NiSource Inc

Hello, my name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Q1 2023 NiceSource 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. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, please press star one again. Thank you. Chris Tournier, Director of Investor Relations. You may begin.

Good morning and welcome to the NYSource first quarter 2023 investor call. Joining me today are President and Chief Executive Officer, Lloyd Yates, Executive Vice President and Chief Financial Officer, Sean Anderson, Executive Vice President of Strategy and Risk and Chief Commercial Officer, Michael Luris, Executive Vice President and Group President, NYSource Utilities, Melody Birmingham, and Vice President of Investor Relations and Treasurer, Randy Hewlin. The purpose of this presentation is to review NYSource's financial performance for the first quarter of 2023, 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 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. Now, I'd like to turn the call over to Lloyd.

Thanks, Chris. Good morning, everyone. and thank you for joining us today. Hopefully you've all had a chance to read our first quarter earnings release issued earlier today. I'll begin on slide seven by reviewing our three key priorities for 2023. First, NYSource remains committed to delivering on our top tier EPS growth plan. We are reaffirming non-GAAP NOEPS guidance of $1.54 to $1.60 in 2023 and growth of 6% to 8% annually through 2027. Annual rate-based growth of 8% to 10% is projected, driven by $15 billion of capital expenditures during the 2023-2027 period. Meanwhile, our O&M target is to remain flat in 2023, as well as throughout the duration of the plan. Second, strong regulatory execution continued in the first quarter. advancing balanced outcomes for all our stakeholders, in March, a settlement agreement was filed in Northern Indiana Public Service Company's electric rate case. The proposed settlement incorporates $1.8 billion of incremental capital investments made on behalf of customers since 2019, including renewable generation projects, grid modernization, and other customer-centric improvements to enhance safety, service, and reliability. The settlement represents a $292 million revenue increase. A final order is anticipated in August with rates effective in 2023 and 2024. Additionally, gas distribution regulatory execution has also advanced with the Columbia Gas of Ohio rate case settlement approval and implementation during the first quarter. the company's track infrastructure replacement programs are executing on plan for 2023 as highlighted by Ohio's recently approved infrastructure replacement program authorizing recovery of $316 million of capital investment targeting safety enhancements in our gas system. Lastly, the sale of the NIPSCO minority interest remains on track for 2023. As previously indicated, The proceeds generated from this financing transaction will immediately strengthen our balance sheet and will enable NYSource to draw upon the portfolio of capital investment opportunities to enhance shareholder value while enhancing safety and reliability for our customers. This includes continuing commitments in Indiana supporting major generation projects, new customer connections, and capital enhancements to existing electric and gas infrastructure to add resiliency to our system. We look forward to continuing to serve the state of Indiana and all of our operating service territories for many years to come. Shifting to our generation transition, Knoxhurst has been a leader among U.S. utilities in the speed of our energy transition, advancing one of the largest projected carbon intensity reductions by the end of this decade. NISOS remains focused and committed to an orderly conversation when the energy transition by leveraging energy delivery solutions across diversified systems. Our team continues to work on developing new generation capacity and a collaborative process started in 2018 involving stakeholder groups, including our customers, communities, regulators, and policymakers. Michael will touch on the commercialization process for energy solutions, replacing our coal retirements in a moment. The established regulatory constructs that utilize track capital investment programs and forward test year rate cases allow our investors a consistent and predictable return on billions of dollars of funding for investment in these critical energy facilities. Indiana's supportive and constructive regulatory mechanisms have enabled NIPSCO to time the construction of these facilities alongside regulatory plans as contemplated in our proposed rate case settlement, which has enabled NYSource to minimize unnecessary financing expense for our customers and reduce regulatory lag. We continue to be encouraged by the active dialogue on electric reliability, affordability, and sustainability in our region. Throughout the last two years of global inflationary pressure, supply chain constraints, policy uncertainty, and commodity volatility, we have remained confident in the value of these investments for our customers. These new projects are projected to provide savings consistent with original expectations while delivering the reliable energy our customers deserve. I'd also like to give you an update on our progress on operational excellence, which continues to prioritize safety, while optimizing our long-term growth profile. We have formally launched Project Apollo, one part of our enterprise-wide transformation effort. Project Apollo contains several initiatives we anticipate driving an annual savings range of $40 to $60 million beginning in 2023. We expect to share more on the progress of the portfolio of initiatives inside Project Apollo as they advance to drive greater value for stakeholders. Project Apollo fits within our broader focus on operational excellence, safety, O&M management, and unlocking efficiencies across our operations, enabling us to streamline work and improve logistics company-wide. Complementary to Project Apollo is our previously announced long-term plan to invest almost $1 billion in proven technologies to change how we plan, schedule and execute work in the field, and how we engage and provide service to our customers. These investments will improve both the customer and employee experience, but are also intended to reduce our overall cost profile. Taken together, these investments and process changes will be critical components of our overall transformation effort to allow us to maintain flat O&M and be safer and more efficient in everything we do. More importantly, this helps sustain customer affordability with expected total annual rate increases that are in line with inflation. I'd like to recognize our dedicated employees and contractors who work tirelessly to ensure our communities receive safe and reliable energy during the quarter. In late February, Winter Storm Olive brought freezing rain and significant ice to Northeast Indiana, impacting distribution switches, lines, and tree limbs. Nearly all customers had power restored the next day, and work was completed without compromising our safety standards. Now, for updates on our electric operations and renewable projects, I'm excited to welcome Michael Lourdes to the NYSource team as Executive Vice President of Strategy and Risk and Chief Commercial Officer. Michael, who has more than 25 years in the utility industry, adds another level of depth and expertise to our already strong management team. Now, Michael, over to you.