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| Other | (4.9) | |
| Change in operating expenses (before cost of energy and other tracked items) | $ | (214.2) | |
| Operating expenses offset in operating revenue | |
Lower cost of energy billed to customers | 447.8 | |
Lower tracker deferrals within operation and maintenance, depreciation, and tax | 31.2 | |
| Increase in gross receipts tax | 8.4 | |
| Total change in operating expense | $ | 273.2 | |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
Electric Operations
Financial and operational data for the Electric Operations segment for the years ended December 31, 2023, 2022 and 2021, are presented below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Favorable (Unfavorable) |
Year Ended December 31, (in millions) | 2023 | | 2022 | | 2021 | | 2023 vs. 2022 | | 2022 vs. 2021 |
| Operating Revenues | $ | 1,785.0 | | | $ | 1,831.7 | | | $ | 1,697.1 | | | $ | (46.7) | | | $ | 134.6 | |
| Operating Expenses | | | | | | | | | |
| Cost of energy | 446.4 | | | 575.8 | | | 429.7 | | | 129.4 | | | (146.1) | |
| Operation and maintenance | 518.0 | | | 486.2 | | | 493.6 | | | (31.8) | | | 7.4 | |
| Depreciation and amortization | 400.9 | | | 362.9 | | | 329.4 | | | (38.0) | | | (33.5) | |
Loss (gain) on sale of fixed assets and impairments, net | 2.2 | | | — | | | (0.9) | | | (2.2) | | | (0.9) | |
| Other taxes | 38.8 | | | 44.4 | | | 57.5 | | | 5.6 | | | 13.1 | |
| Total Operating Expenses | 1,406.3 | | | 1,469.3 | | | 1,309.3 | | | 63.0 | | | (160.0) | |
| Operating Income | $ | 378.7 | | | $ | 362.4 | | | $ | 387.8 | | | $ | 16.3 | | | $ | (25.4) | |
| Revenues | | | | | | | | | |
| Residential | $ | 583.9 | | | $ | 592.4 | | | $ | 568.0 | | | $ | (8.5) | | | $ | 24.4 | |
| Commercial | 578.1 | | | 571.0 | | | 534.9 | | | 7.1 | | | 36.1 | |
| Industrial | 475.0 | | | 561.4 | | | 494.1 | | | (86.4) | | | 67.3 | |
| Wholesale | 32.0 | | | 13.5 | | | 15.7 | | | 18.5 | | | (2.2) | |
| Other | 116.0 | | | 93.4 | | | 84.4 | | | 22.6 | | | 9.0 | |
| Total | $ | 1,785.0 | | | $ | 1,831.7 | | | $ | 1,697.1 | | | $ | (46.7) | | | $ | 134.6 | |
| Sales (Gigawatt Hours) | | | | | | | | | |
| Residential | 3,262.9 | | | 3,482.9 | | | 3,546.8 | | | (220.0) | | | (63.9) | |
| Commercial | 3,614.2 | | | 3,682.4 | | | 3,698.0 | | | (68.2) | | | (15.6) | |
| Industrial | 7,820.3 | | | 7,915.3 | | | 8,253.7 | | | (95.0) | | | (338.4) | |
| Wholesale | 556.4 | | | 50.0 | | | 124.7 | | | 506.4 | | | (74.7) | |
| Other | 78.9 | | | 89.5 | | | 108.5 | | | (10.6) | | | (19.0) | |
| Total | 15,332.7 | | | 15,220.1 | | | 15,731.7 | | | 112.6 | | | (511.6) | |
| Cooling Degree Days | 710 | | | 942 | | | 1,020 | | | (232) | | | (78) | |
| Normal Cooling Degree Days | 831 | | | 831 | | | 803 | | | — | | | 28 | |
% (Colder) Warmer than Normal | (15) | % | | 13 | % | | 27 | % | | | | |
% (Colder) Warmer than prior year | (25) | % | | (8) | % | | 13 | % | | | | |
| Electric Customers | | | | | | | | | |
| Residential | 427,217 | | | 424,735 | | | 422,436 | | | 2,482 | | | 2,299 | |
| Commercial | 58,779 | | | 58,374 | | | 58,010 | | | 405 | | | 364 | |
| Industrial | 2,126 | | | 2,130 | | | 2,137 | | | (4) | | | (7) | |
| Wholesale | 708 | | | 710 | | | 714 | | | (2) | | | (4) | |
| Other | 3 | | | 3 | | | 2 | | | — | | | 1 | |
| Total | 488,833 | | | 485,952 | | | 483,299 | | | 2,881 | | | 2,653 | |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
Electric Operations (continued)
Comparability of operation and maintenance expenses and depreciation and amortization may be impacted by regulatory and depreciation trackers that allow for the recovery in rates of certain costs.
The underlying reasons for changes in our operating revenues and expenses from 2023 to 2022 are presented in the respective tables below. Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results and Discussion of Operations - Electric Operations," of the Company's 2022 Annual Report on Form 10-K for discussion of underlying reasons for changes in our operating revenues and expenses for 2022 versus 2021.
| | | | | |
| Favorable (Unfavorable) |
Changes in Operating Revenues (in millions) | 2023 vs 2022 |
New rates from base rate proceedings, regulatory capital, and DSM programs | $ | 103.5 | |
Renewable Joint Venture revenue, fully offset by Joint Venture operating expense and noncontrolling interest net income (loss) | 10.2 | |
2022 FAC refund to customers | 8.0 | |
| FAC over earnings reserve | 5.8 | |
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The effects of weather in 2023 compared to 2022 | (25.6) | |
| Decreased customer usage | (12.8) | |
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| Other | 0.6 | |
| Change in operating revenues (before cost of energy and other tracked items) | $ | 89.7 | |
| Operating revenues offset in operating expense | |
Lower cost of energy billed to customers | (129.4) | |
Reduction in gross receipts tax, offset in operating expenses | (12.0) | |
Higher tracker deferrals within operation and maintenance, depreciation and tax | 5.0 | |
| Total change in operating revenues | $ | (46.7) | |
Weather
In general, we calculate the weather-related revenue variance based on changing customer demand driven by weather variance from normal cooling degree days. Our composite cooling degree days reported do not directly correlate to the weather-related dollar impact on the results of Electric Operations. Cooling degree days experienced during different times of the year may have more or less impact on volume and dollars depending on when they occur. When the detailed results are combined for reporting, there may be weather-related dollar impacts on operations when there is not an apparent or significant change in our aggregated composite cooling degree day comparison.
