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Operator: Good morning. My name is Chris and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2022 NiSource Earnings Conference Call. Thank you, Chris Turnure, Director of Investor Relations. You may begin.

Chris Turnure: Good day, and welcome to the NiSource Fourth Quarter 2022 Investor Call. Joining me today are Chief Executive Officer, Lloyd Yates; Chief Financial Officer, Donald Brown, Senior Vice President, Strategy and Chief Risk Officer, Shawn Anderson; and Vice President of Investor Relations and Treasurer, Randy Hulen. The purpose of this presentation is to review NiSource’s financial performance for the fourth quarter of 2022 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 MD&A and Risk Factors sections of our periodic SEC filings. Additionally, some of the statements made on the 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 a reconciliation of these measures. I’d now like to turn the call over to Lloyd.

Lloyd Yates: Thanks, Chris. Good morning, everyone, and thank you for joining us. By the end of the call, we want to leave you with 3 takeaways of our business and our future. I’d like to reiterate our confidence, progress and focus. Our confidence in our strategic plan and our strong progress in delivering on our commitments. Our progress on our regulatory initiatives, including pursuing a potential settlement in the NIPSCO electric rate case, and our focus on realizing the upside potential beyond our existing plan. We will touch on some of these incremental investment opportunities later in today’s presentation. Turning to our performance, 2022 was a year of relentless and consistent execution by our team. Among the keys to our success in 2022 was our comprehensive business review.

We believe the goals detailed at our Investor Day are both significant and achievable, and we will measure our progress against our premium utility growth plan each quarter. Our results this quarter and in 2022 were strong and demonstrate that we are off to a great start in the execution of our plan. We delivered earnings above our 2022 guidance and are raising our 2023 guidance. We also grew our dividend 6.4%. We remain on track to drive shareholder value for a compelling 9% to 11% total shareholder return. At Investor’s Day, we committed to optimizing our cost profile and enhancing operational efficiency. We are doing it by transforming both our IT systems and the work process of , behind processes and technology of our people, I want to thank each of our employees for their performance throughout 2022 and a deep commitment to serving our customers.

Let’s turn to Slide 5 of the presentation and take a closer look at our 2022 key achievements. NiSource’s 2022 earnings exceeded our guidance range. We delivered $1.47 non-GAAP diluted NOEPS. That’s up more than 7% from last year, It reflects our continued investment in safety, reliability, customer affordability and sustainability. Looking to 2023, we’ve increased our guidance range to $1.54 to $1.60 per share. This reflects our outperformance in 2022 and confidence in 2023 execution. We’re reaffirming our expectation of a 6% to 8% annual NOEPS growth through 2027 as well as our annual 8% to 10% rate base growth. Slide 6 illustrates 2023 guidance and our commitment to grow 6% to 8% annually through 2027. Driving this top-tier growth are investments of $15 billion in regulated CapEx from 2023 through 2027.

A high-level summary of which you can see on Slide 7. Looking out further, we continue to expect to invest $30 billion from 2023 to 2032. As I alluded to earlier, execution by our regulatory team continues to be a strength. In 2022, we filed 4 rate cases and resolved 3, in Pennsylvania, Maryland, and the Indiana gas case. In addition, the Ohio rate case concluded last month. These cases represent balanced outcomes supporting all stakeholders. Turning to Page 8. We have the following key priorities for 2023. First, continue to enhance our focus on safety and operational excellence. Second, the successful sale of our minority interest in NIPSCO to strengthen our balance sheet. Next, a balanced outcome in the NIPSCO electric rate case, which we will cover in a few moments.

Fourth, drive efficiencies to achieve flat O&M spending to enhance customer affordability. These efforts will keep our customer rates sustainable with expected total annual rate increases that are in line with inflation. And finally, our commitment to delivering on our 2023 guidance. These are the priorities that we will keep top of mind throughout the year. On Slide 9, you will see the additional investment opportunities NiSource may pursue in both the near and long term. NiSource’s investment opportunities include replacing pre-1985 plastic gas pipes as well as gas transmission replacements and reconfirmations to comply with PHMSA regulation. In addition, electric generation tax credit transferability and advanced gas metering infrastructure also represent attractive opportunities for NiSource in the near term.

