NiSource(NI) - 2024 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements - unaudited This section presents NiSource Inc.'s unaudited condensed consolidated financial statements for the quarter and nine months ended September 30, 2024, including income statements, comprehensive income, balance sheets, cash flows, and equity statements, along with detailed notes explaining accounting policies, recent pronouncements, revenue recognition, and other financial details Defined Terms This section provides a glossary of key terms, abbreviations, and acronyms used throughout the report, including definitions for NiSource subsidiaries, financial accounting standards, regulatory programs, and operational segments - NiSource Inc. is referred to as 'we,' 'us,' or 'our' throughout the report[5] - Key subsidiaries include Columbia Gas entities (Kentucky, Maryland, Ohio, Pennsylvania, Virginia) and Northern Indiana Public Service Company LLC (NIPSCO)[5] - Common abbreviations include AFUDC (Allowance for funds used during construction), AOCI (Accumulated Other Comprehensive Income (Loss)), EPS (Earnings per share), GAAP (Generally Accepted Accounting Principles), and IRA (Inflation Reduction Act of 2022)[6][8] Condensed Statements of Consolidated Income (unaudited) The Condensed Statements of Consolidated Income show a slight decrease in net income for the three months ended September 30, 2024, compared to 2023, but a significant increase for the nine months ended September 30, 2024, driven by higher operating income and lower preferred dividends Consolidated Income Highlights (in millions, except per share amounts) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Operating Revenues | $1,076.3 | $1,027.4 | $3,867.3 | $4,083.4 | | Total Operating Expenses | $858.0 | $794.4 | $2,828.6 | $3,150.5 | | Operating Income | $218.3 | $233.0 | $1,038.7 | $932.9 | | Net Income Attributable to NiSource | $85.7 | $85.1 | $536.5 | $476.9 | | Net Income Available to Common Shareholders | $85.7 | $77.0 | $515.8 | $436.1 | | Basic Earnings Per Share | $0.19 | $0.19 | $1.15 | $1.05 | | Diluted Earnings Per Share | $0.19 | $0.17 | $1.14 | $0.98 | - For the three months ended September 30, 2024, Total Operating Revenues increased by $48.9 million (4.7%) YoY, while Operating Income decreased by $14.7 million (6.3%) YoY[18] - For the nine months ended September 30, 2024, Total Operating Revenues decreased by $216.1 million (5.3%) YoY, but Operating Income increased by $105.8 million (11.3%) YoY[18] Condensed Statements of Consolidated Comprehensive Income (unaudited) The Condensed Statements of Consolidated Comprehensive Income show an increase in total comprehensive income for both the three and nine months ended September 30, 2024, primarily due to net unrealized gains on available-for-sale debt securities Consolidated Comprehensive Income Highlights (in millions, net of taxes) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income | $97.0 | $98.4 | $600.4 | $482.5 | | Net unrealized gain (loss) on available-for-sale debt securities | $3.5 | $(1.7) | $3.2 | $(0.9) | | Total other comprehensive income (loss) | $4.0 | $(1.1) | $4.0 | $0.2 | | Comprehensive Income | $101.0 | $97.3 | $604.4 | $482.7 | - Net unrealized gain on available-for-sale debt securities significantly improved from a loss of $(1.7) million in Q3 2023 to a gain of $3.5 million in Q3 2024[22] Condensed Consolidated Balance Sheets (unaudited) The Condensed Consolidated Balance Sheets show a slight decrease in total assets from December 31, 2023, to September 30, 2024, primarily due to a significant reduction in cash and cash equivalents and deposits to renewable generation asset developer, offset by an increase in net property, plant and equipment Consolidated Balance Sheet Highlights (in millions) | Metric | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :----------------- | :---------------- | | Total Assets | $30,828.1 | $31,077.2 | | Net Property, Plant and Equipment | $24,881.4 | $22,274.9 | | Cash and cash equivalents | $126.2 | $2,245.4 | | Deposits to renewable generation asset developer | $0.0 | $454.2 | | Total Stockholders' Equity | $10,328.8 | $10,136.3 | | Long-term debt, excluding current portion | $12,086.3 | $11,055.5 | | Current portion of long-term debt | $1,271.2 | $23.8 | | Short-term borrowings | $257.0 | $3,048.6 | - Cash and cash equivalents decreased significantly from $2,245.4 million at December 31, 2023, to $126.2 million at September 30, 2024[24] - Total Stockholders' Equity increased by $192.5 million, from $10,136.3 million to $10,328.8 million, primarily due to an increase in additional paid-in capital and noncontrolling interest[26] Condensed Statements of Consolidated Cash Flows (unaudited) The Condensed Statements of Consolidated Cash Flows show a decrease in net cash from operating activities and a significant shift from net cash from financing activities in 2023 to net cash used for financing activities in 2024, primarily due to debt repayments and preferred stock redemptions