NiSource (NI) 1 Aug 182018 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to NiSource Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

As a reminder, today's conference is being recorded. And I'd like to turn the call to Mr. Investor President, Vice Hulen, Relations. Randy

You may begin.

Victor, the NiSource you, and call. good to welcome and everyone, second morning, Thank quarter investor XXXX

Joining of The our and Hamrock, Brown, Joe NiSource update financial is me on Officer; the the well today Donald second financing as for and an quarter to Chief review drivers Chief as of plans. operations, purpose Executive Officer. growth performance today's XXXX call Financial are provide

questions. open the call Following our your to presentation, we'll up

this be website that nisource.com. During will are available slides we to supplemental call, referring on at our

actual in to turning those and the quick MD&A Before the risks results conference concerning such and looking. just call during to made from are Joe over materially our the filings. of call of uncertainties sections Donald, risks Information periodic cause is some statements in be uncertainties forward to These expressed and differ reminder; SEC this will a Risk statements subject that included the statements. could Factors and

addition, recording relate made to on some this measures. statements non-GAAP of In the

and information measure directly now including slides I'd turn additional full With to nisource.com. information, on over most available Joe. of to all refer schedules reconciliation the at comparable financial the the and segment measures, GAAP out that supplemental of our additional to like these For please a way, the call

Thank everyone. NiSource's us. joining good strong through for and quarter. you the continued Randy, second morning, Thanks, momentum

that call, discussed outstanding. focus common They mid-July, long-term sheet. credit have refinancing followed We tax and on growth our on combined response deliver included completed our plan. executed equity proactive customer balance our in regulatory $XXX preferred arena our further block on team tax the included These we initiatives strengthened capital quarter improved our and $XXX debt federal and pace and $XXX cost of believe and long-term five-year notes issuing enhanced metrics framework reform. the the which cash debt issuances earnings, on $XXX business and notes of in that in resolved acquire by first new to these our took of sustainability Our financing to investments with million steps the we and the offering steps management, million investments on million the higher proceeds a in commitments. used coupon And we equity to in stock our million remain with impacts strategy, credit

which in outlines now thus Let's our far some key X, XXXX. turn slide accomplishments to of

second versus non-GAAP XXXX. which for earnings operating quarter Our operating net per $X.XX of XXXX, plan achieving to $X.XX keeps share us in were right earnings $X.XX in the on to net share $X.XX guidance per our

invest regulated also our We utility to plan billion remain $X.X on infrastructure $X.X in XXXX. in to billion

case our rate settlement We've continued On order awaiting Indiana, the a we final our case. just to a we're on discussions gas yesterday settlement regulatory in rate our rate Massachusetts' filed case. also in base advance in and settlement front, Maryland

our We and City for at pending modernization electric Indiana and transmission generating projects forward footprint our business, and long-term execute into Schahfer a our continue upgrades programs stations. In our on placed program are moving extensions major across applications Maryland. and to Michigan two in environmental our we gas service have

update. approval long-term In execute continue modernization of electric received and addition, program our to have latest we our and system on transmission tracker distribution modernization

years to Resource robust response proposals Integrated come. process for our with needs to for customers' meet Indiana request diverse should provide continues a in our electricity stakeholder to Our Plan that options

IRP an year's target end next to and generation complete with continue together submission by early by the regulatory coming We strategy year.

financing our plan performance more Donald, who and to over financial discuss call the detail. turn to like in I'd updates Now, will Donald?

