Q3 2026 NiSource Earnings Conference Call - NISOURCE INC

Explicit Guidance:

• 2026 Consolidated Adjusted EPS: Narrowed to the upper half of the previously stated range of $0.002 to $0.007 (implied range: ~$0.0055 to $0.007), driven by disciplined cost management and demand outperformance.
• 2027 Consolidated Adjusted EPS: Initiated guidance of $2.22 to $2.30 per share, implying double-digit year-over-year growth; includes $0.05 to $0.09 contribution from the Genco segment.
• Long-Term Growth Rate (2027–2033): Targeting a 10% to 11% compounded annual growth rate (CAGR) in consolidated adjusted EPS.
• Base Plan EPS Growth (through 2032): Maintaining 6% to 8% annual consolidated adjusted EPS growth.
• Capital Expenditure (CapEx): A $40 billion seven-year capital plan (2027–2033) comprising $32 billion for the base business and $8 billion for Genco investments.
• Bill Impact: Average annual residential customer bill increases capped at less than 4% from 2027 through 2031 on an investment base of 9–10%.
• Balance Sheet Metrics: Targeting a Funds From Operations (FFO) to debt ratio of 14% to 16% for all years in the plan horizon.
• Genco EPS Contribution Targets: Expected to contribute 32 to 40 cents per share in 2030, increasing to 52 to 68 cents per share by 2033 (indicative targets).
• Customer Savings: Signed agreements expected to deliver $1.75 billion in total savings to existing NIPSCO electric customers, with bill credits anticipated to begin as early as January 2028 (pending IURC approval).

Business-Segment Outlook:

• Genco Segment: Launching as a separate financial reporting segment in 2026. Targeting up to 4 gigawatts (GW) of potential additional load beyond the existing 9 GW pipeline.
• Microsoft Agreement: Secured a 20-year term starting in 2028 for approximately 1,100 MW (500 MW combustion turbines, 600 MW battery storage); special contract filing with the Indiana Utility Regulatory Commission (IURC) expected by year-end, with an order sought in the first half of 2027.
• Amazon & Alphabet: Amazon's largest infrastructure project (345 kV substation) expected in service next year; Alphabet construction completed ahead of schedule with billing begun this summer.
• Capacity & Ramp: Customers expected to fully ramp in 2030, 2031, and 2032, strengthening Genco cash flow and capacity revenue.
• Base Business: Six regulated utilities serving 4 million customers; expecting continued stability and double-digit growth through the planning horizon as Genco transitions from development to cash generation.

Market and Competitive Outlook:

• Demand Trends: Robust demand from large load customers (data centers) driving capacity needs; NIPSCO offering "speed to power," transmission access, land, water, and fiber as key differentiators.
• Pipeline Expansion: Evaluating opportunities to exceed the current 9 GW pipeline; a study is ongoing to assess the ability to accommodate load beyond current projections, with updates expected in 2027.
• Regulatory Framework: The "pool strategy" introduced in May remains a core competitive advantage, enabling unique win-win structures for existing retail customers and new large-load customers.

Macro / Industry Outlook:

• Interest Rates: Management does not expect material rate cuts in the plan; they are prepared for current market dislocations and will utilize portfolio flexibility (debt tenor, equity) to manage financing efficiently.
• Regulatory Environment (Indiana): Continued confidence in Indiana as a growth hub; active engagement with the IURC on affordability and the "My Data Center Credit" mechanism, which is isolated from the rate base to mitigate risk for existing customers.
• Affordability: Focus on using Genco savings to offset rate increases; projected to reduce the view on bill increases by over 100 basis points compared to prior estimates.
• Policy & Compliance: Ongoing compliance with FERC orders for Schaefer coal units (pursuing cost recovery); monitoring changes in federal tax credit eligibility and evolving MISO accreditation rules within the Integrated Resource Plan (IRP).

Strategic Initiatives:

• Capital Plan Extension: Extended the investment plan through 2033 (7-year view), with $4 billion of upside opportunities in the base business and 4 GW in Genco potential not yet included in guidance.
• Cost Optimization: Progressing on over $40 million of cost optimization initiatives identified earlier in the year.
• Storm Resiliency: Conducting a full internal after-action review (completion expected late November) and hiring a third-party expert for an independent review to inform future hardening investments.
• Asset Mix: Evaluating an extension of the Schaefer coal unit operations via the IRP; flexible approach to battery ownership (owning, tolling, or mixed) based on cost and technology trends.
• Financing Strategy: Expecting to issue $400 million to $600 million in maintenance equity annually in the near term, stepping down to minimal levels starting in 2032 as the business becomes self-funding.

Risks and Headwinds to Outlook:

• Regulatory Execution: Timing of regulatory approvals (IURC, FERC), construction milestones, and financing costs could impact the specific landing within growth ranges.
• Weather & Resiliency: Response to severe weather events (e.g., the August derecho) may require additional capital investment for system hardening, currently unquantified but acknowledged as a potential long-tail investment.
• Construction & Supply Chain: Execution risks regarding long-lead equipment and EPC arrangements, though mitigated by diversifying vendors and partnerships (e.g., Quanah and Zachary).
• Customer Ramp Timing: Delays in customer load ramps or capacity accreditation could affect the pace of earnings contribution from the Genco segment.

Management Tone on the Future:

• Confidence: High confidence in the "10–11% CAGR" growth trajectory, driven by the complementary nature of the base business and the high-growth Genco segment.
• Strategic Focus: Emphasis on "resiliency," "ingenuity," and "execution," highlighting the ability to deliver savings to customers while expanding the energy infrastructure for data centers.
• Modulation: View of the plan as "highly executable" with "conservative financing assumptions," while acknowledging the potential for upside if the 4 GW pipeline study yields additional opportunities.

Miscellaneous:

• Blackstone Capital: Blackstone to maintain a 19.9% pro-rata contribution across the NIPSCO and Genco capital plans.
• Reporting Change: Genco segment will be disclosed separately with operating income reporting starting in 2026.
• Storm Response: Internal review to conclude late November; independent third-party review to follow over the next several months to inform future resilience investments.