Sales
NIPSCO's Electric Segment results remains closely linked to the performance of the steel industry. MWh sales to steel-related industries accounted for approximately 49.3% and 47.4% of the total industrial MWh sales for the years ended December 31, 2023 and 2022, respectively.
Commodity Price Impact
Cost of energy for the Electric Operations segment is principally comprised of the cost of coal, natural gas purchased for internal generation of electricity at NIPSCO, and the cost of power purchased from generators of electricity. NIPSCO has a state-approved recovery mechanism that provides a means for full recovery of prudently incurred costs of energy. The majority of these costs of energy are passed through directly to the customer, and the costs of energy included in operating revenues are matched with the cost of energy expense recorded in the period. The difference is recorded on the Consolidated Balance Sheets as under-recovered or over-recovered fuel cost to be included in future customer billings. Therefore, increases in these tracked operating expenses are offset by increases in operating revenues and have essentially no impact on net income.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
Electric Operations (continued)
| | | | | |
| Favorable (Unfavorable) |
Changes in Operating Expenses (in millions) | 2023 vs 2022 |
Renewable Joint Venture operating expense, partially offset by Joint Venture operating revenues | $ | (44.7) | |
Higher depreciation and amortization expense driven by new base rates | (25.0) | |
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Higher outside services expenses | (6.9) | |
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Lower materials and supplies | 9.4 | |
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| Other | (6.2) | |
| Change in operating expenses (before cost of energy and other tracked items) | $ | (73.4) | |
| Operating expenses offset in operating revenue | |
Lower cost of energy billed to customers | 129.4 | |
Reduction in gross receipts tax, offset in operating revenues | 12.0 | |
Higher tracker deferrals within operation and maintenance, depreciation and tax | (5.0) | |
| Total change in operating expense | $ | 63.0 | |
Electric Supply and Generation Transition
NIPSCO continues to execute on an electric generation transition consistent with the 2018 Plan and 2021 Plan, which outline the path to retire the remaining two coal units at R.M. Schahfer by the end of 2025 and the remaining coal-fired generation at Michigan City by the end of 2028, to be replaced by lower-cost, reliable and cleaner options. See "Project Status" discussion, below, and "Liquidity and Capital Resources" in this Management's Discussion for information on anticipated in-service dates related to our electric generation transition and additional information on our capital investment spend.
NIPSCO continues to work with the EPA to obtain an administrative approval associated with the operation of R.M. Schahfer’s remaining two coal units until 2025. In the event that the approval is not obtained, future operations could be impacted. We cannot estimate the financial impact on us if this approval is not obtained. Refer to Item 1A. Risk Factors, "Operational Risks," of this Annual Report on Form 10-K for further detail.
The current replacement plan is aligned with the Preferred Energy Resource Plan outlined in the 2021 Plan and primarily includes renewable sources of energy, including wind, solar, battery storage, and flexible natural gas resources to be obtained through a combination of NIPSCO ownership and PPAs. NIPSCO has sold, and may in the future sell, renewable energy credits from its renewable generation to third parties to offset customer costs. NIPSCO has executed several PPAs to purchase 100% of the output from renewable generation facilities at a fixed price per MWh. Each facility supplying the energy will have an associated nameplate capacity, and payments under the PPAs will not begin until the associated generation facility is constructed by the owner/seller. NIPSCO has also executed several BTAs with developers to construct renewable generation facilities.
Since 2020, two wind PPA projects, two wind BTA projects and two solar BTA projects have been placed into service, totaling 1,465 MW of nameplate capacity. NIPSCO has executed commercial agreements for each of the eight remaining identified projects. Dunns Bridge II, Cavalry, Fairbanks, Gibson, GreenRiver, Appleseed, Carpenter and Templeton have received IURC approval. Additional approvals by the IURC may be required to obtain recovery for increases in projects costs. NIPSCO has filed for a new gas peaking facility to be located at R.M. Schahfer Generating Station. On November 22, 2023 the IURC approved NIPSCO's request to convert the Gibson project from a PPA to a BTA. On January 17, 2024 the IURC approved increases to the project costs as well as the full ownership of Cavalry and Dunns Bridge II, allowing NIPSCO to leverage provisions of the IRA to monetize tax credits for the benefit of customers in lieu of utilizing tax equity partnerships. See "Executive Summary - Your Energy, Your Future" in this Management's Discussion for additional information.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
Electric Operations (continued)
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Remaining Renewables Projects | Transaction Type | Technology | Nameplate Capacity (MW) | Storage Capacity (MW) | |
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Cavalry | BTA | Solar & Storage | 200 | 60 | |
Dunns Bridge II | BTA | Solar & Storage | 435 | 75 | |
Fairbanks(1) | BTA | Solar | 250 | — | |
Gibson(1) | BTA | Solar | 200 | — | |
| Green River | 20 year PPA | Solar | 200 | — | |
| Templeton | 20 year PPA | Wind | 200 | — | |
| Carpenter | 20 year PPA | Wind | 200 | — | |
| Appleseed | 20 year PPA | Solar | 200 | — | |
(1) Under the structure approved by the IURC ownership of Fairbanks and Gibson will be transferred to JVs whose members are expected to include NIPSCO and an unrelated tax equity partner. NIPSCO is evaluating leveraging provisions of the IRA to monetize tax credits for the benefit of customers in lieu of utilizing tax equity partnerships. NIPSCO may seek IURC approval for full ownership of the Fairbanks and Gibson projects.