Beyond 2027, we see the need to add electric generation capacity in the marketplace and to enhance electric grid hardening. NiSource electric long-range transmission projects, elect transportation renewable gas infrastructure and hydrogen production hubs also make up long-term and large-scale projects we will seek to participate in to enhance our investment portfolio and drive greater value for our customers. Now let’s turn to Page 10 to review some fourth quarter and recent highlights from gas distribution operations. Columbia Gas of Ohio received an order, except in the settlement in its rate case on January 26. The order includes a revenue increase of $68.2 million net of riders. New rates will be effective on March 1. The settlement in our Pennsylvania rate case was approved in December.

It enables continued investments in the replacement of aging pipe and system upgrades needed to ensure service reliability and pipeline safety. New rates went into effect December 17. Finally, Columbia Gas of Maryland received an order in November, approving its rate case settlement. The settlement supports the company’s continued investments in infrastructure replacement and system upgrades. Now for updates on our electric operations and renewables projects, I’d like to turn it over to Shawn Anderson.

Shawn Anderson: Thank you, Lloyd, and good morning, everyone. You’ll find information about our electric operations on Slide 11. NIPSCO is actively working with stakeholders toward a settlement in its electric rate case, it’s first since 2018. New rates are anticipated to take effect in September 2023 with an incremental rate step applied in 2024. Meanwhile, the company remains on track to support a reliable generation portfolio and to retire all coal-fired generation by the end of 2028 with new assets, predominantly wind and solar facilities coming online. All of the renewable generation projects remain on target with previously revised in-service dates. The construction underway at Indiana Crossroads Solar and Dunns Bridge Solar 1 is nearing completion, with both facilities projected to be in service in the first half of 2023.

Also under construction, the Indiana Crossroads 2 wind project continues to pace to start of commercial operations by the end of 2023. We have entered into contract amendments for our Dunns Bridge 2, Cavalry and Fairbanks projects to address our previously communicated project completion dates and reflect market pressures on pricing. Both Dunns Bridge 2 and Cavalry projects have begun initial construction with activities ramping into full construction this spring. We continue to evaluate the provisions of the Inflation Reduction Act and its applicability to the projects in our generation portfolio, including the potential application of tax transferability, along with the enhanced tax credits provided for in the act. We believe the legislation has enabled the opportunities to drive greater value to both our customers and shareholders while advancing our remaining projects.

It is important to note that the application of all tax credits is analyzed on a project-by-project basis and is impacted by various factors such as capital costs and the expected production of the asset. Meanwhile, NIPSCO is in active commercial negotiations with potential counterparties to fulfill the preferred portfolio outlined in its 2021 integrated resource plan. Project agreements resulting from the all-sources RFP as well as the targeted gas peaking RFP at Schahfer Generating Station are expected to be announced this summer. Additional work continues around capturing direct and indirect funding opportunities from all of the federal legislation passed recently, most notably the nearly $500 billion generated from the Infrastructure Investment and Jobs Act and the inflation Reduction Act.

We have been active in several hydrogen hub proposals across our territory, each of which have received encouragement from the DOE to submit a full application for the regional clean hydrogen hub funding opportunity announcement as designated in the Bipartisan Infrastructure Investment and Jobs Act. I’d like to close by confirming we are on track to achieve our industry-leading environmental impact targets, namely a 90% reduction in Scope 1 greenhouse gas emissions from 2005 levels by 2030. This progress is consistent with the reductions needed to achieve our goal of net 0 Scope 1 and Scope 2 emissions by 2040, which we announced in November. Now I’d like to turn the call over to Donald, who will discuss our financial performance in more detail.

