Good day, and welcome to NiSource Company Conference Call. Participants will be able to listen-only until the question-and-answer portion of this call. Please note that today’s call is being recorded. [Operator Instructions] I’d now like to introduce to the call Chris Turnure, Head of Investor Relations. You may now proceed. Thank you.

Good morning, and welcome to the NiSource Fourth Quarter 2023 Investor Call. Joining me today are President and Chief Executive Officer, Lloyd Yates; Executive Vice President and Chief Financial Officer, Shawn Anderson; Executive Vice President of Strategy and Risk and Chief Commercial Officer, Michael Luhrs; and Executive Vice President and Group President, NiSource Utilities, Melody Birmingham. The purpose of this presentation is to review NiSource’s financial performance for the fourth quarter of 2023 as well as provide an update on our operations and growth drivers. Following prepared remarks, we’ll open the call to your questions. Slides for today’s call are available in the Investor Relations section of our website. We would like to remind you that some of the statements made during this presentation will be forward-looking. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning such risks and uncertainties is included in the risk factors and MD&A sections of our periodic SEC filings. Additionally, some of the statements made on this call relate to non-GAAP measures. Please refer to the supplemental slides, segment information and full financial schedules for information on the most directly comparable GAAP measure and a reconciliation of these measures. I’d now like to turn the call over to Lloyd.

Thanks, Chris. Good morning, and thank you for joining us. I’m excited to be with you this morning to share outstanding financial results and to discuss the advancement of key business initiatives, which are devoted and talented workforce delivered to support our customers, communities and our shareholders across all of 2023. We began the year with a premium business plan represented by the value proposition you see on Slide 3. The bottom line is the NiSource team delivered. You’ll notice successful execution of these key initiatives across the Board. Let me provide a few highlights, which fuel our resilient and sustaining business across all years of our plan. We executed our highest CapEx investment in 2023, exceeding our rate based investment goals. As of the year-end 2023, we had $18.8 billion of rate base. We continue to forecast $3.3 billion to $3.5 billion of capital expenditures in 2024 and $16 billion over our five-year financial plan through 2028. Year-over-year, NOEPS growth achieved 9% increase and achieved the highest end of our guidance range. We are acutely focused on smart capital deployment and maximizing risk adjusted returns and responsible rate-based investing through strong recovery mechanisms across our businesses. Project Apollo achieved this goal of over $50 million of cost savings initiatives. Perhaps more important than the amount of savings is the energy and support demonstrated by our people to build a continuous improvement mindset and enhance productivity by doing things safer, better, more efficiently and with less cost. These initiatives contributed greatly to a total shareholder return, which exceeded mid cap and large cap U.S. utility peers in 2023. For the three-year period, total shareholder return was 10.1% compound annual growth rate versus 5% per peers, which is reflective of our strong earnings per share execution and future growth prospects. We…

Thank you, Lloyd. I’ll begin on Slide 8. NIPSCO’s generation transition remains on track, I believe support the retirement of two of the remaining three coal-fired generation units by the end of 2025 and the final unit by 2028. To this end, construction on our crossroads two wind PPA was completed at the end of 2023 and the facility is now producing sustainable zero fuel cost generation for NIPSCO’s Northern Indiana customers. In fact, customers are seeing the benefit of this generation as part of our renewable portfolio already receiving $18 million in renewable energy credits sold into the marketplace in 2023, lowering customers overall cost of energy. In November of 2023, NIPSCO received approval on a CPCN amendment converting Gibson from a PPA to a build-transfer agreement. Also, progress continues on Cavalry and Dunns Bridge II Solar facilities, and we expect both to be completed as planned later this year. In January, NIPSCO received approval from the IURC to own 100% of these two projects in lieu of owning them through tax equity joint ventures. Fully owning these projects will benefit customers by leveraging the tax credit transferability provisions of the IRA, NIPSCO will be able to monetize tax credits associated with the projects more efficiently than under tax equity agreements, resulting in comparatively lower energy costs for customers. We continue to evaluate the customer benefits of utilizing similar approaches for the Fairbanks and Gibson projects, which are in development. Though we have made significant advancements in our generation portfolio, we are looking forward to how we advance the portfolio in reliability, resiliency, customer benefits, and towards our goal of net zero by 2040. An important component of our generation portfolio planning process is NIPSCO’s Triennial Integrated Resource Plan, or IRP. The 2024 IRP will evaluate NIPSCO’s long-term generating…

