NiSource Reports Third Quarter 2018 Earnings
MERRILLVILLE, Ind., Nov. 1, 2018 /PRNewswire/ -- NiSource Inc. (NYSE: NI) today announced, on a GAAP basis, a net loss available to common shareholders for the three months ended September 30, 2018, of $345.1 million, or $0.95 per share, compared to net income available to common shareholders of $14.0 million, or $0.04 per share, for the same period of 2017. For the nine months ended September 30, 2018, NiSource's net loss available to common shareholders was $45.8 million, or $0.13 per share, compared to net income available to common shareholders of $180.9 million, or $0.55 per share, for the same period of 2017.
NiSource also reported net operating earnings available to common shareholders (non-GAAP) of $35.3 million, or $0.10 per share, for the three months ended September 30, 2018, compared to $23.3 million, or $0.07 per share, for the same period of 2017. For the nine months ended September 30, 2018, NiSource's net operating earnings available to common shareholders (non-GAAP) were $321.4 million, or $0.91 per share, compared to $287.2 million, or $0.88 per share, for the same period of 2017.
NiSource's third quarter GAAP results include $461.9 million in expenses related to third party claims and other expenses associated with the September 13, 2018, incident on its gas distribution system in the Greater Lawrence, Mass., area. These expenses are expected to be substantially recovered through insurance; however, no recovery amounts have been recorded as of September 30, 2018. Schedule 1 of this press release contains a complete reconciliation of GAAP measures to non-GAAP measures. Schedule 2 of this press release provides total current estimates of costs and expenses related to the Greater Lawrence Incident.
"We are deeply humbled by what happened in Massachusetts, and realize that much work lies ahead of us to finish the service restoration in the Lawrence area, and to regain the trust of our customers and communities, " said NiSource President and CEO Joe Hamrock. "We continue to marshal the needed resources and adjust our approach to best accommodate and meet our customers' needs."
NiSource and its contractors have completed 100 percent of the 45-mile accelerated distribution system replacement necessary to make homes and businesses 'Gas Ready'. Work continues to make impacted homes and businesses 'House Ready' so that gas service can be restored.
"Safety and the care of our customers is the foundation of our business. Although the reviews of what occurred are not complete, NiSource is taking steps across our seven-state footprint to enhance the safety of low-pressure systems," Hamrock said. "These enhancements will benefit all customers and communities we serve across all seven states."
Consistent with the company's long-term execution of its gas infrastructure modernization programs, NiSource has replaced nearly 400 miles of pipelines and approximately 40,000 customer service lines to date in 2018 across its seven state gas distribution system. Since the inception of these programs more than a decade ago, NiSource has now replaced more than 3,400 miles of priority pipe, providing modern systems with enhanced safety features for customers.
2018 Net Operating Earnings Guidance, Long-term Growth, Capital Forecasts Reaffirmed
NiSource remains on track to invest $1.7 to $1.8 billion in its utility infrastructure capital programs and deliver non-GAAP net operating earnings of $1.26 to $1.32 per share in 2018. The capital investment includes approximately $135 to $165 million related to the Massachusetts restoration project and many safety-enhancing investments across all our gas distribution businesses. The company expects to make capital investments of $1.6 to $1.8 billion and grow its net operating earnings per share (non-GAAP) and dividend by 5 to 7 percent each year through 2020.
NiSource also remains committed to maintaining investment-grade credit ratings. The company has investment-grade ratings with Fitch Ratings (BBB), Moody's (Baa2) and Standard & Poor's (BBB+). As of September 30, 2018, NiSource had approximately $1.1 billion in net available liquidity, consisting of cash and available capacity under its credit facility and accounts receivable securitizations.
NiSource reminds investors that it does not provide a GAAP equivalent of its earnings guidance due to the impact of unpredictable factors such as fluctuations in weather, asset sales and impairments, and other items included in GAAP results.
Third Quarter 2018 and Recent Business Highlights
"We remain keenly focused on helping our customers in the impacted areas of Massachusetts and restoring their service safely and as quickly as possible," Hamrock said. "At the same time, I am incredibly proud of the work our teams have done to enhance safety system-wide for our customers and communities and to advance our long-term electric generation strategy in Indiana."
Gas Distribution Operations
-- On October 1, 2018, in the first step of a three-step implementation,
new rates went into effect at Northern Indiana Public Service Company
(NIPSCO) following Indiana Utility Regulatory Commission (IURC) approval
of a settlement in the company's gas base rate case. The settlement
supports continued investment in system upgrades, technology
improvements and other measures to increase pipeline safety and system
reliability and will ultimately result in an expected annual revenue
increase of $107.3 million, inclusive of various tracker programs and
reflecting the impact of federal tax reform.
