NiSource Inc

Welcome to the Nice Horse 2022 Investor Day. We're happy so many of you could join us here in person at the New York Stock Exchange. We'd also like to welcome those of you joining on the webcast today. My name is Chris Turnier. I'm Director of Investor Relations. It's great to see so many familiar faces in the audience, and we really want to thank you for being here, given that a very, very busy earnings season is now winding down. I'd like to start off with our legal disclaimer. The purpose of today's call is to provide you with an update on our operations and growth drivers and to review NYSource's financial performance for the third quarter of 2022. We'd 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, and these risks and uncertainties 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 may relate to non-GAAP measures. Please refer to the slides. Segment information and full financial schedules for information on the most directly comparable GAAP measure and reconciliation of these measures. Following our prepared remarks, we'll be available to answer your questions. With that, it's my pleasure to turn things over to our CEO, Lloyd Yates.

Thank you, Chris. Good afternoon, everyone, and welcome. We're delighted to be here with you today at the New York Stock Exchange to update you on the NYSOR story. On your way in, I hope you had a chance to meet our employees stationed in front of the building with one of our advanced leak detection vehicles. They'll be happy to tell you how it enhances our ability to provide safe and reliable service while reducing greenhouse gas emissions. That's part of our vision, to be an innovative and trusted energy partner. Our industry is going through massive change as technologies evolve and as customer expectations evolve. So we've refreshed our mission, vision, and values. As I said, our vision is to be an innovative and trusted energy partner. Our mission, what our employees focus on every day. We exist to deliver safe, reliable energy that drives value for our customers, but not just for our customers. We exist to drive value for all of our stakeholders, from regulators to investors to employees, suppliers, and our communities. And finally, our updated values guide us on how we're going to make this journey together. Be safe. Look for a better way. Act with care and take accountability. Our vision, mission, and values ground us in what's possible and what we need to do to turn that into reality. Together, our mission, visions, and values represent the why and how of what we do every day. During the rest of this presentation, we will focus on what we do, our business strategy, which is our aspirations, objectives, and key results, plus our strategic initiatives to drive the business forward. Let's go to slide five. Knight's Voice is a 100% regulated gas and electric utility serving six states with a focus on safety, reliability, and a commitment to maximizing shareholder value. This map illustrates our significant scale. We operate over a large and diverse footprint in the United States. The proximity of our six companies provides critical mass. Taking a closer look at our operating companies are located in constructive regulatory jurisdictions. These states recognize the value of natural gas and electric service, and they provide very efficient regulatory mechanisms to recover and earn on our investments. NYSERDA serves more than 3 million gas customers across six states, as well as nearly 500,000 electric customers in northern Indiana. We expect the updated growth plan we will share today to drive a compelling total shareholder return of 9% to 11% annually. We believe that is a premium utility performance. Go to slide seven. We're driving to become a premium utility. But what exactly does that mean? A premium utility provides safety above all else, as we do. At NYSource, our team's focus on the safe and reliable service to our customers, employees, and communities is second to none. and the resilience and reliability of our systems has never been more important than they are today. Premium utilities are also long-term infrastructure investors. Every day, they make investment decisions on assets planned to deliver value to stakeholders for up to 40 years into the future. To successfully execute on these investments requires premium utilities to have constructive regulatory backdrops This underpins their ability to make those investment decisions that benefit their customers and provide a return to their investors. At NYSource, there is a deep inventory of investment opportunities that enhance the safety and reliability for our customers. This opportunity represents approximately $3 billion of infrastructure investments annually. regulatory trackers, and rate case flexibility across all six states, optimize cash flow, minimize regulatory lag, both of which allows us to deliver consistent returns on invested capital. Additionally, premium utilities are committed to creating value for all stakeholders. At NYSource, we are building diversity in our employee population with our suppliers and We are focused on the regions which we serve to help them be great places to work and to do business. This is critical and underpins a healthy economy which attracts organic growth, industry, manufacturing, and thus the need for even more infrastructure. People are at the heart of this. None of these investments come to fruition without someone turning a wrench or standing up a pole. or relentlessly being there for our customers and our communities when they need us the most. When these factors come together, premium utilities become the integrator for the community. They multiply the economic value