Project Status. We expect the majority of our remaining BTA and PPA projects to be placed in service in 2024 and 2025. Our contract amendments for these projects formally address inflationary cost pressures communicated from the developers of our solar and storage projects that are primarily due to (i) limited supply of solar panels and other uncertainties related to the U.S. Department of Commerce investigation on Antidumping and Countervailing Duties petition filed by a domestic solar manufacturer (the "DOC Investigation"), (ii) the U.S. Department of Homeland Security's June 2021 Withhold Release Order on silica-based products made by Hoshine Silicon Industry Co., Ltd./Uyghur Forced Labor Prevention Act, (iii) Section 201 Tariffs and (iv) persistent general global supply chain and labor availability issues. We are actively monitoring progress towards project milestones for each of our remaining projects.
In June 2022, the Biden Administration announced a 24-month tariff relief on solar panels subject to the DOC Investigation and authorized the use of the Defense Production Act, to accelerate domestic production of clean energy technologies, including solar panel parts. On August 18, 2023, the department of Commerce issued final determinations in the DOC Investigation and affirmed that tariff relief announced by the Biden Administration in June 2022 would remain in effect until June 2024. At this time, we do not anticipate any significant panel tariffs will impact our solar projects.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
Liquidity and Capital Resources
We continually evaluate the availability of adequate financing to fund our ongoing business operations, working capital and core safety and infrastructure investment programs. Our financing is sourced through cash flow from operations and the issuance of debt and/or equity. External debt financing is provided primarily through the issuance of long-term debt, accounts receivable securitization programs and our $1.85 billion commercial paper program, which is backstopped by our committed revolving credit facility with a total availability from third-party lenders of $1.85 billion. We entered into a $1.0 billion term agreement in the fourth quarter of 2022 and a $650.0 million term credit agreement in the fourth quarter of 2023. On January 3, 2024, we terminated and repaid in full our $1.0 billion term credit agreement and our $650.0 million term credit agreement. On March 24, 2023, we completed the issuance and sale of $750.0 million of 5.25% senior unsecured notes maturing in 2028, which resulted in approximately $742.2 million of net proceeds after discount and debt issuance costs. On June 8, 2023, we completed the issuance and sale of a reopening of $300.0 million of 5.25% senior unsecured notes maturing in 2028 and $450.0 million of 5.40% senior unsecured notes maturing in 2033, which resulted in approximately $742.5 million of net proceeds after discount and debt issuance costs. On June 15, 2023, we redeemed all 400,000 shares of Series A Preferred Stock for a redemption price of $1,000 per share, or $400.0 million in total. As of December 31, 2023, the ATM program and the associated equity distribution agreements expired. On December 31, 2023, we consummated the NIPSCO Minority Interest Transaction in exchange for a capital contribution of $2.16 billion in cash. See Note 4, "Noncontrolling Interest,", Note 6, "Equity," Note 7, "Short-Term Borrowings," and Note 8, "Long-Term Debt," in the Notes to the Consolidated Financial Statements for more information.
We believe these sources provide adequate capital to fund our operating activities and capital expenditures in 2024 and beyond.
Operating Activities
Net cash from operating activities for the year ended December 31, 2023 was $1,935.1 million, an increase of $525.7 million from 2022. This increase in cash from operating activities was primarily driven by year over year change in accounts receivable collections driven by the implementation of new rates and the impact of lower gas prices as compared to 2022, partially offset by lower accounts payables also driven by lower gas prices.
Investing Activities
Net cash used for investing activities for the year ended December 31, 2023 was $3,571.6 million, an increase of $1,001.4 million from 2022. Our current year investing activities were comprised of increased capital expenditures related to system growth and reliability as well as payments to renewable generation asset developers related to milestone payments for certain of our BTA projects in 2023, as well as the property insurance settlement related to the Greater Lawrence Incident received in the prior year.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
Capital Expenditures. The table below reflects actual capital expenditures and certain other investing activities by segment for 2023.
| | | | | | | | | |
| Actual |
| (in millions) | 2023 | | | | |
| Gas Distribution Operations | | | | | |
| System Growth and Tracker | $ | 1,386.8 | | | | | |
| Maintenance | 328.4 | | | | | |
Total Gas Distribution Operations(1) | 1,715.2 | | | | | |
| Electric Operations | | | | | |
| System Growth and Tracker | 440.9 | | | | | |
| Maintenance | 284.6 | | | | | |
| Generation Transition Investments | 13.7 | | | | | |
Total Electric Operations(1) | 739.2 | | | | | |
Corporate and Other Operations - Maintenance(1) | 236.3 | | | | | |
Total Capital Expenditures(2) | $ | 2,690.7 | | | | | |
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| | | | | (1)Programs do not include any costs already included in base rates.(2)Columbia of Maryland’s STRIDE expired December 31, 2023. On June 23, 2023, CMD filed an application for approval of a new five-year STRIDE. On November 21, 2023, the filing was withdrawn. Effective January 1, 2024, the STRIDE capital investments previously recovered are no longer earning a current return.
(3)Coincident with the implementation of Step-1 base rates in August 2023 in Cause No. 45772, TDSIC-3 cumulative capital investment of $554.7 million moved out of this tracker and into base rates.
(4)NIPSCO received approval for a new certificate of public convenience and necessity on December 28, 2022 for an additional Pipeline Safety III Compliance Plan, including $235.3M in capital and $34.1M in operation and maintenance expense project investments.
(5)Columbia of Kentucky placed these rates into effect, as of January 3, 2024, subject to refund, depending on a Commission order ruling on the Application.
On March 30, 2022, NIPSCO Electric filed a petition with the IURC seeking approval of NIPSCO's federally mandated costs for closure of Michigan City Generating Station's CCR ash ponds. The project includes a total estimated $40.0 million of federally mandated retirement costs. On November 2, 2022, NIPSCO Electric filed a petition with the IURC seeking approval of NIPSCO's federally mandated costs for closure of R.M. Schahfer Generation Station's multi-cell unit. The project includes a total estimated $53.0 million of federally mandated retirement costs. Due to the NIPSCO Electric settlement agreement filed on March 10, 2023, both FMCA cases were stayed pending the outcome of the NIPSCO Electric base rate case, which proposed these pond closure costs be recovered through base rates, rather than the FMCA Tracker. NIPSCO received an order approving its electric base rate case settlement on August 2, 2023. Pursuant to that settlement agreement, NIPSCO filed and the IURC approved motions to dismiss the independent FMCA cases related to CCR ash pond recovery, as that recovery will now occur through NIPSCO’s electric base rates. Refer to Note 19, "Other Commitments and Contingencies - D. Environmental Matters," in the Notes to Consolidated Financial Statements for further discussion of the CCRs.
