NiSource Inc. (NI) Earnings

Management highlights

- Core Strategy and Portfolio Diversification: NYSource's strategy centers on delivering safe, reliable, affordable energy while creating long-term stakeholder value across six regulated utility jurisdictions, with diversified asset and regulatory exposure. The data center business via the GENCO/Genco platform operates as a differentiated growth platform projected to return $1.4 billion in customer savings over the life of current contracts, while supporting growing energy demand across service territories. - Safety and Operational Improvement: Safety is the company's top priority. Field teams responded effectively to multiple severe weather events in Q2 2026, an unusually active storm season. The company continues to harden distribution systems for resiliency, and leverages AI-powered tools (as part of Project Apollo, including speech analytics and storm response solutions) to improve decision-making, standardize work, and reduce operational waste. Over $40 million in ongoing cost optimization initiatives (process improvements, tech-enabled efficiencies) will lower long-term costs and customer rates, with benefits extending beyond 2026. - Regulatory Progress: The company secured approval of key infrastructure and safety tracker mechanisms in Ohio, and filed new rate cases in Virginia and Kentucky (expected to be decided in H1 2027) to support recovery of critical system modernization investments. Indiana's IURC approved the company's Amazon and Alphabet data center special contracts and associated power purchase agreements; the company recently filed an amendment to increase Amazon's contracted load by 400MW (already included in guidance) and expects a final order by November 2026. The Alphabet project is approved, on track to energize in summer 2026, with full load ramp by 2030. A recent IURC order on NIPSCO's natural gas modernization program encouraged continued investment while requiring clearer demonstration of individual project benefits. A third federal order requiring continued operation of the Shaper Coal Plant has prompted a FERC Section 205 filing to recover associated compliance costs, with a 60-day approval timeline. - Data Center Growth Pipeline: Current signed contracts total 4 gigawatts, with 3 gigawatts in active strategic negotiations, line of sight to an additional 2 gigawatts, and active assessment of expansion opportunities beyond the existing 9 gigawatt pipeline. The company only pursues opportunities that meet customer protection, commercial, and return requirements. - Affordability and Customer Savings: The company prioritizes customer affordability alongside investment. Existing data center agreements are projected to deliver $1.4 billion in total bill reductions for existing NIPSCO Electric customers over contract terms, equal to up to $124 annually per average residential customer, with benefits starting as early as Q4 2026. 2026 IURC residential electric bill data shows declining customer bills in Indiana, driven by renewable generation investments and associated cost efficiencies. Additional property tax reduction initiatives in Ohio and Indiana will deliver further customer savings. Recent large economic development projects in Virginia (over $1.7 billion planned investment, 1,300 new jobs) highlight the importance of reliable natural gas infrastructure for regional growth.

Guidance

- Management reaffirms 2026 consolidated adjusted EPS guidance range of $2.02 to $2.07 per share, with full-year earnings growth expected to be weighted toward the second half of 2026. - The annual base plan adjusted EPS growth target of 6% to 8% through 2030 is reaffirmed, as is the consolidated adjusted EPS compound annual growth rate target of 9% to 10% from 2026 through 2033. - The five-year capital investment outlook remains unchanged: $21 billion for base business investment, $2 billion in upside base business opportunities, and $7.6 billion in Genco capital investment for data center customers. - Capital plan rate-based growth targets are maintained: 8% to 10% base plan rate-based growth through 2030, and 9% to 11% consolidated rate-based growth from 2026 through 2033. - The company remains committed to maintaining FFO-to-debt of 14% to 16% annually under its five-year financing plan, supported by operating cash, balanced long-term debt, annual equity issuance of $400 to $600 million, and minority interest contributions.

Segment performance

The transcript does not provide segmented financial results with absolute values or revenue contribution percentages for NYSource's individual product or business segments. Only consolidated financial results are reported: Q2 2026 consolidated adjusted EPS of $0.16 (down from $0.22 in Q2 2025), and year-to-date consolidated adjusted EPS of $1.22 (up $0.03 from the same period in 2025).

Risks & headwinds

- Jurisdiction-specific regulatory changes and ongoing affordability discussions in Indiana create uncertainty around gas modernization investment recovery, requiring the company to demonstrate clearer project benefits to regulators and pursue alternative recovery pathways. - Higher-than-usual storm activity and elevated expenses to maintain workforce continuity during ongoing union negotiations offset revenue growth from new rates and recovery mechanisms in Q2 2026. - Federal mandates requiring continued operation of the Shaper Coal Plant create unexpected additional compliance cost exposure, though the company is pursuing regulatory recovery of these costs. - Growing large customer demand beyond the current 9 gigawatt data center pipeline requires advance planning for transmission, generation, land, zoning, and supply constraints, though management notes pre-planning mitigates these risks. - All forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from projections, as detailed in the company's periodic SEC filings.

Analyst Q&A

• Q: Following the latest IURC order on the NIPSCO gas modernization tracker (T-Disc), how does management view the outlook for tracker recovery and multi-year rate plan risk in Indiana, and will the order change rate case timing? /

  A: Management notes the order was not unexpected, and emphasizes it does not reflect a broader shift away from Indiana's constructive regulatory environment. The order encourages continued gas system investment but requires clearer demonstration of individual project benefits, which the company will provide moving forward. The order does not change planned rate case timing, and the company retains multiple pathways to recover investments via future rate cases or alternative recovery mechanisms.

• Q: What can be expected from the August 7 IURC technical conference focused on ROEs and tracker frameworks in Indiana, and when will the Genco segment begin to be separately reported? /

  A: Management expects the conference to be collaborative and balanced, aligned with existing Indiana legislation that contemplates reviews of multi-year rate planning and ROE risk allocation. Management confirms segment reporting for Genco will begin by the end of the 2026 fiscal year.

• Q: What is the level of alignment between Indiana governor's office objectives and NYSource's strategy, given ongoing political discussion around regulatory policy? /

  A: Management confirms broad alignment between the governor, stakeholders, and NYSource on core priorities: all parties agree that economic development is the key to long-term customer affordability in Indiana. The $1.4 billion in customer savings from current data center projects, plus thousands of new jobs generated by data center development, align with shared state objectives.

• Q: What does expanding opportunities beyond the 9 gigawatt data center pipeline entail, and does this signal existing pipeline constraints? /

  A: Management explains pre-planning for expansion beyond 9 gigawatts is standard practice to prepare for strong current market demand, and is not a sign of existing constraints. The company is evaluating all required inputs for expansion, including land, zoning, transmission, fuel supply, and equipment, to enable future pipeline growth while maintaining disciplined execution.