Consolidated Cash Flow Highlights (in millions) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net Cash Flows from Operating Activities | $1,241.7 | $1,535.9 | | Net Cash Flows used for Investing Activities | $(2,414.5) | $(2,503.3) | | Net Cash Flows (used for) from Financing Activities | $(949.5) | $998.6 | | Change in cash, cash equivalents and restricted cash | $(2,122.3) | $31.2 | | Cash, Cash Equivalents and Restricted Cash at End of Period | $158.8 | $106.6 | - Net cash from operating activities decreased by $294.2 million, from $1,535.9 million in 2023 to $1,241.7 million in 2024[28] - Financing activities shifted from a net cash inflow of $998.6 million in 2023 to a net cash outflow of $(949.5) million in 2024, largely due to repayment of short-term credit agreements and redemption of preferred stock[28] Condensed Statements of Consolidated Equity (unaudited) The Condensed Statements of Consolidated Equity reflect an increase in total stockholders' equity, driven by net income, contributions from noncontrolling interests, and common stock issuances through the ATM program, partially offset by common stock dividends and preferred stock redemptions Consolidated Equity Highlights (in millions) | Metric | September 30, 2024 | December 31, 2023 | | :-------------------------------------- | :----------------- | :---------------- | | Total NiSource Stockholders' Equity | $8,345.0 | $8,269.6 | | Noncontrolling interest in consolidated subsidiaries | $1,983.8 | $1,866.7 | | Total Stockholders' Equity | $10,328.8 | $10,136.3 | | Common Stock (shares outstanding, in thousands) | 466,707 | 447,382 | | Preferred Stock (shares outstanding, in thousands) | 0 | 40 | - Total Stockholders' Equity increased by $192.5 million from January 1, 2024, to September 30, 2024, primarily due to net income of $600.4 million and contributions from noncontrolling interests of $99.5 million[33] - Preferred stock was fully redeemed by September 30, 2024, with 40,000 shares outstanding at January 1, 2024, reduced to zero[33][39] Notes to Condensed Consolidated Financial Statements (unaudited) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, recent pronouncements, revenue recognition, noncontrolling interests, earnings per share, equity, debt, regulatory matters, risk management, fair value measurements, income taxes, and other commitments and contingencies 1. Basis of Accounting Presentation The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules, reflecting normal recurring adjustments and consolidating majority-owned subsidiaries and VIEs. They should be read with the annual report, noting that interim results may not predict full-year performance due to seasonal and other factors - Financial statements include NiSource, its majority-owned subsidiaries, and Variable Interest Entities (VIEs) where NiSource is the primary beneficiary[41] - Interim period income may not be indicative of full calendar year results due to weather variations and other factors[42] 2. Recent Accounting Pronouncements NiSource is preparing to implement new FASB ASUs: ASU 2023-07 (Segment Reporting) effective for annual periods after December 15, 2023, and ASU 2023-09 (Income Taxes) effective for annual periods after December 15, 2024, both enhancing disclosure requirements - ASU 2023-07 (Segment Reporting) enhances annual and interim disclosure requirements for reportable segments, focusing on significant segment expenses and allowing multiple measures of segment profit. NiSource will implement this in its 2024 Annual Report on Form 10-K[44] - ASU 2023-09 (Income Taxes) enhances income tax disclosures, requiring specific categories and reconciling items in rate reconciliation, disaggregation of federal, state, and local income taxes paid, and disclosure of income taxes paid by jurisdictions over a certain threshold. NiSource will implement this in 2025[45] 3. Revenue Recognition NiSource disaggregates revenue by reportable segment (Columbia Operations and NIPSCO Operations) and customer class, with historical data recast for consistency. Customer accounts receivable include billed and unbilled amounts, with an allowance for credit losses determined by historical experience, current information, and forecasts - Effective January 1, 2024, reportable segments changed from Gas Distribution Operations and Electric Operations to Columbia Operations and NIPSCO Operations[46] Total Operating Revenues by Segment (in millions) | Segment | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Columbia Operations | $423.4 | $411.0 | $1,864.5 | $1,981.5 | | NIPSCO Operations | $652.6 | $616.2 | $2,002.2 | $2,101.3 | | Corporate and Other | $0.3 | $0.2 | $0.6 | $0.6 | | Total Operating Revenues | $1,076.3 | $1,027.4 | $3,867.3 | $4,083.4 | Allowance for Credit Losses (in millions) | Segment | Balance as of Jan 1, 2024 | Current period provisions | Write-offs charged against allowance | Recoveries of amounts previously written off | Balance as of Sep 30, 2024 | | :-------------------- | :------------------------ | :------------------------ | :----------------------------------- | :------------------------------------------- | :------------------------- | | Columbia Operations | $10.2 | $18.9 | $(34.3) | $8.9 | $3.7 | | NIPSCO Operations | $11.9 | $9.3 | $(7.9) | $0.7 | $14.0 | | Corporate and Other | $0.8 | $0.0 | $(0.8) | $0.0 | $0.0 | | Total | $22.9 | $28.2 | $(43.0) | $9.6 | $17.7 | 4. Noncontrolling Interests NiSource consolidates several Variable Interest Entities (VIEs) related to wind and solar facilities where NIPSCO is the primary beneficiary. Additionally, the NIPSCO Minority Interest Transaction, completed in December 2023, involved a $2.16 billion capital contribution from Blackstone, with NiSource retaining a controlling financial interest - NIPSCO is the primary beneficiary and consolidates four JVs that own and operate wind (Rosewater, Indiana Crossroads Wind) and solar (Indiana Crossroads Solar, Dunns Bridge I) facilities[58] - The NIPSCO Minority Interest Transaction on December 31, 2023, resulted in a $2.16 billion cash capital contribution, with the difference between consideration and carrying value recorded to additional paid-in capital[63] VIE Assets and Liabilities (in millions) | Metric | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :----------------- | :---------------- | | Net Property, Plant and Equipment | $1,335.3 | $1,369.8 | | Current assets | $52.9 | $63.6 | | Total assets | $1,388.2 | $1,433.4 | | Current liabilities | $50.5 | $68.3 | | Asset retirement obligations | $57.7 | $55.7 | | Total liabilities | $108.2 | $124.0 | 5. Earnings Per Share Basic and diluted EPS calculations are based on weighted average common shares, with diluted EPS including effects of long-term incentive plans and ATM forward sale agreements. The two-class method is used due to participating securities (non-vested restricted stock units) Earnings Per Share Calculation (in millions, except per share amounts) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income Available to Common Shareholders - Basic | $85.5 | $76.9 | $514.9 | $435.8 | | Net Income Available to Common Shareholders - Diluted | $85.5 | $77.3 | $514.9 | $437.0 | | Average common shares outstanding - Basic | 451.9 | 413.5 | 449.4 | 413.2 | | Average Common Shares - Diluted | 454.5 | 448.3 | 451.4 | 447.4 | | Basic Earnings Per Share | $0.19 | $0.19 | $1.15 | $1.05 | | Diluted Earnings Per Share | $0.19 | $0.17 | $1.14 | $0.98 | - Diluted EPS for the three months ended September 30, 2024, increased to $0.19 from $0.17 in the prior year, while for the nine months, it increased to $1.14 from $0.98[67] 6. Equity NiSource actively managed its equity through an ATM program, issuing common stock via forward sale agreements, and redeemed all outstanding Series B and B-1 Preferred Stock in March 2024, eliminating preferred stock dividends and recording a redemption premium - In February 2024, NiSource initiated an ATM program to sell up to $900.0 million of common stock, with approximately $297.7 million available as of September 30, 2024[68][74] - All 40,000 outstanding shares of Series B and B-1 Preferred Stock were redeemed on March 15, 2024, for $500.0 million, resulting in a $14.0 million redemption premium recorded as a reduction to retained earnings[76] - On December 1, 2023, 33,898,837 shares of common stock were issued under the purchase contract component of Corporate Units, and all Series C Mandatory Convertible Preferred Stock were returned to authorized but unissued status[78] 7. Short-Term Borrowings NiSource funds short-term needs through a revolving credit facility, commercial paper program, and accounts receivable transfer programs. The commercial paper program limit increased to $1.85 billion in February 2024, and $1.65 billion in term credit agreements were repaid in January 2024 using NIPSCO Minority Interest Transaction proceeds - The commercial paper program limit increased from $1.50 billion to $1.85 billion on February 9, 2024[82] Short-Term Borrowings (in millions) | Metric | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :----------------- | :---------------- | | Commercial paper outstanding | $257.0 | $1,061.0 | | Weighted-average interest rate (commercial paper) | 4.95% | 5.65% | | Short-term borrowings related to securitization transactions | $0.0 | $337.6 | - On January 3, 2024, $1.65 billion in term credit agreements ($1.0 billion and $650.0 million) were fully repaid using proceeds from the NIPSCO Minority Interest Transaction[87] 8. Long-Term Debt NiSource issued $650.0 million of 5.350% senior unsecured notes in March 2024, $500.0 million of 6.950% fixed-to-fixed reset rate junior subordinated notes in May 2024, $600.0 million of 5.200% senior unsecured notes in June 2024, and $500.0 million of 6.375% fixed-to-fixed reset rate junior subordinated notes in September 2024, diversifying its long-term debt portfolio - Issued $650.0 million of 5.350% senior unsecured notes due 2034 on March 14, 2024, with net proceeds of approximately $642.6 