they create. They support all customers of all sizes and economic means and relentlessly work to keep people safe. They improve the value of the communities they serve. And they bring capabilities, jobs, taxes at a rate which leads the community much better than before. That is a premium utility at work. Switching gears to ESG, our strategy is aligned with a commitment to be best-in-class ESG principles. NICE Force has been a leader in reducing greenhouse gas emissions. Building on the progress we've already made, today we are announcing a new goal. Net zero, scope one and two emissions by 2040. We'll need to drive supportive regulatory and legislative policies, favorable stakeholder environments, and advances in technologies that are not currently economical to achieve this, but we are optimistic. Sean will have additional details in his presentation. We are committed to progress on social factors with a transformation focused on safety, reliability, and affordability. And we are enhancing our diversity, equity, and inclusion efforts. Finally, our commitment to governance begins with our diverse, skilled, and independent board of directors. The board has been refreshed. And an updated committee structure provides for a robust framework for strategy, risk management, and oversight. You'll find more information about our fundamentals and our ESG profile in the appendix to today's presentation. So now that we've taken a look at a nice list of strong fundamentals, Let's get to the heart of the presentation, the strategy that supports an extension of our top-tier growth plan and a premium utility valuation. What you'll hear today begins with an overview of our NYSOR strategy and direction, including the findings of our strategic business review. Sean Anderson will discuss our sustainable gas and generation transition. Donald Brown will give us a financial overview. And finally, I will wrap up our presentation and open the floor for your questions. When I became CEO at Knivesource in February, I announced a strategic business review with a goal of ensuring Knivesource is well-positioned to drive long-term value for all stakeholders. It was important to bring the right people to the table, building a review team with a deep background in finance, operations, and strategy. We were very fortunate to have board members with decades of utility experience. Mike Jasanis, Theo Bunting, and Bill Johnson. Donald Brown, Sean Anderson, and I participated from our leadership team. We also bought in strategic advisors from Lazard and Goldman Sachs to provide additional expertise. This is a strong and seasoned team focused on continually enhancing long-term shareholder value. Over the course of the last seven months, this group met in person and virtually more than 15 times. That is in addition to the countless hours of work behind the scenes by everyone involved to do the analysis, evaluate the options, progress the conversations, and everything else. I want to thank everyone for their hard work. But let me take a step back, because I've been in this business a long time, 40-plus years. As I have observed in my career, and I'm sure you all appreciate, the best way to drive long-term value in the utility industry is to do some combination of the following, all of the following in a best-in-class way. First, run a safe system and be committed to safe operations above all else. Continuously identify investment opportunities that can grow rate-based in a way that is sustainable for our customers. Relentlessly manage cost. Finance the business in a way that optimizes the cost of capital, maintains financial health, and enables additional rate-based investment opportunities. And finally, flawless execution. In other words, the best opportunities for us to drive stakeholder value exist within our business. Now, that doesn't mean we shouldn't look for other possibilities, but getting these things right is the key for success, and we are executing on those opportunities. For example, we've invested significantly in our safety initiatives, and we will continue to do so. We have more than $30 billion of investment opportunities in our six operating businesses, all of which we can invest at one time's rate base. We have a cost profile and an approach to work that presents efficiency opportunities to better manage customer bill pressures. For example, our wrench time in the field needs significant improvement. Our customer contact centers need to be optimized, and management of our contractors needs to be enhanced. This focus will help us keep our commitment to you as investors to significantly grow the bottom line through capital investment. We also leverage the scale of our operations and central services to create efficiency for our stakeholders. Beyond simply focusing on cost structure, we have an opportunity to focus on working smarter, doing things more safely and more efficiently. I brought a number of those observations of what I've seen at NYSource to the review. As I've traveled across the footprint, it became obvious to me that NYSource has some great strengths. These include our team's regulatory execution and the legislative environment in the states we serve. We have a long runway of investment of opportunities and the ability to grow over a long time horizon. And we have great people. Our employees are flexible, they're committed, and they have a strong focus on serving our customers. They're living the mission statement I mentioned a few minutes ago. I've also found some significant weaknesses. NYSOR's balance sheet has been constrained for some time, more than 20 years. We've had to issue a lot of equity to fund our investments, and that's led to dilution. We