Thank you for standing by. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2024 NiSource Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Chris Turnure, Head of Investor Relations. You may begin.

Thank you. Good morning and welcome to the NiSource third quarter 2024 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 third quarter of 2024, as well as provide an update on our operations and growth drivers. Following our 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 could 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 now like to turn the call over to Lloyd.

Thank you, Chris and good morning, everyone. I'll begin on slide three. The NiSource investment thesis is simple. We serve our customers by delivering safe and reliable energy at an affordable value. Affordable energy requires efficient capital deployment, safe asset operations and constructive regulatory recovery mechanisms. These fundamentals generate competitive returns while enhancing our balance sheet position. Importantly, these are the foundation to the NiSource business plan which continues to offer compelling value to stakeholders. Driven by regulated utility operations across six highly constructive jurisdictions, offering diversification across fuel type and regulatory location, strong execution from our team and these business fundamentals are what have driven a trailing twelve month 9.9% earned ROE at the NiSource level, demonstrating our focus on shareholder returns despite rapidly growing deployed capital and declining financial leverage. This is a GAAP number with an adjustment made only to normalized weather. All of this informs our long-term value proposition which our teams continue to advance each quarter. But before we focus on the long-term plan refresh, let's turn to Slide four and touch on the progress our teams have made on our regulatory activity. Being a trusted energy partner and enhancing NiSource's superior regulatory and stakeholder foundation is a priority and we believe differentiates us from peer regulated utilities. We remain active in rate case and tracker filings and build our credibility through our six-state footprint by utilizing a stakeholder focused mindset as we approach these processes. Last month an administrative law judge in Pennsylvania recommended the Commission approve our general rate case multiparty settlement as filed. In October we reached a settlement in our Kentucky General rate case. Approval of both these settlements is subject to final Commission approval. In Indiana, we received approvals for both our Solar CPCN amendments to add full ownership of…

Thank you, Lloyd. Good morning. We continue our disciplined and methodical approach to developing and effectuating a robust pipeline of investments to benefit stakeholders. I'll begin on Slide six with an update on our generation investments. As Lloyd mentioned, there has been substantial progress made related to generation investments that will benefit all stakeholders. With Gibson and Fairbanks having received regulatory approval for full ownership in August, we have now converted four projects to full ownership, which will materially lower cost to customers. In addition, we have progressed well in bringing our renewable assets into service. The 200-megawatt Cavalry Solar project with 45 megawatts of storage was placed in service in May, and we expect the 435-megawatt Dunns Bridge II solar project with 56 megawatts of storage to come online very early next year. Fairbanks and Gibson are expected to be in service later in 2025 with no changes to time lines since our last update. 100% of modules for Fairbanks are already on site and Gibson is expected to have all modules delivered by early Q1 2025. In continuing the work of maximizing the benefits of our assets for customers, NIPSCO filed a notification earlier this week with the IURC that an application will be filed requesting to convert the 200-megawatt Templeton Wind Energy Center in Benton County, Indiana, which was approved by the IURC of the PPA to a build transfer agreement in which NIPSCO will own the asset upon completion. If approved, it will reduce customer costs versus the PPA structure at a valuable wind property to our generation portfolio and increase shareholder investment. It is a great example of the NiSource team at work creating a win for all stakeholders. The projects on Slide six are the result of the 2018 and 2021 NIPSCO Integrated Resource…