Thanks, Michael, and good morning, everyone. I’m excited to share our 2023 financial results on Slide 10. Non-GAAP net operating earnings in the fourth quarter were $239 million or $0.53 per diluted share, up from $221 million or $0.50 per diluted share in the same period in 2022. This earnings increase is driven by regulatory mechanisms recovering capital investment, partly offset by a modest increase in non-tracked O&M and higher interest expense. For the full year, we reported $716 million of non-GAAP net operating earnings for $1.60 per diluted share, up from $648 million and $1.47 in 2022, respectively. Across this period, regulated revenue returns were partly offset by higher depreciation expense, interest expense, and lower other income. On Slide 11, you’ll find segment detail and key drivers of our results. For the full year, non-GAAP operating income increased across each of the gas, electric and corporate segments, accounting for a $209 million increase to consolidated net operating earnings. Capital expenditures fueled regulated returns, and as Lloyd highlighted earlier, we deployed approximately $3.6 billion in infrastructure projects to enhance safety and reliability of our energy systems. This drove an increase of $335 million through regulatory activity, in rate cases and capital trackers across our jurisdictions. A growing customer base across our businesses also provided a lift in our 2023 financial results and supports customer affordability. Demand for our fuel continues to be very strong, with residential customer count growing over 80 basis points in our gas businesses and over 50 basis points in our electric business last year, both of which enhanced the scale of NiSource. Economic development continues to thrive in the Midwest, and there is no better example of how this collaboration can benefit customers, communities and investors than in Ohio. Our operations in the state serve 1.5…

Ladies and gentlemen, we are now opening the floor for question-and-answer session. [Operator Instructions] Our first question comes from Barclays Capital. Your line is now open.

Hey, thanks. Good morning. This is Nick Campanella on.

Good morning, Nick.

Appreciate all the disclosures today. Good morning. So I guess, just to start, the renewables investment and ownership upside that you kind of highlighted on slides here, just how are you kind of thinking about the timing of layering that into the plan? And then I guess, Shawn, can you still sequence those cash flows from those projects to kind of do this without additional equity financing or just how are you kind of thinking about that? Thanks.

Yes, thank you. So this is Michael. We’re continuing to work through this in a discipline and methodical way, just as we have been all through the last year. Just maybe to walk through a little bit of history associated with it. So if you look at the Gibson and Fairbanks projects, which are part of the billion dollar upside, when we look at a $2 billion upside, when we look at the CapEx plan. We filed for in July, a change for the Gibson from a PPA to a bill transfer agreement that was received in November. We also in 2023 filed for full ownership of Cavalry and Dunns Bridge. We received that in January of 2024. During this period, we’ve been evaluating our analysis on Fairbanks and Gibson, and we expect to be able to work through those final details at our analysis now and give a more fulsome update in Q2. But we would plan to have that update and roll that through as we complete that analysis.

Yes. Then, Nick, this is Shawn to the second part of your question. I think the way we’ve described the future financing plan associated with any of the upside CapEx is that we would need to evaluate the cash flow profile of the projects, in this case, the two renewables projects that Michael’s described that you asked about would have some assistance from PTC monetization over the plan horizon. It also would come with a higher depreciation rate relative to some of the alternative investments. Those have the ability to help the cash flow profile of the business. That said, construction timelines, regulatory recovery, and obviously the approval from the IURC would all play into the fact of how we would finance those projects, which is why we’ve described a potential modest increase associated with the ATM to maintain the capital structure when we access the upside CapEx plan.

Got it. That’s helpful. And then I guess, just maybe sticking with financing. You’re clear in slides that it’s an ATM strategy for 2024, but it does seem in the prepared remarks that you’re open to doing something more kind of bilateral. Can you just kind of explain the thought there and where you stand.

Yes, sure. We’ve studied our available trading days for the remainder of the year, and we’re confident the equity need is highlighted. It’s very executable under the ATM without placing any undue pressure on daily volumes. We’ve got strong sales agents set up to support the execution, and we’ll be highly engaged in this on a daily basis to ensure successful execution. And that our stock can realize the valuation uplift that we expect with our continued strong performance. That said, what we like about the ATM is it’s very low cost. It has low friction costs and transaction fees associated with it. It also allows us to dollar cost average, the access of equity to the timing by which that we would deploy the CapEx and line those cash flows up, which creates more efficiency throughout the year as opposed to a scenario where you might need to over finance or bring in more dollars than you need at any one point to deploy. So those are the things we like about the ATM. There are still ways inside the ATM to be able to line those fundamentals up. And we’re open to those options if it makes sense. But bottom line, we need to be very, very efficient from a cost basis standpoint and very much lined up with the timing of cash flows that we need to deploy to support our CapEx.