million[89] - Issued $500.0 million of 6.950% fixed-to-fixed reset rate junior subordinated notes due 2054 on May 16, 2024, with net proceeds of approximately $493.4 million[90] - Issued $600.0 million of 5.200% senior unsecured notes due 2029 on June 24, 2024, with net proceeds of approximately $593.7 million[92] - Issued $500.0 million of 6.375% fixed-to-fixed reset rate junior subordinated notes due 2055 on September 9, 2024, with net proceeds of approximately $493.6 million[93] 9. Asset Retirement Obligations NiSource recorded a $164.6 million increase in asset retirement obligations during Q3 2024, based on initial assessments of estimated costs to comply with the EPA's revised rule for disposal of Coal Combustion Residuals (CCRs), with additional costs expected as they become probable and estimable - An increase of $164.6 million was recorded in Q3 2024 for estimated costs to comply with the EPA's revised CCR rule[94] - These costs are expected to be recoverable through existing and future depreciation rates[94] 10. Regulatory Matters NiSource received IURC approvals for direct ownership of Gibson and Fairbanks renewable projects, a regulatory asset deferral for its WAM system, and approval for a 400 MW natural gas peaking facility. Columbia Gas of Virginia's CARE Plan was also approved - IURC approved direct ownership of the Gibson and Fairbanks renewable projects in August 2024[96] - NIPSCO received IURC approval in September 2024 to defer $16.9 million as a regulatory asset for its WAM program, an enterprise resource planning system[97] - NIPSCO's request for a certificate of public convenience and necessity for an approximately 400 MW natural gas peaking generation facility was approved in October 2024[98] - Columbia Gas of Virginia's Conservation and Ratemaking Efficiency (CARE) Plan was approved in September 2024, effective January 1, 2025, through December 31, 2027[99] 11. Risk Management Activities NiSource manages commodity price risk through derivatives (futures, options, forwards) to mitigate natural gas price volatility, with most costs passed through to customers via regulatory mechanisms. As of September 30, 2024, net energy derivative volumes outstanding were 64.4 MMDth, and the company had no active interest rate swap positions - NiSource uses derivatives (futures, options, forwards) to mitigate commodity price risk related to natural gas purchases, with most costs passed through to customers[101] - As of September 30, 2024, net energy derivative volumes outstanding for natural gas hedges were 64.4 MMDth, down from 76.1 MMDth at December 31, 2023[102] Risk Management Assets and Liabilities (in millions) | Category | September 30, 2024 Assets | September 30, 2024 Liabilities | December 31, 2023 Assets | December 31, 2023 Liabilities | | :----------- | :------------------------ | :----------------------------- | :----------------------- | :---------------------------- | | Current | $4.1 | $3.7 | $1.1 | $7.5 | | Noncurrent | $14.8 | $3.0 | $22.2 | $1.9 | | Total Net Asset Position | $12.2 | | $13.9 | | - NiSource had no active interest rate swap positions as of September 30, 2024, and December 31, 2023[106] 12. Fair Value NiSource measures financial assets and liabilities at fair value on a recurring basis, primarily classifying risk management assets/liabilities and available-for-sale debt securities within Level 2 of the fair value hierarchy due to the use of market-based inputs. The company also assesses non-recurring fair value for assets like goodwill Recurring Fair Value Measurements (in millions) | Category | September 30, 2024 | December 31, 2023 | | :-------------------------------------- | :----------------- | :---------------- | | Risk management assets | $18.9 | $23.3 | | Available-for-sale debt securities | $137.9 | $159.1 | | Total Assets | $156.8 | $182.4 | | Risk management liabilities | $6.7 | $9.4 | | Total Liabilities | $6.7 | $9.4 | - Risk management assets and available-for-sale debt securities are primarily classified within Level 2, utilizing broker or over-the-counter exchanges and matrix pricing models with market-based information[111][114] Available-for-Sale Debt Securities (in millions) - September 30, 2024 | Security Type | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | | :------------------------ | :------------- | :--------------------- | :---------------------- | :-------------------------- | :--------- | | U.S. Treasury debt securities | $49.1 | $0.0 | $(1.9) | $0.0 | $47.2 | | Corporate/Other debt securities | $94.4 | $1.1 | $(4.6) | $(0.2) | $90.7 | | Total | $143.5 | $1.1 | $(6.5) | $(0.2) | $137.9 | 13. Income Taxes NiSource's effective tax rates for the three and nine months ended September 30, 2024, were 14.1% and 15.4%, respectively, differing from the federal statutory rate primarily due to renewable partnership income, amortization of deferred tax liabilities, and tax credits. The three-month rate increased due to higher non-taxable AFUDC equity Effective Tax Rates | Period | 2024 Effective Tax