NiSource Inc

Good morning and welcome to the NYSource Third Quarter 2023 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 Luers, 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 third 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. I'd now like to turn the call over to Lloyd. Thanks, Chris.

Good morning and thank you for joining us. I'll start with an overview of our value proposition on slide three. At year end 2022, we had $16.6 billion of rate base deployed for our customers and today are outlining a refreshed base plan to invest another nearly $16 billion of capital over the next five years. we plan to execute on our resilient financial commitments supported by a superior regulatory and stakeholder foundation and balance sheet flexibility. Assuming a constant PE ratio, our plan can deliver a total shareholder return of 10 to 12%. Slide four shows our four key priorities. First, today we are reiterating our expectation of achieving the upper half of our $1.54 to $1.60 EPS range this year. We are introducing 2024 EPS guidance of $1.68 to $1.72, over 8% growth midpoint to midpoint versus our current 2023 range. We are extending our 6% to 8% long-term EPS growth guidance to the 2023 to 28 period. This is supported by a five-year base capital plan of $16 billion and an 8% to 10% annual 2023-28 rate-based growth. We are confident our commitments are resilient to periods of rapidly changing business conditions, such as those seen by the utility industry over the last 12 months. We continue building a track record of execution and growth, and our commitment to investors, employees, and customers is central to everything we do. Second, our superior regulatory and stakeholder foundation differentiates us from peers. In early August, the Indiana Utility Regulatory Commission approved MIPSCO's Electric Rate Case Settlement. This case represented the culmination of years of investment and stakeholder engagement beginning with our 2018 Integrated Resource Plan. In October, the public utility law judge of Maryland's recommendation to approve Columbia Gas of Maryland's rate case settlement became a final order. Last week, we filed a new gas general rate case in Indiana seeking recovery of $1.1 billion estimated cumulative investments to be completed through the end of 2024. Third, our balance sheet flexibility allows us to both optimize cost of capital for customers, and ultimate return on capital for our shareholders. The transaction announced in June with Blackstone Infrastructure Partners is an example of the diverse funding sources embedded in our plan, raised at an attractive relative value while preserving the scale of our business. Fourth, our company is experiencing a record investment cycle driven by safety, reliability, regulatory mandates, decarbonization, and modernization. Investment is constrained primarily by normal operational constraints and our desire to manage the impact on customer bills. The surplus of investment opportunity puts us in a favorable position to prioritize the deployment of capital in the investments and jurisdictions generating the highest risk adjusted returns. Slide five details our annual capital expenditures across our six-state service territory. In the five-year period through 2028, we plan to invest $16 billion. Every single one of these dollars is a real investment in our communities. For example, at Columbia Gas of Virginia, we replaced over 8,000 feet of main and over 10,000 feet of service line infrastructure as part of a $4 million investment in our system in the town of Culpeper. As part of this project, Columbia Gas updated several multimeter sets and 130 individual customer connections, improving the quality and reliability of service to our customers within Culpeper County. Slide six shows key rate case and select capital rider activity since 2021. Our leading regulatory execution continues with no less than 10 cases filed in seven jurisdictions across six states during this period. 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. A dialogue with our Pennsylvania stakeholders starting late last year is an example of this. An approved long-term infrastructure improvement plan in the state is a prerequisite to recovering investments through a disk tracker. Columbia Gas Pennsylvania sought the authority to replace infrastructure based on risk rather than a prior focus on bare steel and was granted approval this spring. This change enables inclusion of an additional first-generation assets such as first-generation plastic pipe for expedited replacement, enhancing the safety and reliability of our system. All of this activity is built on a foundation of robust economic activities for our states. 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. In southwestern Pennsylvania, one of the largest titanium melting companies in the world has advanced plans for a plant expansion in our service territory. Columbia Gas of Pennsylvania engaged the business and the Department of Community and Economic Development to enable the extension of a gas infrastructure and support job creation and economic development in the region. Moreover, this extension will present greater access to low-cost natural gas throughout the surrounding community while enhancing energy diversification and energy resilience. Slide 7 shows how our operational excellence model is incorporated into decision-making in all areas of the company. Project Apollo is on track, generating efficiencies by doing things safer, better, more efficiently, and with less cost. This will keep non-track O&M flat through the duration of our five-year plan. NYSource has continued to invest in technology that will drive risk reduction across gas and electric assets and increase customer value by ensuring reliable service. Advanced mobile leak inspection is one example. Our historical practice of addressing leaks one by one is transforming into a process of clustering large volume leaks into small replacement projects. This project brings visibility to large volume leaks and prioritization repair, reduces methane emissions, and improves efficiency. We're focused on affordability for our customers every day, and all of this is expected to contribute to keeping total customer bills in line with inflation over the five-year financial plans. These achievements would not be possible without our dedicated employees and their commitment to our customers communities, and all NYSER stakeholders. With that, I'll turn the call over to Michael.