need to fix that to provide the returns that reflect a premium utility valuation. Our cost profile is another substantial weakness. Many of our key technology systems are inefficient and they're outdated. We feel very fortunate to have a long list of opportunities. They include creating efficiencies and taking advantage of our vast scale. We can reach industry-leading environmental goals. There's also an opportunity in streamlining the organization and an opportunity for investment and leadership in the energy transition and grid modernization on both the electric and gas sides. As I scan the horizon beyond managing the near-term supply chain issues, the core threats I see that affect everyone in our industry, and I think we all understand them well. High commodity prices have raised customer bills, high interest rates driving higher capital investment costs. And while the energy transition presents great opportunities, there's a threat to those who don't continue to move forward in a way that creates value. The actions we are taking help insulate NYSource from these threats. This slide clearly shows the impact of our constrained balance sheet Since NYSource and the Columbia Pipeline Group separated in 2016, NYSource has grown its rate base by about 70%. Net operating earnings have grown about 60%, a compound annual growth rate of more than 10%. That's outstanding. However, the picture changes when we look at net operating earnings per share. Growth of just 25%. Despite the strengths NYSource enjoys, a constrained balance sheet has resulted in a dilution of shareholder value. That became an important gap we need to address. These observations helped to frame the scope of the strategic business review. The team kept an open mind towards avenues that would help us deliver maximum value to stakeholders. We began with our best-in-class, high-growth base case. How could we optimize it to produce maximum value? Financing was carefully considered. We looked for options in alignment with our long-term strategy that would strengthen our balance sheet, a problem that we've been dealing with for a long time. The review team conducted a thorough analysis of our options for optimizing our portfolio. We conducted extensive scenario analysis to assess how each might be accretive. We looked at all sorts of M&A, things we could sell, impart, and hold, things we could buy, other companies we could partner with, et cetera. We even had various forms of conversations with potential counterparties. I'm not going to get into the specifics, but I am telling you so that you can appreciate how robust our process has been. To better understand NYSWR's position and potential outcomes, the team did robust benchmarking of all of our OPCOs against other utility OPCOs. When people talk about benchmarking, O&M usually comes to mind. However, we expanded the definition significantly. We believe a comprehensive benchmarking analysis sheds light on strengths and weaknesses of our strategic positioning. We included such items as long-term investment inventory, operational efficiencies, instructiveness of regulatory environments, including historic ability to deliver strong returns in the energy transition in a constructive manner, and importantly, visibility to short- and long-term growth drivers. This provided valuable perspective and a stimulant for running the business better, more efficiently, and at a lower cost. We also looked at NYFORCE's culture and talent, which are foundational for our long-term success, along with organizational structure to help drive accountability. And we looked at our corporate overhead and all other elements of how we spend money, including those that are behavioral and work management related. In total, the review considered many avenues for maximizing shareholder value, backed by robust and impactful information. And so here's what we concluded in the actions we were taking. First, the review confirmed that the scale and diversity of our current portfolio of operating companies adds value, scale offers opportunities to manage costs in our operations and across our supply chain, something that's particularly important in this inflationary environment. Diversification across multiple states helps mitigate financial risk, and the seasonal nature of gas and electric businesses helps smooth annual cash flow needs. Second, we clearly saw our industry-leading recovery programs drive top-line growth. We began earning on 75% of our investments within 18 months, and we believe that's a significant advantage. The review identified an opportunity to remove the balance sheet constraint, and in a moment, we'll talk about a significant action we're taking. And finally, we concluded we must improve our cost profile to help maintain customer affordability over the long term. We're taking action on these conclusions. First, we're announcing today an intent to sell up to 19.9% interest in NIPSCO in a tax-efficient transaction. NYSRUS remains committed to our NIPSCO business, our customers, employees, and the communities we serve in northern Indiana, and will continue to execute and enhance our business strategy there as we have before. However, the proceeds from this minority interest sale will immediately strengthen our balance sheet We'll be able to fully leverage our portfolio of investment opportunities to enhance shareholder value. Sean and Donna will tell you more about the impacts of this transaction in a few minutes. Our second and third actions are tied together. We will focus on optimizing our cost profile and enhancing operational efficiency. NYSource has great hard-working employees, but outdated systems and work processes are a big drag on our