-- Also in Indiana, NIPSCO continues to execute on its long-term gas
infrastructure modernization program with plans for investments through
2020. The latest Transmission, Distribution and Storage System
Improvement Charge (TDSIC) tracker update request, covering
approximately $73 million of investments made in the first half of 2018,
is pending before the IURC, with an order expected in the fourth quarter
of 2018. The company's application for a new seven-year TDSIC program
was dismissed without prejudice by the IURC due to pending legal
matters, and the company is reviewing options to refile its application
at a later date.
-- Columbia Gas of Pennsylvania filed a settlement agreement in its base
rate case on August 31, 2018. The settlement supports upgrades and
replacement of the company's natural gas distribution pipelines and
reflects the impact of federal tax reform. If approved as filed, the
settlement is expected to increase annual revenues by $26 million. A
Pennsylvania Public Utility Commission decision is expected in the
fourth quarter of 2018, with new rates in effect in December 2018.
-- On October 25, 2018, Columbia Gas of Ohio filed a settlement in its
Capital Expenditure Program (CEP) rider application pending before the
Public Utilities Commission of Ohio. If approved as filed, the initial
$74.5 million CEP rider would allow the company to begin recovering
capital investments and related deferred expenses made between 2011 and
2017 that are not currently recovered through its infrastructure
modernization tracker. The settlement also benefits customers by
reducing base rates by approximately $23 million to reflect the impact
of federal tax reform.
-- Columbia Gas of Virginia filed a base rate case with the Virginia State
Corporation Commission on August 28, 2018, seeking to recover costs
associated with ongoing infrastructure investment programs and to
incorporate changes from federal tax reform. If approved as filed, the
request would increase annual revenues by $22.2 million, including $8
million of current infrastructure tracker revenue. The company has asked
that new rates go into effect February 1, 2019. A commission order is
expected in the second half of 2019.
-- Columbia Gas of Massachusetts on September 19, 2018, withdrew its base
rate case, which had been pending before the Massachusetts Department of
Public Utilities, to focus on service restoration and assisting
customers impacted by the September 13, 2018 incident in the Greater
Lawrence area.
-- A settlement of Columbia Gas of Maryland's base rate case remains
pending before the Maryland Public Service Commission (PSC). The
settlement supports continued replacement of gas pipelines and pipeline
safety upgrades, and reflects the impact of federal tax reform. If
approved as filed, the settlement is expected to increase annual
revenues by $3.7 million. A PSC order is expected in the fourth quarter
of 2018, with rates expected to be effective in November 2018. Also in
Maryland, a five-year extension of the company's Strategic
Infrastructure Development Enhancement Plan was approved by the PSC.
Electric Operations
-- NIPSCO submitted its 2018 Integrated Resource Plan to the IURC on
October 31, 2018. Consistent with what the company outlined for
stakeholders, the plan calls for the retirement of nearly 80 percent of
its remaining coal-fired generation in the next five years, and all coal
generation to be retired within 10 years. The replacement plan is still
being defined, but options point toward lower-cost renewable energy
resources such as wind, solar and battery storage technology. The plan
is consistent with the company's goal to transition to the most
economical, cleanest electric supply mix available while maintaining the
reliability, diversity and flexibility for technology and market
changes.
-- Also on October 31, 2018, NIPSCO filed an electric base rate case with
the IURC. The request seeks changes to the company's depreciation
schedules related to the early retirements of coal fired generation
plants called for in the IRP, as well as changes in tariffs to provide
service flexibility for industrial customers as they seek to remain
competitive in the global marketplace. The proposal also reflects the
impact of federal tax reform. If approved as filed, the request is
expected to increase annual revenues by $21.4 million. An IURC order is
anticipated in the third quarter of 2019, with rates effective in
September 2019.
-- NIPSCO's approximately $193 million Coal Combustion Residuals capital
projects are progressing, and expected to be completed by the end of
2018. These projects include environmental upgrades at its generating
facilities to meet current EPA standards. The IURC in December 2017
approved a settlement authorizing these projects and recovery of
associated costs.