Donald Brown: Thanks, Shawn, and good morning, everyone. Turning to our fourth quarter 2022 results on Slide 13. Fourth quarter non-GAAP net operating earnings were $221 million or $0.50 per share compared to $167 million or $0.39 per share in the fourth quarter of 2021. Full year earnings were $648 million or $1.47 per share compared to $571 million or $1.37 per share in 2021. Taking a closer look at our fourth quarter segment, non-GAAP results on Slide 14. Gas distribution operating earnings were $288 million in the fourth quarter, an increase of $72 million versus the same quarter last year. Operating revenues, net of the cost of energy and tracked expenses were higher by $66 million, mainly due to new rates resulting from base rate cases and regulatory capital programs.

Operating expenses, again, net of the cost of energy and tracked expenses were lower by $6 million due primarily to lower O&M and other taxes. In our electric segment, non-GAAP operating earnings for the fourth quarter were $68 million, $14 million lower than in the same quarter last year. Operating revenues, net of the cost of energy and tracked expenses were lower by $4 million, mainly due to slightly lower weather-normalized customer usage. Operating expenses, once again excluding the cost of energy and tracked expenses were higher by $10 million, primarily due to increased depreciation and amortization. Now I’d like to briefly touch on our debt and credit profile. Our debt level as of December 31, 2022, was $11.3 billion, of which $9.6 billion was long-term debt with a weighted average maturity of 14 years and a weighted average interest rate of 3.7%.

At the end of the fourth quarter, we maintained net available liquidity of over $1.6 billion. consisting of cash and available capacity under our credit facility and our accounts receivable securitization programs. We remain committed to our current investment-grade credit ratings. Slide 16 highlights our financing strategy and credit commitments. We issued a $1 billion 1-year term loan in December and used the proceeds to reduce our commercial paper balances and the loan bridges the gap into our equity unit remarketing in the fall. Our financing plan includes no block or ATM equity issuances in 2023 or 2024. And is consistent with all of our earnings growth and credit commitments through 2027 and remains unchanged from Investor Day in November.

I’d like to highlight that the recent drop in natural gas prices directly reduces our customers’ bills over time and reduces the natural gas impact on working capital and financing charges. A year in 2022, deferred fuel amounted to roughly 54 basis points of FFO to debt versus 76 basis points at year-end 2021. For some context of the impact of higher gas prices over the last 2 years, at year-end 2020, deferred fuel only had a 6 basis point impact on our FFO to debt. In summary, we reported 2022 EPS of $1.47, exceeding our $1.44 to $1.46 guidance range. We have raised our 2023 guidance to $1.54 to $1.60, an increase of over $0.03 versus our prior midpoint. We’re also reiterating our long-term growth commitment of 6% to 8% annual NOEPS growth through 2027.

Despite persistent macroeconomic headwinds and volatility, we are advancing key elements of our 5-year plan, and we remain focused on safety, reliability, affordability and sustainability. Before we open up the line to answer your questions, I’d like to reiterate our confidence, progress and focus. Our confidence in our strategic plan and our strong progress in delivering on those commitments. Our progress on our regulatory initiatives, including pursuing a potential settlement in the NIPSCO electric rate case, and our focus on realizing the upside potential beyond our existing plan. Thank you all for participating today and for your ongoing interest in and support of NiSource. We’re now ready to take your questions.

Operator: First question is from Nicholas Campanella with Credit Suisse.

Nicholas Campanella: So I guess just on the NIPSCO rate case and the time line for potential settlement, would you prospectively want to have that done before the March 13 hearings? Or just how do we kind of think about the time line there, if you can move to settlement?

Lloyd Yates: Nick, Lloyd Yates here. So when we think about the NIPSCO rate case, we filed our rebuttal testimony February 16, and we’ve already started discussions with the various parties on that rate case. I’m optimistic about settling that rate case, I think that you started thinking about time line around February 27, If hearings are starting March 13, I think that the time line is you should expect to see something around the end of February. If things are progressing, we could — history has been to extend those a week or so to get settlement discussions complete. But I think that’s the track we’re on right now.

Nicholas Campanella: That’s really helpful. And then I guess just on the minority interest sale. Can you kind of just give us a sense, I know in the prepared remarks, you said you’re on track. What type of demand are you kind of seeing from either financial or strategics? And then how are you kind of framing the time line for an announcement here? Do you expect to have something by next quarter? Or just any additional color would be helpful.

