NiSource's Q3 2025: Contradictions Emerge on Data Center Demand, GenCo Process, and Risk Management

Date of Call: October 29, 2025

Financials Results

• EPS: $0.19 adjusted EPS in Q3, compared to $0.20 in Q3 2024; year-to-date adjusted EPS $1.38; reaffirming upper half of 2025 guidance $1.85–$1.89 and initiating 2026 consolidated guidance $2.02–$2.07.

Guidance:

• Reaffirming upper half of 2025 adjusted EPS guidance of $1.85–$1.89; initiating 2026 consolidated adjusted EPS guidance of $2.02–$2.07 (including $0.01–$0.02 from Genco).
• Base-plan adjusted EPS growth of 6%–8% annually through 2030; consolidated adjusted EPS CAGR of 8%–9% through 2033 (Genco contribution $0.25–$0.45 by 2033).
• Five-year base CapEx refreshed to $21B (increase of $1.6B); consolidated 5-year CapEx of ~$28B including ~$7B for Genco.
• Maintain 14%–16% FFO/debt target and expect $300M–$500M annual ATM equity issuance.

Business Commentary:

* Earnings Performance and Growth Strategy: - NiSource reported adjusted EPS of $0.19 for Q3, bringing the year-to-date total to $1.38. - The company reaffirmed the upper half of its 2025 adjusted EPS guidance range at $1.85 to $1.89 and announced 2026 consolidated EPS guidance of $2.02 to $2.07. - Growth strategies include the execution of a breakthrough data center contract with an investment-grade customer and the introduction of an 8% to 9% adjusted EPS CAGR through 2033. - This alignment is supported by a significant investment of $7 billion in Genco, which is expected to drive shareholder value and support the economic transition.

• Capital Expenditure and Infrastructure Development:
• NiSource's capital expenditures include a $21 billion base plan supporting its regulated utility operations and $7 billion for Genco, totaling $28 billion over the next five years.
• The company is advancing large-scale customer transformation initiatives and infrastructure projects, including a significant investment in data center growth and traditional utility operations.
• NiSource is investing in customer affordability through AI efficiency initiatives, with AI work management intelligence delivering sustained fuel productivity uplifts of over 20%.

• The investments are aimed at enhancing grid modernization, operational excellence, and economic development opportunities.

• Data Center Agreement and Strategic Pipeline:

• NiSource executed a data center contract with an investment-grade customer, involving the construction of 2 combined cycle gas turbine power plants and 400 megawatts of battery storage capacity.
• The agreement is backed by a $6 billion to $7 billion investment for infrastructure, ensuring customer benefits, regulatory compliance, and community economic development.

• The company's strategic pipeline includes negotiations for an additional 1 to 3 gigawatts of projects, with a long-term vision to support the economic transition and sustainable energy future.

• Regulatory and Economic Initiatives:

• NiSource is advancing its regulatory agenda, including the approval of the Genco model in Indiana and full ownership of the Templeton Wind asset.
• The company is promoting economic development through initiatives like Columbia Gas Virginia's partnership with Eli Lilly, which is estimated to create 650 permanent jobs and 1,800 construction jobs.
• NiSource's regulatory strategy aims to protect existing customer benefits while serving new large load customers with speed and flexibility, enhancing shareholder value and community prosperity.

Sentiment Analysis:

Overall Tone: Positive

• Management reiterated: "we are reaffirming the upper half of our 2025 adjusted EPS guidance of $1.85 to $1.89," introduced "8% to 9% adjusted EPS CAGR for the consolidated business through 2033," and announced a data center contract representing "approximately $6 billion to $7 billion in capital investment," signaling growth confidence.

Q&A:

• Question from Shahriar Pourreza (Wells Fargo): Can you speak to the quality of the customer behind the agreement (hyperscaler vs co-locator) and what the broader pipeline (1–3 GW) could mean for CAGR?
  Response: It's a very large investment-grade data center customer (~2.4 GW load for the announced deal); the transaction is a replicable blueprint to scale the pipeline and drive the projected CAGR upside.