Refer to Note 12, "Regulatory Matters," in the Notes to Consolidated Financial Statements for a further discussion of regulatory developments during 2023.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
Financing Activities
Common Stock, Preferred Stock and Equity Unit Sale. Refer to Note 6, "Equity," in the Notes to Consolidated Financial Statements for information on common stock, preferred stock and equity units activity.
Short-term Debt. Refer to Note 7, "Short-Term Borrowings," in the Notes to Consolidated Financial Statements for information on short-term debt.
Long-term Debt. Refer to Note 8, "Long-Term Debt," in the Notes to Consolidated Financial Statements for information on long-term debt.
Non-controlling Interest. We received $2.16 billion upon closing the NIPSCO Minority Interest Transaction. Proceeds from the closing of the NIPSCO Minority Interest Transaction were used to repay short-term debt, including our credit agreements. Under the terms of the LLC Agreement, Blackstone will provide up to $250 million in additional capital contributions over a three-year period after the Closing, which obligation is backed by an Equity Commitment Letter from an affiliate of Blackstone. Refer to Note 4, "Noncontrolling Interest," and Note 7, "Short-Term Borrowings," in the Notes to Consolidated Financial Statements for more information.
Sources of Liquidity
The following table displays our liquidity position as of December 31, 2023 and 2022:
| | | | | | | | |
Year Ended December 31, (in millions) | 2023 | 2022 |
| Current Liquidity | | |
| Revolving Credit Facility | $ | 1,850.0 | | $ | 1,850.0 | |
Accounts Receivable Programs(1) | 383.9 | | 447.2 | |
| Less: | | |
| Commercial Paper | 1,061.0 | | 415.0 | |
| Accounts Receivable Programs Utilized | 337.6 | | 347.2 | |
| Letters of Credit Outstanding Under Credit Facility | 9.9 | | 10.2 | |
| Add: | | |
| Cash and Cash Equivalents | 2,245.4 | | 40.8 | |
| Net Available Liquidity | $ | 3,070.8 | | $ | 1,565.6 | |
(1)Represents the lesser of the seasonal limit or maximum borrowings supportable by the underlying receivables.
Debt Covenants. We are subject to a financial covenant under our revolving credit facility which requires us to maintain a debt to capitalization ratio that does not exceed 70%. As of December 31, 2023, the ratio was 58.2%.
Credit Ratings. The credit rating agencies periodically review our ratings, taking into account factors such as our capital structure and earnings profile. The following table includes our and NIPSCO's credit ratings and ratings outlook as of December 31, 2023. There have been no changes to our credit ratings or outlooks since February 2020.
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.
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| S&P | Moody's | Fitch |
| Rating | Outlook | Rating | Outlook | Rating | Outlook |
| NiSource | BBB+ | Stable | Baa2 | Stable | BBB | Stable |
| NIPSCO | BBB+ | Stable | Baa1 | Stable | BBB | Stable |
| Commercial Paper | A-2 | Stable | P-2 | Stable | F2 | Stable |
Certain of our subsidiaries have agreements that contain “ratings triggers” that require increased collateral if our credit ratings or the credit ratings of certain of our subsidiaries are below investment grade. These agreements are primarily for insurance purposes and for the physical purchase or sale of power. As of December 31, 2023, a collateral requirement of approximately $90.1 million would be required in the event of a downgrade below investment grade. In addition to agreements with ratings triggers, there are other agreements that contain “adequate assurance” or “material adverse change” provisions that could necessitate additional credit support such as letters of credit and cash collateral to transact business.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
Equity. Our authorized capital stock consists of 770,000,000 shares, $0.01 par value, of which 750,000,000 are common stock and 20,000,000 are preferred stock. As of December 31, 2023, 447,381,671 shares of common stock and 40,000 shares of preferred stock were outstanding. For more information regarding our common and preferred stock, see Note 6, "Equity," in the Notes to Consolidated Financial Statements.
Contractual Obligations, Cash Requirements and Off-Balance Sheet Arrangements
We have certain contractual obligations requiring payments at specified periods. Our material cash requirements are detailed below. We intend to use funds from the liquidity sources referenced above to meet these cash requirements.
At December 31, 2023, we had $11,079.3 million in long-term debt and $3,048.6 million in short-term borrowings outstanding.
During 2024 and 2025, we expect to make cash payments of $652.0 million and $485.7 million, respectively, related to pipeline service obligations including demand for gas transportation, gas storage and gas purchases.
Our expected payments include employer contributions to pension and other postretirement benefits plans expected to be made in 2024. Plan contributions beyond 2024 are dependent upon a number of factors, including actual returns on plan assets, which cannot be reliably estimated at this time. In 2024, we expect to make contributions of approximately $2.2 million to our pension plans and approximately $23.1 million to our postretirement medical and life plans. Refer to Note 16, "Pension and Other Postemployment Benefits," in the Notes to Consolidated Financial Statements for more information.
We cannot reasonably estimate the settlement amounts or timing of cash flows related to certain of our long-term obligations classified as "Total Other Liabilities" on the Consolidated Balance Sheets.
We have uncertain income tax positions for which we are unable to predict when the matters will be resolved. Refer to Note 15, "Income Taxes," in the Notes to Consolidated Financial Statements for more information.
NIPSCO has executed several PPAs to purchase 100% of the output from renewable generation facilities at a fixed price per MWh. NIPSCO has also executed several BTAs with developers to construct renewable generation facilities. See Note 19, "Other Commitments and Contingencies - A. Contractual Obligations," and Note 19, "Other Commitments and Contingencies," - E. "Other Matters - Generation Transition," in the Notes to Consolidated Financial Statements for additional information.
In addition, we, along with certain of our subsidiaries, enter into various agreements providing financial or performance assurance to third parties on behalf of certain subsidiaries. Such agreements include guarantees and stand-by letters of credit.