Thank you, Michael. Let's start on Slide nine. Third quarter adjusted EPS was $0.20 per share, an increase of $0.01 versus the same period one year ago. Higher rate base investments drove $61 million in incremental revenue and net financing benefits of approximately $26 million were also realized on a year-over-year basis. Customer count and usage also added $2.6 million across our electric and gas businesses versus last year and have grown over $28 million total for the year. Moving to Slide 10. Let's break down our CapEx plan through 2029. As Lloyd mentioned earlier, we've refreshed our 5-year plan outlook, which starts with a base capital plan of $19.3 billion. The enhanced base plan is $2.9 billion larger than our prior base plan, which is driven by a number of factors, including increased generation investments, gas compliance and system hardening projects, and investments to modernize our information technology systems. As Michael shared, the base plan now reflects the inclusion of the Templeton project, which shifted from our upside plan into our base plan after our teams reached commercial agreement on the ownership of the project. We have enhanced our disclosure on the new base plan to detail the investment themes we are seeing as necessary to deliver safe and reliable service to our customers. All of these investments have met our threshold to be included in the base plan, mainly based on socialization with stakeholders, compliance and safety requirements and commercial structures at an affordable value. We've also spent time refreshing the portfolio of projects in the upside plan, those that our teams are actively working on flowing into the base plan. The revised upside plan now sits at $1.8 billion, and we've included an estimation of when those projects may become viable in our CapEx charts, despite not…

Thank you, the floor is now open for questions. [Operator Instructions]. Your first question comes from the line of Nick Campanella with Barclays. Please go ahead.

Hey, good morning. Good to see everything playing out from the Analyst Day here. So, congrats on that. So, in your prepared remarks, you kind of talked about you're having discussions continuing with data centres. And I understand that the recent increase in CapEx was largely just on the gas side, it seems. So just can you kind of talk about what the catalysts that we should be watching for, for you to kind of layer in those opportunities. Is it getting through an NIPSCO rate case? Is it finishing those discussions on what the tariff looks like? And what would the timing of that be?

So I'll start, and I'll let Michael Luhrs provide more detail NiSource sees the data center opportunity is just a really good incremental investment opportunity. But I think for the company and where we are now, it's primarily a 2025 activity. I think as we progress in discussions with some of the counterparties, who want to kind of get down to the detail and make sure that we do this in a disciplined and methodical way, and that's just going to take time. And if you think about what we just with Templeton Wind project. I mean our ability to do things in a disciplined, methodical way has been probably one of the keys to why we've been executing so well. So, Mike, anything to add to that?

No, you hit it, Lloyd, we were going to work through these opportunities in a manner, as you said, disciplined and methodically, make sure we're providing the benefits to existing customers, that it's accretive for shareholders. And then as we come through those opportunities at which point they are accretive or we know that they're beneficial, we will bring them forward just as we do with the Templeton Wind project today.

Okay. So, is it the right take that these are truly incremental to the plan that the balance sheet can absorb it and that the customer rates can absorb it? And maybe you can kind of just clarify on if you raise CapEx from here, does that require additional equity financing? Thanks.

Yes. Just to be clear, the $19.3 billion capital plan is fully financed through all the systems that we've shared with you today. The $1.8 billion of potential upside CapEx may require modest amounts of equity based on the cash flow profiles of those projects, when they get sequenced and how it would work through the regulatory mechanisms themselves. The incremental investment opportunities are not captured in any of those systems that I just highlighted. That's where data center investments would theoretically live. Therefore, we would have to reevaluate everything to incorporate incremental investment opportunities through our systems. But we don't need a full planned refresh to do that, we'll flow those through our systems, and you'll know those when we know those through this mechanism.

All right, have a great day. Thanks.

Your next question comes from the line of Julien Dumoulin-Smith with Jefferies. Please go ahead.

Hey, good morning, team. Very well done, truly impressive. Those are not your average LDCs, I got to say. In fact, to that end, just understand the staggering of different data points here. I mean just impressive CapEx update here, the $1.8 billion upside here. I mean, you're going to get a number of these data points over the next year, that's not something we should be looking to with 4Q. That's going to be a year out. The AI data center-related data points here, given the December IRP, that's a 4Q update presumably, correct?

