Nisource Inc · NYSE:NI
Nisource — Investor Day (March 2017)
57 slides from Nisource's investor day presentation, Mar 8, 2017
Slide 1: Investor Day March 8, 2017
NiSource | NYSE: NI | nisource.com | INVESTOR DAY MARCH 8, 2017 NISOURCE
Slide 2: Forward Looking Statements
NiSource | NYSE: NI | nisource.com | Forward Looking Statements Forward-Looking Statements This presentation contains forward-looking statements within the meaning of federal securities laws. Investors and prospective investors should understand that many factors govern whether any forward-looking s
Slide 3: NiSource Participants
NiSource | NYSE: NI | nisource.com | NISOURCE PARTICIPANTS Experienced Team, Demonstrated Track Record Joe Hamrock President and Chief Executive Officer Donald Brown Executive Vice President and Chief Financial Officer Jim Stanley Executive Vice President and Chief Operating Officer Violet Sistovari
Slide 4: Agenda
NiSource | NYSE: NI | nisource.com | AGENDA NiSource Investor Day 2017 8:00 AM Registration and Welcome 8:30 AM Strategic Overview & Introductions Joe Hamrock President and Chief Executive Officer 8:45 AM Natural Gas Segment Pablo Vegas Executive Vice President and President, Columbia Gas Group 9:15
Slide 5: Premier Regulated Utility Business
NiSource | NYSE: NI | nisource.com | PREMIER REGULATED UTILITY BUSINESS Delivering on Commitments to Customers, Communities, Employees and Investors COLUMBIA GAS OF KENTUCKY COLUMBIA GAS OF MASSACHUSETTS COLUMBIA GAS OF OHIO COLUMBIA GAS OF PENNSYLVANIA COLUMBIA GAS OF VIRGINIA COLUMBIA GAS OF MARYL
Slide 6: NiSource Strategic Framework
NiSource | NYSE: NI | nisource.com | NISOURCE STRATEGIC FRAMEWORK Solid Long-Term Investment Proposition Strategic Direction Delivering on Our Commitments • Industry-leading safety and performance • Top-tier customer satisfaction • Investments that systematically and efficiently deliver service inte
Slide 7: Balanced Strategy Drives Benefits
NiSource | NYSE: NI | nisource.com | BALANCED STRATEGY DRIVES BENEFITS • Safe, Reliable System • Customer-Focused Service and Response • Enhanced Customer Value and Growth • Energy Efficiency and Assistance Programs to Help Ensure Affordability CUSTOMERS • Public Safety, Community Support and Involv
Slide 8: Delivering on Commitments
NiSource | NYSE: NI | nisource.com | DELIVERING ON COMMITMENTS • Identified Long-Term Infrastructure Investments of ~$30B • Grow Rate Base of ~$8.0B by 6%-8% Annually • Grow Net Operating EPS** by 4%-6% Annually (2015 EPS = $0.94) • Grow Dividend by 4%-6% Annually (2015 Dividend = $0.60) • Execute B
Slide 9: Key Investment Considerations
NiSource | NYSE: NI | nisource.com | STRONG UNDERLYING BUSINESS EXECUTION FINANCIAL OUTCOME KEY INVESTMENT CONSIDERATIONS • 100% Regulated Gas and Electric Utility Business – Balanced Business Mix of 66% Gas and 34% Electric – Stable Revenue Stream with ~65% Non-Volume Sensitive • Significant Scale
Slide 10: Natural Gas Segment
NiSource | NYSE: NI | nisource.com | PABLO VEGAS Executive Vice President and President, Columbia Gas Group NATURAL GAS SEGMENT
Slide 11: Natural Gas Segment
NiSource | NYSE: NI | nisource.com | NATURAL GAS SEGMENT * As of December 31, 2016 • Safe, Reliable Service • Affordable Rates • Enhanced Customer Service, Programs and Growth Initiatives • J.D. Power Satisfaction Scores Improving CUSTOMERS • Commitment to Community Engagement and Charitable Giving
Slide 12: Constructive Regulatory Environment
NiSource | NYSE: NI | nisource.com | CONSTRUCTIVE REGULATORY ENVIRONMENT Mechanisms Support Continued Capital Investment ESTABLISHED RECOVERY MECHANISMS IN ALL STATES EARNING ON EXPECTED 2017-2020 ANNUAL CAPITAL INVESTMENTS 20-YEAR INVESTMENT OPPORTUNITY $20B+ NATURAL GAS SYSTEM IDENTIFIED INVESTMEN
Slide 13: Gradual Impact on Customer Bills
