NiSource Inc. — 2024 Q1

It's Shahriar for Constantine. Let me just on the data center side. I mean, obviously, we've all seen kind of media reports of kind of maybe just sizable data centers coming to Indiana, including Amazon, right? I guess can you maybe talk a little bit about what you're seeing in terms of that potential demand and what it means to the overall plan. I guess, can you be a little bit more specific on when it can hit the plan?

So I think as I said in some of my remarks, I think Shawn also repeated it. When you think about the NIPSCO system in Northern Indiana, and we have a number of fundamentals, one, a very robust transmission system, plentiful land, a lot of farmland there, available energy capacity. Great energy policy, really enhance a really positive place to do business. I mean you start to realize a region is right for data center development. And because of that, we are in the midst and have been midst of discussions with several data center developers, and we're really optimistic about the opportunity to grow our load with respect to data centers.

Perfect. I appreciate that, Lloyd. And then just lastly here, I know you've mentioned before you ensure that you could ramp up the ATM to cover sort of any incremental equity needs from upside CapEx that's being shifted over to the plan, right? I guess for the remaining $1.6 billion of upside capital, what could sort of be -- what could be next in terms of projects that move into that base plan from there? And then just more importantly, how do we think about the funding source for that?

So I'll ask Shawn handle that. Maybe Michael will help him.

Yes. So Shar, first and foremost, I think your question on what are the types of projects, the upside CapEx plan. So still have some electric generation projects in our upside plan based on the results of the 2021 IRP. So we'll watch the 2024 IRP process to understand how these upside projects might fit in our investment timelines. I think gas infrastructure work around PHMSA requirements and some of the additional projects stand out to us are compelling, particularly based on compliance requirements, but we need to watch and see how that plays itself out from a rule-making standpoint.

Picking up the data center question again, just curious if you see the IRP, the '24 IRP to be specific, as the best look over the next, say, 12 months on how that might layer in incrementally to your current plan? Or do you see things still evolving, I guess, either faster or slower than that process?

So I think it could be a combination of both, but things could definitely evolve faster than the IRP process in Indiana. I think just like all the other companies across the industry, the data center developers are talking to a lot of people. I think that they are looking for utilities or energy companies that can move quickly. We want to be one of those. And I think that process may develop or could or probably will develop faster than the IRP process.

Got it. Very helpful color there. And then just a few regulatory items, Pennsylvania rate case. Anything you can speak to on kind of stakeholder engagement there, how the process has been running so far and how you feel about kind of catalysts over the back half of the year with regards to those case milestones, maybe prospects for settlement? And then separately, the NIPSCO deferral, you referenced, kind of any timeline to think about on getting an approval there? And does that have any financial impacts to the plan that we should think about?

I will pass it to Melody who heads up our regulatory utilities.

Yes. Can you hear me okay?

Yes, we hear you.

Okay. Very good. As far as the Pennsylvania rate case, which you -- that we filed March 15, it's coming along well, our team continues to engage with our stakeholders there in Pennsylvania. This is not the first time, just so you know, when we have a rate case that we began to have discussions with the stakeholders or to understand what intervenors are wanting or expecting from us. So it's an ongoing dialogue that the team and Pennsylvania has throughout the year up until the time that we file. We -- with all cases, they're uncertain, but we do work to stay as aligned as possible with the stakeholders to mitigate any surprises. So I would say it's going as well as we expect at this point. And then your next question?

The NIPSCO deferral. Just overall timing to get an outcome there? And is that something that we should think about having a financial impact or rate case timing impact or anything else?

So it should not have an impact on the rate case. We still expect to get an order on the NIPSCO gas rate case sometime this summer. And because of the deferral mechanism, it should not have a negative impact on our financials.

This is Travis Miller. On the $1.6 billion of upside, the slide there, some of those gas-related upside numbers. Can you talk about what jurisdictions have the most upside? And again, I realize there's a scale difference here, but just maybe on a percentage basis, which of those gas jurisdictions do you think could check a lot of the boxes here in terms of the upside?