productivity. Updating systems and focusing on operational excellence will have far-reaching impacts. This change will make us safer operators and help us to maintain affordable rates for our customers. This is key to that effort. You'll see more detail in the next slide. Our review was thorough. I'd like to thank the review team and those supporting them for the countless hours they spent on this work. The opportunities the team uncovered will drive our long-term growth and maximize value for all stakeholders. Our work will be built on a foundation of operational excellence. It's the key to increasing productivity, controlling cost, and protecting public safety. We intend to keep O&M costs flat through the life of this plan. Doing that is essential to customer affordability and safety. It gives us the ability to invest in better service and reliability. We see broad opportunities to standardize work and apply industry best practices. Of course, operational excellence goes hand in hand with our enhanced focus on safety. Our team has worked tirelessly to advance the safety of our customers, communities, and employees. Here are some stats from our safety report that are responsive or representative of the progress we're making. While having zero significant safety events is an important headline number, the other numbers show we're focused on the details, working to prevent problems, and responding promptly to incidents. NYSOR has reached a major milestone this year in our safety journey through our safety management system. We became only the second U.S. company recognized as being in compliance with the American Petroleum Recommended Practice 1173. That's the document that defines a safety management system. One innovation that shows how we've changed our approach to safety is our risk-based capital allocation strategy. This ensures we're getting capital where it's needed to address risk. We've built a culture where every employee can report risk and where risks are systematically addressed. We'll continue to advance safety through a culture of operational excellence. Strengthening our balance sheet and building a culture of excellence enhances our ability to execute our investment plan. NYSource has a deep portfolio of investment opportunities. We've identified about $30 billion worth of investment opportunities over the next 10 years. The largest share of those investments are on the gas side of the business. We'll continue to replace and modernize our infrastructure. That activity is essential. We're continuing to provide safe and reliable aging gas lines has helped us achieve significant reductions in methane emissions. You also see large chunks of the pie go into electric infrastructure as well as the generation transition and renewables. We expect to make significant investments in customer growth. Having several buckets of investment opportunities gives us significant flexibility to move investments where we can drive the greatest benefit for our stakeholders. I'll close my presentation with a look at the NYSource value proposition all in one slide. I'll give you a moment to take it all in. Because I believe these numbers tell a great story. We offer a very attractive total shareholder return proposition of 9% to 11%, more de-risk customer rate sensitive, 6% to 8% annual growth in that operating earnings per dilute share, our 8% to 10% growth in rate base, and our targeted 60% to 70% dividend payout ratio. Add to that more than $30 billion of investment opportunities and a strengthened balance sheet. This is what we believe a premium utility looks like. I want to thank you for your attention, and now we'll turn it over to Sean Anderson.

Thank you, Lloyd. Good afternoon, and thank you all for being with us today. As Lloyd just described, the strategic business review process we embarked upon included a thorough review and rigorous evaluation of our businesses focused on creating long-term shareholder value. We incorporated all ideas into this process, aided by the diverse perspectives of all of the stakeholders involved. As this slide lays out, and as Lloyd touched upon, we studied a wide range of different ideas and alternatives for NYSource. I'd like to focus a bit here on our approach during the process, which began with looking at ways to optimize our best-in-class, high-growth proposition within the NYSource business plan. Importantly, our plan includes the operation of our premium utilities, situated across six highly constructive jurisdictions with approximately 4 million customers, who we are so fortunate to have the opportunity to serve. We'll talk more about these companies and why they are premium utilities, and importantly, how they fit and contribute to NYSource's strategy and growth. We looked hard at different ways to finance the business. Over the last five years, our operating companies have averaged a rate-based growth of 13% on an annualized basis and are projected to grow rate-based at approximately 8% to 10%, on a forward-looking basis. So financing solutions that maximize balance sheet health, minimize dilution, are always going to be something we study and evaluate thoroughly. Priorities such as flat O&M, leveraging efficient regulatory mechanisms which deliver a return on capital expenditures inside 18 months, help to de-risk and streamline cash flows from our investments. and leverage the premium fundamentals of the NYSource business plan. All of this translates directly into a compelling total shareholder return proposition, which is accretive annually and will drive value creation for years to come. Throughout the review, one of our core goals was to make our base case business plan and growth outlook as strong