NiSource | NYSE: NI | nisource.com | $0 $20 $40 $60 $80 $100 $120 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E GRADUAL IMPACT ON CUSTOMER BILLS Continued Projected Single Digit Percentage Annual Increases in Total Typical Bills • Low and stable natural gas price environments create headroom fo
Slide 14: Natural Gas Growth Markets
NiSource | NYSE: NI | nisource.com | NATURAL GAS GROWTH MARKETS • Housing Market • Construction Economics • Execution • Awareness and Need • Value • Execution DRIVERS DRIVERS • Single Family • Multi-Family • Commercial • Existing Single Family Homes • Existing Commercial Buildings 2/3 CURRENT NISOUR
Slide 15: New Construction Strategy
NiSource | NYSE: NI | nisource.com | NEW CONSTRUCTION STRATEGY • Supportive Policies • Targeted Marketing • Builder/Developer Field Partnerships Capitalizing on Specific Markets U.S. HOUSING STARTS Housing Market Recovering from Historic Lows 15
Slide 16: Customer Conversion Strategy
NiSource | NYSE: NI | nisource.com | FUEL SPREADS CUSTOMER CONVERSION STRATEGY • Supportive Policies • Targeted Marketing • Trade Ally Relationships • New Conversion Consultants • Appliance Failure Fast Path Service Opportunity Driven by Execution FUEL SPREADS Opportunity to Grow Customer Base 10% b
Slide 17: Gas Customer Growth Program
NiSource | NYSE: NI | nisource.com | GAS CUSTOMER GROWTH PROGRAM 1/2 FUTURE CUSTOMER ADDITIONS FROM NEW CONSTRUCTION 1/2 FUTURE CUSTOMER ADDITIONS FROM CONVERSIONS 2014 2015 2016 2017E 2018E 2019E 2020E Net Customer Additions 19,700 15,900 30,300 35,000 Net Customer Growth 0.59% 0.47% 0.89% 1.00% Ca
Slide 18: Clear Strategy for Natural Gas Segment
NiSource | NYSE: NI | nisource.com | CLEAR STRATEGY FOR NATURAL GAS SEGMENT Balanced Focus Benefiting All Stakeholders • Executing on Our Regulatory Strategy • Constructive Regulatory Environments across All Jurisdictions • Capital Plan Focuses on Modernization Investments and Customer Growth • Sign
Slide 19: Electric Segment
NiSource | NYSE: NI | nisource.com | VIOLET SISTOVARIS Executive Vice President and President, NIPSCO ELECTRIC SEGMENT
Slide 20: Electric Segment (NIPSCO)
NiSource | NYSE: NI | nisource.com | ELECTRIC SEGMENT (NIPSCO) * As of December 31, 2016 • Safe, Reliable Service • Affordable Rates • Enhanced Customer Service and Innovation • J.D. Power Satisfaction Scores Improving CUSTOMERS • Commitment to Community Engagement and Charitable Giving • Focused on
Slide 21: Constructive Regulatory Environment
NiSource | NYSE: NI | nisource.com | • Transmission, Distribution and Storage System Improvement Charge (TDSIC) − ~$1.25B, seven-year infrastructure modernization plan (2016-2022) • Federally Mandated Cost Adjustment (FMCA) Mechanism − $400M Environmental Compliance filing made in Nov. 2016 for Coal
Slide 22: Regulatory Strategy
NiSource | NYSE: NI | nisource.com | REGULATORY STRATEGY • Long-Term Transmission and Distribution Electric Modernization – Initial seven-year $1.25B program approved July 2016 – $175M-$225M annual investment – Improves system safety and reliability – Recovery through semi-annual tracker filings – A
Slide 23: Electric Transmission
NiSource | NYSE: NI | nisource.com | ELECTRIC TRANSMISSION • Reynolds to Topeka Project − 100-Mile, 345-kV transmission project − ~$350M-$400M investment • Greentown to Reynolds (Joint Project) − 65-Mile, 765-kV transmission project − ~$350M-$400M investment (NIPSCO portion ~$175M-$200M) • Both Proj
Slide 24: Long-Term Electric Generation
NiSource | NYSE: NI | nisource.com | LONG-TERM ELECTRIC GENERATION NIPSCO Planning Considerations • Evolving landscape, technologies and market conditions • Significant maintenance costs needed in aging coal fleet • Low, stable natural gas prices • Heavy industrial customer base Planning for the Fut
