NiSource(US:NI)2023-11-01 11:49Financial Performance - NiSource reported operating revenues of $1,027.4 million for the three months ended September 30, 2023, a decrease of $62.1 million compared to $1,089.5 million in the same period of 2022[150]. - The net income available to common shareholders for the three months ended September 30, 2023, increased by $25.0 million to $77.0 million, primarily due to higher revenues driven by regulatory rate increases[151]. - Total operating expenses decreased by $138.4 million to $794.4 million for the three months ended September 30, 2023, compared to $932.8 million in the same period of 2022[150]. - NiSource's operating income for the three months ended September 30, 2023, was $233.0 million, an increase of $76.3 million compared to $156.7 million in the same period of 2022[150]. - Operating revenues for Q3 2023 were $531.5 million, a decrease of $44.0 million (7.7%) compared to Q3 2022, while revenues for the nine months ended September 30, 2023, were $2,731.8 million, down $27.8 million (1.0%) year-over-year[162]. - Operating income for Q3 2023 increased to $52.2 million, up $18.8 million (56.3%) from Q3 2022, while for the nine months, it decreased to $614.5 million, down $10.3 million (1.7%) year-over-year[162]. - The decrease in net income available to common shareholders for the nine months ended September 30, 2023, was primarily due to the absence of an insurance settlement received in 2022[152]. Energy Costs and Revenue Drivers - The company achieved a significant reduction in the cost of energy, which fell by $149.5 million to $181.3 million for the three months ended September 30, 2023[150]. - The cost of energy for Q3 2023 was $72.1 million, down $85.9 million (54.3%) from Q3 2022, and for the nine months, it was $823.1 million, a decrease of $177.4 million (17.7%) compared to the previous year[162]. - The change in operating revenues for Q3 2023 was primarily driven by new rates from base rate proceedings and regulatory capital programs, contributing $42.3 million, while the impact of weather resulted in a decrease of $2.6 million[164]. - The decrease in operating revenues was primarily due to a $63.6 million reduction in the cost of energy billed to customers, which was offset by lower operating expenses[174]. Customer and Market Dynamics - Residential revenues increased by $20.4 million (6.1%) in Q3 2023 compared to Q3 2022, and for the nine months, they rose by $56.0 million (3.2%) year-over-year[162]. - The total number of gas distribution customers increased to 3,236,685, an increase of 28,445 customers compared to the previous year[162]. - Residential sales decreased by 2.7% to $176.0 million in Q3 2023, while industrial sales saw a significant decline of 36.1% to $116.0 million compared to Q3 2022[172]. - The total volume of electricity sold decreased by 137.3 GWh (3.2%) in Q3 2023 compared to Q3 2022, primarily due to reduced usage by industrial and residential customers[176]. Renewable Energy Transition - The company plans to replace its coal generation capacity by the end of 2028 with primarily renewable resources, with substantial completion of its first two solar projects achieved in August 2023[143]. - NIPSCO is transitioning to renewable energy sources, with three wind projects and two solar projects totaling approximately 1,269 MW of nameplate capacity already in service[184]. - The company is working on several renewable projects, with the majority expected to be placed in service in 2024 and 2025, amid challenges related to supply chain issues and regulatory investigations[185]. - NiSource continues to implement energy efficiency programs to reduce emissions and conserve resources, contributing to a long-term trend of declining average use per customer[213]. - NiSource Inc. announced a Net-Zero Goal of achieving net-zero greenhouse gas emissions by 2040, with interim targets to reduce fugitive methane emissions by 50% from 2005 levels by 2025[229]. Regulatory and Compliance Matters - NiSource filed a request for a certificate of public convenience and necessity for a new 400 MW natural gas peaking generation unit in September 2023, expected to enhance system reliability[144]. - The approved revenue increase for NIPSCO's electric operations is $291.8 million, effective August 2023, with an approved ROE of 9.80%[217]. - NIPSCO's gas operations have an active rate case with a proposed revenue increase of $161.9 million, with an order expected in Q3 2024[217]. - The company is evaluating proposed regulatory revisions under the PIPES Act of 2020, which may require increased leak detection and repair efforts[219]. - NiSource is monitoring potential impacts from proposed EPA regulations aimed at reducing carbon dioxide emissions from natural gas and coal-fired electric generating units[225]. Financial Position and Investments - NiSource reported cash from operating activities of $1,535.9 million for the nine months ended September 30, 2023, an increase of $499.7 million compared to $1,036.2 million in 2022[189]. - The company utilized $2,503.3 million in investing activities during the same period, which is an increase of $820.6 million from $1,682.7 million in 2022, primarily due to higher capital expenditures[189][191]. - NiSource's financing activities generated $998.6 million, up by $368.4 million from $630.2 million in 2022, reflecting improved access to capital[189]. - The company plans to invest between $3.3 billion and $3.6 billion in capital expenditures for 2023 and approximately $16.0 billion from 2024 to 2028 to support its renewable generation transition strategy[192]. - NiSource entered into a BIP Purchase Agreement for a 19.9% equity interest in NIPSCO for $2.150 billion, aimed at funding capital expenditure plans and reducing debt[188]. Risk Management and Financial Stability - The company has a $1.5 billion commercial paper program backed by a $1.85 billion revolving credit facility, ensuring liquidity for ongoing operations[187]. - The debt to capitalization ratio was 63.1% as of September 30, 2023, remaining below the covenant limit of 70.0%[203]. - NiSource's credit ratings remained stable with S&P rating at BBB+ and Moody's at Baa2 as of September 30, 2023[204]. - The company has approximately $89.5 million in collateral requirements that would be triggered by a downgrade below investment grade[204]. - Interest rate risk exposure indicates that a 100 basis point increase in short-term interest rates would have increased interest expense by $4.8 million for Q3 2023[237]. Employee and Operational Challenges - The company is facing increased competition for talent, leading to higher costs for attracting and retaining employees, which may impact operational efficiency[147]. - Higher employee and administrative expenses contributed to an unfavorable change of $8.2 million in Q3 2023 compared to Q3 2022[170]. - The company continues to monitor regulatory approvals for its coal units, which are critical for its operational strategy and future financial performance[182].