Refer to Note 19, "Other Commitments and Contingencies," in the Notes to Consolidated Financial Statements for additional information regarding our contractual obligations over the next 5 years and thereafter and our off-balance sheet arrangements.
Market Risk Disclosures
Risk is an inherent part of our businesses. The extent to which we properly and effectively identify, assess, monitor and manage each of the various types of risk involved in our businesses is critical to our profitability. We seek to identify, assess, monitor and manage, in accordance with defined policies and procedures, the following principal market risks that are involved in our businesses: commodity price risk, interest rate risk and credit risk. We manage risk through a multi-faceted process with oversight by the Risk Management Committee that requires constant communication, judgment and knowledge of specialized products and markets. Our senior management takes an active role in the risk management process and has developed policies and procedures that require specific administrative and business functions to assist in the identification, assessment and control of various risks. These may include, but are not limited to market, operational, financial, compliance and strategic risk types. In recognition of the increasingly varied and complex nature of the energy business, our risk management process, policies and procedures continue to evolve and are subject to ongoing review and modification.
Commodity Price Risk
Our Gas and Electric Operations have commodity price risk primarily related to the purchases of natural gas and power. To manage this market risk, our subsidiaries use derivatives, including commodity futures contracts, swaps, forwards and options. We do not participate in speculative energy trading activity.
Commodity price risk resulting from derivative activities at our rate-regulated subsidiaries is limited and does not bear significant exposure to earnings risk, since our current regulatory mechanisms allow recovery of prudently incurred purchased power, fuel and gas costs through the rate-making process, including gains or losses on these derivative instruments. These changes are included in the GCA and FAC regulatory rate-recovery mechanisms. If these mechanisms were to be adjusted or
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
eliminated, these subsidiaries may begin providing services without the benefit of the traditional rate-making process and may be more exposed to commodity price risk. For additional information, see "Results and Discussion of Operations" in this Management's Discussion.
Certain of our subsidiaries are required to make cash margin deposits with their brokers to cover actual and potential losses in the value of outstanding exchange traded derivative contracts. The amount of these deposits, some of which are reflected in our restricted cash balance, may fluctuate significantly during periods of high volatility in the energy commodity markets.
Refer to Note 13, "Risk Management Activities," in the Notes to Consolidated Financial Statements for further information on our commodity price risk assets and liabilities as of December 31, 2023 and 2022.
Interest Rate Risk
We are exposed to interest rate risk as a result of changes in interest rates on borrowings under our revolving credit agreement, commercial paper program, term credit agreements and accounts receivable programs, which have interest rates that are indexed to short-term market interest rates. Based upon average borrowings and debt obligations subject to fluctuations in short-term market interest rates, an increase (or decrease) in short-term interest rates of 100 basis points (1%) would have increased (or decreased) interest expense by $18.9 million and $8.7 million for 2023 and 2022, respectively. We are also exposed to interest rate risk as a result of changes in benchmark rates that can influence the interest rates of future debt issuances. From time to time, we may enter into forward interest rate instruments to lock in long term interest costs and/ or rates.
Credit Risk
Due to the nature of the industry, credit risk is embedded in many of our business activities. Our extension of credit is governed by a Corporate Credit Risk Policy. In addition, Risk Management Committee guidelines are in place which document management approval levels for credit limits, evaluation of creditworthiness, and credit risk mitigation efforts. Exposures to credit risks are monitored by the risk management function, which is independent of commercial operations. Credit risk arises due to the possibility that a customer, supplier or counterparty will not be able or willing to fulfill its obligations on a transaction on or before the settlement date. For derivative-related contracts, credit risk arises when counterparties are obligated to deliver or purchase defined commodity units of gas or power to us at a future date per execution of contractual terms and conditions. Exposure to credit risk is measured in terms of both current obligations and the market value of forward positions net of any posted collateral such as cash and letters of credit.
We evaluate the financial status of our banking partners through the use of market-based metrics such as credit default swap pricing levels, and also through traditional credit ratings provided by major credit rating agencies.
Other Information
Critical Accounting Estimates
We apply certain accounting policies in accordance with GAAP, which require that we make estimates and judgments that have had, and may continue to have, significant impacts on our operations and Consolidated Financial Statements. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following represent the more significant items requiring the use of judgment in preparing our Consolidated Financial Statements:
Basis of Accounting for Rate-Regulated Subsidiaries. ASC Topic 980, Regulated Operations, provides that rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the way in which regulators establish rates, if the rates established are designed to recover the costs of providing the regulated service and if the competitive environment makes it probable that such rates can be billed and collected. Accordingly, certain expenses and credits subject to utility regulation or rate determination normally reflected in income may be deferred on the Consolidated Balance Sheets and recognized in income as the related amounts are included in service rates and recovered from or refunded to customers. The total amounts of regulatory assets and liabilities reflected on the Consolidated Balance Sheets were $2,460.2 million and $1,789.3 million at December 31, 2023, and $2,580.8 million and $2,012.6 million at December 31, 2022, respectively. For additional information, refer to Note 12, "Regulatory Matters," in the Notes to Consolidated Financial Statements.
In the event that regulation significantly changes the opportunity for us to recover our costs in the future, all or a portion of our regulated operations may no longer meet the criteria for the application of ASC Topic 980, Regulated Operations. In such
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
event, a write-down of all or a portion of our existing regulatory assets and liabilities could result. If transition cost recovery is approved by the appropriate regulatory bodies that would meet the requirements under GAAP for continued accounting as regulatory assets and liabilities during such recovery period, the regulatory assets and liabilities would be reported at the recoverable amounts. If we were unable to continue to apply the provisions of ASC Topic 980, Regulated Operations, we would be required to apply the provisions of ASC Topic 980-20, Discontinuation of Rate-Regulated Accounting. In management’s opinion, our regulated subsidiaries will be subject to ASC Topic 980, Regulated Operations for the foreseeable future.
Certain of the regulatory assets reflected on our Consolidated Balance Sheets require specific regulatory action in order to be included in future service rates. Although recovery of these amounts is not guaranteed, we believe that these costs meet the requirements for deferral as regulatory assets. If we determine that the amounts included as regulatory assets are no longer probable of recovery, a charge to income would immediately be required to the extent of the unrecoverable amounts.