-- NIPSCO continues to execute on its seven-year electric infrastructure
modernization program, which includes enhancements to its electric
transmission and distribution system designed to further improve system
safety and reliability. The IURC-approved program represents
approximately $1.25 billion of electric infrastructure investments
expected to be made through 2022. A settlement was filed October 25,
2018 in NIPSCO's latest tracker update request, which remains pending
before the IURC. It seeks a semi-annual incremental rate decrease of
$11.2 million, due primarily to the pass back to customers of a $14.1
million base rate refund for the January through May 2018 period related
to federal tax reform. An order is expected in the fourth quarter of
2018.
Additional information for the quarter ended September 30, 2018, is available on the Investors section of www.nisource.com, including segment and financial information and our presentation to be discussed at our third quarter 2018 earnings conference call scheduled for November 1, 2018 at 9:00 a.m. ET.
About NiSource
NiSource Inc. (NYSE: NI) is one of the largest fully-regulated utility companies in the United States, serving approximately 3.5 million natural gas customers and 500,000 electric customers across seven states through its local Columbia Gas and NIPSCO brands. Based in Merrillville, Indiana, NiSource's approximately 8,000 employees are focused on safely delivering reliable and affordable energy to our customers and communities we serve. NiSource has been designated a World's Most Ethical Company by the Ethisphere Institute since 2012 and is a member of the Dow Jones Sustainability - North America Index and was named by Forbes magazine as the top-rated utility among America's Best Large Employers in 2017. Additional information about NiSource, its investments in modern infrastructure and systems, its commitments and its local brands can be found at www.nisource.com. Follow us at www.facebook.com/nisource, www.linkedin.com/company/nisource or www.twitter.com/nisourceinc. NI-F
Forward-Looking Statements
This press release 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 statement contained herein will be or can be realized. Any one of those factors could cause actual results to differ materially from those projected. Examples of forward-looking statements in this press release include statements and expectations regarding NiSource's or any of its subsidiaries' business, performance, growth, commitments, investment opportunities, and planned, identified, infrastructure or utility investments. All forward-looking statements are based on assumptions that management believes to be reasonable; however, there can be no assurance that actual results will not differ materially. Factors that could cause actual results to differ materially from the projections, forecasts, estimates, plans, expectations and strategy discussed in this press release include, among other things, NiSource's debt obligations; any changes in NiSource's credit rating; NiSource's ability to execute its growth strategy; changes in general economic, capital and commodity market conditions; pension funding obligations; economic regulation and the impact of regulatory rate reviews; NiSource's ability to obtain expected financial or regulatory outcomes; any damage to NiSource's reputation; compliance with environmental laws and the costs of associated liabilities; fluctuations in demand from residential and commercial customers; economic conditions of certain industries; the success of NIPSCO's electric generation strategy; the price of energy commodities and related transportation costs or an inability to obtain an adequate, reliable and cost-effective fuel supply to meet customer demands; the reliability of customers and suppliers to fulfill their payment and contractual obligations; potential impairments of goodwill or definite-lived intangible assets; changes in taxation and accounting principles; potential incidents and other operating risks associated with our business; impacts from the Greater Lawrence incident (including any changes in management's estimates or assumptions regarding financial impact, the timing and amount of insurance recoveries, the outcomes of governmental investigations, changes to state and federal legislation or regulation impacting our operating practices, and our ability to recover our costs through rates or offset them through operational or other cost savings); the impact of an aging infrastructure; the impact of climate change; potential cyber-attacks; construction risks and natural gas costs and supply risks; extreme weather conditions; the attraction and retention of a qualified work force; advances in technology; the ability of NiSource's subsidiaries to generate cash; tax liabilities associated with the separation of Columbia Pipeline Group, Inc.; NiSource's ability to manage new initiatives and organizational changes; the performance of third-party suppliers and service providers; the availability of insurance to cover all significant losses and other matters set forth in Item 1A, "Risk Factors" section of NiSource's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and in other filings with the Securities and Exchange Commission. A credit rating is not a recommendation to buy, sell or hold securities, and may be subject to revision or withdrawal at any time by the assigning rating organization. In addition, dividends are subject to board approval. NiSource expressly disclaims any duty to update, supplement or amend any of its forward-looking statements contained in this press release, whether as a result of new information, subsequent events or otherwise, except as required by applicable law.
Regulation G Disclosure Statement
This press release includes financial results and guidance for NiSource with respect to net operating earnings available to common shareholders, which is a non-GAAP financial measure as defined by the SEC's Regulation G. The company includes this measure because management believes it permits investors to view the company's performance using the same tools that management uses and to better evaluate the company's ongoing business performance. With respect to such guidance, it should be noted that there will likely be a difference between this measure and its GAAP equivalent due to various factors, including, but not limited to, fluctuations in weather, the impact of asset sales and impairments, and other items included in GAAP results. The company is not able to estimate the impact of such factors on GAAP earnings and, as such, is not providing earnings guidance on a GAAP basis.