All right, thanks so much. Have a great day.

Thanks, Nick.

Our next question comes from Shar Pourreza from Guggenheim Partners. Your light is now open.

Hey, good morning, Lloyd and Shawn. How are you guys doing?

Good morning, Shar.

Hey, good morning, Shar.

Good morning. So, obviously, you rebased higher again today, and you have the $2 billion of upside CapEx that you’ve identified. But obviously that’s not reflected in your plan. It’s obviously, the messaging is pretty straightforward, right. You guys have confidence in the 6% to 8% growth. Are you comfortable guiding kind of where you are within the range you sit, the numbers seem to point closer to the top end. But as we’re thinking about the incremental opportunities, I guess, were you within the 6% to 8%? Thanks.

So, Shar, we did a detail assessment. We did raise guidance. We said it in the past, we’re going to raise guidance. Our guidance for 2024 was based off of our strong performance in 2023. So if you think about the $1.60, the $1.70 to $1.74implies a 7.5% target for 2024. And we’re very comfortable with those guidance ranges. So we’re not necessarily guiding between the 6% and 8% at this point.

Yes, just to reinforce that. Shar, it’s a great question, when we see signs from the business that will lead us to a different outcome. We’ve built a track record to flow those updates through this call. We’ve done so at various points. So we won’t wait to give you greater insight once we have a higher degree of confidence of exactly where we’re going to land within the range if we need to send that signal. But right now, 6% to 8% off of a strong 2023 year end is the plan.

Okay, perfect. That’s helpful. And then just on the next – just any status on the next NIPSCO case? Just trying to get a sense on how much renewable spending will likely be captured since the last case. Thanks.

So, Melody, you want to talk about NIPSCO Gas case? Are you talking about – I’m sorry, Shar, NIPSCO – are you talking about the NIPSCO, current NIPSCO gas case or future electric?

The future electric.

Well, we have not filed an electric case, so there isn’t an electric case currently that has been shared. But we have in fact filed our gas case October of last year. And we are currently working with our interveners as we’re discussing what we see as a successful outcome through those negotiations, what we’re expecting and working towards with those interveners.

The way to think about the next electric case, Shar, is what we like to do is file that case, pretty much align with when we finish those renewable projects. And if you think about the last case, those renewable projects went in right before that case was executed. So I think we try to keep that gap really small. So that was to be dependent upon finishing those renewable projects. And right now they’re on time and on schedule. We have more information about that. We’ll file the electric case and we’ll let you guys know that as soon as possible.

Okay, Lloyd. Yes. That was the impetus of the question. It’s just how do we think about the timing of the next electric? I think you answered it. Thanks, guys.

Our next question comes from Durgesh Chopra from Evercore ISI. Your line is now open.

Hey, good morning team. Thanks for giving me time. Hey, Shawn, just housekeeping for us, the $600 million, have you done any equity so far, year-to-date? And then can you clarify, you mentioned, you might be doing some, I think you said some private placements, some small private placements, if I heard that correctly. So what did you intend to say there?

Yes, absolutely, Durgesh. We have not executed anything under the 600 – up to $600 million ATM program anticipated for 2024. In fact, we had an ATM equity program expire at the end of 2023 and we’ll need to file a new ATM equity program to access the current guidance of up to $600 million. And we plan to do that very soon, which would give us the balance of year for us to be able to execute that equity plan. We described a potential bilateral or discrete agreement inside the context of the ATM. It wouldn’t be a private placement necessarily. However, some investors can solicit interest from sales agents directly and transact at greater than one share, for example, and that transaction would then be placed under the ATM. And certainly, we would be interested if investors are interested at an efficient pricing.

Got it. And so perfect, that’s very helpful, Shawn. And you’ll update us on the quarterly calls as you execute on this program, or how will we know over time what portion of the $600 million you have executed?

Yes, that’s exactly correct. We’ll keep score along the way and we’ll certainly let folks know what we expect for the balance of the year and/or if any of the other aspects of the financing plan change, we’ll be sure to update the slide that you see in the disclosure doc deck today.