Rate | 2023 Effective Tax Rate | | :------------------------------------ | :---------------------- | :---------------------- | | Three Months Ended September 30, | 14.1% | 3.7% | | Nine Months Ended September 30, | 15.4% | 17.7% | - The increase in the three-month effective tax rate (10.4% in 2024 vs. 2023) was driven by higher non-taxable AFUDC equity, offsetting higher renewable partnership income in 2023[123] - No material changes to unrecognized tax benefits are expected in the next twelve months[124] 14. Pension and Other Postemployment Benefits NiSource provides defined contribution and noncontributory defined benefit retirement plans, along with health care and life insurance benefits for retirees. Regulatory assets and liabilities are recorded for postretirement benefit costs, with contributions made to pension and OPEB plans Contributions to Pension and OPEB Plans (in millions) | Plan | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :---- | :----------------------------- | :----------------------------- | | Pension | $1.9 | $2.6 | | OPEB | $18.3 | $16.7 | Net Periodic Benefit Cost (in millions) - Three Months Ended Sep 30, | Component | Pension 2024 | Pension 2023 | OPEB 2024 | OPEB 2023 | | :------------------------ | :----------- | :----------- | :-------- | :-------- | | Service cost | $5.5 | $5.1 | $1.3 | $1.3 | | Interest cost | $16.3 | $17.1 | $5.5 | $5.4 | | Expected return on assets | $(23.8) | $(23.6) | $(4.0) | $(3.8) | | Recognized actuarial loss | $7.2 | $8.4 | $0.8 | $0.8 | | Settlement loss | $5.9 | $7.4 | $0.0 | $0.0 | | Total Net Periodic Benefit Cost | $11.1 | $14.4 | $3.2 | $3.2 | - A settlement charge of $5.9 million was recorded for one pension plan during Q3 2024[129] 15. Other Commitments and Contingencies NiSource provides guarantees for future performance under Build-Transfer Agreements (BTAs) for renewable generation projects, with total guarantees increasing to $1,150.2 million. The company faces various legal and environmental liabilities, including those related to CERCLA, Manufactured Gas Plant (MGP) sites, and Coal Combustion Residuals (CCRs), with a significant increase in CCR-related liabilities due to new EPA rules - Guarantees for multiple BTAs totaled $1,150.2 million at September 30, 2024, up from $646.1 million at December 31, 2023[131] - Environmental remediation liability increased to $92.6 million at September 30, 2024, from $80.0 million at December 31, 2023[137] - An additional $164.6 million was accrued in Q3 2024 for probable and estimable compliance activities associated with the EPA's Legacy CCR Rule[142] - NIPSCO made significant payments for Cavalry and Dunns Bridge II projects upon mechanical and substantial completion, with full ownership of Gibson and Fairbanks projects also approved[143] 16. Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss (AOCI) decreased from $(33.6) million at January 1, 2024, to $(29.6) million at September 30, 2024, primarily due to net current-period other comprehensive income, including gains on securities and pension/OPEB items Accumulated Other Comprehensive Loss (in millions, net of tax) | Component | Balance as of Jan 1, 2024 | Net current-period other comprehensive income (loss) | Balance as of Sep 30, 2024 | | :-------------------------------------- | :------------------------ | :--------------------------------------------------- | :------------------------- | | Gains and Losses on Securities | $(7.3) | $3.2 | $(4.1) | | Gains and Losses on Cash Flow Hedges | $(12.8) | $(0.3) | $(13.1) | | Pension and OPEB Items | $(13.5) | $1.1 | $(12.4) | | Total Accumulated Other Comprehensive Loss | $(33.6) | $4.0 | $(29.6) | - The net current-period other comprehensive income for the nine months ended September 30, 2024, was $4.0 million[148] 17. Business Segment Information NiSource's operations are now evaluated through two primary reportable segments: Columbia Operations (regulated natural gas) and NIPSCO Operations (regulated gas and electric), with 'Corporate and Other' covering unallocated costs. Operating income is the primary measurement for segment performance - Reportable segments were revised to Columbia Operations and NIPSCO Operations following the NIPSCO Minority Interest Transaction[151] Operating Revenues by Segment (in millions) | Segment | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Columbia Operations | $426.7 | $414.0 | $1,874.1 | $1,990.6 | | NIPSCO Operations | $652.9 | $616.6 | $2,003.0 | $2,102.1 | | Corporate and Other | $145.9 | $121.9 | $425.1 | $361.8 | | Consolidated Operating Revenues | $1,076.3 | $1,027.4 | $3,867.3 | $4,083.4 | Operating Income by Segment (in millions) | Segment | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Columbia Operations | $41.2 | $54.6 | $499.8 | $507.5 | | NIPSCO Operations | $171.3 | $173.1 | $530.0 | $413.9 | | Corporate and Other | $5.8 | $5.3 | $8.9 | $11.5 | | Consolidated Operating Income | $218.3 | $233.0 | $1,038.7 | $932.9 | 18. Other, Net The 'Other, net' income significantly increased