NiSource(US:NI)2022-05-04 17:07PART I FINANCIAL INFORMATION Financial Statements The unaudited financial statements show a significant increase in net income driven by higher operating revenues and a slight rise in total assets Condensed Statements of Consolidated Income NiSource reported significantly increased operating revenues and net income for Q1 2022 compared to the prior year Consolidated Income Statement Highlights (Q1 2022 vs Q1 2021) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total Operating Revenues | $1,873.3 million | $1,545.6 million | | Operating Income | $600.3 million | $433.2 million | | Net Income Attributable to NiSource | $426.8 million | $295.5 million | | Diluted Earnings Per Share (EPS) | $0.94 | $0.72 | - The increase in operating income was primarily driven by higher customer revenues, which rose to $1,840.3 million from $1,506.5 million, partially offset by an increase in the cost of energy20 Condensed Consolidated Balance Sheets Total assets and equity slightly increased as of March 31, 2022, while long-term debt remained stable Balance Sheet Summary | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $24,365.5 million | $24,156.9 million | | Net Property, Plant and Equipment | $18,120.7 million | $17,881.8 million | | Total Liabilities | $16,834.1 million | $16,884.0 million | | Total Equity | $7,531.4 million | $7,272.9 million | | Long-term debt (excluding current portion) | $9,179.8 million | $9,183.4 million | Condensed Statements of Consolidated Cash Flows Net cash from operating activities increased, while investing activities were primarily driven by capital expenditures Cash Flow Summary (Three Months Ended March 31) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Flows from Operating Activities | $579.8 million | $448.3 million | | Net Cash Flows used for Investing Activities | ($370.4 million) | ($401.8 million) | | Net Cash Flows used for Financing Activities | ($173.9 million) | ($75.4 million) | | Change in cash, cash equivalents and restricted cash | $35.5 million | ($28.9 million) | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, segment performance, regulatory matters, and financing activities - The company adopted ASU 2020-06 on January 1, 2022, which impacted the calculation of diluted EPS for its Equity Units by requiring the assumption of share settlement for the remaining purchase contract payment balance3947 - The company has two primary reportable segments: Gas Distribution Operations and Electric Operations, with Q1 2022 operating revenues of $1,439.8 million and $430.3 million respectively138139 - In April 2022, a milestone payment of $71.9 million was made to a developer for the Dunn's Bridge I renewable energy project140 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased net income, segment performance, liquidity, and key risks including supply chain delays impacting its electric generation transition Executive Summary The company focuses on long-term infrastructure investment and safety while navigating delays in its renewable energy transition and monitoring economic risks - The 'Your Energy, Your Future' plan to replace coal generation with renewables faces delays on solar projects, with the retirement of two R.M. Schahfer coal units now expected by the end of 2025150 - The company is monitoring economic risks including supply chain delays, increased competition for labor, and a substantial increase in natural gas spot market prices154156157 Results and Discussion of Segment Operations Both Gas and Electric segments saw increased operating income, though the electric generation transition is challenged by solar project delays Segment Operating Income (Three Months Ended March 31) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Gas Distribution Operations | $510.8 million | $346.9 million | | Electric Operations | $99.2 million | $87.9 million | Liquidity and Capital Resources The company maintains adequate liquidity through credit facilities and financing programs to support its significant capital investment plans Net Available Liquidity | Date | Amount | | :--- | :--- | | March 31, 2022 | $1,910.1 million | | December 31, 2021 | $1,606.5 million | - The company plans to make capital investments totaling approximately $8 billion during the 2022-2024 period, with flexibility to adjust timing due to renewable project delays198 - As of March 31, 2022, the company was in compliance with its debt covenant, with a debt-to-capitalization ratio of 56.4% against a 70% limit206 Regulatory, Environmental and Safety Matters The company is engaged in multiple rate cases and continues its strategy to reduce GHG emissions while exploring lower-carbon technologies - The company has active rate cases in several jurisdictions, including a request for a $221.4 million revenue increase for Columbia of Ohio and a $109.7 million increase for NIPSCO Gas219 - NiSource continues to implement plans to reduce Scope 1 GHG emissions by 90% from 2005 levels by 2030, having achieved an approximate 58% reduction by year-end 2021227 - Columbia of Pennsylvania and Columbia of Virginia have filed petitions for a voluntary 'Green Path Rider' allowing customers to offset natural gas emissions through RNG attributes and carbon offsets229 Quantitative and Qualitative Disclosures About Market Risk The company's principal market risks are commodity prices, interest rates, and credit, which are managed through derivatives and regulatory mechanisms - The company's principal market risks are commodity price risk, interest rate risk, and credit risk231 - A 100 basis point (1%) change in short-term interest rates would have resulted in a $1.5 million change in interest expense for the three months ended March 31, 2022236 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The chief executive officer and chief financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period243 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls244 PART II OTHER INFORMATION Legal Proceedings This section refers to financial statement notes detailing legal matters, primarily related to the 2018 Greater Lawrence Incident - For a description of legal proceedings, the report refers to Note 15, "Other Commitments and Contingencies," in the Notes to Condensed Consolidated Financial Statements247 Risk Factors A new operational risk factor highlights expected delays in the electric generation strategy due to significant solar industry supply chain uncertainty - A new risk factor details expected delays in the electric generation strategy due to challenges in the solar industry supply chain, including federal policy actions and macro supply chain issues249250 - The uncertainty around solar project completion creates risks for meeting capacity obligations, potentially extending the operation of two coal units at the Schahfer plant to the end of 2025251252 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None reported257