Thank you for standing by. At this time, I'd like to welcome everyone to the Q1 2024 NiSource Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Chris Turnure, Director of Investor Relations. Please go ahead.

Good morning, and welcome to the NiSource First Quarter 2024 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 Luhrs; and Executive Vice President and Group President, NiSource Utilities, Melody Birmingham. The purpose of this presentation is to review NiSource's financial performance for the first quarter of 2024 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 reconciliation of these measures. I'd now like to turn the call over to Lloyd.

Thank you, Chris, and good morning, everyone. I'll begin on Slide 3. The NiSource investment thesis is simple. We serve our customers by delivering safe and reliable energy at an affordable price. Affordable energy delivery requires deployment of capital and operating assets efficiently. It requires operating in jurisdictions which have constructive regulatory mechanisms. The byproduct of these fundamentals generates competitive regulated returns for our shareholders while maintaining and improving our balance sheet position. Capital deployment comes from a $16.4 billion base CapEx plan projected over the next 5 years, plus over $1.5 billion in upside projects as well as substantial opportunity for investment beyond 2028. The stable public policy and ratemaking in our states across multiple election and regulatory appointment cycles has been crucial to efficient capital allocation and recovery to support our communities. Our balance sheet is derisked and more flexible than ever before and enables industry-leading sustainable organic investment. As part of this flexibility, we are more disciplined and return-focused with our internal allocation decisions whenever. We recognize the competitive environment for capital and we do not take your investment for granted. Our total year-end 2023 rate base was $18.8 billion, consisting of $9 billion in Indiana, $4 billion in Ohio, $3 billion in Pennsylvania and over $1 billion in Virginia. Our nearly 4 million customers contribute to gross domestic product of over $3.8 trillion across our 6 states of operation or approximately 14% of U.S. GDP. We expect our system to see substantial low growth over the next 5 years due to data centers and reshoring of manufacturing. Northern Indiana offers constructive fundamentals for data center development through robust electric transmission, overall energy system capacity, plentiful land, limited physical disaster risk, tax incentives and a pro-business policy environment. During the last 5 years, NIPSCO and the Columbia…

*Thank you, Lloyd. I'd like to turn to Slide 6 to give you an overview of NiSource's safety journey since 2017. We often get asked by investors new to the company for a picture of specific risk mitigation metrics over time. I'll begin by saying that the magnitude of change at the company over the last 6 years cannot be overstated. Our centralized operations team has implemented both engineering design and process-based solutions to improve our gas system safety. Our system management system -- our safety management system was recently reconfirmed for American Petroleum Institute recommended Practice 1173, making NiSource one of only two utilities in the world to maintain this designation. We also completed a conformance assessment and are pursuing certification for standard 55001, an International Organization for Standardization, or ISO. This validates advancement in our asset management practice maturity and illustrates our commitment to optimizing value through a balance of risk, asset performance and costs. Our gas assets now have automatic shutoff valves and remote pressure monitoring on 100% of low-pressure systems. Isometric drawings provide 3D renderings of all our regulating stations. We have 36% fewer miles of pipe designated as priority compared to year ending 2017. 51% of our 55,000 mile system has been surveyed with advanced mobile leak detection vehicles. 98% of our gas service lines are mapped as of the year-end 2023, which is up from only 4% 6 years ago. These tangible verified metrics are only a part of our story. Leading-edge safety management is fueled by culture and it's critical to any safety work environment. Every day, our NiSource team lives the Core 4 through employee certification and training, knowledge transfer, technology utilization and community engagement. Let's move to Slide 7, where you'll see a timeline of our regulatory activity. As we've said…