for both the three and nine months ended September 30, 2024, primarily driven by higher Allowance for Funds Used During Construction (AFUDC) equity Other, Net (in millions) | Component | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Interest income | $3.4 | $2.7 | $7.8 | $6.3 | | AFUDC equity | $32.1 | $6.0 | $56.7 | $15.2 | | Pension and other postretirement non-service cost | $(5.9) | $(9.8) | $(10.2) | $(18.2) |\n| Miscellaneous | $(0.4) | $(0.5) | $(2.9) | $(1.4) | | Total Other, net | $29.2 | $(1.6) | $51.4 | $1.9 | - AFUDC equity increased substantially from $6.0 million in Q3 2023 to $32.1 million in Q3 2024, and from $15.2 million to $56.7 million for the nine-month period[157] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on NiSource's financial condition and operational results, highlighting strategic initiatives like energy transition, the NIPSCO Minority Interest Transaction, and enterprise-wide transformation. It also discusses liquidity, capital resources, regulatory matters, and market risks Executive Summary NiSource, an energy holding company, focuses on long-term infrastructure investment, safety, tariff alignment, and addressing changing customer demand. Key initiatives include advancing energy transition by retiring coal-fired generation, modernizing gas systems, and evaluating data center development opportunities. The company is also undergoing an enterprise-wide transformation and monitoring economic risks - NiSource's utility subsidiaries are fully regulated natural gas and electric companies operating in six states, generating substantially all operating income through Columbia Operations and NIPSCO Operations segments[165] - The energy transition strategy involves retiring remaining coal-fired electric generation by 2028, replacing it with low- or zero-emission sources, and ongoing pipe replacement and modernization programs[167] - NIPSCO received IURC approval for full ownership of Cavalry, Dunns Bridge II, Gibson, and Fairbanks projects, allowing for more effective monetization of renewable tax credits[167] - The 2024 Integrated Resource Plan will inform future generation investments, considering anticipated load growth from data centers and new EPA emissions rules[169][171] - An enterprise-wide transformation roadmap focuses on operational excellence, safety, and efficiency, with the first phase of the Work and Asset Management (WAM) program successfully implemented in electric distribution operations[174] Summary of Consolidated Financial Results Consolidated financial results show an increase in net income available to common shareholders for both the three and nine months ended September 30, 2024, driven by higher revenues (net of energy costs), increased AFUDC Equity, and the elimination of preferred stock dividends, partially offset by higher depreciation and interest expenses Consolidated Financial Results Summary (in millions, except per share amounts) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating Revenues | $1,076.3 | $1,027.4 | $3,867.3 | $4,083.4 | | Operating Income | $218.3 | $233.0 | $1,038.7 | $932.9 | | Net Income Available to Common Shareholders | $85.7 | $77.0 | $515.8 | $436.1 | | Diluted Earnings Per Share | $0.19 | $0.17 | $1.14 | $0.98 | - Net income available to common shareholders increased by $8.7 million for the three months and $79.7 million for the nine months ended September 30, 2024, compared to the prior year[178] - The increase was primarily due to higher revenues (net of cost of energy), increased AFUDC Equity, and the elimination of preferred stock dividends, partially offset by higher depreciation and interest expenses[179] Results and Discussion of Segment Operations This section details the financial and operational performance of NiSource's two primary reportable segments: Columbia Operations (gas distribution) and NIPSCO Operations (gas and electric). It analyzes changes in operating revenues and expenses, customer usage, weather impacts, and commodity price effects for each segment Columbia Operations Columbia Operations saw an increase in operating revenues for the three months ended September 30, 2024, driven by new rates and customer growth, but a decrease for the nine-month period due to lower cost of energy billed to customers. Operating income decreased for both periods, impacted by higher operation and maintenance, and depreciation expenses Columbia Operations Financial and Operational Data (in millions, except MMDth and customers) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating Revenues | $426.7 | $414.0 | $1,874.1 | $1,990.6 | | Operating Income | $41.2 | $54.6 | $499.8 | $507.5 | | Total Sales and Transportation (MMDth) | 96.0 | 93.0 | 412.9 | 402.8 | | Total Customers | 2,390,272 | 2,377,139 | 2,390,272 | 2,377,139 | - Operating revenues increased by $12.7 million (3.1%) for the three months ended September 30, 2024, primarily due to new rates from base rate proceedings and regulatory capital programs ($19.1 million)[188] - Operating income