I mean I think the way to think about it is to think about the size of our jurisdictions, right? So you think about Ohio, Indiana and then Pennsylvania will have the broadest impact in terms of capital investment from those rules of that $1.6 billion.

On a scale basis, would -- are there other opportunities in the smaller one...

There are. You asked the biggest impact. I think there are opportunities in all of those jurisdictions for capital investment as a result of the new rules. But again, it will be, I'd say, allocated to be a size of the jurisdiction is the way to think about that. Michael, do you want to add anything to that?

Yes. The only thing I would add to that is when we look across all of our territories, that's one of the benefits of having sort of the diversified territories and what we have in our current capabilities. And so you can take things such as in Virginia, there is very constructive legislation around biofuels that allow us to look at those opportunities.

Yes. Maybe one last point here, this is Shawn. The stakeholder alignment is critical, and so the timing to implement the rules will matter as you think about our current CapEx plan, '23 to '28. So we'll need to pace that through. So what you'll see if it moves from the upside plan to the base plan will be actionable projects within the context of the timing of this CapEx plan. But those rules could extend the amount of work into the early 2030s. And so how we segment that along the actual jurisdictions that Michael just referenced will be dictated a lot by our stakeholder engagement and the pacing set forth by themselves.

Perfect. That's really helpful. And then one other, obviously, the hot topic of the data center. But if you think about your mix of business in terms of gas and electric, how much upside or available upside at least is manufacturing, which you mentioned versus data centers?

Yes. So I'd say some -- I mean, I think you started thinking about the economic development in Ohio, in Indiana outside of data centers is really strong. You think about reshore and you think about the Intel project just here in Columbus, you think of some of the battery, Stellantis in Indiana. I mean, reshoring or onshoring; however, you want to characterize that is, again, a great opportunity for us. We are strengthening our economic development pipeline getting more focused on that because there are more people interested in that. I mean, I think we have -- I mean the -- one of the strengths of the company is we did -- the jurisdictions we operate in, most if it, not all of our states, provide huge economic development incentives and people are very motivated to create manufacturing jobs where possible. That's the one thing no matter what your politics or everybody agrees on job creation and economic development and we're positioned very well to take advantage of those.

It's Bill Appicelli from UBS. Just going back to the technology capital deferral mechanism. I guess how much capital could flow through that? And then just to clarify, that would be a deferral on D&A and O&M.

Yes, this is Shawn. I'll take that. The existing project cost allocation is set forth to be about $250 million across NiSource, but that splits itself to the allocation across their jurisdiction. So think about it around $150 million of capital that will flow through NIPSCO, both on the electric side and the gas side. And then -- yes, it covers the onetime O&M component of it and then some depreciation and amortization.

Okay. All right. Great. And then just going back to the PHMSA rules and maybe can you just share exactly what you need to see coming out of that final rule making to trigger some of the incremental capital opportunities?

Yes. I mean we are actively involved with federal government and I'll say the PHMSA rulemaking. As you probably know, PHMSA is about really grading leaks and repair timelines and leak detection methodologies. We think those rules will be finalized by the end of this -- by the end of 2024, so far and as we start to develop plans for compliance to those rules, you'll start to see us have input to our capital plan or additions to our capital plan to facilitate those rules by some time in the middle of the plan. So if you develop a compliance plan within 18 months. And in 36 months, you kind of have to roll into your capital plan. So we expect to see capital upside from the PHMSA rule sometime in the middle of the plan.

Okay. All right. And then lastly, and apologies if you said this earlier, but on the ATM issuance, can you just remind us how much you've done year-to-date?

We did approximately 1/3 on the ATM to date.

Again, thank you for participating in the phone call. We're optimistic about the NiSource plan. Appreciate the questions. Have a great day.