One of the more significant items recorded through the application of this accounting guidance is the regulatory overlay for JV accounting. The application of HLBV to consolidated VIEs generally results in the recognition of profit from the related JVs over a time frame that is different from when the regulatory return is earned. In accordance with the principles of ASC 980, we have recognized a regulatory deferral of certain amounts representing the timing difference between the profit earned from the JVs and the amount included in regulated rates to recover our approved investments in consolidated JVs. For additional information, refer to Note 1, "Nature of Operations and Summary of Significant Accounting Policies - S. Noncontrolling Interest," in the Notes to Consolidated Financial Statements.
Pension and Postretirement Benefits. We have defined benefit plans for both pension and other postretirement benefits. The calculation of the net obligations and annual expense related to the plans requires a significant degree of judgment regarding the discount rates to be used in bringing the liabilities to present value, expected long-term rates of return on plan assets, health care trend rates, and mortality rates, among other assumptions. Due to the size of the plans and the long-term nature of the associated liabilities, changes in the assumptions used in the actuarial estimates could have material impacts on the measurement of the net obligations and annual expense recognition. Differences between actuarial assumptions and actual plan results are deferred into AOCI or a regulatory balance sheet account, depending on the jurisdiction of our entity. These deferred gains or losses are then amortized into the income statement when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the fair value of plan assets (known in GAAP as the “corridor” method) or when settlement accounting is triggered.
The discount rates, expected long-term rates of return on plan assets, health care cost trend rates and mortality rates are critical assumptions. Methods used to develop these assumptions are described below. While a third party actuarial firm assists with the development of many of these assumptions, we are ultimately responsible for selecting the final assumptions.
The discount rate is utilized principally in calculating the actuarial present value of pension and other postretirement benefit obligations and net periodic pension and other postretirement benefit plan costs. Our discount rates for both pension and other postretirement benefits are determined using spot rates along an AA-rated above median yield curve with cash flows matching the expected duration of benefit payments to be made to plan participants.
The expected long-term rate of return on plan assets is a component utilized in calculating annual pension and other postretirement benefit plan costs. We estimate the expected return on plan assets by evaluating expected bond returns, equity risk premiums, target asset allocations, the effects of active plan management, the impact of periodic plan asset rebalancing and historical performance. We also consider the guidance from our investment advisors in making a final determination of our expected rate of return on assets. For measurement of 2023 net periodic benefit cost, we selected a weighted-average assumption of the expected pre-tax long-term rate of return of 7.00% and 6.96% for our pension and other postretirement benefit plan assets, respectively. For measurement of 2024 net periodic benefit cost, we selected a weighted-average assumption of the expected pre-tax long-term rate of return of 7.02% and 7.06 % respectively, for our pension and other postretirement benefit plan assets.
We estimate the assumed health care cost trend rate, which is used in determining our other postretirement benefit net expense, based upon our actual health care cost experience, the effects of recently enacted legislation, third-party actuarial surveys and general economic conditions.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
We utilize a full yield curve approach to estimate the service and interest components of net periodic benefit cost for pension and other postretirement benefits by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. For further discussion of our pension and other postretirement benefits, see Note 16, "Pension and Other Postemployment Benefits," in the Notes to Consolidated Financial Statements.
Typically, we use the Society of Actuaries’ most recently published mortality data in developing a best estimate of mortality as part of the calculation of the pension and other postretirement benefit obligations. We adopted Aon's U.S. Endemic Mortality Improvement scale MP-2021, accounting for both the near-term and long-term COVID-19 impacts.
The following tables illustrate the effects of changes in these actuarial assumptions while holding all other assumptions constant:
| | | | | | | | | | | |
| Impact on December 31, 2023 Projected Benefit Obligation Increase/(Decrease) |
Change in Assumptions (in millions) | Pension Benefits | | Other Postretirement Benefits |
| +50 basis points change in discount rate | $ | (51.8) | | | $ | (20.5) | |
| -50 basis points change in discount rate | 55.9 | | | 22.3 | |
| |
| |
| | | |
| Impact on 2023 Expense Increase/(Decrease)(1) |
Change in Assumptions (in millions) | Pension Benefits | | Other Postretirement Benefits |
| +50 basis points change in discount rate | $ | (1.6) | | | $ | 0.3 | |
| -50 basis points change in discount rate | 1.4 | | | (0.3) | |
| +50 basis points change in expected long-term rate of return on plan assets | (6.8) | | | (1.1) | |
| -50 basis points change in expected long-term rate of return on plan assets | 6.8 | | | 1.1 | |
| |
| |
(1)Before labor capitalization and regulatory deferrals.
Goodwill and Other Intangible Assets. We have six goodwill reporting units, comprised of the six state operating companies within the Gas Distribution Operations reportable segment. Our goodwill assets at December 31, 2023 were $1,486 million, most of which resulted from the acquisition of Columbia on November 1, 2000.
As required by GAAP, we test for impairment of goodwill on an annual basis and on an interim basis when events or circumstances indicate that a potential impairment may exist. Our annual goodwill test takes place in the second quarter of each year and was performed on May 1, 2023. A qualitative ("Step 0") test was completed on May 1, 2023, for all reporting units. In the Step 0 analysis, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the applicable reporting units as compared to the baseline "step 1" fair value measurement performed May 1, 2020. The results of this assessment indicated that it was more likely than not that the estimated fair value of the reporting units substantially exceeded the related carrying values of our reporting units; therefore, no "step 1" analysis was required and no impairment charges were indicated. Since the annual evaluation, there have been no indications that the fair values of the goodwill reporting units have decreased below the carrying values.
As noted above, application of the qualitative goodwill impairment test requires evaluating various events and circumstances to determine whether it is not more likely than not that the fair value of a reporting unit is less than its carrying amount. Although we believe all relevant factors were considered in the qualitative impairment analysis to reach the conclusion that goodwill is not impaired, significant changes in any one of the assumptions could potentially result in the recording of an impairment that could have significant impacts on the Consolidated Financial Statements.