decreased by $13.4 million (24.5%) for the three months and $7.7 million (1.5%) for the nine months, mainly due to higher employee and administrative expenses, and increased depreciation and amortization[186][194] - Total sales and transportation volumes increased by 3.0 MMDth (3.2%) for the three months and 10.1 MMDth (2.5%) for the nine months, driven by increased industrial usage[186][190] NIPSCO Operations NIPSCO Operations experienced an increase in operating revenues for the three months ended September 30, 2024, but a decrease for the nine-month period. Operating income decreased slightly for the three months but significantly increased for the nine months, primarily due to lower cost of energy and higher new rates. Electric sales volumes increased, while gas sales volumes decreased NIPSCO Operations Financial and Operational Data (in millions, except GWh, MMDth, and customers) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating Revenues | $652.9 | $616.6 | $2,003.0 | $2,102.1 | | Operating Income | $171.3 | $173.1 | $530.0 | $413.9 | | NIPSCO Electric Total Sales (GWh) | 4,558.1 | 4,375.4 | 12,225.6 | 11,728.9 | | NIPSCO Gas Total Sales (MMDth) | 68.9 | 70.4 | 260.6 | 267.0 | | NIPSCO Electric Total Customers | 491,263 | 487,447 | 491,263 | 487,447 | | NIPSCO Gas Total Customers | 866,701 | 859,546 | 866,701 | 859,546 | - Operating revenues increased by $36.3 million (5.9%) for the three months ended September 30, 2024, but decreased by $99.1 million (4.7%) for the nine months[197] - Operating income decreased by $1.8 million (1.0%) for the three months but increased by $116.1 million (28.1%) for the nine months, primarily due to lower cost of energy billed to customers and new base rates[197][207] - NIPSCO continues its electric generation transition, with two wind PPA projects, two wind BTA projects, and three solar BTA projects totaling 1,665 MW already in service. Remaining projects are expected to be in service between 2025 and 2027[211] Liquidity and Capital Resources NiSource maintains adequate liquidity through cash flow from operations, debt, and equity issuances. Key financing activities in 2024 included a $2.16 billion capital contribution from the NIPSCO Minority Interest Transaction, repayment of $1.65 billion in term credit agreements, and multiple long-term debt issuances. Net available liquidity stood at $1,934.8 million as of September 30, 2024 - The NIPSCO Minority Interest Transaction on December 31, 2023, provided a $2.16 billion capital contribution, used to repay $1.65 billion in term credit agreements on January 3, 2024[216][217] - NiSource issued $650.0 million of senior unsecured notes, $500.0 million of junior subordinated notes, $600.0 million of senior unsecured notes, and another $500.0 million of junior subordinated notes in 2024[219][220][221] Cash Flow Activities (in millions) | Activity | 2024 | 2023 | Change in 2024 vs 2023 | | :---------------------- | :---------- | :---------- | :--------------------- | | Operating Activities | $1,241.7 | $1,535.9 | $(294.2) | | Investing Activities | $(2,414.5) | $(2,503.3) | $88.8 | | Financing Activities | $(949.5) | $998.6 | $(1,948.1) | Liquidity Position (in millions) | Metric | September 30, 2024 | December 31, 2023 | | :------------------------------------ | :----------------- | :---------------- | | Revolving Credit Facility | $1,850.0 | $1,850.0 | | Accounts Receivable Programs | $225.0 | $383.9 | | Less: Commercial Paper | $(257.0) | $(1,061.0) | | Less: Accounts Receivable Programs Utilized | $0.0 | $(337.6) | | Add: Cash and Cash Equivalents | $126.2 | $2,245.4 | | Net Available Liquidity | $1,934.8 | $3,070.8 | Regulatory, Environmental and Safety Matters NiSource's operating results are influenced by regulatory trackers that allow for cost recovery, with all states requiring periodic review of gas procurement. The company is actively monitoring and responding to PHMSA regulations for pipeline safety and methane emissions, as well as federal and state climate change legislation, including the IRA and state-specific acts, to achieve its Net Zero Goal by 2040 - Regulatory trackers allow for recovery of certain costs, such as gas costs and fuel costs, with minimal impact on operating income[243][244][246] Current Rate Case Actions (in millions) | Company | Approved ROE | Requested Incremental Revenue | Approved Incremental Revenue | Rates Effective | | :---------------------- | :----------- | :---------------------------- | :--------------------------- | :-------------- | | Columbia of Pennsylvania | None specified | $82.2 | $44.5 | December 2022 | | NIPSCO - Gas | 9.75 % | $161.9 | $120.9 | September 2024 | | NIPSCO - Electric | 9.80 % | $291.8 | $261.9 | August 2023 | | Pending Rate Cases: | | | | | | Columbia of Kentucky | In process | $23.8 | In process | January 2025 | | NIPSCO - Electric | In process | $368.7 | In process | September 2025 | - PHMSA proposed new regulatory revisions in 2023 to minimize methane emissions and enhance distribution system