Thank you, Lloyd. I'll begin on slide eight. NIPSCO's generation transition continues to advance as we optimize the new portfolio to benefit customers and retire all coal-fired generation by the end of 2028. Our first four renewable projects and the associated electric transmission are in service and represent approximately $1 billion of investment in economic, sustainable, zero fuel cost new generation for NIPSCO's northern Indiana customers. Also, our Indiana Crossroads II wind PPA is advancing and is expected in service late this year. Construction on Calvary Solar and Storage and Dunsbridge II Solar and Storage continues, and both projects have expected and service dates in 2024. The Fairbanks solar project is expected to be in service in 2025 and is in the early stages of construction. The Gibson project is also expected to be in service in 2025 and construction is anticipated to begin in early 2024. Our plans have included these four owned renewable projects under tax equity structures. However, based on our evaluation of the Inflation Reduction Act and the benefits to customers with tax credit monetization, we have filed a modification with the IURC for approval of full ownership of Calvary Solar and Storage and Dunsbridge II Solar and Storage. Full ownership of these projects provides a lower cost to customers than tax equity, supporting affordability, and enhances our base plan. We continue to assume tax equity structures in our plan for the other two projects, Fairbanks and Gibson, However, we are actively evaluating the potential benefits to customers of Inflation Reduction Act provisions related to these projects. NIPSCO has several generation-related filings under review at the IURC. A CPCN for conversion of the Gibson project into a BTA, a bill transfer agreement modification for Calvary and Dunsbridge II filed in August, which includes the aforementioned customer beneficial proposal of switching to NPSCO's full ownership of the projects instead of tax equity financing, and a CPCN for our planned gas peaker project. In addition, NPSCO has recently received orders approving several PPA projects, Appleseed Solar, Templeton Wind, and Carpenter Wind. For the gas peaker, in September we filed a CPCN for an approximately 400 megawatt brownfield gas peaker project on our Schaefer site in Indiana. The project utilizes a combination of technologies including aero derivatives for quick start capability and is a key enabler of our generation transition, system performance, and the full retirement of cold-fire generation by 2028. Our in-service renewable projects are performing in line with expectations and are reducing fuel costs for our customers. Since our first project went commercial in late 2020, We have been passing back both excess generation and renewable energy credits revenues to customers from this and subsequent projects. In the third quarter alone, this amount totaled $5.3 million for a year-to-date total of $19.9 million. As we look forward, slide 9 shows additional CapEx opportunities not included in our base financial plan through 2028. These include potential items such as continued employment of the IRA to benefit customers and reduce tax equity financing, long-term incremental generation investment opportunities, Venza gas infrastructure spending, and multiple additional opportunities. The 2020 Federal PICE Act will require incremental investment in our system for various leak reduction, safety, and other operational requirements. These requirements would build on the investments we have been making on our advanced leak detection and repair program. We will continue to be active in this area to support the best outcome for customers in terms of safety, emissions, and infrastructure investment. The pipeline of opportunities listed on this page and the approximately 2 billion 2024 to 2028 upside CapEx opportunities continues to be evaluated to determine the most beneficial actions to deliver safe, reliable, and cost-effective energy for our communities. As we look beyond 2028, we think a regulated gas and electric integrated utility such as NYSource has the potential to access even more investment. This is particularly true as we think about the landscape of further decarbonization. As nascent technology develops into practical applications, NYSource will look to work these investments into our capital expenditure plans in a customer beneficial manner. These potential and current investments across our electric and gas business support our clean energy transition, further our Scope 1 emissions reduction goals, and enhance customer value in a balanced way. In early October, we announced the launch of a multi-phase hydrogen blending project. It is one of the first in the United States to use a blending skid in a controlled setting to mix hydrogen and natural gas at precise levels. Columbia Gas of Pennsylvania partnered with EN Engineering to construct the skid at our training facility, allowing for the controlled blending of hydrogen into our isolated and controlled natural gas system to blend levels ranging from 2 to 20% hydrogen. Throughout the blending project, NYSource will continue to evaluate the viability of hydrogen natural gas blends for other applications, such as factories and power plants. As we consider the benefits and potential uses of hydrogen in the future, this project is one step that helps NYSource determine the most beneficial and viable opportunities. Finally, last month we issued our first sustainability report. For years we have published an integrated annual report incorporating both financial and sustainability metrics. This year marks our first standalone report of key sustainability topics. The report details the incorporation of E, S, and G policies throughout the organization and how these actions support and align with our mission, vision, and values. I'm proud of the company-wide efforts captured in this report that demonstrate how we strengthen and support our communities through our business activities, and I encourage everyone with an interest in sustainability to review the report. I'll now turn things over to Sean.