• Question from Shahriar Pourreza (Wells Fargo): How should we think about the credit/downgrade threshold as NiSource becomes more integrated with Genco?
  Response: We've engaged rating agencies; contract protections mirror the base business, guidance targets 14%–16% FFO/debt, and the downgrade threshold is 13%, so no change is expected.

• Question from Nicholas Campanella (Barclays): What drives the $0.25–$0.45 contribution range and is the 1–3 GW in negotiations incremental to the announced 3 GW?
  Response: The $0.25–$0.45 range reflects the announced customer (and could reach the high end with additional customers); the 1–3 GW negotiation pipeline is incremental and could outperform the top end if realized.

• Question from Nicholas Campanella (Barclays): With Blackstone committing $1.5B, how should we think about NiSource's funding contribution to Genco and the capital structure?
  Response: Guidance already incorporates minority equity and full financing; the $300M–$500M annual ATM equity in guidance supports the consolidated $28B CapEx plan.

• Question from Julien Dumoulin-Smith (Jefferies): Is the $0.25–$0.45 driven solely by the first $6–7B of CapEx and how should we frame sensitivity to additional GW?
  Response: The projected $6–7B CapEx supports Genco and the announced customer; the $0.25–$0.45 is achievable with the announced customer and additional customers would lift the high end but require incremental capital.

• Question from Julien Dumoulin-Smith (Jefferies): How confident are you in executing the full 1–3 GW pipeline and timing sensitivity?
  Response: High confidence—regulatory approval, EPC partnership, secured long‑lead equipment and execution capability provide speed-to-market and strong executability for additional GW.

• Question from Elias Jossen (J.P. Morgan): What learnings/advantages from the initial data center contract help you execute additional deals?
  Response: The deal builds a scalable platform—regulatory framework, EPC relationships, equipment lead-time management and execution experience that improves ability to commercialize further opportunities.

• Question from William Appicelli (UBS): What are the return profile and capital structure assumptions inside Genco?
  Response: Cannot disclose exact ROE, but returns are expected to exceed NIPSCO's regulated ROR; Genco will be capitalized to preserve 14%–16% FFO/debt, support construction cash needs, and minimize dilution.

• Question from William Appicelli (UBS): Timing — most CapEx is spent before full earnings ramp; how should we think about that differential?
  Response: Majority of CapEx occurs between 2025–2030 with customer ramp completing around 2032; recovery follows construction, so earnings strengthen as projects energize and customers ramp.

• Question from Steven Fleishman (Wolfe Research): Does the $7B Genco CapEx cover the path to the 2033 contribution range and how does equity need look?
  Response: $7B supports development through 2032 and is sufficient to reach the $0.25–$0.45 by 2033 for the announced customer; accelerated construction or extra customers create upside but would require incremental capital.

• Question from Nicholas Amicucci (Evercore): Is the Quanta EPC contract strictly for the initial scope or scalable for additional projects?
  Response: Initial EPC covers the two CCGTs and 400 MW of batteries, and the Quanta partnership is structured to scale and accelerate execution for subsequent projects.

• Question from Nicholas Amicucci (Evercore): On affordability — should we expect incremental customer-driven savings to be flowed back to consumers as load grows?
  Response: Yes; using existing transmission paid by retail customers enables flow-back of savings to retail customers as new large load customers utilize the grid.

• Question from Travis Miller (Morningstar): Is there cash inflow from the customer before full ramp and can financing be short‑term to cover CapEx?
  Response: The contract is structured to provide cash flow during construction with some inflows before full ramp; financing mix and timing will be optimized to minimize long‑term cost.

• Question from Unknown Analyst (Ladenburg/Paul Fremont): Is the $7B spent at Genco or some at NIPSCO—how is spending allocated?
  Response: Spending will occur across Genco and utility entities; majority is generation-related, but the company will segment reporting and cannot disclose exact splits now.

• Question from Christopher Jeffrey (Mizuho): Why retain Blackstone at ~20% rather than keep 100% ownership?
  Response: Blackstone reduces NiSource's financing needs, lowers cost of capital, provides $1.5B equity and long-term partnership and increases flexibility and certainty for funding the Genco pipeline.

