NiSource Inc

ladies and gentlemen thank you for standing by my name is brent and i will be your conference operator today at this time i would like to welcome everyone to the second quarter 2023 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 if you would like to ask a question at that time simply press star followed by the number one on your telephone keypad if you would like to withdraw your question Again, press star 1. Thank you. It's now my pleasure to turn today's call over to Chris Turner, Director of Investor Relations. Please go ahead.

Good morning and welcome to the NYSOR second 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 Lures, 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 second 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 gap measure and a reconciliation of these measures. I'd now like to turn the call over to Lloyd.

Thanks, Chris. Good morning, everyone, and thank you for joining us. Hopefully, you've all had a chance to read our second quarter earnings release issued earlier today. I'll begin on slide six to provide you with an update on our three key priorities. First, we are raising our 2023 non-GAAP NOEPS guidance to the upper half of $1.54 to $1.60. We are also reaffirming our annual non-GAAP NOEPS growth of 6% to 8% through 2027 and annual rate-based growth of 8% to 10%. Meanwhile, our non-TRAC O&M target is to remain flat in 2023 as well as throughout the duration of the plan. We continue building a track record of execution and growth, and our commitment to investors, employees, and customers is central to everything we do. Recall our original 2023 NOEPS discrete guidance of $1.50 to $1.57 was introduced at our investor day in November. In February, we raised and narrowed our estimate to $1.54 to $1.60, and today we are again raising to the upper half of this range. In the approximately nine months since November, our superior operations, regulatory, and financing execution have enabled this increase in earnings expectations. For our customers, commodity market conditions have been improving. However, inflation and interest rate headwinds continue to persist. Despite this, we remain focused on delivering value to our customers and highly visible de-risk financial results for our investors. Second, our leading regulatory execution continued this quarter in both the electric and gas businesses. May was a particularly busy month for our gas distribution business as the Columbia Gas of Maryland filed a request with the Maryland Public Service Commission seeking approval to adjust base rates. The request seeks to recover approximately $40 million of capital investment. Additionally, the Virginia State Corporation Commission approved a settlement among Columbia Gas of Virginia and the parties in its base rate case originally filed in April 2022. The base rate adjustment approval authorizes recovery of approximately $390 million of capital investment. Columbia Gas of Ohio's infrastructure replacement program rider rates went into effect in May, initiating the recovery of $316 million of capital investment. At the electric business, the record is closed in the Northern Indiana Public Service Company's electric rate case. We believe the settlement reached back in March represents a balanced outcome for stakeholders as the company invests billions of dollars in our customers and communities in the state. A final order is anticipated today from the Indiana Utility Regulatory Commission with rates anticipated to be effective in steps by September 2023 and March 2024. At FERC, we received approval for incentives on two new MISO M-TEP electric transmission projects last month, supporting our rate-based investment and customer reliability beyond our current financial plan through 2027. Lastly, In June, we announced a definitive agreement to sell a minority stake in NIPSCO to Blackstone Infrastructure Partners. The transaction strengthens our balance sheet and financial flexibility and marks yet another example of NYSource's steadfast execution for stakeholders. More importantly, it enables us to support ongoing investments in Indiana and our 1.3 million electric and gas customers in the state. Slide 7 details our annual capital expenditures across our six-state service territory. In the five-year period through 2027, we plan to invest $15 billion in our customers and communities. At Columbia Gas of Pennsylvania, we are currently replacing 21,000 feet of pipe in Fredericktown in Washington County. Nearly half of the small town's residents will have their service lines upgraded. with the remaining customers to be upgraded in the next two years. As part of this project, Columbia Gas is converting a low-income housing authority system from a master meter to individual meters, helping to lower the authority's maintenance obligations. This $6 million project is part of the company's $110 million capital investment in Pennsylvania during the second quarter alone. NIPSCO remains committed to the gas teeters plan to extend gas service into rural areas including Steuben, Allen, and Lake Counties in northern Indiana. Our major projects and local operating area teams have installed over 24 miles of rural gas main and installed 1,170 new services year-to-date through June as part of this plan. On the other side of our footprint, Crews at Columbia Gas of Maryland are installing new pipe in the city of Cumberland to improve safety by abandoning three low pressure regulator stations, along with abandoning a significant amount of bare steel pipe. This is part of an investment of nearly $8 million of total capital in the state during the second quarter. Turn to slide eight shows key rate case and select capital rider activity since 2021. Our leading regulatory execution continues with no less than nine cases filed in seven jurisdictions across six states in the last three years. Our state regulatory teams are in a constant cycle of communication and engagement with key interveners, regulators, and customer groups. In addition to general rate cases, regular capital tracker filings allow timely recovery on and of our investments. All of this activity is built on a foundation of robust economic activity in our states. For example, at NIPSCO, the Northern Indiana Commuter Transportation District provides vital transportation links to Chicago and Cook County, Illinois, and is constructing the Double Track Northwest Indiana project. The project is anticipated to expand service, improve mobility and accessibility, and stimulate job creation for Southern Lake County, and we are in the process of constructing substations to support this major transportation investment in the region. In Ohio, the new Intel chip factory has been under construction since mid 2022 in Licking County on the outskirts of Columbus. It is estimated to be a $20 billion investment in the state, and Intel will be a new Columbia Gas of Ohio customer. In Virginia, the Norfolk Naval Shipyard is the Navy's primary East Coast repair, overhaul, and modernization facility and one of the four public shipyards that play a critical role in maintaining America's fleet. The shipyard is installing a combined heat and power plant expected to be complete later this year that will significantly improve energy security and efficiency with expected consumption of 1.7 million decatherms annually for Columbia Gas of Virginia. Customer count across our territories has been growing on average by 0.5 to 1% annually for years, including 2023 to date. Favorable demographic trends have driven inbound migration thanks to a stable and growing manufacturing base, robust utility and non-utility infrastructure, and low tax rates in the states we serve. Turning to another foundational element of value for our 4 million customers, our internal teams continue to advance on all aspects of our operational excellence initiative. Project Apollo is on track generating efficiencies by doing things safer, better, more efficiently, and for less cost. One recent example is establishing standard buffer zones around our underground infrastructure to indicate areas where digging can safely occur especially for third-party excavators. Before instituting a standard zone, field crews are being called out to excavation sites to locate underground facilities when it wasn't needed. We've eliminated more than 10,000 unnecessary trips in the last three months, allowing more time to be spent on value-added work. Technology investments are also key to our operational excellence initiative. This year, we began our five-year, approximately $1 billion transformation with an initial $300 million investment in SAP and Salesforce technology platform implementation that will standardize work practices and drive efficiencies for our field employees to improve service to our customers. All of this is expected to contribute to keeping total customer build levels and live with inflation over the five-year financial plan. These achievements would not be possible without our dedicated employees and their commitment to our customers, communities, and all NYSERDA stakeholders. With that, I'll turn the call over to Michael Louris.