Lloyd Yates: So Shawn is leading that initiative for the company. I’m going to let Shawn Anderson answer that.

Shawn Anderson: Yes. Thanks, Nick. Appreciate the question. We’ve observed a broad range of qualified partners, which are positioned to help NIPSCO and NiSource realize its strategic goals. We’re confident this is the right audience to evaluate a partnership with NiSource as we laid out in November. And we’re also confident the process we’ve launched will lead us to a successful outcome this year.

Operator: The next question is from Shahriar Pourreza with Guggenheim Partners.

Shahriar Pourreza: Look, just on — starting with the CapEx, when you shifted sort of a fair amount of the generation spending from ’24 to ’23, it looks like you also slightly increased the overall CapEx plan at the same time as sort of the ’23 range moved up more than the ’24 CapEx reduction, can you maybe just elaborate on this and whether we should treat this as incremental to sort of your overall planning assumptions?

Lloyd Yates: So I would not treat that as incremental. That shift was really for progress payments for our renewable projects, I mean I think our plan is still as is, spending around $3 billion a year in CapEx is what we’re committed to. We feel like we can execute that really, really well, but there’s no increase in CapEx at all. Those are just progress payments for the projects.

Shahriar Pourreza: Got it. And then just a follow up on Nick’s question on the GRC. I guess, how are you sort of thinking about the potential for the coal plant cost recovery mechanism to get approved?

Lloyd Yates: So we’re in the middle of conversations. There’s been some debate about that mechanism. We think that mechanism is really good for customers. As we shut those coal plants down, that cost goes back to customers immediately. We’re in conversations with the various parties about how to make that work, I’m optimistic that we can do that because I think that’s good for customers, and passing that cost back immediately. But I think those are an integral part of the settlement discussions right now.

Shahriar Pourreza: Got it. Okay. Perfect. And then just real quick, lastly, Donald, I know you sort of mentioned equity, but you threw out the word block in there as well, so just not ATM, but you also mentioned the word block post ’25. Is there any reason to believe like you would come to market with block equity, especially post this minority sale?

Donald Brown: No. And let me correct. It certainly didn’t say block. Our financing plan has not changed. It still is that we expect to enter into ATM post 2025. And that’s really to keep us in that 14% to 16%, FFO to debt range, but no blocks planned are expected at this point.

Operator: The next question is from Durgesh Chopra with Evercore ISI.

Durgesh Chopra: Team, good morning. Can you hear me okay?

Lloyd Yates: We hear you fine.

Durgesh Chopra: Okay. Perfect. Sorry. just Donald, thank you for sharing details on the deferred fuel and impact to your credit metrics. But maybe can you talk about the customer bill implications? And when could we sort of see the lower gas prices flow through your customer bills? And I know it’s different states are different, but just at a very high level, can you discuss that?

Donald Brown : Yes. No, great question. Certainly, seeing favorable natural gas prices, including today, we’re seeing NYMEX March price around $2 or below $2. So that’s great impact for our customers. As we look at it, we’re expecting probably a 20% to 25% decrease in customer bills, ’23 versus 2022. So really good outcome.

Durgesh Chopra: That’s super helpful. And then just maybe I just want to switch gears and see if you could give us any additional color on the updated, this is Slide 9 now. I’m on the near-term opportunities on CapEx. Any way that you can size the overall CapEx dollars we are talking about here in terms of your overall capital plan. How should we think about that? Any color you can share there, whether it’s increased ownership of the generation assets, AMI, et cetera, et cetera.

Lloyd Yates: Durgesh, we realize — I mean those opportunities are out there. We don’t have a size for those opportunities yet. I think as we get closer to those opportunities and know more about pre-1985 plastic pipe or MISO issue in new transmission opportunities, we’ll be able to size it then. But as soon as we can size it, we’ll let you guys know about it.