See Note 10, "Goodwill," in the Notes to Consolidated Financial Statements for further information.
Unbilled Revenue. We record utility operating revenues when energy is delivered to our customers. However, the determination of energy sales to individual customers is based upon the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to customers since the date of their last meter reading are estimated and corresponding unbilled revenues are calculated. This unbilled revenue is estimated each month based upon historical usage, customer rates and weather. As of December 31, 2023, we recorded $337.6 million of customer
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
NISOURCE INC.
accounts receivable for unbilled revenue. Significant fluctuations in energy demand for the unbilled period or changes in the composition of customer classes could impact the accuracy of the unbilled revenue estimate. Refer to Note 3, "Revenue Recognition," in the Notes to Consolidated Financial Statements for additional information regarding our significant judgments and estimates related to unbilled revenue recognition.
Income Taxes. The consolidated income tax provision and deferred income tax assets and liabilities, as well as any unrecognized tax benefits and valuation allowances, require use of estimates and significant management judgement. Although we believe that current estimates for deferred tax assets and liabilities are reasonable, actual results could differ from these estimates for a variety of reasons, including reasonable projections of taxable income, the ability and intent to implement tax planning strategies if necessary, and interpretations of applicable tax laws and regulations across multiple taxing jurisdictions. Ultimate resolution or clarification of income tax matters may result in favorable or unfavorable impacts to net income and cash flows, and adjustments to tax-related assets and liabilities could be material.
We account for uncertain income tax positions using a benefit recognition model with a two-step approach including a more-likely-than-not recognition threshold and a measurement approach based on the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. We evaluate each position based solely on the technical merits and facts and circumstances of the position, assuming the position will be examined by a taxing authority having full knowledge of all relevant information. Significant judgment is required to determine whether the recognition threshold has been met and, if so, the appropriate amount of tax benefits to be recorded in the consolidated financial statements. At December 31, 2023 and 2022, we had $21.7 million of unrecognized tax benefits. Changes in these unrecognized tax benefits may result from remeasurement of amounts expected to be realized, settlements with tax authorities and expiration of statutes of limitations.
On a quarterly basis, we evaluate our deferred tax assets by considering current and historical financial results, expectations for future taxable income and the availability of tax planning strategies that can be implemented, if necessary, to realize deferred tax assets. Failure to achieve forecasted taxable income or successfully implement tax planning strategies may affect the realization of deferred tax assets. We establish a valuation allowance when we conclude it is more likely than not that all, or a portion, of a deferred tax asset will not be realized in future periods. Significant judgment is required to determine the amount of tax benefits expected to be realized. At December 31, 2023 and 2022, we had established $6.4 million and $7.8 million, respectively, of valuation allowances (net of federal benefit) related to certain state net operating loss carryforwards. Refer to Note 15, "Income Taxes," in the Notes to Consolidated Financial Statements for additional information.
Recently Issued Accounting Pronouncements
Refer to Note 2, "Recent Accounting Pronouncements," in the Notes to Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and Qualitative Disclosures about Market Risk are reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Disclosures.”
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NISOURCE INC.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of NiSource Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NiSource Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related statements of consolidated income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Non-Controlling Interest - Minority Interest Investment in NIPSCO Holdings II LLC – Refer to Notes 1, 4, 6, and 15 to the financial statements
Critical Audit Matter Description
On December 31, 2023, the Company consummated the closing of the issuance of a 19.9% equity interest in NIPSCO Holdings II LLC, a wholly-owned subsidiary of the Company and the sole owner of Northern Indiana Public Service Company LLC (“NIPSCO”), to BIP BLUE BUYER L.L.C., an affiliate of Blackstone Infrastructure Partners. At closing, BIP BLUE BUYER L.L.C., acquired a 19.9% equity interest in NIPSCO Holdings II LLC in exchange for making a capital contribution of $2.16 billion in cash to NIPSCO Holdings II LLC. Upon consummation of the minority interest transaction, the Company owns an 80.1% controlling indirect equity interest in NIPSCO LLC while BIP BLUE BUYER L.L.C., owns the remaining 19.9% indirect equity interest.
We identified the $2.16 billion minority interest investment in NIPSCO Holdings II LLC as a critical audit matter due to the significant degree of judgement involved in complex accounting and tax conclusions. This required a significant degree of auditor judgment when performing audit procedures, including the need to involve professionals in our firm with the
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
appropriate expertise to assist us in evaluating management’s conclusions around the accounting and tax treatment for the transaction.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the minority interest investment in NIPSCO Holdings II LLC included the following, among others:
•We tested the effectiveness of controls over the accounting assessment for this transaction, including the controls over technical accounting conclusions and income tax treatment of this transaction.
•We evaluated management’s conclusions related to accounting for the transaction by:
▪Obtaining and reading the contractual agreements related to this transaction,
▪Involving professionals in our firm with the appropriate expertise in accounting for minority interest transactions to evaluate the work performed by management related to the accounting treatment of the transaction,
▪Involving professionals in our firm with the appropriate expertise in income taxes to evaluate the work performed by management related to the tax treatment of the transaction,
•We evaluated the appropriateness of the Company’s disclosures related to the minority interest investment, including balances recorded.
Regulatory Matters - Impact of Rate Regulation on the Financial Statements - Refer to Notes 1, 9, and 12 to the financial statements
Critical Audit Matter Description
The Company’s subsidiaries are fully regulated natural gas and electric utility companies serving customers in six states. These rate-regulated subsidiaries account for and report assets and liabilities consistent with the economic effect of the manner in which regulators establish rates, if the rates established are designed to recover the costs of providing the regulated service and it is probable that such rates can be charged to and collected from customers. Certain expenses and credits subject to utility regulation or rate determination normally reflected in income are deferred on the consolidated balance sheets and are later recognized in income as the related amounts are included in customer rates and recovered from or refunded to customers.
The Company’s subsidiaries’ rates are subject to regulatory rate-setting processes. Rates are determined and approved in regulatory proceedings based on an analysis of the subsidiaries’ costs to provide utility service and a return on, and recovery of, the subsidiaries’ investment in the utility business. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The respective commission’s regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the commission in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. While the Company has indicated it expects to recover costs from customers through regulated rates, there is a risk that the commission will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.