Slide 25: Diversifying NIPSCO's Resource Portfolio
NiSource | NYSE: NI | nisource.com | POST 2023 PROJECTED CAPACITY* DIVERSIFYING NIPSCO’S RESOURCE PORTFOLIO Projected Retirement of 50% of Coal Capacity by 2023 * Net Demonstrated Capacity, Excluding Interruptible Resources Other 1% Natural Gas 21% Coal 78% 2016 CAPACITY* Other 1% Addressable Capaci
Slide 26: Enhancing Environmental Stewardship
NiSource | NYSE: NI | nisource.com | ENHANCING ENVIRONMENTAL STEWARDSHIP • ~$850M Invested in Flue Gas Desulfurization (FGD) Facilities and New Environmental Controls through 2016 • Increased Natural Gas Generation Capacity • Efficiency Improvements in Generation Fleet • Customer Energy Efficiency a
Slide 27: Clear Strategy for Electric Segment
NiSource | NYSE: NI | nisource.com | CLEAR STRATEGY FOR ELECTRIC SEGMENT Balanced Focus Benefiting All Stakeholders • Executing on Our Regulatory Strategy • Constructive Regulatory Environment • Focus on Customer Value and Experience • Integrated Resource Plan Sets Stage to Diversify NIPSCO’s Genera
Slide 28: Operations Overview
NiSource | NYSE: NI | nisource.com | JIM STANLEY Executive Vice President and Chief Operating Officer OPERATIONS OVERVIEW
Slide 29: NiSource Operations
NiSource | NYSE: NI | nisource.com | NISOURCE OPERATIONS • Industry-Leading Safety Performance • Customer-Focused Service and Response • Infrastructure Investments to Reduce Risk • Enhanced Field Workforce Training and Development • Disciplined Capital Allocation and Execution 2017 - 2018 Top Quarti
Slide 30: Industry-Leading Safety Performance
NiSource | NYSE: NI | nisource.com | INDUSTRY-LEADING SAFETY PERFORMANCE • Customer and Community Safety – High-value system infrastructure investments – Public education and training emphasis – Improved emergency response using new technology and processes • Employee Safety – Significant progress o
Slide 31: Focused Initiatives Drive Value
NiSource | NYSE: NI | nisource.com | FOCUSED INITIATIVES DRIVE VALUE Driving Towards Industry-Leading Safety, Reliability and Emergency Response Comprehensive Approach to Increase Public Safety and Reduce Risk Initiative Value Leak Reduction 14% reduction in found natural gas leaks year-over-year Na
Slide 32: Delivering Reliable and Enhanced Services
NiSource | NYSE: NI | nisource.com | DELIVERING RELIABLE AND ENHANCED SERVICES Through Education, Technology, Training and Process Improvement • Achieve goal of responding to 98% of emergency calls within 45 minutes • Investment in emergency responder training • Improving our processes to enhance ou
Slide 33: Clear Focus and Strategy – Visible Progress
NiSource | NYSE: NI | nisource.com | CLEAR FOCUS AND STRATEGY – VISIBLE PROGRESS Balanced Focus Benefiting All Stakeholders • Executing on Our Strategy to Achieve Industry Leadership in Safety • Transparent Stakeholder Approach • Investing in Our Infrastructure and People • Leveraging New Technology
Slide 34: Financial Profile
NiSource | NYSE: NI | nisource.com | DONALD BROWN Executive Vice President and Chief Financial Officer FINANCIAL PROFILE
Slide 35: Premier Regulated Utility Business
NiSource | NYSE: NI | nisource.com | PREMIER REGULATED UTILITY BUSINESS Delivering on Commitments to Customers, Communities, Employees and Investors Total Revenue** STABLE REVENUE PROFILE Stable 100% Regulated Revenue Stream BALANCED BUSINESS MIX Gas 66% Electric 34% Residential 55% Commercial 25% I
Slide 36: Building Shareholder Value
NiSource | NYSE: NI | nisource.com | $0.94 $1.09 $1.12– $1.18 2015 2016 2017E $0.60 $0.64 $0.70 2015 2016 2017E 48.4% 33.0% 29.5% NI Dow Utilities S&P Utilities BUILDING SHAREHOLDER VALUE EARNINGS GROWTH DIVIDEND GROWTH TOTAL SHAREHOLDER RETURN 48.4% Total Shareholder Return from July 2, 2015 – Feb.