safety, requiring increased leak detection, faster repairs, and updated integrity management plans[251][252][253] - NiSource announced a Net Zero Goal for Scope 1 and Scope 2 GHG emissions by 2040, building on a 72% reduction from 2005 levels by the end of 2023[265] Market Risk Disclosures NiSource manages commodity price risk through derivatives, with limited earnings exposure due to regulatory recovery mechanisms. The company is exposed to interest rate risk from variable-rate borrowings and credit risk from customers, suppliers, and counterparties, which is managed through a Corporate Credit Risk Management Policy - Commodity price risk is managed using derivatives (futures, swaps, forwards, options) at rate-regulated subsidiaries, with prudently incurred costs and derivative gains/losses recovered through regulatory mechanisms (GCA and FAC)[269][270] - An increase of 100 basis points in short-term interest rates would have increased interest expense by $1.7 million for the three months and $6.9 million for the nine months ended September 30, 2024[273] - Credit risk is managed through a Corporate Credit Risk Management Policy, which includes guidelines for credit limits, evaluating creditworthiness, and mitigation efforts[274] Other Information This section refers to the Annual Report on Form 10-K for critical accounting estimates and Note 2 for recent accounting pronouncements, indicating no material changes to critical accounting estimates as of September 30, 2024 - No material changes were made to critical accounting estimates as of September 30, 2024, compared to the Annual Report on Form 10-K for the year ended December 31, 2023[277] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to Item 2, 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk Disclosures,' for detailed quantitative and qualitative information regarding market risks Item 4. Controls and Procedures NiSource's CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2024, providing reasonable assurance of accurate and timely financial information processing and reporting. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were deemed effective as of September 30, 2024, ensuring accurate and timely financial reporting[279] - No material changes to internal control over financial reporting occurred during the most recently completed quarter[280] PART II OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 15, 'Other Commitments and Contingencies - B. Legal Proceedings,' for a description of NiSource's legal proceedings, indicating that various claims and proceedings are pending or threatened in the ordinary course of business Item 1A. Risk Factors This section highlights that there have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for 2023, except for an expanded discussion on the inability to execute business plans or growth strategies, including utility infrastructure investments and data center development opportunities - No material changes to risk factors, other than an expanded discussion on the inability to execute business plans or growth strategies, including utility infrastructure investments and data center development[283][284] - Risks include operational, financial, or regulatory conditions impacting natural gas pipeline modernization, renewable energy projects, and managing complex data center development opportunities[285][286] - Ongoing supply chain challenges and labor availability issues are impacting the ability to obtain materials and ensure timely project completion[286] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report during the period Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities to report during the period Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to NiSource's operations Item 5. Other Information This section reports that no director or Section 16 officer adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2024 - No director or Section 16 officer adopted, terminated, or modified a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended September 30, 2024[288] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including amended articles of incorporation and bylaws, forms of subordinated notes, supplemental indentures, an executive deferred compensation plan, and certifications from the CEO and CFO - Exhibits include amended and restated Articles of Incorporation and Bylaws, forms of 6.375% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due 2055, and the Second Supplemental Indenture[291] - Also included are the Amended and Restated Executive Deferred Compensation Plan and certifications from the Chief Executive Officer and Chief Financial Officer[292] Signature This section contains the signature of Gunnar J. Gode, Vice President and Chief Accounting Officer (Principal Accounting Officer) of NiSource Inc., certifying the filing of the report on October 30, 2024 - The report was signed by Gunnar J. Gode, Vice President, Chief Accounting Officer (Principal Accounting Officer) of NiSource Inc., on October 30, 2024[295]