Perfect. Thank you. And then just one big picture question, perhaps for Lloyd, CenterPoint announced gas LDC sales earlier, just thinking about the opportunities you have within your current portfolio. Are there opportunities to optimize assets to fund that growth? Or how are you thinking about that?

So let me talk about it this way. I don’t necessarily comment on any kind of specific M&A, but what I will say is, when you think about NiSource, we are always very diligently reviewing options to enhance shareholder value in our plan. But we’re currently focused on our organic plan, investing $16 billion at one times rate base with another potential upside to invest another $2 billion. If you go back to 2022, we did a lot of work here in terms of our business review and we see a couple of things that we like, and that is the scale at NiSource has tremendous value and we like the diversification of our six operating companies. You also saw us last year raise capital via – but you all raise capital via the NIPSCO transaction, what we thought was a very efficient process with respect – very efficient tax process with respect to taxes. So with all that being said, what I’ll say to you is, we are always looking to enhance shareholder value. And if we find an opportunity to raise capital more efficiently to improve our enterprise value, we plan to take advantage of it. But right now, we’re focused on our organic plan.

Super. Very clear. Thanks guys. Congrats on a solid quarter here.

Thanks, Durgesh.

Our next question comes from Travis Miller from Morningstar. Your line is now open.

Good morning, everyone. Thank you.

Hey, good morning, Travis.

Question on this CapEx plan, I know it’s difficult to parse out things here, but especially on the gas side of that five-year plan and whatever incremental part would be associated with the gas, how much would you attribute to base spending, safety spending, core spending on the system, and then how much would you attribute to the new expansion opportunities you’ve talked about manufacturing and other new build opportunities on the industrial side.

Yes. Thanks, Travis. This is Shawn. I think that what we would attribute the planned CapEx for gas is almost all planned for safety, reliability, and compliance work supporting our regulatory requirements from PHMSA and from the local PUCs that we support. So as we think about the gas CapEx, that’s the vast majority of the CapEx. We actually don’t plan for significant amount of future expansion costs into the CapEx guidance itself because we often see that those CapEx amounts can be supported by incoming revenues to support the cost of basis itself. So as we have incremental projects like we had in Ohio for Intel to help support a larger economic development project. We’ll work with local stakeholders, local mechanisms, and move those into the capital plan as necessary. Some of those are signaled on the slides that Michael shared from the upside plan itself. But the way I would think about it is nearly all of the CapEx that we spend from a gas standpoint, absent a small amount is driven for safety, compliance, reliability upgrades across our system.

Okay. That makes sense. And then similar question of that, how much do you expect to flow through some of the mechanisms you have that are non-base rate case related?

Yes. We do have mechanisms in different jurisdictions that enable recovery of whether you’re calling economic development type projects. We have legislation that’s supported in Ohio have had for a number of years to support economic development expansion as well as in Indiana. But some of the forward-look test years, such as that in Pennsylvania can enable us to project these types of projects, if we have line of sight to where economic development is going to come into place. And we can work through the regulatory mechanisms themselves or the rate cases themselves to ensure that we can get quick recovery or prompt recovery of those. So we haven’t seen economic development or business expansion be a drag on our earnings power across any of our businesses. And in fact, it often is one of the components that leads us to an upside within our range.

Okay. That’s great. Thanks so much.

Thanks, Travis.

We have our next question from Barclays. Your line is now open.

Hey, it’s Nick Campanella again. I just had a quick follow-up, if you don’t mind. Just I’m looking through your regulatory kind of outlook slides here, and I just wanted to know if you’re still planning to file a rate case in Pennsylvania this year.

Melody, you want to handle that one?

Hi there, Nick. We did file a notice of intent for Pennsylvania. And so we are working through the details of when we file for this year.

Right. We don’t have any raised hands as of the moment. I’d now like to hand back over to the management for their final remarks.

So before I close, I want to take a minute here to thank Donald Brown. Donald is our EVP and Chief Innovation Officer, our former CFO. And after nearly a decade with NiSource, Donald informed us that he’ll be leaving the company to pursue other professional opportunities. I would say we’re extremely grateful to Donald for his service to NiSource and for helping us build a strong financial foundation and to help us evolve and execute our transformation strategy. And we wish him well in his future endeavors. I want to thank all of you for great questions and your support of NiSource and look forward to continue to update you on future business activities. Thank you very much.

For attending today’s call, we hope you have a wonderful day. Goodbye.