NiSource Reports Second Quarter 2020 Results
MERRILLVILLE, Ind., Aug. 5, 2020 /PRNewswire/ -- NiSource Inc. (NYSE: NI) today announced, on a GAAP basis, a net loss available to common shareholders for the three months ended June 30, 2020, of $18.5 million, or $0.05 per share, compared to net income available to common shareholders of $283.1 million, or $0.76 per share, for the same period of 2019. For the six months ended June 30, 2020, NiSource's net income available to common shareholders was $43.3 million, or $0.11 per share, compared to $488.2 million, or $1.31 per share, for the same period of 2019.
NiSource also reported net operating earnings available to common shareholders (non-GAAP) of $50.2 million, or $0.13 per share, for the three months ended June 30, 2020, compared to net operating earnings available to common shareholders (non-GAAP) of $19.1 million, or $0.05 per share, for the same period of 2019. For the six months ended June 30, 2020, NiSource's net operating earnings available to common shareholders was $341.1 million, or $0.89 per share, compared with $326.8 million, or $0.87 per share, for the same period of 2019. Schedule 1 of this press release contains a complete reconciliation of GAAP measures to non-GAAP measures.
NiSource's GAAP results for the six months ended June 30, 2020, include a $364.6 million loss due to the re-classification of Columbia Gas of Massachusetts' assets as held for sale resulting from the previously announced asset purchase agreement with Eversource Energy (NYSE: ES) regarding the sale of these assets. This pending transaction remains on track for regulatory approval by the end of the third quarter of 2020, with closing targeted shortly thereafter.
"2020 is a transitional year for NiSource," said NiSource President and CEO Joe Hamrock. "As we mitigate the impacts of the COVID-19 pandemic, and complete the sale of Columbia Gas of Massachusetts, we continue to execute on our strong core growth plan while repositioning for enhanced execution in our key focus areas. We continue to invest in our asset modernization and safety enhancement programs while advancing our transition to renewable generation. To build on these transformational efforts, we have accelerated the initiative to realign our capabilities and cost structure designed to ensure optimal performance as we execute on the significant opportunities in the NiSource business plan."
Ongoing COVID-19 Response
NiSource and its Columbia Gas and NIPSCO operating companies remain focused on employee and customer safety and providing reliable utility service through the COVID-19 pandemic. Our COVID-19 protections for customers and employees, as outlined in the first quarter 2020 earnings release dated May 6, 2020, remain in place.
In line with the company's base case scenario, NiSource continues to see modest commercial and industrial load impacts due to COVID-19, which are partially offset by increases in residential load. Cost savings and other measures have been implemented to mitigate these negative impacts on revenues. The company expects to continue to manage these impacts and update investors in future quarters. Despite challenges related to the pandemic, NiSource continues to expect to make $1.7 to $1.8 billion in capital investments in 2020.
Update on CMA
Advancing the pending sale of the CMA assets, on July 2, 2020, NiSource and Eversource filed a joint petition with the Massachusetts Department of Public Utilities (DPU) seeking approval of the transaction, as well as a proposed settlement with the Attorney General's Office and the Department of Energy Resources of all remaining state investigations related to the 2018 Greater Lawrence event, including the DPU's investigations on pipeline safety and emergency response. NiSource has agreed to make a payment of $56 million, in lieu of penalties, into an Energy Relief Fund to settle and resolve these pending matters subject to regulatory approval of the transaction and the proposed settlement.
Strategic Initiative Launched to Improve Cost Structure, Support Continued Safety and Generation Investments
NiSource has launched a multi-year enterprise-wide strategic initiative to better leverage the company's current scale, improve its cost structure and drive efficiencies across the organization. This initiative is expected to support continued substantial capital investments in the company's long-term safety and modernization programs, as well as its electric generation strategy, providing value to both customers and investors.
The repositioning of executive leadership roles and responsibilities, announced in May, the strategic initiative and a voluntary separation program for certain employees which commenced today are the first steps in a process designed to ensure that the NiSource organization is best positioned to support the company's enhanced focus on safety, operational excellence and customer value.
2021 EPS Guidance Initiated; Investor Day Previewed
NiSource today is initiating 2021 non-GAAP net operating earnings guidance in the range of $1.28 to $1.36 per share. The company's 2021 guidance reflects management's expectations about initial cost savings to be achieved through the strategic initiative and includes the base case scenario impacts of COVID-19. This guidance establishes the starting point for the long-term plan that will extend through 2024 with an expected rate base compound annual growth rate (CAGR) of 10% to 12%. This rate base growth is expected to drive earnings per share growth in excess of the previous 5 to 7% annual growth commitment, with a shift to a CAGR due to the timing of investments in our renewable generation portfolio.
