NiSource Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Unaudited results. NiSource is a regulated natural gas and electric utility holding company operating in six states, primarily through Gas Distribution Operations and Electric Operations.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Operating revenue | $1,027.4 | $1,089.5 | $4,083.4 | $4,146.0 |
| Operating income | $233.0 | $156.7 | $932.9 | $900.3 |
| Operating margin | 22.7% | 14.4% | 22.9% | 21.7% |
| Net income attributable to NiSource | $85.1 | $65.8 | $476.9 | $559.6 |
| Net income available to common shareholders | $77.0 | $52.0 | $436.1 | $518.2 |
| Diluted EPS | $0.17 | $0.12 | $0.98 | $1.18 |
| Net interest expense | $129.2 | $91.6 | $348.6 | $259.8 |
- Quarterly comparison: Revenue decreased $62.1 million, while operating income rose $76.3 million and common earnings rose $25.0 million. Lower energy costs largely reduce both revenue and expense; operating income benefited from regulatory rate increases and lower costs of energy. The quarter also had a lower effective tax rate than Q3 2022.
- Nine-month comparison: Revenue declined $62.6 million and common earnings fell $82.1 million. The prior-year period included a $105.0 million insurance settlement related to the Greater Lawrence Incident; higher interest expense and pension costs also weighed on results. Higher net revenues from rate initiatives partly offset these items.
- Cash flow, nine months: Operating cash flow was $1,535.9 million, investing cash outflow was $2,503.3 million, and financing cash inflow was $998.6 million. Capital expenditures were $1,885.6 million; payments to renewable project developers were $486.7 million.
- Debt and liquidity at September 30: Long-term debt was $11,011.3 million, current long-term debt $26.8 million, and short-term borrowings $2,219.9 million. Cash and cash equivalents were $56.0 million. Reported net available liquidity was $971.7 million, down from $1,565.6 million at year-end 2022. The debt-to-capitalization covenant ratio was 63.1%, against a 70.0% limit.
- Equity and dividends: NiSource redeemed all 400,000 Series A preferred shares in June for $400.0 million, plus a $6.2 million redemption premium. Q3 common dividends declared were $0.25 per share.
Material developments and outlook
- NiSource agreed to sell an indirect 19.9% interest in NIPSCO to a Blackstone Infrastructure Partners affiliate for $2.15 billion in cash, subject to adjustments and closing conditions. FERC approval was received October 19, 2023; the parties expected closing by year-end 2023. NiSource planned to use proceeds and future investor contributions to support NIPSCO investment, reduce debt, and fund the generation transition. Closing and expected benefits were not assured.
- Management projected 2023 capital investment of $3.3–$3.6 billion and approximately $16.0 billion over 2024–2028. Estimates are subject to review and may change.
- NiSource said its coal-to-cleaner-generation transition was underway: the remaining two R.M. Schahfer coal units were planned for retirement by the end of 2025, and Michigan City coal generation by the end of 2028, subject to required approvals. The company reported three wind and two solar projects in service, totaling about 1,269 MW; timing, costs, supply-chain constraints, permitting, and interconnection remain execution considerations.
- NIPSCO filed for approval of an approximately 400 MW natural-gas peaking unit in September 2023. Management also described a net-zero Scope 1 and Scope 2 emissions goal by 2040, dependent in part on supportive policy and technologies becoming feasible.
- After the quarter, an IURC clarification required a customer refund related to NIPSCO Electric rate implementation. NiSource reserved an estimated $12.4 million plus accrued interest.
- Interest rates, labor and materials costs, renewable project supply chains, severe weather, cybersecurity, regulatory outcomes, and environmental requirements are among the risks identified by management. The filing also discusses ongoing Greater Lawrence claims, an FERC investigation with estimated maximum NIPSCO disgorgement exposure of $7.7 million, and environmental remediation liabilities of $82.7 million.
Most important facts for investors to verify
- Whether the NIPSCO minority-interest sale closed, its final proceeds and adjustments, and how proceeds affected debt and capital funding.
- Progress against the 2023 and 2024–2028 capital plans, renewable project schedules and costs, and coal-retirement approvals.
- Debt balances, borrowing costs, available liquidity, and compliance with the 70.0% debt-to-capitalization covenant.
- The amount and timing of the NIPSCO Electric customer refund, and the outcome of the Greater Lawrence claims and FERC investigation.
- Whether rate recovery, regulatory decisions, supply availability, and project execution support the company’s investment and emissions plans.