as it could be. because that underlying execution will maximize long-term shareholder value in all scenarios. Another key area of evaluation was inorganic options, namely portfolio optimization pathways and M&A opportunities, as ways for us to enhance the already strong foundation crafted in our base case. As Lloyd referenced, we reviewed a variety of options and held discussions with prospective counterparties and spent a good amount of time to get a sense of the marketplace. Some of the observations and learnings from these evaluations are similar to what we've observed in the past. Our evaluation concluded it's difficult to realize accretion through full OPCO sales as NYSource and its customers benefit from scale, diversity, and centralized service costs. Selling an OPCO or OPCOs creates dis-synergies that take time to mitigate and put pressure on the remaining company and customers. Doing so is also tax inefficient and is dilutive as a result of lost earnings and cash flow. Likewise, it can be difficult to create incremental value through outbound M&A. It's hard for us to create value by paying market premiums when we have a massive inventory of opportunity that can be invested in at one time's rate base. Thus, we landed on the minority interest sale as the best path forward. It achieves several goals. It allows us to strengthen our balance sheet. It's tax efficient. It avoids disenergies. It maintains the scale of our business. There's a good precedent in the industry of this type of transaction being completed successfully. And it's a very efficient means of financing our business. I'll talk some more about this in a few slides. But before we head that direction, as we look across our jurisdictions, first and foremost, we make long-term investment decisions designed to deliver value to stakeholders. The regulatory support in these areas that help us to prioritize safety and execute on our investments is of critical importance. We spent a lot of time on this concept in the review of our business last Understanding the investment parameters are necessary and what it would take for each business to be a successful investment story consistent with the premium business plans such as ours. As you can see on this slide, we have forward-looking capital mechanisms in nearly every operating company, reducing regulatory lag. The exception to this is Ohio, which is unique in its ability to track 100 percent of our related capital expenditures and begin recovery within 12 months. Strong rate-based growth, aired with constructive regulatory environments, is even more impactful when you realize that approximately 90% of our capital spend is within Ohio, Indiana, and Pennsylvania, where you have the benefit of these regulatory mechanisms. Meanwhile, Virginia has historically experienced strong organic customer growth, which we expect to continue into the future. Just last week, Virginia was ranked number one by Site Selection Magazine in terms of constructive business climate. Maryland exhibits a stable economic environment, zero lag due to forward-looking infrastructure replacement programs, and growing communities attracting from the Washington, D.C. area. And Kentucky is one of three of our LDC businesses operating within states which have passed legislation to preserve customer choice of energy fuel diversity. All of these regulatory and legislative fundamentals underpin a balanced growth rate across all of our jurisdictions, each of which have achieved a five-year average ROE in the mid-9% and 10% range. In summary, what makes us so bullish on the investment thesis for NYSource is the quality and strength of each of our jurisdictions as we see significant economic development and growth opportunities both as a whole and when independently reviewing each jurisdiction. We are so fortunate to serve and support communities amongst the most constructive in the United States. Early in our process, we observed that the company's balance sheet constraints created an impediment to achieve many of the goals set out for in the strategic business review. In some ways, this is the missing link which enables us to convert our rate-based growth opportunities into net operating earnings per share in an efficient manner. Historical circumstances coupled with the demand for significant amounts of rate base to be deployed required external capital market solutions as a funding source for our business. As we look toward the future and recognize even more investment opportunity on the horizon, we see more demand for capital, not less. We also recognize the state of the external capital markets today as more volatile than in years in the past. Higher interest rates and the overall cost of capital has an impact on our company's plans, which creates a dependence on these marketplaces being available at a low cost each and every year of our plans. These observations contributed to focus on accelerating the strengthening of our balance sheet and de-risking our future capital markets needs. Our evaluation demonstrated that diversifying our capital raise could strengthen our credit and financing flexibility, while stabilizing both our earnings power and our financing plan, especially when coupled with a minority interest sale of our business. We evaluated a range of potential outcomes, And we are confident that we will be able to execute this sale with a transaction that delivers relative value to the NYSOR standalone plan for EPS metrics, our credit metrics, and our overall valuation. We've looked at a range of industry precedents, many of which have attracted significant investor interest and have driven premium valuations in all types of market conditions. And we've