NiSource is also announcing that it plans to host a virtual Investor Day on September 29, 2020, at which it intends to discuss details of this long-term growth strategy, including:
-- Continuation of the approximately $1.8 to $1.9 billion annual capital
investment into ongoing utility safety and infrastructure programs.
-- Anticipated incremental capital investment opportunities related to its
electric generation strategy of approximately $1.8 to $2.0 billion,
primarily in 2022 and 2023.
-- This investment is currently expected to represent ownership of at
least 50% of the replacement capacity, in the form of joint ventures
that will include NIPSCO and tax-equity partners as the members.
-- Driving a renewable portfolio that retires 80% of coal-fired
generation by 2023, and retires all coal-fired generation by 2028.
-- The replacement plan is expected to provide an industry leading 90%
reduction in greenhouse gas emissions by 2030 compared to 2005
levels.
-- Additional aspects and progress on the corporate strategic initiative
highlighted above.
-- Full details of its balanced financing plan. The plan will be focused on
maintaining current investment-grade credit ratings.
"We look forward to discussing in further detail at our Investor Day in late September how these initiatives are designed to drive value creation over the next several years," Hamrock said. "Building on the strength and momentum of the core growth drivers in the NiSource business, the plan we will outline is focused on enhanced execution and growth to deliver long-term value for all stakeholders. As we move through the balance of 2020, completing the CMA asset sale, accelerating restructuring of our capabilities and cost structure, and finalizing our financing plan, we are well-positioned for the significant opportunities in our long-range business plan."
Continued Focus on Safety Enhancements across Enterprise
NiSource will continue to prioritize its safety initiatives across its gas and electric businesses, including its accelerated Safety Management System (SMS) implementation. SMS is a comprehensive approach to managing safety, emphasizing continual assessment and improvement as well as pro-actively identifying and mitigating potential risks.
The company has seen strong results thus far in 2020, including:
-- Utilizing advanced analytics to drive the development of targeted
strategies to reduce pipeline damages, which are down by 5% through June
compared to the same period in 2019.
-- Initiating deployment of advanced leak survey technology to perform
quality assurance. Continued use of this platform will enhance decision
making with respect to repair or replacement of gas infrastructure.
-- Continued progress on improving maps and records.
-- Leveraging and maturing our Corrective Action Program, or CAP, to
mitigate risks across the enterprise. Examples include procedural
changes in our meter and regulatory processes as well as equipment
changes to address specific concerns at customer premises.
-- Continued installation of automatic shutoff devices on its gas
distribution system.
Second Quarter 2020 and Recent Business Highlights
Gas Distribution Operations
-- Columbia Gas of Pennsylvania's base rate case remains pending before the
Pennsylvania Public Utility Commission. The request, filed April 24,
2020, seeks an annual revenue increase of $100.4 million to invest in,
modernize and upgrade the company's existing natural gas distribution
system as well as maintain the continued safety of the system. New rates
are expected to become effective in February 2021.
-- On May 15, 2020 Columbia Gas of Maryland filed a base rate case request
with the Maryland Public Service Commission (PSC). The request supports
further upgrading and replacement of the company's underground natural
gas pipelines. The company filed a supplemental update request on July
1, 2020. The updated proposal would result in an annual revenue increase
of $6.3 million, including $1.3 million of current tracker revenue, if
approved as filed. A PSC order is expected in the fourth quarter of
2020, with rates effective in December 2020.
-- The Indiana Utility Regulatory Commission (IURC) on July 22, 2020,
approved Northern Indiana Public Service Company's (NIPSCO) application
for a six-year extension of its long-term gas infrastructure
modernization program. The plan includes nearly $950 million in capital
investments through 2025, to be recovered through semi-annual
adjustments to the existing gas Transmission, Distribution and Storage
Improvement Charge (TDSIC) tracker. The existing gas TDSIC program has
been in place since 2014.
-- New rates went into effect in May 2020 for Columbia Gas of Ohio's (COH)
Infrastructure Replacement Program (IRP) following Public Utilities
Commission of Ohio (PUCO) approval of the company's annual tracker
adjustment. This allows COH to begin recovery of approximately $234
million in safety and infrastructure investments made in 2019. This
well-established pipeline replacement program, authorized through 2022,
covers replacement of priority mainline pipe and targeted customer
service lines. Also in Ohio, the company's annual application for
adjustment to its Capital Expenditure Program (CEP) rider remains
pending before the PUCO. The CEP rider allows the company to recover
capital investments and related deferred expenses that are not recovered
through its IRP. The adjustment application seeks to begin recovery of
approximately $185 million in capital invested in 2019. A PUCO order is
expected in August 2020, with new rates effective in September 2020.
