Q3 2026 NiSource Earnings Conference Call - NISOURCE INC

Financial Performance:

• Reported Q3 2026 consolidated adjusted EPS of $0.27, year-over-year increase from $0.19; YTD consolidated adjusted EPS is $1.49.
• Revenue growth driven by disciplined cost management and outperformance of natural gas and electricity demand across NIPSCO, Columbia Gas of Ohio, Virginia, and Kentucky.
• Narrowed 2026 consolidated adjusted EPS guidance to the upper half of the previously stated range ($0.02 to $0.07); initiated 2027 guidance at $0.22 to $0.30 per share.
• Established a seven-year extended plan (through 2033) targeting a 10-11% compounded annual growth rate (CAGR) for consolidated adjusted EPS.
• Maintained a disciplined balance sheet with a target FFO-to-debt ratio of 14-16% across the planning horizon.
• Operating expenses (O&M) were higher YoY due to storm response costs, while other operational activities remained flat.

Guidance and Future Outlook:

• Extended long-term investment plan through 2033 with a total capital expenditure of $40 billion ($32 billion base plan, $8 billion Genco).
• Projected base business EPS growth of 6-8% annually through 2032; Genco segment expected to contribute $0.52 to $0.68 per share by 2033.
• Anticipates average annual residential customer bill increases of less than 4% from 2027 through 2031, a reduction of over 100 basis points from prior expectations.
• Expects multiple years of double-digit EPS growth, with the Genco segment transitioning from development to cash generation, reducing external equity funding needs starting in 2032.
• Future financing strategy involves annual maintenance equity issuance of $400-$600 million in the near term, stepping down to minimal levels by 2032 as the business self-funds.

Business Segments and Product Lines:

• Regulated Utilities (Base Business): Operates six regulated utilities across six states serving 4 million customers; focuses on safety, reliability, and infrastructure modernization including gas pipeline replacement and electric reliability.
• Genco (Growth Business): Delivers power to large load customers (data centers); signed agreements with Alphabet, Amazon, and now Microsoft.
• Microsoft Partnership: Announced a 20-year agreement starting in 2028 for 1,100 MW (approx. 500 MW combustion turbines + 600 MW battery storage), increasing total signed agreements to ~1.75 billion in expected customer savings.
• Pipeline Progress: Currently advancing ~5 GW of capacity; targeting up to 4 GW of additional load; construction on Amazon's site (largest infrastructure project in company history) on track for next-year energization.
• Alphabet: Completed transmission infrastructure ahead of schedule with billing commenced; two additional Amazon incremental agreements signed.

Market and Competitive Landscape:

• Strong demand from large load customers for data center operations in Northern Indiana due to credible speed to power, transmission access, and a supportive regulatory framework.
• Market dynamics support expansion beyond the current 9 GW pipeline; a study is underway to assess potential for upscaling the Genco portfolio in 2027.
• Regulatory environments in Ohio (SB 103 forward-looking rate case), Virginia, Kentucky, and Indiana are progressing constructively, aiming to reduce regulatory lag and align recovery with safety investments.
• Competitive advantage highlighted by the ability to offer a "win-win-win" model: economic development for regions, energy for tech companies, and bill credits for existing retail customers.

Risks and Challenges:

• Severe Weather: August 11th derecho caused significant system damage; over 1,700 personnel mobilized for restoration with zero injuries; conducting internal and third-party independent reviews to improve resilience.
• Regulatory Uncertainty: Ongoing proceedings in Indiana (IURC), Pennsylvania (ROE methodologies), and federal reviews regarding coal unit operations (Schaefer units); risks associated with rate case approvals and timing of generation requirements.
• Construction Execution: Risks related to securing long-lead equipment and managing EPC partnerships for Genco projects, though mitigated by diversifying vendors and established partnerships.
• Affordability: Continued legislative and regulatory scrutiny on customer bill impacts and rate-making frameworks across jurisdictions.

Management Commentary and Tone:

• Management expressed high confidence and optimism, emphasizing the complementary nature of the base business and Genco strategy.
• Tone was resolute regarding the "ingenuity" and execution capabilities of the team, citing the Microsoft deal as a proof point for the affordability strategy.
• Emphasized that the Genco segment is isolated from the rate base, meaning utility customers do not bear the risk of Genco construction costs.
• Stressed a focus on "safety as the top priority" and an "improvement mindset" following the severe storm events.
• Highlighted that the new capital plan improves cash efficiency by converting >90% of investments into initial recovery within 12 months.

Analyst Questions and Answers:

• Microsoft Opportunity: Clarified that the agreement does not capture the entirety of potential future load with Microsoft, but the company remains confident in executing the current pipeline and adding to the portfolio with high-credit customers.
• Indiana Regulatory Risks: Management remains optimistic about Indiana, viewing economic development and affordability as top priorities that align with the Genco model; confident in positive regulatory outcomes.
• Infrastructure Upsizing: Confirmed the current resource plan is designed to preserve the ability to serve additional Microsoft load; no need for a new strategic review before executing the next 4 GW of the pipeline.
• Storm Hardening: Plans to actively participate in IURC hearings to present capital investment needs for system hardening based on the results of the ongoing internal and independent storm response reviews.
• Amazon Schedule Shift: Clarified that changes to CCGT timelines for Amazon are optimizations to de-risk execution and accelerate other assets (batteries, pool portfolio), not delays; capital requirements remain unchanged.
• Financing Flywheel: Explained that as Genco customers ramp (fully ramped by 2030-2032), cash flow strengthens, allowing for reduced reliance on external equity and maintaining investment-grade status without changing the overall CapEx profile.
• Genco Cost Drivers: The 2033 EPS contribution range ($0.52-$0.68) is driven by capacity fees as customers fully ramp; earnings efficiency is expected to improve further as financing costs decline.

Other Key Points:

• Customer Savings: The five signed Genco agreements are expected to deliver $1.75 billion in savings to existing NIPSCO electric customers, equating to ~$140/year per average residential customer at full ramp.
• Bill Credits: Bill credits are expected to begin as early as January 2027, pending IURC approval.
• Safety & Storm Response: NIPSCO received a fourth federal order to operate Schaefer coal units; compliance costs are being pursued through FERC approved tariffs.
• Capital Plan Details: The $40 billion plan includes gas system modernization (60,000 miles of pipeline), electric reliability, generation for capacity needs, and data center infrastructure.
• Blackstone Involvement: Confirmed Blackstone will maintain its pro-rata contribution (approx. 19.9% of investments) across both NIPSCO and Genco capital plans.