heard from interested parties on the merit and value to invest in a minority interest at NIPSCO and how that would align with their investment thesis over the long-term horizon. Indiana has also been one of the most constructive states to execute minority interest transactions with multiple precedents in the marketplace already. We did not expect any tax leakage or meaningful disenergies with this type of transaction, And thus, it is a much more efficient capital raise than any full opcode disposition potentially considered. Finally, NYSORS retains long-term strategic flexibility across all of our scale of six operating companies focused on gas and electric utility operations and can still leverage the vast array of investment potential fueled by our growing businesses. We believe this transaction will reposition the NYSource balance sheet to a position of strength and eliminate the need for all discrete equity issuances through 2027 while relying only upon traditional debt and ATM equity to simply maintain the capital structure on a go-forward basis in 2025 and beyond. I will wrap up this portion of my presentation with a look at a different slice of our benchmarking data. We thought it was important to share the fundamentals of the NYSource business plan, which are premium when compared to many of our peers, as well as how this shifts as a result of the transaction process we will commence in Q1 2023. We continue to commit to our 100% regulated business mix across six jurisdictions, retaining diversification of operating territory, as well as fuel source with our gas and electric businesses. We maintain a premium rate-based investment opportunity of 8% to 10% annually, shaped by a risk-informed capital allocation process. And we're able to translate these investments into 6% to 8% net operating earnings per share annually, in large part due to our streamlined cost commitment, the reduction on external equity needs, and importantly, the strength of our cash flow recovery mechanisms across each of our high-quality regulated jurisdictions. We continue our commitment to a dividend payout ratio of 60 to 70 percent, an investment yield opportunity to complement our growth rate and help target double-digit annual returns for our investors. Finally, our business plan sets up to deliver these enhancements, all while realizing a step change in credit quality through the balance sheet strengthening anticipated with the minority interest transaction. As we noted, this transaction de-risks the external financing needs over the duration of this plan and allows our team to focus on execution of the high-quality capital allocation opportunities we have in front of us and maximize the value creation across all of our projects. Taken together, we believe these strengths show NYSOR should be considered a premium utility investment. Now let's turn to the long-term sustainability of our business plan. NYSource is committed to enabling an equitable energy transition for our stakeholders through investments that will drive safety, systems reliability and resiliency, and significant greenhouse gas emissions reductions. While these efforts will support broader decarbonization in our communities, we're also focused on doing so in a way that is affordable as well. An equitable energy transition will look different from state to state and community to community. We're taking a collaborative, supportive, and stakeholder-centric approach to truly understand the perspectives which inform the long-term plans and support in each of the communities we serve. The energy transition creates significant economic benefit to our communities by way of regulated investments, of which we have approximately $30 billion already identified over the next 10 years. These investments are critical to community safety and reliability, but many of these investments are integral to enhancing the sustainability of our communities as well. Along with driving down greenhouse gas emissions and protecting local environments, these investments support thousands of jobs, generate hundreds of millions in tax proceeds for state and local government, and allow us to drive long-term premium returns for our shareholders. Customer affordability is of critical focus during this energy transition, and through 2027, we anticipate low single-digit annual growth in customer bills, supported by reduced commodity prices, energy efficiency, O&M discipline, and additional benefits of scale as our customer base expands. Even if you eliminate the impact of commodity costs, we expect distribution rates to grow less than 5% on an annualized basis. We have seen natural gas prices moderate from recent highs and expect pricing to return to the 450 to 550 range during this planned horizon, in line with broader market expectations. We are also advantageously located close to the Marcellus and Utica shale formations, allowing us to access supply from basins which trade at a historical discount to Gulf and East Coast markets. Our electric business is also able to benefit from geographic advantages, derived from the transmission efficiency of our central Midwest location, and optimized grid access facilitating regional energy movement. NIPSCO's generation transition is well underway, and upon conclusion will support customer affordability through an increase of zero-commodity generation resources, and we remain on track to deliver the execution of the projects identified from the 2018 IRP. And lastly, Our own commitment to Flat O&M, leveraging an enhanced focus on operational excellence, is contributing to low customer bill growth. This discipline will directly benefit customers and allow headroom for continued investments