NiSource Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed February 21, 2024. This filing reports full-year results, not standalone fourth-quarter results. NiSource is a regulated gas and electric utility holding company serving approximately 3.8 million customers in six states.
Business context
Results are generated principally by Gas Distribution Operations and Electric Operations. On December 31, 2023, NiSource completed a transaction in which Blackstone contributed $2.16 billion for a 19.9% interest in NIPSCO Holdings II; NiSource retained an 80.1% controlling interest.
Key financial results
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Operating revenue | $5.505 billion | $5.851 billion | Down $345.2 million |
| Operating income | $1.296 billion | $1.266 billion | Up $29.7 million |
| Operating margin | 23.5% | 21.6% | Up about 1.9 percentage points |
| Net income available to common shareholders | $661.7 million | $749.0 million | Down $87.3 million |
| Diluted EPS | $1.48 | $1.70 | Down $0.22 |
| Net cash from operating activities | $1.935 billion | $1.409 billion | Up $525.7 million |
Operating income improved despite lower revenue, while common-shareholder earnings and diluted EPS declined. Management attributed the earnings decrease principally to warmer weather, the absence of a 2022 insurance settlement related to the Greater Lawrence incident, and higher interest expense, partly offset by lower tax expense and the effect of noncontrolling interests. The filing does not provide a standalone fourth-quarter financial summary in the supplied text.
Gas segment operating income was $901.9 million, down $13.9 million; warmer weather reduced gas throughput. Electric segment operating income was $378.7 million, up $16.3 million; lower cost of energy was largely passed through to customers, while new rates supported results. These segments reported operating revenues of $3.733 billion and $1.785 billion, respectively.
Cash flow, investment, debt and liquidity
- Cash used for investing was $3.572 billion, including $2.646 billion of capital expenditures and $761.4 million of milestone and final payments to renewable project developers. Financing provided $3.842 billion, including the NIPSCO minority-interest contribution. Year-end cash and cash equivalents were $2.245 billion.
- Year-end long-term debt was $11.079 billion and short-term borrowings were $3.049 billion; together these represent approximately $14.128 billion of indebtedness. Debt-to-capitalization was 58.2%, below the 70% revolving-credit covenant limit.
- Reported net available liquidity was $3.071 billion at year-end. NiSource had investment-grade ratings with stable outlooks from S&P, Moody’s and Fitch.
- Interest expense, net rose to $489.6 million from $361.6 million, reflecting higher short- and long-term borrowing costs. A 100-basis-point change in short-term rates would have changed 2023 interest expense by an estimated $18.9 million.
- NiSource expects approximately $16.0 billion of capital investment during 2024–2028, including an estimated $1.7 billion for renewable generation. Its 2024 capital-investment estimate is $3.3–$3.5 billion.
Material changes, outlook and notable matters
- Revenue fell 5.9% year over year, while operating income rose 2.3%. Gas heating degree days were 14% below normal; electric cooling degree days were 15% below normal. Lower energy commodity costs reduced reported revenue and expense because most such costs are passed through to customers.
- NiSource invested $1.5 billion in infrastructure modernization in 2023, including replacement of 339 miles of gas distribution main and service lines. It added 22,000 customers across its gas and electric businesses.
- The company plans to retire the remaining two Schahfer coal units by the end of 2025 and remaining coal-fired generation, including Michigan City, by the end of 2028, subject to required approvals and reliability considerations. Most remaining renewable projects are expected to enter service in 2024–2025; supply-chain, labor, cost and permitting challenges could affect timing and economics.
- NiSource has a goal of net-zero Scope 1 and 2 greenhouse-gas emissions by 2040 and stated it remained on track for interim targets. Management cautioned that achievement depends on supportive policy, technology development and project execution.
- A NIPSCO Gas rate case filed in October 2023 requested $161.9 million of incremental revenue; management expected a decision and initial new rates in 2024. Regulatory decisions affect the timing and extent of cost recovery and returns.
- On January 3, 2024, NiSource terminated and repaid $1.0 billion and $650 million term credit agreements. On February 9, 2024, it announced redemption of Series B and B-1 preferred shares on March 15, 2024.
- In January 2024, FERC approved a settlement resolving an investigation involving a NIPSCO industrial customer’s MISO demand-response activity. NIPSCO is to disgorge $7.7 million, to be returned to customers; the filing says NIPSCO had recovered more than half of its costs.
- Environmental remediation liabilities were $80.0 million at year-end. The filing also describes uncertainty around coal-ash pond compliance and potential environmental-rule changes. NiSource reported no material cybersecurity incident during the year and received unqualified audit opinions on its financial statements and internal control over financial reporting.
Guidance: The filing provides capital-investment expectations but no explicit earnings or EPS guidance in the supplied text.
Key investor verification points
- Review the NIPSCO minority-interest transaction’s governance, distributions, additional Blackstone capital commitment and effect on cash available to NiSource.
- Track the NIPSCO Gas rate-case outcome and whether requested investment and operating costs are recovered in rates.
- Verify renewable project schedules, final costs, approvals, customer-rate recovery and replacement capacity ahead of coal retirements.
- Monitor debt maturities, borrowing costs, liquidity after the January 2024 term-loan repayments, and the preferred-stock redemption.
- Assess environmental, pipeline-safety and regulatory exposures, including coal-ash obligations and the range of potential MGP remediation costs.
- Compare future earnings with 2023’s weather effects, prior-year insurance settlement, and higher interest expense; confirm whether operating cash flow supports the planned investment program and dividends.