Yes. Let me just step through it real quick. So, the $1.8 billion of upside CapEx, you can actually see it in the capital allocation side that we shared. But to your point, we don't see much upside CapEx in 2025, but we do see some start to emerge in 2026, 2027. And you can kind of see it layered in. We'll continue to move those around on those bars based on the profile and the development of those projects. As we know more, we'll update that CapEx allocation on where those upside opportunities might land. And then in terms of updates, the IRP, it seems we're clearly working through the preferred portfolio and what it takes to action those. Likewise, with data centres well underway and under development. I imagine both are pretty significant strategies for the company. Therefore, I imagine we'll discuss those on the 4Q call, but I don't know yet what the outlook will be and how those will be incorporated. Again, we'll need to do the commercial development and understand the value creation for all stakeholders. Once we understand that and roll that through the systems, we'll post it here on the call.

Got it. Excellent, guys. And if I may, can I open up -- can I get around the details of this -- the data center proposal here, right? You've got the various different iterations here. But the base 2.6 gigawatts here, as you talk about, I mean, is there any kind of thought process that you'd walk though? I mean, I know you can put basic dollar per kilowatt assumptions, maybe some baselines on what you historically owned. Anything that you'd offer up as initial observations to start to translate this kind of a number here, if you will, in a little more detail.

Michael, do you want to take that?

Yes. Thank you. The only thing I'll add to that associated with it is if you look at the IRP detail, you can see what we posted on Monday. What the 2,600 megawatts imputes relative to generation assets and what those assets would entail associated with it. And the investments associated that would be required in storage and CCGTs and other mechanisms. But at this point in time, we don't have additional detail out to that, just as Shawn said, that would be more of a 2025 activity. As Lloyd commented, I will comment that we have multiple scenarios in the IRP process, covering a range of outcomes and opportunities, including an upside case associated with 6,000 megawatts, but again, you can see from the materials, sort of what that could potentially entail associated with assets.

Yes. Got it. But at this time, no specific views on percent palatable to own?

No, not at this time.

Excellent. All right, guys, thank you very much. We'll see you soon. Nicely done.

Your next question comes from the line of Richard Sunderland with JPMorgan. Please go ahead.

Hey, good morning and thank you for the time today. Maybe I'll just pick up on what Julien was asking on just now again, the 2.6 gigawatts in the load scenarios and the IRP, I think that's really clear. But as you've showed with Templeton, you've also done a lot of work on generation that's outside of this kind of data center load opportunity that we're all focused on. I'm curious what type of generation you might need in the IRP regardless of said data center load shows up or not? And maybe just the sort of generation needs overall, given you've done a lot of this work to convert PPA projects into company-owned projects? Kind of how do you think about that bucket broadly going forward?

Yes. I'd be happy to talk about that more. So, when you look at what we've done, just hitting on one of the points you made. We have done a lot of work associated with the generation assets, which are very beneficial relative to customers and all stakeholders and shareholders associated with it. We will continue to do work like that to make sure we're maximizing the opportunities and the benefits to all parties. And so, we're excited about the opportunity associated with Templeton should it be approved by the commission. When you look at the IRP and the elements going forward, in pretty much all cases especially given the DLOL rules for MISO, you need storage and you need between 500 megawatts and a gigawatt of storage associated with it. And that's to help address those different accreditation methodology for MISO and the impacts of them. At the same time, to statable resources, we've all known that statable resources will be necessary, batteries help with that. But at the same time, you also are going to need additional spinning assets such as gas turbines or peakers. You see that when you look at those scenarios, regardless of data centres, you need more dispatchable resources, that will show up in most likely the form of cash generation. I will emphasize with that. We are still focused on our 2014 goal and we continue to work through those, even though we make sure that we're doing our interim goals associated with it in the most customer beneficial way. But you can just see from those what those potential assets look like in the near term, even though I will say -- as you look at that, most of those assets would be in the sort of as you're looking beyond the 2029 kind of time frame associated with it. So not as much in the next couple of years, as Shawn highlighted. And then obviously, the resource plan goes significantly further out, which then there's significantly more resource potential additions as you move through time with the EPA rules.