Electric Operations
-- NIPSCO on July 17, 2020 submitted applications with the IURC for
approval of two purchase power agreements (PPAs) with NextEra Energy,
which will build projects with a combined nameplate solar capacity of
300 megawatts and 30 megawatts of storage. Commercial negotiations are
advancing on build-transfer agreements (BTAs) representing a significant
amount of additional solar capacity. Regulatory filings related to these
BTAs are expected shortly after commercial agreements are executed.
These new renewable projects are consistent with NIPSCO's 2018
Integrated Resource Plan, which outlines plans to retire nearly 80% of
its remaining coal-fired generation by 2023, and retire all coal
generation by 2028, to be replaced by lower-cost, reliable and cleaner
options. The plan is expected to drive a 90% reduction in NiSource's
greenhouse gas emissions by 2030 compared with 2005 levels, and is
expected to save NIPSCO electric customers more than $4 billion over 30
years. The planned replacement in 2023 of approximately 1,400 megawatts
of retiring coal-fired generation could provide NiSource with
incremental capital investment opportunities in the range of $1.8 to $2
billion, primarily in 2022 and 2023. Currently, half of the capacity in
the replacement plan is targeted to be owned by joint ventures that will
include NIPSCO and tax-equity partners as the members. The remaining new
capacity is expected to be primarily in the form of PPAs. During the
second quarter, the Midwest Independent System Operator (MISO) approved
the planned retirement of the R.M. Schahfer Generating Station by 2023.
-- Construction continues on both the Rosewater and Jordan Creek wind
projects, which are expected to be in service by the end of this year.
NiSource closed on a tax equity financing agreement with Wells Fargo on
the Rosewater project in July.
Additional information for the quarter ended June 30, 2020, is available on the Investors section of www.nisource.com, including segment and financial information and our presentation to be discussed at the company's second quarter 2020 earnings conference call scheduled for August 5, 2020 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 8,400 employees are focused on safely delivering reliable and affordable energy to our customers and communities we serve. NiSource is a member of the Dow Jones Sustainability - North America Index and the Bloomberg Gender Equality Index and has been named by Forbes magazine among America's Best Large Employers since 2016. 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. These forward-looking statements include, but are not limited to, statements concerning our plans, strategies, objectives, expected performance, expenditures, recovery of expenditures through rates, stated on either a consolidated or segment basis, and any and all underlying assumptions and other statements that are other than statements of historical fact. 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 and expectations discussed in this press release include among other things, our debt obligations; any changes to our credit rating or the credit rating of certain of our subsidiaries; our ability to execute our growth strategy; changes in general economic, capital and commodity market conditions; pension funding obligations; economic regulation and the impact of regulatory rate reviews; our ability to obtain expected financial or regulatory outcomes; our ability to adapt to, and manage costs related to, advances in technology; any changes in our assumptions regarding the financial implications of the Greater Lawrence Incident; compliance with the agreements entered into with the U.S. Attorney's Office to settle the U.S. Attorney's Office's investigation relating to the Greater Lawrence Incident; the pending sale of the Columbia Gas of Massachusetts business, including the terms and closing conditions under the Asset Purchase Agreement; potential incidents and other operating risks associated with our business; continuing and potential future impacts of from the COVID-19 pandemic ; our ability to obtain sufficient insurance coverage and whether such coverage will protect us against significant losses; the outcome of legal and regulatory proceedings, investigations, incidents, claims and litigation; any damage to our reputation, including in connection with the Greater Lawrence Incident; compliance with applicable laws, regulations and tariffs; 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; 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; 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 workforce; the ability of our subsidiaries to generate cash; our ability to manage new initiatives and organizational changes; the performance of third-party suppliers and service providers; changes in the method for determining LIBOR and the potential replacement of the LIBOR benchmark interest rate; and other matters in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as updated in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and our subsequent SEC filings. In addition, the relative contributions to profitability by each business segment, and the assumptions underlying the forward-looking statements relating thereto, may change over time. 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. All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to the future results over time or otherwise, except as required by 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)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except per share amounts) 2020 2019 2020 2019
--- ---
GAAP Net Income (Loss) Available to Common
Shareholders $(18.5) $283.1 $43.3 $488.2
--- ---
Adjustments to Operating Income:
Operating Revenues:
Weather - compared to normal (5.1) 1.5 21.2 (9.4)
Operating Expenses:
Greater Lawrence Incident(1) 5.0 (333.5) 13.1 (199.9)
Loss on classification as held for sale(2) 84.4 364.6
Plant retirement costs(3) 4.6 4.6
Massachusetts Business separation costs(4) 5.2 5.2
Massachusetts Business depreciation and
amortization(5) (19.9) (19.9)
Loss (gain) on sale of fixed assets and
impairments, net (0.6) (0.1) (0.7) 0.1
Total adjustments to operating income 73.6 (332.1) 388.1 (209.2)
--- ---
Income Taxes:
Tax effect of above items(6) (4.9) 68.1 (90.3) 47.8
Total adjustments to net income 68.7 (264.0) 297.8 (161.4)
--- ---
Net Operating Earnings Available to Common
Shareholders (Non-GAAP) $50.2 $19.1 $341.1 $326.8
Basic Average Common Shares Outstanding 383.5 373.9 383.3 373.6
GAAP Basic Earnings (Loss) Per Share $(0.05) $0.76 $0.11 $1.31
Adjustments to basic earnings per share 0.18 (0.71) 0.78 (0.44)
Non-GAAP Basic Net Operating Earnings Per
Share $0.13 $0.05 $0.89 $0.87
---
(1) Represents costs incurred for
estimated third-party claims and
related other expenses as a result
of the Greater Lawrence Incident,
net of insurance recoveries
recorded.