Thanks, Melody. Let's begin on Slide 8. We are steadfast in our commitment to deliver safe and reliable energy to our customers at an affordable price. Growing our investment opportunity is a crucial element to this, and our base capital plan is now comprised of a portfolio of projects projected at $16.4 billion through 2028. The plan is driven by programmatic and enduring investments necessary to maintain safe, reliable and sustainable energy infrastructure that our customers deserve. These investments are diversified across renewable electricity, gas and electric customer growth, distribution modernization and system hardening for both the electric and gas businesses. Importantly, there is limited large individual project execution risk in our plan. Moving ahead to Slide 9, I'd like to provide an update on our renewable development program. The table shows base plan amounts, and reflects incremental CapEx from the full ownership of the Fairbanks and Gibson solar projects, which Lloyd just highlighted. By displacing tax equity investor capital and removing the associated joint venture structure, we are able to reduce customer bills relative to our prior plan and be more resilient in our operations over the energy generated for our customers. In the aggregate, our billions of dollars of renewable generation investments negotiated since 2019 remains significantly cheaper and lower risk for our customers compared to the alternative status quo scenario across their useful life. NIPSCO's final coal retirements continue to project to conclude by 2028. And in each of the remaining 4 owned and 4 PPA renewable projects remain on schedule for in-service. On Slide 10, you'll see an overview of additional investment opportunities. We continue to identify capital investment opportunities to enhance service for our communities beyond the capital projected in the base plan. Generation investments, gas distribution and transmission system modernization, Advanced metering and renewable…

[Operator Instructions] Our first question comes from the line of Constantine Lednev.

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? And when it obviously more important, this whole topic of rate design as you guys are attracting data centers or also trying to protect, I guess, that residential customer base. How are you thinking about rate design and maybe special tariffs for these hyperscalers? As you're in discussions, I mean, would you need to file updated proceedings in order to get the rates?

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. I think you said something really important and that is -- I think we're working hard on how we're evaluating ways to structure the opportunity so that it benefits all stakeholders. That includes our customers, our shareholders and the communities we serve. So I know I'm not directly answering your question because we don't have real specifics. We like to have detail and have quantifiable detail before we put them into our IRP and our load growth projections. And we're still working on those things, although we are very optimistic about our ability to develop data centers in the NIPSCO service territory.

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. Likewise, electric T&D has several projects, which could create upside to the plan, both as we think about MISO Tranche 1 and maybe as we start to approach the next decade Tranche 2. But grid modernization and system hardening is still important work for us to deliver reliable service. And then to Lloyd's point, I mean, we added the economic development and data center and technology innovation support the energy infrastructure to deliver that to Slide 10 as we start to think about the formulation of our upside plan. We think there's a lot of work there, but economic development is challenging. It requires alignment for many different stakeholders, but it can make a big splash for our communities, just like the Intel project did in Central Ohio. So it's entirely possible that these -- the portfolio of these projects develop and could do so quickly. But we don't put those into the base plan as Lloyd said until we're highly certain that these are projects that can deliver value. And then in terms of financing for these projects, we'll evaluate this as it arises. Part of the criteria for investing in these upside projects is seeking accretive projects to help NiSource and our communities grow. We believe the portfolio of projects that we've identified will help us do just that. And in many cases, we think the financing required will be fairly efficient because of the profile of these projects. Fortunately, we operate in constructive regulatory jurisdictions with efficient regulatory mechanisms, which balance the value creation for customers and shareholders. But we're a fully regulated business and committed to balancing our capital structure to ensure the credit quality that we've been able to obtain here, and we'll be committed to do so.

Our next question comes from the line of JPMorgan Chase.

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.

Next question comes from the line of Miller Travis.

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. If you look at many of our others, we have multiple opportunities, whether that be through what's already been mentioned in the economic development side or AMI transitions associated with it or some of the opportunities when we're looking at what we're going to have to do associated with just hardening in the electric liability that Shawn mentioned earlier. Quite frankly, there's a pretty strong pipeline of opportunities for that $1.6 billion upside. And just as we've done previously, as you've seen with some of the full ownership on the projects as we work through those methodically, we will bring those into the plan and make sure that we announce them once we have that level of confidence, as Lloyd mentioned.

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.

[Operator Instructions] Our next question comes from UBS Securities.

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.

Thank you. And I will now turn the call back over to management for closing remarks.

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

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.