Great. Thank you for that color there. And then again, kind of zooming out here on the data center opportunity, I realize there's a lot more work and you've been clear on some of the commercial efforts. But going back to the summer with that big Microsoft project announcement, curious if you could say anything more on that front? Is that -- given that's out there, is it something closer along to getting firmed up and added to either your base or your upside plan. And anything else you could say there about kind of the work going forward on that?

The point is, I think all of the data center, the activity and the associated work with the counterparty is primarily the 2025 activity. And Microsoft did announce that last year, but I think the timetable we're on is 2025.

Got it clear enough. Thank you very much.

Your next question comes from the line of Durgesh Chopra with Evercore ISI. Please go ahead.

Hey team, good morning. Thanks for giving me time. Just first quick clarification is Templeton Wind. I just want to be clear on this. That's in the base plan. Is that correct?

Yes. We just moved that -- the upside to the base plan.

Okay. Perfect. And then maybe, Shawn, I know you kind of talked to the equity staying the same, but it's a substantial increase in the capital plan versus five years like close to 20%. And you talked about 81%, I believe, was the number that you called out, getting recovery in the zero to six months. Is it just that with this -- even with this capital increase, you don't have to issue any more equity? Or is this more regulatory filings, perhaps an improvement in ROE, maybe just a little bit more color around that front would be helpful.

Yes, sure. Appreciate it, Durgesh. More efficient capital allocation, which minimizes regulatory lag. That's really the key, and it supports a higher cash flow from operations, which we're seeing across our systems, maybe about 10% over the course of the plan horizon. That's helping to contribute to a more efficient financing structure. But again, I'd note we worked ahead here in 2024 on credit quality, both in terms of outperforming our financial projections in the current year and utilizing the junior sub marketplace for $1 billion of funding, which were not initially in the plan. So, we've already made some of this progress to date and we're capitalizing on some of that benefit also.

Got it. So, I mean you have some breathing room to start with. Okay. Final question, just on flat O&M. You've had this guidance for a few years now. So maybe just how you're thinking through that? I understand, obviously, there's a large increase in the capital program. With that comes higher operating expenses, well, I would assume, but generally, growth in the business, inflation has come down, but it's still there. Just how are you thinking? What's the confidence level in sort of extending that flat O&M as we go to sort of latter years of your financial plans?

So Durgesh, I mentioned in the value safer, better, faster and more efficient and to lower cost. And I think there's a lot more opportunity at NiSource to drive those values through the organization. We talked about our work in asset management process and using AI to improve our schedule and efficiencies. So, our hands on time and our workforce has gone up and we're just getting more done with the people we have. And I think when you look at the foreseeable future, I do see -- continue to see flat O&M Project Apollo is in its second year, and there's just a whole lot more opportunity. So, we see being flat for the foreseeable future by being more effective and more efficient.

That's very clear. Congrats, guys. Thank you.

Your next question comes from the line of Ross Fowler with Bank of America. Please go ahead.

Morning, Lloyd. Morning, Michael. Morning, Shawn, how are you? So, you mentioned sort of MISO capacity in the prepared remarks. So, I just wanted to dig into that a little bit. Clearly, they've adopted some of the constructs for the next auction that PJM also has. And so, we saw what happened in PJM with higher capacity prices we saw sort of what the feedback there has been. I guess a couple of questions related to that. Do you feel like the IRP and the rate case and sort of the vertically integrated model in Indiana allow you to get that conversation going with the regulator get in front of what we might see for an auction result next spring. And then in the context of the IRP, you talked about data centres and sort of the demand being a 2025 kind of thing. How do you think about the risk of timing related to the demand coming in over time, right? Because it still takes time to build the data center and the ability to sort of build disbatchable generation, which we're hearing takes sort of four, five, six years by the time you get the permitting and the turbine and that sort of thing. So maybe contextualize.