Durgesh Chopra: I understand it. And maybe just 1 quick 1 real quick. On the timing itself, Shawn, at Analyst Day last year, you guys might have suggested a mid-year announcement on the assets, is that still — on NIPSCO sale, is that still on track? Or we’ve seen some of your peers were trying to sell some renewable assets shift their time line?

Shawn Anderson: Yes. Thanks for the question. The time line has not changed. We still expect to be able to complete this in 2023. And as you can imagine, we’re still early days in the process itself. So we’ll be able to provide updates along the way when it’s appropriate to do so.

Operator: The next question is from Travis Miller with Morningstar.

Travis Miller: Just following up on that, the idea of the timing on the sale. I imagine you have to get the rate case either settled or concluded before that sale. Is that correct? Is there — is that a gating factor essentially for making that financing move?

Shawn Anderson: These are really 2 separate processes, and we believe both can proceed as we’ve laid out today.

Travis Miller: Okay. So not necessarily conclusion on the rate case before you could have a transaction done?

Shawn Anderson: That’s correct.

Travis Miller: Okay. And then separately, obviously, some good moves on the gas side. What’s your thought in terms of cadence, given the different regulatory mechanisms you have in the CapEx plan in terms of general rate cases or base rate cases at the gas businesses, what’s your sense on timing of that going forward.

Donald Brown: Yes, great question. If you look at our history, we’re typically in every 2 to 3 years in most jurisdictions. We’re actually coming off a pretty heavy year last year where we were in 5 rate cases, Ohio, Indiana, new rates in 2022, Virginia, Kentucky and Maryland. So last year was a pretty heavy year. But if you look at our history, Maryland’s almost every year, PA is almost every year, and then other states typically every 2 to 3 years.

Travis Miller: Okay. And that cadence to continue, roughly?

Donald Brown: Yes. We’re evaluating Pennsylvania, but I’d say otherwise, it’s every 2 to 3 years on the other states. .

Operator: The next question is from Ryan Levine with Citi.

Ryan Levine: In your prepared remarks, if I heard correctly, there was some mention of revised contracts for select renewable projects. Can you impact the materiality of these changes and what remaining risks you see from a time line execution standpoint?

Shawn Anderson: Yes. Thanks, Ryan. Appreciate the question. As you can imagine, we’re still working through the process. So we still consider these contract amendments confidential. But the 1 thing I’d say is that we will work forward with our partners in the appropriate filings with the commission to move these forward. We’re talking about the 4 remaining projects that are not substantively under construction, apart from those that are already in service. The market seeing increases in cost in the 10% to 25% range. What we’ve seen is consistent with that. And we’ve also been able to benchmark that off of the most recent RFP in August of 2022. So we feel good about the value proposition that these projects still provide to our customers in Northwest Indiana, and we’ll proceed accordingly.

Ryan Levine: And in terms of the time line on Slide 12, you highlighted potential changes to kind of the cadence around execution. Are those amendments reflective of future potential changes in time line? Or could you see further adjustments if it’s time lines slow?

Shawn Anderson: No, great question. Let me clarify. The contract amendments that were made are to support the time lines that we disclosed in 2022 and support the time lines that you see on that slide. which placed those remaining projects in service in ’24 and ’25.

Ryan Levine: Okay. And then 1 follow-up on the NIPSCO sale process, have betting rooms been formed? And have you seen any initial rounds of bids, any color you could share around how early in the process you may be?

Shawn Anderson: Yes. Unfortunately, there isn’t additional color I can offer at this time. We’re focused on advancing the process, and we’ll just have to come back with updates around these topics when it’s appropriate to do so.

Operator: The next question is from Richard Sunderland with JPMorgan.

Richard Sunderland : I joined late, so apologies if I missed this earlier. Just curious, what are you seeing on O&M trends coming out of 4Q relative to what you discussed this fall at Analyst Day. And curious if there are any moving pieces here relative to the latest 2023 outlook versus initial.

Lloyd Yates: Richard, this is Lloyd. First of all, I would say we’re on track for flat O&M year-over-year. And I’d like to characterize it, we are really developing our O&M muscle. We have something going on at the company called Project Apollo we have outlined various processes and projects that we have teams working on to target doing things safer, better, more efficiently and for lower cost, and we’re on track to achieve those.