Slide 37: Consistent Earnings Growth
NiSource | NYSE: NI | nisource.com | CONSISTENT EARNINGS GROWTH 2017 GUIDANCE • Net Operating EPS* Range $1.12-$1.18 • Annual Dividend of $0.70 per Share Following an ~6.1% Increase in February 2017 PROJECTED GROWTH THROUGH 2020 • 8%-10% Annual Rate Base • 5%-7% Annual Net Operating EPS* • 5%-7% Ann
Slide 38: Capital Expenditures
NiSource | NYSE: NI | nisource.com | 25% 27% 51% 56% 24% 17% 2017E 2018E - 2020E Within 0-12 Months (Modernization / Environmental) Periodic Rate Cases (Maintenance / Other) * Includes Corporate (2017 = $15M, 2018 = $13M, 2019 = $14M, 2020 = $14M) CAPITAL EXPENDITURES Regulatory Programs Support Tim
Slide 39: Transformation to Enhance Value for Customers
NiSource | NYSE: NI | nisource.com | TRANSFORMATION TO ENHANCE VALUE FOR CUSTOMERS Focused on Long-Term Affordability • Optimizing Processes, Investments, and Technology across the Footprint • Logical Next Step Following Separation to Further Enhance Utility Operations • Builds Sustainability of Saf
Slide 40: Primary Sources and Uses of Cash
NiSource | NYSE: NI | nisource.com | PRIMARY SOURCES AND USES OF CASH Predictable Financing for Programmatic Investments CapEx ($1,600M-$1,800M) ATM – Equity ($200M-$300M) Funds From Operations ($1,100M-$1,400M) Dividends ($225M-$325M) DRIP – Equity ($50M-$75M) New Debt Issuances ($500M-$1,000M) PRI
Slide 41: Debt and Credit Profile
NiSource | NYSE: NI | nisource.com | * Committed capacity on accounts receivable securitization facilities changes with seasonality ** Consisting of cash and available capacity under credit facilities DEBT AND CREDIT PROFILE Current Debt Level: ~$7.9B as of December 31, 2016 • ~$6.3B of long-term de
Slide 42: Potential Tax Policy Reform
NiSource | NYSE: NI | nisource.com | POTENTIAL TAX POLICY REFORM Advocacy – Key Policy Objectives • Balance the interests of customers and shareholders • Preserve deductibility of interest expense and state/local taxes • Maintain low dividend and capital gains tax rates • Ensure fair and effective t
Slide 43: Key Investment Considerations
NiSource | NYSE: NI | nisource.com | STRONG UNDERLYING BUSINESS EXECUTION FINANCIAL OUTCOME KEY INVESTMENT CONSIDERATIONS • 100% Regulated Gas and Electric Utility Business – Balanced Business Mix of 66% Gas and 34% Electric – Stable Revenue Stream with ~65% Non-Volume Sensitive • Significant Scale
Slide 44: Appendix
NiSource | NYSE: NI | nisource.com | APPENDIX
Slide 45: Forecasted Generation Strategy Timeline
NiSource | NYSE: NI | nisource.com | FORECASTED GENERATION STRATEGY TIMELINE 2016 2017 2018 2019 2023 Submitted 2016 IRP MISO Approval for Bailly Units 7, 8 Submit 2019 IRP Retire Bailly Units 7, 8 (May 31, 2018) Retire Schahfer Units 17, 18 (By End of 2023 - Requires MISO Approval) EPA Compliance C
Slide 46: NiSource Long-Term Debt Profile
NiSource | NYSE: NI | nisource.com | NISOURCE LONG-TERM DEBT PROFILE Strong Financial Foundation to Support Long-Term Infrastructure Investments $350 $476 $1,041 $550 $64 $530 $250 - $275 - $90 $30 - $2,650 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 … 2040+ Maturities (in millions)
Slide 47: Natural Gas Distribution Infrastructure Programs
NiSource | NYSE: NI | nisource.com | Company Base Case Authorized ROE Year-End 2016 Rate Base Total Identified Investments Modernization Program Investments Estimated Annual Modernization Program Investment Recovery Mechanism Columbia Gas of OH Not Specified $2.1B ~$7.4B ~$3.4B $205M - $260M Tracked