good everyone. and Joe, morning, Thanks,

Through implementation, solid million by or operating $XX half or and our of per in same $X.XX of consolidated $XX biggest first trackers. net Due driver On us results $X.XX of impacts to per million to is and investment, period continues approximately putting of the earnings the can our of right tax long-term track XXXX, the earnings to XXXX. our quarter timing million be approximately impact performance are share. supported for non-GAAP net were compare. XXXX deliver the with see on the established statement you'll financial which operating $X.XX be slide to our on per X, outcome approximately in share our always, $X.XX regulatory year-over-year our to federal share share, per reform infrastructure infrastructure commitment financial difficult compared $X.XX second $XXX As or modernization guidance the

with would I expenses, this decrease quarters, XXXX. driven million overall in maintenance management and in trend $XX continue activities. highlight expect maintenance to which and will our by However, decreased operating expenses like through I O&M part compared generation the the of our expense two flat approximately commitment next to exceed

business Let's results our non-GAAP financial segments. turn the to for now

million slide investment at primarily million segment million quarter revenue of Gas X, a period our by impact tax approximately of about excluding $XX operating Operations about were earnings same the the XXXX. regulated from increased earnings the of up Looking operating reform in $XX year ago, earnings had of $X.X driven revenues. infrastructure for with compared Distribution Operating

for segment, earnings a Operations of million for the of covered decrease period X, same quarter, on million $X about operating of Electric about the reported slide Our $XX XXXX.

industrial revenue increased to higher slightly regulated infrastructure $X to expenses, XXXX. reform, earnings is segment the revenues due to by investment primarily impact million offset and O&M operating excluding However, by compared approximately lower tax usage. increase reduced This partially electric

annual earlier, our our This down XXXX XXXX. expect enhance expenses our strengthen progress O&M highlighted approximately X% in our and now is we're reflect versus value sustainability annual beginning we on and to managing to and culture the we maintenance efforts deliver and of long-term progress improvement for plan. that the transformational the to our expenses, customers will be continue continuous I operating making As continued

profile. and X, touch to turning to like briefly Now, slide our I'd on debt credit

our was XX XX billion, about billion $X.X the as was years our and long-term weighted our level credit $X.X covered is weighted securitizations. to debt which and long-term to like and position average million cash and approximately I'd mid-July, is our X.X%. about due details slides receivable of X balance lower about At completion transaction XX, average at accounts approximately rate would than and And note on $XXX of available XX. this of which long-term long-term turn facility I billion, debt in the additional was puts capacity the some and net of now balance the approximately current the consisting end maturity debt. available about financing was the debt on today June of interest debt $X actions, second we under our liquidity to Our the June make-whole maintained quarter, on $X.X of billion.

notes; As stock were $XXX a of proceeds outstanding million you acquire used initiated of in know, June, million. private issuing $XXX May transactions to approximately were long-term common and in which a tender And in five-year we included and stock million with of approximately proceeds these $XXX we And which debt the of preferred redemptions. sold offers completed million totaling shares million mid-July. $XXX placement certain XX of in refinancing through notes

an XXXX metrics call, with impacts activity $XX million put and address end and us our from our And Joe investments. growth credit annual to to cash year's and million financing start plan our debt XX% $XXX financing million these the on ATM to to from the program from by of track plan and the other $XX range financing our XXXX, of mentioned and employee it our our our This operations tax metric stock execution sheet. range profile XX% to strengthening is credit federal going to long-term forward and plan to beyond. XX% in purchase As strengthen of to programs. the and by back a of our expected reform, improving steps previous at the balance of This million credit fund includes $XXX improve funds enhance equity in

regulatory a infrastructure turn to who highlights. the I'll discuss back Now, will customer, investment call few and Joe,

Donald. you, Thank

our into to a in and we progress Before I'd operational updates, items couple regulatory to jump our other detailed that speak mention like areas.