driving safety, reliability, and sustainability. In the regions we operate, natural gas is a clear economic advantage versus competing alternatives. Emerging higher efficiency gas technologies have the potential to expand this advantage even further. We are seeing continued demand growth for natural gas across all customer segments, and several of our states are in the midst of a manufacturing and industrial resurgence that is being fueled by natural gas. Natural gas remains a critical component of a diverse clean energy portfolio. Its role allows for accelerated decarbonization through a more cost-effective approach as compared to pure electrification by leveraging existing infrastructure, zero to low-carbon fuels such as RNG and hydrogen, and utilizing more efficient end-use equipment. Blending RNG and hydrogen with natural gas and delivering it through our existing infrastructure will require limited changes to customers' end-use, thereby speeding up access to low-carbon energy. When looking at large industrial customers, these fuels will also allow for decarbonizing applications, which are not well-suited for electrification. Our modeling across our service territory demonstrates an electrification-focused pathway is 44% more costly on an NPV basis than an optimized portfolio, which combines some electrification with natural gas, renewable natural gas, hydrogen, and the use of existing gas infrastructure. The additional benefit is that much of the infrastructure required for the optimized portfolio is already in place, thereby accelerating the rate of decarbonization in the near term. NYSERUS has taken an active role in directly advocating for and advancing federal and state policies that support a clean and equitable energy transition. Impactful policies such as the Infrastructure Investment Jobs Act and the Inflation Reduction Act are helping to champion an innovation and foster tangible outcomes that can drive affordable decarbonization. Supportive policy and regulatory frameworks are necessary to reach our long-term decarbonization goals. And NYSORS is focused on key areas such as alternative fuels legislation, delivery of energy efficiency programs, advancement of accelerated leak detection, continued gas system modernization, and renewable energy investments. NYSource is also taking an active role in supporting the development of technologies that will enable decarbonization through the natural gas system. Across our states, we are deploying PECARO advanced leak detection vehicles, like the one out front today. And innovations like these have the potential to greatly influence utilities' visibility into their emissions inventory and transform how the industry identifies, prioritizes, and repairs leaks. Nicehorse is also committed to supporting the growth of RNG across our service territories. Over the past year, we've established common RNG gas quality standards across all of our gas LDCs and streamlined our processes to facilitate RNG producers connecting to our systems. Nicehorse currently has RNG producers injecting close to 2 BCF per year into our system and expect that figure to grow based on pending demand and our engineering queue. We recently launched a hydrogen blending pilot at our Columbia Gas of Pennsylvania Training Center. The first phase will allow our pilot to study the impacts on the different blends of hydrogen and natural gas in a controlled environment on our distribution system and on end-use equipment. We are also participating in several regional hydrogen hub proposals that are seeking DOE funding within the IIJA's Clean Hydrogen Hub program. On to our electric business. As you know, the nice source generation transition started in 2018 when our portfolio was about three-fourths coal. By the end of this decade, we will have retired all of our coal generation and transitioned the majority of our portfolio to renewables and storage assets, with natural gas continuing to play an important role providing reliable base load and peaking load generations. We are on track to deliver on the projects that will replace the capacity from Schaefer Generating Station, eight owned and joint ventures, and the remaining in PPA contracts. And over the last few months, we've worked tirelessly to address and mitigate the supply chain issues the industry has faced earlier in the year and are confident in our current project timelines. Rosewater and Indiana Crossroads Wind One are both in service and providing clean energy to our customers today. Our projects expected to be complete next year, Dunns Bridge 1 and Indiana Crossroads Solar, are in a strong position with respect to panels and other key inputs and are in the final stages of construction. These projects represent a tremendous first step into our solar portfolio and are among a small subset of projects across the country to only face minor delays. Also, Dunns Bridge 2 and Cavalry Solar have both started construction, and the last two projects, Fairbanks and Elliott, are continuing in commercial negotiations. Our advancement, despite recent market constraints, reflects highly of our relationships with our developer partners as we leverage creative solutions to address market pressures. All told, CapEx to support the retirement of Schaefer is projected to be approximately $2.2 billion. CapEx to support the next wave of investments beyond Schaefer is currently estimated at approximately $1 billion to support the future portfolio through 2028. Driving these costs are increased capacity needs as a result of the MISO seasonal construct and the supply chain ramifications observed through our recent RFP. Incremental generation resources and transmission upgrades will support future