Yes. Let me start that Mike can weigh in. You think about NIPSCO, where we serve electricity, even though we're part of MISO, we continue to be a vertically integrated utility, responsible for generation transmission and distribution. I think the MISO model gives us a competitive advantage in terms of speed to market to facilitate some of these data center load. I think with respect to the speed, the data center grows or below demand, I think that's part of the conversation of the activity for 2025. At what pace can we build it? And can we build to match the demand of those data center loads as part of the conversations that we're having that will go into 2025. Mike, anything to add to that?

The only thing I would add is when we go through the IRP process, it includes stakeholders across it. So those conversations relative to MISO accreditation the scenarios around it, the EPA requirements, which may require carbon sequestration and storage have already been gone. So, we've been having those conversations with stakeholders now and introducing that, what the impact of that would be and also what that means some potential portfolios. The only thing I would highlight relative to data centres in addition is that we are working through those activities, and I would just say we are well aware of the demand requirements of the entities associated with what they would want to do. So, as we work through it in a methodical and disciplined fashion. I would also say we're working through what it takes to meet that demand in a methodical and disciplined fashion to satisfy our customer needs.

Okay. And then I guess on the capacity auction, if you do get a high capacity clear, which you've already kind of seen in Missouri and ISO I know you're a different zone, but given the rules they've adopted with the VR curve sector. Do you worry about that in conjunction with your regulators? And does that eat into a little bit of a headroom? Or how should I think about that? Should we be going the same capacity price direction in MISO that we've seen in PJM?

My comment to that would be, and then others can jump in associated with it. My comment to that would be that's one of the reasons the vertically integrated model has so been official associated with it. because we have requirements and whatever is brought to bear that we have to provide for the reserve margin on top of that as well as what's associated with the accreditation reduction. So, I would say, fundamentally, supply/demand, we're helping to keep that supply-demand in balance associated by what we're doing and what we're looking at would be required in resource additions, which is also why we included the case -- the reference case with 2,600 megawatts of potential large low like data centres and the scenario upside. So, though we are always cognizant of that and focus on what that impact the customers in, I would also say that vertically integrated model helps mitigate a lot of that risk.

Thank you for that.

Your next question comes from the line of Travis Miller with Morningstar. Please go ahead.

Hello everyone. Thank you. Good figure, another data center question, and perhaps this is just a clarification and the clarification of all the clarifications you've given. But do you technically need to build anything, put infrastructure in the ground to allow power to flow to that Microsoft center initially and then maybe one or two others. That's more of a technical question, right? Do you actually need to build anything in the short term to get these first couple of data centres online?

Yes, we would need to build to facilitate the kind of low demand we're talking about, whether it's Microsoft or any other counterparty.

And is that more generation or transmission for the first for the Microsoft Center and maybe one or two others.

Most of these investments would require both generation and transmission.

The only thing I would add associated with that, though, is as mentioned before, we do have a very beneficial territory associated with that from what we have in transmission capability capacity as well as we have great sites associated with that generation. But when you look at the demand associated with all these entities, you are going to have to add additional resources and additional infrastructure in order to meet the high load factor and high reliability demand of those entities.

Okay. So literally, the Microsoft Center that was announced can't come online until you build new generation or new transmission, however, that works out.

I wouldn't infer that from it. I would just infer that when you're talking about adding significant scale associated with the system, you have to make sure that you're meeting the reserve margins and reliability requirements, saying that they can't come online without any of that in place, I would say, would be sort of going a step too far associated with it.

Okay. Got it. And then on the different topic gas demand. What are you seeing right now in terms of gas demand? And how much gas demand growth is in your new and extended CapEx plan assumption?

Yes, we're still seeing a fair amount of growth across our service territories, most notably, Virginia, Central Ohio continue to grow and continue to extend the system. We're still seeing customers close to 1% on a net customer basis, the total number of additions we have minus attrition is ending at about net 1% for the gas businesses. We continue to see demand from an economic development standpoint for onshoring and for gas pipelines to support electric vehicle battery manufacturers and a few other examples that we have across the service territory. We tend to be a little bit bearish in our forecast as it relates to total customer additions. Economic development and customer growth can be hard to predict. Therefore, we tend to mute what the forecast looks across the horizon for total customer count growth, but we're continuing to see close to that 1% on a trailing 12-month basis.

