

Q Durgesh Chopra

A Shawn Anderson

Q Durgesh Chopra

A Donald Eugene Brown

Q Durgesh Chopra

A Donald Eugene Brown

Q Jamieson Alexander Ward

A Lloyd M. Yates

Q Jamieson Alexander Ward

A Lloyd M. Yates

Q Jamieson Alexander Ward

A Lloyd M. Yates

Q Jamieson Alexander Ward

A Donald Eugene Brown

Q Jamieson Alexander Ward

A Lloyd M. Yates

A Donald Eugene Brown

Q Jamieson Alexander Ward

A Donald Eugene Brown

Q Jamieson Alexander Ward

Q Richard W. Sunderland

A Donald Eugene Brown

Q Richard W. Sunderland

A Donald Eugene Brown

Q Julien Dumoulin-Smith

A Donald Eugene Brown

Q Julien Dumoulin-Smith

A Donald Eugene Brown

Q Ross Fowler

A Shawn Anderson

A Shawn Anderson

Q Christopher Giroux DeNunzio

A Donald Eugene Brown

Q Christopher Giroux DeNunzio

A Lloyd M. Yates

Q Steve Fleishman

A Donald Eugene Brown

Q Steve Fleishman

A Donald Eugene Brown

Q Steve Fleishman

A Shawn Anderson

Q

A Donald Eugene Brown

Q

A Donald Eugene Brown

Q

A

Lloyd M. Yates

Q

Julien Dumoulin-Smith

A

Lloyd M. Yates

A

Shawn Anderson

Q

Julien Dumoulin-Smith

A

Donald Eugene Brown

A

Shawn Anderson

A

Donald Eugene Brown

A

Shawn Anderson

A

Shawn Anderson

A

Shawn Anderson

A

Shawn Anderson

A

Shawn Anderson

A

Donald Eugene Brown

A

Donald Eugene Brown

A

Lloyd M. Yates

A

Shawn Anderson

A

Christopher Turnure

Q

Steve Fleishman

A

Donald Eugene Brown

Q

Steve Fleishman

A

Lloyd M. Yates

A

Shawn Anderson

Q

Durgesh Chopra

A

Shawn Anderson

Q

Durgesh Chopra

A

Donald Eugene Brown

Q

Durgesh Chopra

A

Donald Eugene Brown

Q

Jamieson Alexander Ward

A

Lloyd M. Yates

Q

Jamieson Alexander Ward

A

Lloyd M. Yates

Q

Jamieson Alexander Ward

A

Lloyd M. Yates

Q

Jamieson Alexander Ward

A

Donald Eugene Brown

Q

Jamieson Alexander Ward

A

Lloyd M. Yates

A

Donald Eugene Brown

Q

Jamieson Alexander Ward

A

Donald Eugene Brown

Q

Jamieson Alexander Ward

Q

Richard W. Sunderland

A

Donald Eugene Brown

Q

Richard W. Sunderland

A

Donald Eugene Brown

Q

Julien Dumoulin-Smith

A

Donald Eugene Brown

Q

Julien Dumoulin-Smith

A

Donald Eugene Brown

Q

Ross Fowler

A

Shawn Anderson

A

Shawn Anderson

Q

Christopher Giroux DeNunzio

A

Donald Eugene Brown

Q

Christopher Giroux DeNunzio

A

Lloyd M. Yates

Q

Steve Fleishman

A

Donald Eugene Brown

Q

Steve Fleishman

A

Donald Eugene Brown

Q

Steve Fleishman

A

Shawn Anderson

A

Donald Eugene Brown

A

Donald Eugene Brown

A

Donald Eugene Brown

A

Donald Eugene Brown

A

Donald Eugene Brown

A

Donald Eugene Brown

A

Donald Eugene Brown

A

Donald Eugene Brown