recognized four our meeting pleased To team, we work and we've and best for communities. of are place stakeholders. another large strived all attract magazine best of point, as creating state-of-the-art value as to completing to we May, development serve be for and to the before, in provide to in prepared company announced our to and one As country. happy that needs were opened say center key more spring, our we are I've the employees, opportunities our communities When Forbes for top retain our Massachusetts well. the year, so this mentioned centers employers in our the we consecutive I'm employees and the all why third XXXX. I'm that customers recognized That's in they that the of customers employee training in the right training by To the

others in Virginia. The Ohio, are Pennsylvania and

XXXX latest by in expected in annual reliability. the on settlement program investments the operations second filed, extend Indiana, third $XX more quarter. million. a our early pipeline settlement supports remains quarter let's in approximately Now, continues measures pending If and approved infrastructure decision the before in remains XX. of The approximately million investments The decision in of to in Also in the third system previously tracker decision a the our as quarter Pennsylvania. fourth update to year. and approximately with $XXX in agreement approved programs highlights expected XXXX upgrades represents for expected third rate half our XXXX. the of is a slide of our continued case NIPSCO quarter base investments system base specific second to application in made is of safety case on from this rate Indiana, settlement $XXX expected has increase filing in XXXX. turn The and modernization million our some the other increase invested billion gas revenues Progress with pending covering in IURC, $X.XX the than through gas gas to since quarter. The gas

a in request to for tax replacement of in filing before In seeks continuing completed in application ordered the reform to capital continued reflects adjust underway Our system implementation about and filed legislation. XXXX. commission. upgrades our expenditure expected gas Pennsylvania and support to March Utility Ohio, fourth also quarter Public the natural a is is A pipelines. rider order distribution rates well audit Commission The program month. is A the be commission of expected of

a base procedural recovery on begin schedule the approximately infrastructure into Massachusetts, in went made in established. of modernization the operating in infrastructure in case general rates to infrastructure. attorney the our supports in under million regulatory us should request with upgrading be we The $XXX discussions federal effect completion recovery XXXX. settlement filed gas rate to costs associated of investments In distribution with capital on new progress mandates make current and we Following related our Ohio, May allowing audit, Also state to continue tracker, April. costs of and

of annual XXXX net recovery filed, rate of expected XXXX expected in decision investments the the on incremental our of Also revenues originally about XXXX. of infrastructure base proposal decision And case X Massachusetts, Gas As our finally, the million. million about the took end starting trackers. $XX of end May February. Maryland, $XX System A Enhancement commission by Plan, is by effect in new would increase by under rates is capital

settlement, issue Strategic million. filed a is extension in Commission considering our settlement covering our As increase one The approved, in or program Infrastructure but also earlier, is STRIDE, Enhancement Maryland and plan by which if noted our modernization expected approximately revenues five-year of we I the The $X.X agreement a this to is Development for case. yesterday annual application all, state.

Virginia Looking decided to a by Gas file Commission August and of the request State to with case Columbia has Virginia base rate XX. file the Corporation ahead, expects

let's Electric to XX. Operations on our turn Now, slide

to megawatts, XX for our XX,XXX access increasing generation system in and to The contained fuel proposals and serve RFP submitted Station NIPSCO's a access of Combustion expected of useful will constructively generation I including very assets, wind XX-mile for the into to develop primarily remaining capacity by year, May. base treatment of lower electricity long-term resource reviewed tax of integrated outlined were at kV XXXX. Reynolds-Topeka City capital options which transmission to together, portfolio a These underway response and the energy Unit completed IURC case the generation Bailly capacity of XX% of November cost projects which with will projects results details electric solar NIPSCO's than region-wide and process needs. Greentown-Reynolds long-term earlier, provide continues mentioned to and note a customers. reform Michigan generation XXXX end before to June, recovery on and well comes investment. December XXXX, Residuals this also include benefits are we retire generating rate creating environmental XXX-mile, competitive life IRP in step deferred to next electric enhance the The were of XXX our stakeholder a Schahfer XX a this the the file and Units XXXX retired capacity The at The plan customers' are focus a improved meeting. planning submitted our be planning of long-term request of taxes customers. advance. balanced our develop went million IRP As to These [XX-mile], end best line fully X as schedule would all additional Through (sic) results that end two these more Units and energy culminating costs. addressing Indiana recent replacement effort R.M. current XXXX in this as a is result are approved contain on an for the be Investments plan reliability, capacity Coal evaluate I X, a by process, we working robust XX of of expected Generating authorizing options. projects our settlement major environmental XXX-kV diverse serve $XXX upgrades the NIPSCO's service several XXXX, these the IRP, customers. to the we the meet electric electric to our Under facilities. to and and XXXX, totaling projects to on plans. is by to by last associated of The right to our model just IURC In coal-fired year. six-year XX best