• Question from Christopher Jeffrey (Mizuho): What explains the 2029 CapEx concentration in the updated base plan?
  Response: Plan profile: ~50% natural gas, ~25% NIPSCO electric, ~25% Genco; 2029 ramps for DLOL compliance, PHMSA work and MISO long-range transmission, driving larger spend that year.

Contradiction Point 1

Data Center Demand and Contract Structure

It involves differing statements about the nature and size of data center demand in NiSource's territory and the structure of contracts with data center customers, which could impact investor perceptions of growth opportunities and financial stability.

Can you confirm the customer type (true hyperscaler or co-locator) and assess the 1-3 gigawatt pipeline in negotiations? - Shahriar Pourreza (Wells Fargo)

2025Q3: This is a very large investment-grade data center customer served via NIPSCO's transmission network. - Lloyd Yates(CEO)

Considering the Columbus metro area developments, how are you evaluating the data center opportunity in NIPSCO’s service area? Is the load forecast still accurate, and what is the potential scale of the opportunity? - Julien Patrick Dumoulin-Smith (Jefferies LLC, Research Division)

2025Q2: There is a significant demand for data centers in Northern Indiana, which hasn't decreased. - Lloyd M. Yates(CEO)

Contradiction Point 2

GenCo Process and Counterparty Discussions

It pertains to the timeline and progress of the GenCo process and counterparty discussions, which are crucial for understanding NiSource's strategic direction and execution capabilities.

Can you discuss the downgrade threshold under the Genco strategy? - Shawn Anderson (NiSource)

2025Q3: NiSource expects an order by the third quarter but continues ongoing discussions with counterparties, focused on meeting the four pillars for these opportunities. - Lloyd M. Yates(CEO)

What is the timeline for data center loads and any examples of concrete transactions? - Julien Patrick Dumoulin-Smith (Jefferies LLC, Research Division)

2025Q2: The GenCo declination process and counterparty discussions are separate. NiSource continues working with counterparties while the GenCo process progresses. - Lloyd M. Yates(CEO)

Contradiction Point 3

Data Center Customer Type

It directly impacts the perceived quality of the customer and the potential financial impact on the company, affecting investor expectations and the valuation of the company.

Is the customer a true hyperscaler or a co-locator? - Shahriar Pourreza (Wells Fargo)

2025Q3: This is a very large investment-grade data center customer served via NIPSCO's transmission network. - Lloyd Yates(CEO)

What is the status of large loan counterparty engagement? - Richard Sunderland (JPMorgan)

2025Q1: These are large load counterparties who are actively investing in data centers. - Lloyd Yates(CEO)

Contradiction Point 4

Special Contract Announcement and Genco Filing

It involves the timeline and conditions for announcing special contracts and the Genco filing process, which are critical for strategic planning and investor communication.

Is the customer under the agreement a true hyperscaler or a co-locator? - Shahriar Pourreza (Wells Fargo)

2025Q3: We've unlocked a new business model with the Genco declination. - Lloyd Yates(CEO)

Can you clarify the Genco filing process and whether a deal can be announced prior to the outcome? - Shar Pourreza (Guggenheim Partners)

2025Q1: We can announce a special contract without the Genco completion. - Michael Luhrs(CRO)

Contradiction Point 5

Genco Risk Management and Downgrade Threshold

It involves differing opinions on the risk management and financial stability of the Genco strategy, which could impact the company's credit rating and financial health.

Can you explain the downgrade threshold regarding the Genco strategy? - Shawn Anderson (NiSource)

2025Q3: We engage with rating agencies on Genco's risk management provisions, which provide protections similar to the base business. The current guidance for FFO to debt is 14% to 16%, and the downgrade threshold is 13%. Strengthening cash flow supports this trend. - Shawn Anderson(CFO)

Can you discuss the risk-sharing aspects in the GENCO filing, rate-making implications, and the timing of commercial arrangements? - Julien Dumoulin-Smith (Jefferies)

2024Q4: Our GENCO filing sets up a regulated, customer-focused entity to protect existing customers and maintain NIPSCO's financial integrity. - Michael Luhrs(CMO)