Schedule 1 - Reconciliation of Consolidated Net Income (Loss) Available to Common
Shareholders to Net Operating Earnings Available to Common Shareholders (Non-GAAP)
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions, except per share amounts) 2018 2017 2018 2017
---
GAAP Net Income (Loss) Available to Common Shareholders $(345.1) $14.0 $(45.8) $180.9
--- ---
Adjustments to Operating Income (Loss):
Operating Revenues:
(11.4) 3.2 (21.9) 37.1
Weather - compared to normal
Operating Expenses:
- 3.3 1.5
Plant retirement costs(1)
- 8.2 13.3
IT service provider transition costs(2)
451.6 451.6 -
Greater Lawrence Incident(3)
(Gain) Loss on sale of assets and impairments, net 0.7 0.4 (0.1)
---
Total adjustments to operating income (loss) 440.9 11.4 433.4 51.8
---
Other Income (Deductions):
10.3 10.3 -
Greater Lawrence Incident - Charitable contribution(3)
- (21.2)
Interest rate swap settlement gain
33.0 45.5 111.5
Loss on early extinguishment of long-term debt
Income Taxes:
(103.8) (2.1) (100.8) (57.0)
Tax effect of above items
Total adjustments to net income (loss) 380.4 9.3 367.2 106.3
---
Net Operating Earnings Available to Common Shareholders (Non-GAAP) $35.3 $23.3 $321.4 $287.2
Basic Average Common Shares Outstanding 363.9 331.1 352.1 326.7
GAAP Basic Earnings (Loss) Per Share $(0.95) $0.04 $(0.13) $0.55
Adjustments to basic earnings (loss) per share 1.05 0.03 1.04 0.33
Non-GAAP Basic Net Operating Earnings Per Share $0.10 $0.07 $0.91 $0.88
--- ---
(1) Represents costs incurred associated with the planned retirement of Units 7 and 8 at Bailly Generating Station.
(2) Represents contract termination costs and external legal and consulting costs associated with termination of the IBM IT services
agreement and the transition to a new multi-vendor strategy for IT service delivery.
(3) Represents costs incurred for estimated third-party claims and related other expenses as a result of the Greater Lawrence Incident.
Schedule 2 - Total Current Estimated Amounts of Costs and Expenses Related to the Greater
Lawrence Incident
Cost or Expense
Total Current
Estimated Amount(1)
($ in millions)
--- ---
Capital Cost(2)
$135 - $165
Incident Related Expenses(3)
Third Party Claims-Related
Expenses(4)
$415 - $450
Other Expenses(5)
$180 - $210
(1) Total estimated amount includes
costs or expenses in the quarter
ended September 30, 2018 and
estimated expected expenses in
future periods in the aggregate.
Amounts shown are estimates made
by management based on currently
available information. Actual
results may differ materially from
these estimates as more
information becomes available.
(2) Amount represents the estimated
cost of replacing the entire
affected 45-mile cast iron and
bare steel gas pipeline system
impacted in the Greater Lawrence
incident with plastic distribution
mains and service lines, as well
as enhanced safety features such
as pressure regulation and excess
flow valves at each premise.
(3)These amounts are expected to be
substantially paid through
insurance recovery under insurance
policies with an aggregate limit
of $800 million, subject to
certain policy limits, conditions
and exclusions. The amount shown
does not include fines, penalties,
and settlements with governmental
authorities, which cannot be
estimated at this time and are not
recoverable under insurance.
(4) Amount includes approximately
$415 million of expenses recorded
in the quarter ended September 30,
2018. Amount represents estimated
third-party claims related to the
Greater Lawrence incident,
including personal injury and
property damage claims, damage to
infrastructure, and other damage
claims, which include mutual aid
payments to other utilities
assisting with the restoration
effort, gas-fueled appliance
replacement and related services
for impacted customers, temporary
lodging for displaced customers,
and claims-related legal fees.
The total amount incurred will
depend on the final outcome of
open investigations and the
number, nature, and value of
third-party claims. The amount
shown does not include damages for
third-party business interruption
claims, which are not estimable at
this time.
(5) Amount shown includes other
incident related expenses of
approximately $45 million recorded
in the quarter ended September 30,
2018. Amount represents certain
consulting costs, administration
costs, charitable contributions,
and other labor and related
expenses in connection with the
incident.
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SOURCE NiSource Inc.