on safety approximately execute made represents XXXX. of further The system May approximately through billion seven-year program modernization to our transmission May, request $X.XX infrastructure investments includes electric update million made improve infrastructure to continue designed and enhancements distribution electric IURC from be XXXX In expected through covering investments We XXXX. tracker reliability. to our $XX to electric November program, approved IURC-approved the our and which system in

XXXX which Just yesterday rates. an includes refund tax request reflecting we filed for base new the $XX our rate approximately customers million latest to period, January through federal May

to turn with leave questions, we Before I'd takeaways like to key you some your NiSource. about

provides team impacts sustains tax is initiatives regulatory plan, in our investment programs our a that growth commitments customers. of maintains managing way well all on and and of executing financial Our to reform the and savings our our

expect range to XXXX. We continue With non-GAAP to our to net and to continue in XXXX, grow billion of expect in through to share earnings we per by operating dividend plans, the capital X% to maintaining share earnings operating per to while annually ratings. deliver and our complete billion X% in to $X.X investment-grade investment $X.XX credit robust our both $X.X net investments $X.XX

and to provide our interest the long-term plan year, you your questions. all ongoing today we'll advanced heard We're early today, position by or XXXX. Thank With number for at those your NiSource. we electric As including have an be in in significant you've generation of other expected up initiatives now in business several and take in Victor? regulatory and participating significantly in Indiana a of jurisdictions. for to a support be wrapped updated place plus end proceedings of ready of to you in rate most look strategy cases our the

the comes Paul KeyBanc. our question first line And of from Ridzon from

You begin. may

morning? Joe, how are Donald, you this

well, Doing Paul. Good morning.

morning. Good

if XXXX, front. a the what then we implications Just down review you new are those think on just what retired? And post the couple given the X% questions about How now flat financings that? versus that should XXXX could for on O&M and versus on the the you're were trajectory coupons that are EPS

Yeah, Paul, sure.

that that's that, to as process relates we confident if our guidance than value, our on as to underway we're year beyond performance a to something So XXXX. it's better customer are not, for the in O&M efforts and end refer a early relative beyond. that specific we're flat drive it said, and to the on now, That little we're and affordability gear customers. for And as year, improvements trajectory here, update an that guide we right planning as improvements outlook especially XXXX the last look that toward of as

financing to ask the Let me to question. refer Donald

Hi, Paul.

refinance what the asked the I you think So the rate... were and new of coupons debt

the of savings interest kind relative here. Yes,

Yeah.

did, then So the rate look when between and stock, X.XX%. our five-year X.XX%. the and what of they when we perpetual weighted average you average notes about about interest XXXX XXXX, XXXX refinanced tax rate about you look an after interest new preferred tax and after at maturities the had the was in And at securities

So extent savings, that there because some to to get the year was of absolutely the notes same issued preferred we the last not but credit. equity as

And going just that back be this of sustainable? is we expect on can the some to O&M,

Absolutely. Absolutely.

too customer certainly to as think operations our efforts, corporate benefits. on see gas side. too to but as the much opportunities starting we're into certainly starting value opportunities and well future, are and I early through we electric the our to Joe's in to point, seeing guide it's But realize

much. very you Thank

Paul. you, Thank

And Lapides comes from of Goldman from our Michael Sachs. question line next the

You may begin.