Okay, great. I appreciate all the thoughts.

Your next question comes from the line of Gabe Moreen with Mizuho Securities. Please go ahead.

Hey, good morning, everyone. Just following up on the last question around gas. Can you just maybe give a little more color on the step change within Columbia CapEx? Are you accelerating work here? Is it costing more? Are there any discrete projects at various jurisdictions you point to. And then sort of as a second part to that, can you just talk about to what extent any changes in the gas forward curve, which has come down since the last five-year plan may or may not have played into the CapEx increase as well as the ability to keep customer bills 5% or lower? Thanks.

Yes. You bet, Gabe. I appreciate the question. So the gas system hardening work that we're seeing. I don't know if I'd necessarily call it a step change so much as a glide into what the requirements will be for the completion of the Bersteel replacement programs. Some new first-generation plastic replacement programs are starting to pop up as well. We do have some gas AMI investment, which we've been focused on, and we would like to continue. We think that drives great efficiency and better service for our customers. So, there is some of that included as well. But IOI in-line inspection work continues as well as some transmission compliance. We expect that some PHMSA of rulemaking as well in the new year could give better indications on time lines associated with the compliance requirements for linked detection rules. So, there's a whole host of things for us to do to help harden the gas system, and that's what you're seeing in the capital allocation itself. And then in terms of the forward-look gas curve, the average cost for gas right now across our service territory is about $2.20, we've used the NYMEX curve in this forecast, which increases that by 43% next year, an additional 12% in the subsequent year. So, it already reflects a pretty healthy step up in gas costs that's included inside that fuel that we've projected across the horizon.

Great, thanks Shawn.

Your next question comes from the line of Ryan Levine with Citi. Please go ahead.

Good morning. Are there any steps that have been taken for NiSource or NIPSCO to enter a Q for critical gas generation infrastructure that could help accelerate the time to market for your customers?

Yes. I wouldn't get into those specific details associated with what we've done on those activities based as we're going through the commercial discussions. I will just say that we have been appropriately planning associated with what's needed just as the previous question was asking relative to there's any infrastructure required. All these facilities require some level of infrastructure, whether it be substation, transmission, generation, et cetera. But we have been -- we're appropriately aware and have been calibrated to that and have been positioning ourselves effectively.

One of the advantages of NIPSCO is our proximity to the gas supplies to the Utica and Marcellus shales. So, I think as you look at these opportunities, I mean we mentioned earlier, approximately a robust transmission -- electric transmission system in proximity to gas supply are just critical advantages for the company.

And I will add one more thing to that. We are seeing that gas benefit and that gas benefit across territories in more than just Indiana. We see it in other of our territories because it's very beneficial relative to not only the onshoring, but also for data center activities. And other areas as a look of how to address potential power shortfalls in other areas.

And maybe a follow-up, given maybe increased demand for this type of infrastructure, how much of your new CapEx guidance change is associated with items previously in the plan costing more versus additional items being added to the CapEx plan?

Ryan, I don't think we have that exact calc on what's an inflationary increase versus a change in compliance requirements, regulation requirement or what's necessary for us to deliver reliability for our customers. So wouldn't be able to parse it down. But I think the thematic answer is that additional work not the cost of the same work is what's driving the cost -- the direction it's headed. And we just continue to see the cost of compliance and regulation to increase, whether that's coming from EPA, whether that's coming from MISO and FERC whether that continues to come from PHMSA is really the driver of the capital allocation increase.

Thank you.

That concludes our Q&A session. I will now turn the conference back over to Lloyd Yates, CEO, for closing remarks.

Thank you for your interest, and thanks for your questions today. Thank you for your interest in NiSource. And we look forward to seeing all of you at the EEI financial conference in a couple of weeks.

This concludes today's call. Thank you for joining. You may now disconnect.