NiSource Inc. 2026 Q2 Earnings Call

Good morning and welcome to NiSource's second quarter 2026 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 Technology, Customer and Chief Commercial Officer, Michael Luhrs; and Executive Vice President and Group President of NiSource Utilities, Melody Birmingham. Today, we'll review NiSource's financial performance for the second quarter and share updates on operations, strategy, and growth drivers. Following our prepared remarks, we'll open the line for your questions. Slides for today's call are available in the investor relations section of our website. Some 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 MDA sections of our periodic SEC filings. Additionally, some statements made on this call relate to non-GAAP financial 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. With that, I'll turn the call over to Lloyd.

Thank you, Durgesh. Good morning, everyone. I'll begin on slide three. At NiSource, our strategy remains grounded in delivering safe, reliable, and affordable energy while creating long-term value for our customers, communities, and shareholders. Disciplined capital deployment, operational excellence, along with constructive regulatory and stakeholder relationships across our jurisdictions continue to support successful execution. Our value proposition is anchored in regulated utility operations across six states, providing diversification in both asset mix and regulatory environment. Our base business provides stability and flexibility as we continue to modernize our electric and gas infrastructure. Our data center strategy adds a differentiated growth platform, returning an expected $1.4 billion in savings to our customers over the lives of our data center contracts. Together, these businesses position NiSource to deliver on our commitments while supporting the significant energy needs emerging across our service territories.

Turning to our key priorities on slide four, regulatory execution continues to advance our strategy and support the financial plan, as evidenced by rate case filings in Virginia and Kentucky, as well as several regulatory advances in our data center strategy, including IURC approvals of our data center agreements. At the same time, we continue to advance operational improvements through AI-enabled efficiency and continuous improvement initiatives, helping us work more effectively in strengthening execution across the business. Today, we report a second quarter consolidated adjusted EPS of $0.16, bringing our year-to-date consolidated adjusted EPS to $1.22. With strong visibility into second-half performance, we remain firmly on track to deliver on our full-year commitments. Moving to operational excellence on slide five, safety remains our top priority and the foundation of how we serve our customers.

This quarter, our teams responded safely and effectively to multiple severe weather events across our service territory. 2026 has been an unusually active year with a record number of tornadoes, driving increased outages and system impacts. Our field teams, supported by operations and customer care, worked around the clock to assess damage, restore service, and support impacted communities as quickly and safely as possible. This quarter reinforced why proactive investment in our systems and technology matters. We continue to harden our distribution systems to improve resiliency while enabling employees to interact with enterprise data through AI-powered experiences that accelerate decision-making beyond traditional reports and dashboards. This system, our speech analytics and storm response solution, is another example of how Project Apollo leverages artificial intelligence, advanced analytics, and other technology-enabled tools to standardize work, improve visibility, and reduce waste.

On slide six, we continue to make strong progress on our regulatory agenda. In Ohio, we received approval of key infrastructure and safety-related tracker mechanisms. Since our last call, we filed rate cases in Virginia and Kentucky to support timely recovery of critical investments that improve system safety and reliability. As we modernize our systems, we remain focused on managing the pace of investment and the resulting impact on customer bills. We expect decisions on both filings by the first half of 2027. At NIPSCO, we continue to invest in projects that strengthen system reliability and deliver customer value. We're reviewing the order issued today from the IURC regarding our continued gas modernization investments in safety and reliability, which informs our program going forward and the meaningful progress we have made modernizing NIPSCO's natural gas system over the past decade.

We remain confident in the investment thesis as Indiana offers multiple pathways to recover proven investments through the FMCA and/or base rate cases. Notably, the commission recognized the need for continued investment and encouraged us to pursue recovery while demonstrating the specific benefits delivered by the individual projects. In June, we were issued a third federal order requiring the continued operation of the Schahfer Coal Plant. We are pursuing recovery of the associated compliance costs through a FERC Section 205 filing and seeking approval within 60 days. As we navigate these federal directives, our plan remains flexible and focused on balancing reliability, customer impact, and our financial commitments. Recently, CNBC named its ranking for America's top states for business, which includes several of the states we serve, led by Ohio at number one and two others in the top 10, Virginia and Indiana.