of a my taking for question. Thanks guys. Hey, have I them. Actually couple

anticipated by may need rehash is the bit rate plan. (XX:XX) future under-earning return you anticipate NIPSCO an to you capital and possible. at the be being you little but what can much as that electric a investments case plan So therefore, this And for as not or make your reduce get you be in adequate might lag want in the future as now, sure

navigate Michael. the portfolio. issues, strategy the a Yeah. our number long-term a we the as life will of just also reliability of risks our important of IRP later assets. foundation noted, including generating dealing policy tax be of Really affordability, laid all reform, in is and an year, to relative Good as changes balance position morning, helps filed with us part to with implementation generation notice useful strategy for in tax yesterday to out IURC remaining the rates; that there it and this coal existing And in

specifically a under-earning as concern to. myriad of not you issues, So an alluded it's

And it. Or in Indiana, Do Got do the have thinking or submit via you self-build utility-owned electric question IRP one the utilities process? alternatives PPA? does you anything do be other IRP RFP and about to ones, process. part alternatives of as the contracted

those It's the CPC with for and in combination or follow really PPA capacity. of all it's likelihood, a would, outline, We some an outlook whether self-build of two. more the or a of type

it's all owned. XX-year plans bit terms prescriptive horizon in precise regarding including we So the we're for those of it's capacity contracted all at less of a less options But the of certainly the the we'll evaluate self-build whether of look or form as for. or planning

a the fleet some little state west Got Indiana to of or issue, in is kind resource simply has a retrofitting I in capacity of resource very the a due not your for or and qualification neighbors is and Illinois state supply Indiana movement it. that Indiana other when especially types in slower in territory, relative look Last service than capacity. the kind that the demand that think just maybe of I of and little Or time? as its about renewables meaning weaker of wind issue about generation. Is generation over one other on bit everyone's, places? you, to but kind just and of just to generating or Southern the solar a at thought But

above. it's a it's the and Yeah, question probably bit a great all of of

year. look the you're the going want sun wind where more the and blows you If frequently energy to cost profile, hours at to certainly the shines of more be

not always that only as can driver, drive So that's mandates RPS the well.

those of little So that the driver. it's being one to answer with factors a hard

or review the outside shared week the All what's up-close said, RFP both we a region. the get that as of could Indiana and ago. And available IRP the so in we process, did in part a a MISO just or of with why that's of those we stakeholders high at so level to that last results look an us week

think picture continue we're really we'll robust that the So a of I update to in that stakeholder IRP evaluate upcoming getting and meetings.

Much Joe. appreciate Got it. Thank you, it.

Thanks, day. a great Michael. Have

next line from our And the comes Suisse. of Weinstein Credit from Michael question

Suisse You Hi. (USA) morning, may Good - LLC Securities Credit begin. Michael Weinstein guys.

Michael. morning, Good

- Michael Securities morning. LLC Credit Weinstein Suisse Good Hey. (USA)

early IRP around you'll the going think was is when you filed, that, you So XXXX be what be ready? said to

expect (USA) will Weinstein - early LLC November; in we November? Suisse November. be be IRP it in Securities to Credit Michael

Weinstein LLC at - saying Suisse are to going are Day Investor you have about an quarter that first Michael talk you – early what Yes. Credit it for XXXX, planning or or the are And we yeah. (USA) Securities on point to

Yeah, date determined. to be

update We expect and Day an in to ideally. an Investor a to position first do the in long-range outlook sometime quarter our on be

that that process together the our visibility well and and in us we other planning of factors in after all that So January. – we're with that do will work our that as and clarity the greater in, planning process board IRP much as give comes

Securities Credit So, – expect. Weinstein what some be we maybe sometime kind do have (USA) LLC before to point or Michael to case is resolution if does by you the Would first in some expect of in you that Suisse that the quarter - rate resolved electric that?