Operator: The next question is from Julien Dumoulin-Smith with Bank of America.

Julien Dumoulin-Smith: So just sticking with Richard’s question, cost reduction seems to be a focus in the narrative with NIPSCO in the case. How do you think about effectively settling that issue here and how that marries up with the time line that you’ve articulated here with Project Apollo and wider O&M savings. Again, I’m not trying to ask you to negotiate the settlement on the call here per se, but how does that line up and especially vis-a-vis time line here with some of these efforts that you have underway, you talked about holding it flat for this year in particular. And then I suppose related question following up on the earlier 1 but from Nick is, if you’re looking at the next couple of weeks, potentially trying to sell this out, is there anything that you really need to get out there in the record in a hearing context? Or is it all sufficiently hashed out at this point as far as you’re concerned?

Lloyd Yates: So let me handle both those questions. Starting with the O&M and the time line. I think that we try to align those with our rate cases, but I think — our strategy here is any O&M that we can take out of the system that we can lean out of the system on any given day is better for our customers. And our O&M is about keeping customer — keeping our customers or keeping our rates affordable. So we’re not necessarily trying to line that up with rate cases, if it lines up signed, if not I think we’re okay too. Ultimately, we’re going to this coming out of the system. It’s going to be good for customers, and we’re going to continue down that path and not try to be cute there. I think when you look at the NIPSCO rate case and if you look at the intervenor testimony, what you see is there’s no argument over the capital investments.

All the capital investments, the renewable — primarily renewable projects in Titus, all that’s been agreed to. So we’re debating over O&M and ROE, which I think is really positive. And typically, when you have that — when those 2 limited subject matters, you can typically come to some reasonable settlement on those 2 issues. So I think we’re in a good spot with respect to the NIPSCO rate case, with respect to the O&M, and I’m optimistic the next 2 weeks are going to pan out real well for all involved stakeholders.

Julien Dumoulin-Smith: Got it. Excellent. And then just going back to the related question on the minority asset sale and the equity that Shawn brought up. So given the indications that you see today, I mean I suppose the question is, do you have equity needs in that longer-term period? How do you think about the early indications in the process relative to the beyond 25 balance sheet needs. Again, clearly, you’re trying to take out a lot of those cumulative capital needs here with this asset sale. The question is to what extent can you more meaningfully address it?

Donald Brown: Yes. I’d say our financing plan hasn’t changed. And as Shawn stated that the process is going as expected. When we get more details that we can communicate on the sale transaction, we’ll do that. But no change to the financing plan at this point.

Julien Dumoulin-Smith: Excellent. And just lastly here, I heard that you said you reaffirmed the time lines for the various, I believe, the 4 solar projects solar storage project. Just on that point on time line, again, obviously, you’re paying to have these on a timely manner. Do you see them as broadly on track, given some of the interconnection issues and given some of the deliverability, I think specifically in the interconnect side here, just curious on your level of covenants on that front.

Shawn Anderson : Yes. As we shared, our projects are all continuing on schedule with the revised in-service dates we updated in 2022, Dunns Bridge 1 and Crossroad Solar specifically at the stage of construction, we’re each are receiving panels on a regular basis to support the in-service dates within the first half of this year. And we’re continuing to work in good faith with our developer partners and all the remaining €“ all the other remaining projects to advance accordingly.

Operator: There are no further questions at this time. I’ll turn it over to Lloyd Yates, Chief Executive Officer, for any closing remarks.

Lloyd Yates: So thank you for your questions. And as we close, I want to reiterate what Donald and I have said about our confidence, progress and focus. Our confidence in our strategic plan and our strong progress in delivering on our commitments. Our progress on our regulatory initiatives, including pursuing a potential settlement in the NIPSCO electric rate case, and our focus on realizing the upside potential beyond our existing plan. I believe the future is bright for NiSource and we’re confident in the execution of the 5-year plan we had unveiled at Investor Day. We appreciate you joining us this morning, and I hope all of you stay safe. Thank you.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.