(2) Represents loss recorded as a
result of measuring the assets and
liabilities of the Massachusetts
Business at fair value, less costs
to sell. Second quarter increase
primarily includes the $56 million
payment in lieu of penalties and
approximately $28 million of capital
expenditures that will not be
recouped through the Asset Purchase
Agreement.
(3) Represents costs incurred
associated with the planned
retirement of Units 14, 15, 17 and
18 at the Schahfer Generating
Station. Includes costs for write
downs of certain capital projects
and materials and supplies inventory
balances.
(4) Represents third-party
consulting costs incurred for the
separation and transition of the
Massachusetts Business to Eversource
that will occur at the consummation
of the Asset Purchase Agreement.
(5) Represents depreciation and
amortization expense that was ceased
for GAAP purposes as a result of
classifying the Massachusetts
Business as held for sale.
(6) Represents the tax effect of the
adjustments to operating income,
adjusted for the CMA non-deductible
payment in lieu of penalties, tax
effected at statutory tax rates.
Schedule 2 -Total Current Estimated Amounts of Costs and
Expenses Related to the Greater
Lawrence Incident
Cost or
Expense
Total Current
Estimated Amount(1)
($ in millions)
Capital
Cost(2) $258
Incident Related Expenses
Third-party claims and
government fines, penalties
and settlements(3)
$1,039 - $1,055
Other incident-related
costs(4)
$445 - $455
Insurance
Recoveries(5) $800
--- ---
(1) Total estimated amount includes
costs or expenses from the incident
through June 30, 2020 and estimated
expected expenses in future periods
in the aggregate. Amounts shown are
estimates made by management based
on currently available information.
See the footnotes below for
additional information. Actual
results may differ materially from
these estimates as more information
becomes available.
(2) We have invested approximately
$258 million of capital spend for
the pipeline replacement. This work
was completed in 2019. We maintain
property insurance for gas pipelines
and other applicable property.
Columbia Gas of Massachusetts has
filed a proof of loss with its
property insurer for the full cost
of the pipeline replacement. In
January 2020, we filed a lawsuit
against the property insurer,
seeking payment of our property
claim. We are currently unable to
predict the timing or amount of any
insurance recovery under the
property policy. This pipeline
replacement cost is part of the
Massachusetts Business that is
classified as held for sale at June
30, 2020. The assets and liabilities
of the Massachusetts Business have
been recorded at fair value, less
costs to sell, which resulted in the
loss on classification as held for
sale that was recorded as of June
30, 2020.
(3) Amount includes approximately
$1,039 million of expenses recorded
since the Greater Lawrence Incident
for estimated third-party claims
and fines, penalties and settlements
associated with government
investigations. With regards to
third-party claims, these costs
include, but are not limited to,
personal injury and property damage
claims, damage to infrastructure,
business interruption claims, and
mutual aid payments to other
utilities assisting with the
restoration effort. These costs do
not include costs of certain third-
party claims and fines, penalties or
settlements with government
investigations that we are not able
to estimate. The process for
estimating costs associated with
third-party claims and fines,
penalties and settlements associated
with government investigations
relating to the Greater Lawrence
Incident requires management to
exercise significant judgment based
on a number of assumptions and
subjective factors. As more
information becomes known, including
additional information regarding
ongoing investigations, management's
estimates and assumptions regarding
the financial impact of the Greater
Lawrence Incident may change.
(4) Amount shown includes other
incident related expenses of
approximately $436 million recorded
since the Greater Lawrence Incident.
Amount represents certain consulting
costs, legal costs, vendor costs,
claims center costs, labor and
related expenses incurred in
connection with the incident, and
insurance-related loss surcharges.
(5) The aggregate amount of third-
party liability insurance coverage
available for losses arising from
the Greater Lawrence Incident is
$800 million. We have collected the
entire $800 million. Expenses
related to the incident have
exceeded the total amount of
insurance available under our
policies.
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SOURCE NiSource Inc.