Slide 48: Columbia Gas of Ohio Business Profile
NiSource | NYSE: NI | nisource.com | Business Profile • Largest LDC in Ohio (~1.4M customers) • ~ 20,100 miles of pipe • ~ 2,550 miles of bare steel and cast iron • ~ $2.1B rate base Customer Focus • Nationally recognized energy efficiency programs • Positive trending customer satisfaction Rate Desi
Slide 49: Columbia Gas of Pennsylvania Business Profile
NiSource | NYSE: NI | nisource.com | Business Profile • Third Largest LDC in PA (~430K customers) • ~ 7,600 miles of pipe • ~ 1,500 miles of bare steel and cast iron • ~ $1.3B rate base Customer Focus • State leader in universal services, low income initiatives, choice and energy efficiency programs
Slide 50: NIPSCO Gas Business Profile
NiSource | NYSE: NI | nisource.com | Business Profile • Largest LDC in Indiana (~820K customers) • ~ 17,900 miles of pipe • ~ 50 miles of bare steel • ~ $915M rate base Customer Focus • Lowest-cost gas provider in Indiana • Fewest customer complaints in Indiana • Continued rise in J.D. Power custome
Slide 51: Columbia Gas of Massachusetts Business Profile
NiSource | NYSE: NI | nisource.com | Business Profile • Largest gas-only LDC in MA (~320K customers) • ~ 5,000 miles of pipe • ~ 690 miles of bare steel and cast iron • ~ $669M rate base Customer Focus • Strong customer interest in conversion from oil to natural gas • Broad based energy efficiency p
Slide 52: Columbia Gas of Virginia Business Profile
NiSource | NYSE: NI | nisource.com | Business Profile • Third Largest LDC in VA (~260K customers) • ~ 5,200 miles of pipe • ~ 160 miles of bare steel • ~ $609M rate base Customer Focus • Broad residential, commercial and industrial portfolio • Industry-leading third party damage rate Rate Design • ~
Slide 53: Columbia Gas of Kentucky Business Profile
NiSource | NYSE: NI | nisource.com | Business Profile • Second Largest Gas-Only LDC in KY (~135K customers) • ~ 2,600 miles of pipe • ~ 400 miles of bare steel and cast iron • ~ $238M rate base Customer Focus • Top tier customer satisfaction levels • Sustained industry-leading employee safety perfor
Slide 54: Columbia Gas of Maryland Business Profile
NiSource | NYSE: NI | nisource.com | Business Profile • Complementary to PA operations (~33K customers) • ~ 650 miles of pipe • ~ 80 miles of bare steel & cast iron • ~ $93M rate base Customer Focus • Sustained industry-leading employee and system safety performance Rate Design • Revenue normalizati
Slide 55: Electric Segment Investment Programs
NiSource | NYSE: NI | nisource.com | INFRASTRUCTURE INVESTMENT PROGRAMS / PROJECTS Program / Project Identified Investments Estimated Annual Investment Recovery Mechanism Program/Project Length Infrastructure Modernization ~$4.2B ~$135M - $235M Tracked 20+ Years Environmental Compliance ~$0.4B ~$10M
Slide 56: NIPSCO Electric Business Profile
NiSource | NYSE: NI | nisource.com | Business Profile • Third largest electric utility in Indiana (~470K customers) • Fully integrated electric utility • 3,300 MW of environmentally compliant generation • ~10,000 distribution line miles • ~3,000 transmission line miles • ~ $3.4B rate base Customer F
Slide 57: Reconciliation of Net Operating Earnings to GAAP
NiSource | NYSE: NI | nisource.com | 57 RECONCILIATION OF NET OPERATING EARNINGS TO GAAP (in millions, except per share amounts) 2016 2015 2014 Net Operating Earnings (Non-GAAP) 351.2$ 298.8$ 256.4$ Items Excluded from Operating Earnings: Net Revenues: Weather - compared to normal (12.4) (15.6) 14.3