retirements and grid reliability. We are also on track to retire the remaining Schaefer coal units by the end of 2025 and retire legacy gas peaking units and Michigan City by 2026 to 2028. Timing of construction for the post-Schaefer projects will drive the exact retirement of these units. As mentioned, we expect Dunsbridge 1 and Crossroads Solar to be online in the first half of 2023 with Dunsbridge 2, Cavalry, Fairbanks, and Elliott coming online in 2024 and 2025. The RFP we issued this summer drew robust interest from bidders. However, we saw less participation than in past RFPs. There are several potential reasons for this, as there have been numerous RFPs issued in Indiana in the last 18 months. And solar supply chain issues may have slowed developer pipelines. But this dynamic also suggests a high value for all of the projects we've completed and are underway to be delivered to our customers. We received 54 projects in the RFP, representing about 9 gigawatts of capacity across a range of technologies. Overall, we're seeing pricing for projects much higher than last year across all technologies and deal structures. We're still evaluating the bids and conducting additional portfolio analysis using the refreshed RFP data, but we see no material departure from the 2021 IRP preferred plan, which called for an uprate to Sugar Creek, a new gas peaking resource, and energy storage to fill the required capacity of our portfolio. Definitive agreements are expected in early to mid-2023. We expect to execute on our industry setting IRP-RFP combination with similar success in the past in terms of transaction count and speed to firm agreements. We've also observed that the IRA provides incremental tax credits. Some of our existing projects can take advantage of these opportunities and provide credits back to our customers. As we move forward, today we have announced a net zero goal targeting a 2040 timeframe. More on that in a moment. But first, I just wanted to highlight the outstanding progress we've already made. We remain well on track to achieve an industry-leading 90% reduction in Scope 1 greenhouse gas emissions by 2030. Reductions have been made, driven by core utility infrastructure investments, and are supported across the spectrum of key drivers. Remaining coal will be retired by 2026 to 2028. We are making significant advancements in methane reduction through our modernization programs and deployment of advanced leak detection and repairs. This represents one of the fastest reductions in coal utilization across the sector and facilitates one of the most significant drops in carbon intensity across all of our peer set. Strong stakeholder engagement and support, maintaining affordability, capturing investment opportunities, and aligning with state and federal policy continue to be foundational for our success. With the demonstrated ability to achieve robust reductions, we are extending our decarbonization goal to achieve net zero scope one and two emissions by 2040. The pathway to net zero builds on well-established programs while continuing to maintain affordability, reliability, and resiliency. At the core is both the continuation and the enhancement of existing programs, maintaining a balanced mix of low to zero emission electric generation and ongoing pipe replacement and modernization programs, and deployment of advanced leak detection and repair technologies. In addition, NYSERC plans to advance other low- or zero-emission energy resources and technologies, such as hydrogen, renewable natural gas, and support the deployment of carbon capture and utilization technologies if and when these become technologically and economically feasible. Carbon offsets and other renewable energy credits may also support us in this net zero goal. And while this goal reflects what we believe is achievable by 2040, it does require regulatory support and legislative policies, constructive stakeholder environments, and the advancement of emerging technology. But we are excited about being a leader in this space. We are confident this represents a tremendous opportunity for our gas and electric businesses and the communities we serve. As this transition continues to evolve, we expect additional investment opportunities to arise in which our businesses can participate. For example, we've touched on the importance of electric transmission projects in today's session, but that opportunity set alone could range from $400 million to $900 million, not currently captured in our current capital allocation plan. Additionally, we have not projected any infrastructure investment opportunities in our capital allocation related to enabling biofuel supply and delivery on the gas side of the business, which we believe will only increase as a result of tax credits and support at the federal and state levels. As we continue to work with stakeholders to create supportive policies and mechanisms consistent with the optimal pathways to decarbonize, we expect these areas to increase investment opportunities across all of our operating companies. Finally, this slide presents the many ways NYSource is leading the clean energy transition. We're making the fastest transition away from coal, 74% coal to zero in a single decade. A 90% reduction in emissions by 2030, including the 58% reduction we've already achieved. And now a goal of net zero by 2040. We plan to invest up to $2.2 billion in renewable investment opportunities through 2025, plus about $1 billion in additional capacity-focused investments. This amazing progress also brings the potential for additional investments. That is premium performance. Thank you for your support of NYSource. Now I'll turn the mic over to Donald.