NiSource's Regulatory Certainty and Data Center Disclosure Diverge in 2026 Q2 Earnings Call

Date of Call: Aug 5, 2026

Financials Results

• EPS: Q2 consolidated adjusted EPS was $0.16, compared with $0.22 for the same period last year. Year-to-date consolidated adjusted EPS is $1.22, an increase of $0.03 versus the same period last year.

Guidance:

• Reaffirmed 2026 adjusted EPS guidance range of $2.02 to $2.07 per share.
• Reaffirmed 6-8% compound annual growth rate (CAGR) for consolidated adjusted EPS through 2030.
• Reaffirmed 9-10% CAGR for consolidated adjusted EPS from 2026 through 2033.
• Capital investment plan supports base plan rate-based growth of 8-10% through 2030 and 9-11% from 2026 through 2033.
• Five-year financing plan aims to maintain FFO to debt ratio of 14-16% annually.

Business Commentary:

Financial Performance and Regulatory Recovery:

• NYSource reported a second quarter consolidated adjusted EPS of $0.16, compared with $0.22 for the same period last year, bringing the year-to-date consolidated adjusted EPS to $1.22, an increase of $0.03 versus the same period last year.
• The year-over-year results reflect increased revenue from new rates and recovery mechanisms, including the continued benefit of rate implementation, which was offset by higher O&M expenses and costs related to storm activity and union negotiations.

Data Center Strategy and Customer Savings:

• The company's agreements with Amazon and Alphabet are expected to provide approximately $1.4 billion in bill reductions for existing NIPSCO Electric customers over the respective contract terms.
• This is attributed to the strategic investment in data centers, which is expected to deliver significant savings and is aligned with the company's growth platform.

Capital Investment and Growth Outlook:

• NYSource's capital investment plan supports a base plan rate-based growth of 8% to 10% through 2030 and consolidated rate-based growth of 9% to 11% from 2026 through 2033.
• The investment plan is diversified across electric and gas businesses, focusing on modernization, system reliability, and supporting the energy transition.

Regulatory Environment and Affordability Discussions:

• The company is navigating a regulatory environment focused on affordability, with discussions scheduled to begin on August 7th regarding potential changes to the state's regulatory framework.
• The emphasis is on balancing investment recovery with enhancing customer affordability through economic development and targeted refinements to the regulatory framework.

Operational Excellence and Cost Optimization:

• NYSource is implementing cost optimization initiatives expected to yield over $40 million in savings across the business as part of efforts to reduce costs for customers.
• These initiatives include process improvements, technology-enabled efficiencies, and maintaining service quality, supporting the company's broader financial plan.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence in regulatory execution, capital deployment, and data center strategy. Statements include: 'We remain confident in the investment thesis' and 'We are encouraged by the progress we have made and remain focused on converting this momentum into disciplined execution.' The call highlighted strong economic development momentum and constructive regulatory environments.

Q&A:

• Question from Julianne Dumoulin-Smith (Jefferies): Can you talk about the affordability backdrop and specifically today, how are you thinking about tracking recovery and multi-year rate plan?
  Response: The recent Indiana commission decision is not reflective of the broader regulatory environment; they remain confident in future constructive proceedings. The signal is to better demonstrate investment benefits for recovery.

• Question from Julianne Dumoulin-Smith (Jefferies): Can you speak to the backdrop on the three gigawatts in data center negotiations and how advanced they are?
  Response: Management is confident in their pipeline, with three gigawatts in active negotiations and another two gigawatts of potential beyond the current nine-gigawatt pipeline, driven by strong demand.

• Question from Andrew Cadeveon (SHAR): Could you give an update on ROEs and trackers in Indiana?
  Response: Expectations are for balanced results that are correct and focus on bill transparency; they are optimistic and await the commission's findings.

• Question from Andrew Cadeveon (SHAR): When should we expect the segment reporting to be broken out?
  Response: On track to start reporting segment information by the end of the fiscal year.

• Question from Nick Campanella (Barclays): Can you clarify the mechanical impact of the T-DISC order on EPS and capital?
  Response: The CapEx plan is unchanged, with flexibility to recover costs via trackers, rate cases, or FMCA; no change to EPS outlook or 2026 capital guidance.

• Question from Evercore ISI: What is the governor's ultimate objective and how does it align with your experience in Indiana?
  Response: Believe Indiana will remain a constructive regulatory environment focused on economic development, which aligns with their goals of affordability and growth through data centers and manufacturing.

• Question from Evercore ISI: How is the upside to the base plan ($2B) expected to be executed in 2026/2027?
  Response: The upside is for the base business only; $2B is largely generation-related and can be worked into existing plans via trackers, rate cases, or other mechanisms without changing the outlook.