No. No.

earlier, said matter the really I the case is set a to foundation. more rate of As policy

it expect. for se areas we what Securities thing LLC Is What's of reduction nice Credit is One guidance. cash One improvement, that Hey. on would that? flow to generation have ratio - it's a XX% the Suisse the of that that's key or is doesn't as question (USA) expected That'd XX% be side range major discussed to ratio, That or life. earlier, be something resolved to to The Okay. debt Michael is improving that, have, the XXXX, cost debt last adjusted to is XXXX. FFO Weinstein improve the that more else? the total us and but provide from savings remaining O&M is here. of per useful driver to not it

really earnings. our Yeah. It's

$X.X If a and drives our flows. to we're that you billion year think earnings cash billion about program, investing $X.X

And so, FFO our over time, improve metric going debt to to was anyway.

So we need program. to do in program. LLC significant - Okay. any get don't It really $XXX you. us equity Great. Weinstein million track our back other including to $XXX (USA) million does of necessarily the refinancing on just Securities ATM Suisse Michael through Credit Thank an

you, Thank Michael.

comes from Our Greg of Gordon next question from line ISI. Evercore

may begin. You

Good morning, Greg. actually for team. It's Durgesh on

morning. Good

Good morning. questions. I have two

does that The of me. and the to line revenue is an income for does and sort tax hit (XX:XX) quarter for was other was that in Just understand that one-time that go one EPS on First the expense? quarter-over-quarter charge Donald, booked, offsetting words, reserve the that that drivers a like bottom – Donald. or trying

Yeah.

the really started reserves in we So, revenue quarter. first the

about you jurisdictions between the did if and And to in the require most reserve rate and tariff so, – the there's XX% not jurisdictions difference think seven us our the XX%. of

more over throughout detail? happens But tax evens Randy, year and at out. to reform, versus it pre-tax year, tax course our impacted quarterly a When all how a rate you last of quarter-to-quarter is little give this lower of regarding some by bit impact you a year. the impact year. the want there that are on basis earnings look the year-over-year So the

Durgesh, on revenues taxes tax income your benefit impact you and based at your end bit your of can the in will And reform But the of a basis. variance. Basically, book the book based curve. on net a pre-tax revenue it Yeah. of you regulated of on smaller on be zero quarters, off it the year a the sometimes they curve, a throw converge,

So little timing. bit that we're of seeing a

give fact, half reform in only revenues. you're side, you on negative impact benefit of about if our tax it's tax the take, together regulated seeing, on of about the we that add that And flow slides, $XX million impact of income or In through. outlined

putting of on So little quarterly the it a is bit number. pressure

of to But where expect million should close zero? see. to million is versus $XX less more be the course we I throughout year difference the the $XX or that

That's right. Yes.

Correct.

we And where back see are be because get you period the not same. a tax then rates that on once into you'd the would difference XXXX,

Perfect. Thanks just sort for your the high then for long-term level of team. that. question And guidance

of that last CapEx the – the obviously you to have given your initiatives, hit you your and then long-term refinancing, equity, improvement that credit I plan, might that high ability So have the EPS growth in are sort X% where your reaffirmed stated the that so In believe, now you've call, you X% completed end. the range? to you the

So given where that chances you your are now, hitting range? of end high of the growth what are EPS long-term

changed. Yeah. Nothing has

base a to we've moving rate our through and for operating programs, and next early I earnings our able our initiatives, and be our that the top call. half we provide parts got information end of we But guidance cases regulatory then the we'll It's almost of the where of confidence full hit range reaffirm some programs. more can of at our that think year both it's range. did number too tracker to narrow range with the with

Thank Perfect. you.

Thanks, Durgesh.

comes next of from our the question from Wolfe line And Research. Peters David

begin. may You

maybe mute. we this Joe on to Your All at questions line no now the turn closing back right, have Hamrock, call for time. further remarks. like I'd to

participating your Take NiSource. day. forward talking of everybody you soon. in for thanks We and Victor, to support great a continued for look today to Thank care. to Have you, again and interest and

program in does This you today's Everyone for the participating Ladies may conclude all thank gentlemen, conference. and disconnect. have you and a day. great