This recognition underscores the strong economic development momentum we are seeing across our service territories, bringing new jobs and investment to the communities we serve. For example, in Virginia, two major aerospace and defense manufacturers have announced projects representing more than $1.7 billion of planned investment and over 1,300 new jobs. These projects highlight the importance of reliable natural gas infrastructure in supporting long-term growth in our communities. Turning to updates across our state operations, we believe Pennsylvania remains a constructive regulatory environment. We continue to proactively engage with all stakeholders, including the governor's office and the commission, as we evaluate our investment plans and regulatory requirements. Our Plan 2026 capital program is fully supported under the framework established in our most recent rate case. As we move forward, we will continue to evaluate trackers and other recovery mechanisms to support future investment.

Moving to Indiana, the recent approvals of our Amazon and Alphabet agreements reinforce the constructive regulatory support we continue to see for GenCo. Together, our data center agreements support continued economic growth and investment in the state while providing substantial bill relief for existing customers. We are engaged in the affordability discussions underway while the commission is evaluating a range of issues. We're encouraged by the collaborative and constructive nature of the discussions scheduled to begin on August 7th. We expect the process to remain balanced and focused on enhancing customer affordability through economic development, greater bill transparency, and thoughtful, targeted refinements to the state's regulatory framework. Importantly, state leaders have acknowledged the significant customer savings delivered through our GenCo strategy and continue to recognize the role that economic development and investment recovery mechanisms play in supporting the reliable infrastructure our customers depend on.

The diversity of our portfolio helps mitigate risk and preserves flexibility as jurisdiction-specific developments evolve. Affordability and customer outcomes remain central to the regulatory dialogue, and we believe economic development is an important part of the solution. We will continue to engage openly with our state commissions and other stakeholders as these efforts advance. We continue to identify opportunities to help manage customer costs through disciplined planning and constructive stakeholder engagement. In Indiana, the IURC's recent 2026 residential electric bill survey shows our customers' bills declining year-over-year, driven in part by our strategic investments in renewable generation and the associated cost efficiencies those resources provide. In Ohio, we are continuing to pursue avenues to reduce property taxes that create ongoing savings for customers.

In addition, an approved economic development agreement for a peaking plant project in Jasper County, Indiana, is expected to lower property taxes by nearly 40% over the life of the investment, generating meaningful customer savings and supporting long-term affordability. These actions complement our broader affordability-focused efforts, including our GenCo strategy. We remain focused on capturing the benefits of growing energy demand while protecting our existing customers, as shown on slide seven. Our agreements with Amazon and Alphabet are expected to provide approximately $1.4 billion of bill reductions for existing NIPSCO electric customers over their respective contract terms. For an average residential customer, that equates to up to $124 annually or roughly one month of an electric bill.

We expect these benefits to begin flowing to customers as early as the fourth quarter of this year. We see further opportunity for this to grow as we advance opportunities through our pipeline on slide eight. Demand from large load customers remains robust, with three gigawatts in active strategic negotiations and line of sight to approximately two gigawatts of additional potential customers. We remain disciplined in pursuing opportunities that align with our customers' protections, commercial requirements, and return expectations as we look forward to providing updates as these discussions advance. We continue to see favorable market dynamics that could expand opportunities beyond our current nine gigawatt pipeline. We are assessing execution pathways to advance and integrate that additional growth into our pipeline. Slide nine highlights the continued progress we are making to move our data center strategy from commercial agreements through regulatory approval and execution.

In June, the IURC approved the original Amazon special contract, the related power purchase agreement, and the generation resource proposed to support the agreement. Parties also agreed to support expedited procedural schedules of 90-120 days for future agreements. This approval represents an important validation of the structure and establishes a foundation for advancing future data center agreements. On July 17th, we filed NIPSCO's request for approval of amendments to its existing Amazon Data Center Electric Service Agreement and the associated PPA with GenCo. Collectively, the amendments increased Amazon's contracted load by 400 megawatts, which we announced with our first quarter earnings and are already incorporated in our near and long-term guidance. We are seeking final order by November. We also continue to execute on our Alphabet partnership, receiving IURC approval of the agreement in July.