• Question from Travis Miller (Morningstar): How are you thinking about affordability discussions overlaying your rate case timeline?
  Response: Affordability discussions are not connected to rate case filings; they will learn more from August 7th conversations, but rate case filing is expected in the second half of 2028.

• Question from Travis Miller (Morningstar): Is the rate case filing the way you return customer savings from data centers?
  Response: No, savings flow immediately after energization with appropriate regulatory approval, appearing as a bill credit.

• Question from Steve D'Ambrizi (RBC Capital Markets): What does looking beyond the nine gigawatts mean, and does it imply a constrained pipeline?
  Response: It means normal pre-planning for expansion based on demand, considering factors like land and transmission, not a sign of constraint.

• Question from Steve D'Ambrizi (RBC Capital Markets): Can you highlight how much capital is secured via FMCA and other mechanisms?
  Response: Do not disclose breakdown by state or mechanism, but are confident in having recovery mechanisms to secure all 2026 and 2027 CapEx.

Contradiction Point 1

Regulatory Environment and Recovery Mechanisms

Contradiction regarding the regulatory environment's favorability and the certainty of recovery mechanisms.

Julianne Dumoulin-Smith (Jefferies) - Julianne Dumoulin-Smith (Jefferies)

2026Q2: Regarding the **Indiana regulatory order**, it is not reflective of the broader regulatory environment, which remains constructive. - Lloyd Yates(CEO)

Can you discuss your strategy regarding affordability, tracking recovery, and the multi-year rate plan, as well as the progress on the three gigawatts in data center negotiations and specifically the LaPorte County (Microsoft) development? - Bill Appicelli (UBS)

2026Q1: The previous regulatory outcome was constructive, and the company has flexible mechanisms (like trackers) to support future capital investments. - Lloyd Yates(CEO)

Contradiction Point 2

Data Center Pipeline and Disclosure

Contradiction regarding the disclosure of data center pipeline progress and specific project details.

Julianne Dumoulin-Smith (Jefferies) - Julianne Dumoulin-Smith (Jefferies)

2026Q2: Specific comments on the Microsoft/LaPorte County opportunity were declined. - Lloyd Yates(CEO)

Can you discuss the affordability backdrop, your approach to tracking recovery and multi-year rate planning, the status of three gigawatt data center negotiations, and provide an update on the LaPorte County (Microsoft) development? - Eli Josien (JPMorgan)

2026Q1: The company is methodically working on developmental opportunities like those in La Porte County. - Michael Luhrs(CCO)

Contradiction Point 3

Capital Recovery Mechanisms and Regulatory Approval

Contradiction on the certainty and type of recovery mechanisms for capital expenditures.

Nick Campanella (Barclays) - Nick Campanella (Barclays)

2026Q2: Recovery options include the FMCA mechanism, trackers, and future rate cases. The company is confident it has recovery mechanisms (like FMCA) to secure all 2026 and 2027 capital. - Sean Anderson(CFO), Lloyd Yates(CEO)

Can you clarify the mechanical impact of the T-DISC order on EPS and capital, and what is preventing the disclosure of the nine gigawatts in the pipeline and potential undisclosed executed agreements? - Spark Li (Jefferies) for Julien Dumoulin-Smith

2025Q4: The next opportunity is not dependent on the IURC approval for the Amazon contract. - Lloyd Yates(CEO)

Contradiction Point 4

Progress and Disclosure of Data Center Negotiations

Contradiction on the status of negotiations and willingness to disclose specific opportunities.

Julianne Dumoulin-Smith (Jefferies) - Julianne Dumoulin-Smith (Jefferies)

2026Q2: The company is confident in its pipeline of three gigawatts in active negotiations and has another two gigawatts of potential... Specific comments on the Microsoft/LaPorte County opportunity were declined. - Lloyd Yates(CEO), Michael Lohr(Executive)

Can you discuss the affordability backdrop, how you're tracking recovery and approaching the multi-year rate plan, and provide updates on the three gigawatts in data center negotiations, including the status of the LaPorte County (Microsoft) development? - Nicholas Campanella (Barclays)

2025Q4: Discussions with counterparties are progressing well. - Michael Luhrs(Executive)

Contradiction Point 5

Regulatory Environment and Affordability Discussions

Contradiction on the alignment between the company's view of the regulatory environment and the timing of affordability proceedings.

Evercore ISI (Questioner) - Evercore ISI (Questioner)

2026Q2: Despite regulatory activity, Indiana is expected to remain a constructive regulatory environment. Alignment exists around the importance of economic development for affordability... - Lloyd Yates(CEO)

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Otherwise, output as-is. So, can the input be rephrased into an earnings call question? The input is about alignment with activities. If the company operates in Indiana and the governor's objectives might affect their operations, then how does that alignment impact earnings? So the - Nicholas Campanella (Barclays)

2025Q3: The risk management provisions in the Genco contract provide protections pretty similar to the existing base business. - Shawn Anderson(CFO)