We identified the impact of rate regulation, specifically certain regulatory assets and liabilities at the Company’s Northern Indiana Public Service Company LLC and Columbia Gas of Ohio, Inc. subsidiaries, as a critical audit matter due to the significant judgments made by management to support its assertions about certain account balances and the significant degree of subjectivity involved in assessing the likelihood of recovery of incurred costs in current or future rates due in part to uncertainty related to future decisions by the rate regulators. This required specialized knowledge of accounting for rate regulation and the rate setting process due to its inherent complexities and a significant degree of auditor judgment when performing audit procedures to evaluate the reasonableness of management’s conclusions.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the application of specialized rules to account for the effects of cost-based rate regulation related to the uncertainty of future decisions by the rate regulators, specifically the Indiana Utility Regulatory Commission (IURC) and the Public Utility Commission of Ohio (PUCO), included the following, among others:
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
•We tested the effectiveness of management’s controls over (1) the evaluation of the likelihood of (a) the recovery of costs deferred as regulatory assets in future periods, and (b) regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates; and (2) the evaluation of Hypothetical Liquidation Book Value (HLBV) Models for the company’s Renewable Joint Ventures and its impact on the Company’s regulatory assets for recovery in rate base.
•We read relevant regulatory orders issued by the IURC and the PUCO, including regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to assess the likelihood of recovery in future rates or a future reduction in rates based on precedents of the commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness, including the implementation of new rate orders at Northern Indiana Public Service Company LLC’s electric business and Columbia Gas of Ohio, Inc.
•For the Northern Indiana Public Service Company LLC gas base rate case proceeding, we inspected the Company’s and intervenors’ filings with the commissions that may impact the Company’s future rates, for any evidence that might contradict management’s assertions related to recoverability of recorded assets.
•We inquired of management about property, plant, and equipment that may be abandoned with an emphasis on the generation strategy related to Northern Indiana Public Service Company LLC’s R.M. Schahfer and Michigan City Generating Stations. We inspected minutes of the board of directors and regulatory orders and other filings with the IURC to identify evidence that may contradict management’s assertion regarding probability of an abandonment.
•We read the relevant regulatory orders issued by the IURC for the Company’s renewable energy investments. We evaluated the appropriateness of recognizing a regulatory liability or asset representing timing differences between the profit allocated under the HLBV method related to the consolidated joint ventures and the allowed earnings included in regulatory rates. We also evaluated the appropriateness of the offset to the regulatory liability or asset recorded in depreciation expense.
/s/
February 21, 2024
We have served as the Company's auditor since 2002.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
STATEMENTS OF CONSOLIDATED INCOME
| | | | | | | | | | | | | | | | | |
Year Ended December 31, (in millions, except per share amounts) | 2023 | | 2022 | | 2021 |
| Operating Revenues | | | | | |
| Customer revenues | $ | | | | $ | | | | $ | | |
| Other revenues | | | | | | | | |
| Total Operating Revenues | | | | | | | | |
| Operating Expenses | | | | | |
| Cost of energy | | | | | | | | |
| Operation and maintenance | | | | | | | | |
| Depreciation and amortization | | | | | | | | |
| | | |
| | | |
| Loss (gain) on sale of assets, net | | | | () | | | | |
| Other taxes | | | | | | | | |
| Total Operating Expenses | | | | | | | | |
| | | |
| Operating Income | | | | | | | | |
| Other Income (Deductions) | | | | | |
| Interest expense, net | () | | | () | | | () | |
| Other, net | | | | | | | | |
| Total Other Deductions, Net | () | | | () | | | () | |
Income before Income Taxes | | | | | | | | |
| Income Taxes | | | | | | | | |
| | | |
| | | |
| | | |
Net Income | | | | | | | | |
Net (loss) income attributable to noncontrolling interest | () | | | () | | | | |
Net Income attributable to NiSource | | | | | | | | |
| Preferred dividends | () | | | () | | | () | |
Preferred redemption premium | () | | | | | | | |
| | | |
Net Income Available to Common Shareholders | | | | | | | | |
| | | |
| | | |
| | | |
| | | |
Earnings Per Share | | | | | |
| | | |
| | | |
Basic Earnings Per Share | $ | | | | $ | | | | $ | | |
| | | |
| | | |
| | | |
Diluted Earnings Per Share | $ | | | | $ | | | | $ | | |
| | | |
| Basic Average Common Shares Outstanding | | | | | | | | |
| Diluted Average Common Shares | | | | | | | | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
Year Ended December 31, (in millions, net of taxes) | 2023 | | 2022 | | 2021 |
Net Income | $ | | | | $ | | | | $ | | |
Other comprehensive income: | | | | | |
Net unrealized gain (loss) on available-for-sale securities(1) | | | | () | | | () | |
Net unrealized (loss) gain on cash flow hedges(2) | () | | | | | | | |
Unrecognized pension and OPEB benefit (costs)(3) | () | | | () | | | | |
Total other comprehensive income | | | | | | | | |
Total Comprehensive Income | $ | | | | $ | | | | $ | | |
| | | |
| | | |
(1) million tax expense, $ million tax benefit and $ million tax benefit in 2023, 2022 and 2021, respectively.
(2) million tax benefit, $ million tax expense and $ million tax expense in 2023, 2022 and 2021, respectively.
(3) million tax benefit, $ million tax benefit and $ million tax expense in 2023, 2022 and 2021, respectively.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| (in millions) | December 31, 2023 | | December 31, 2022 |
| ASSETS | | | |
| Property, Plant and Equipment | | | |
| Plant | $ | | | | $ | | |
| Accumulated depreciation and amortization | () | | | () | |
| |
| |
Net Property, Plant and Equipment(1) | | | | | |
| Investments and Other Assets | | | |
| Unconsolidated affiliates | | | | | |
Available-for-sale debt securities (amortized cost of $ and $, allowance for credit losses of $ and $, respectively) | | | | | |
| Other investments | | | | | |
| Total Investments and Other Assets | | | | | |
| Current Assets | | | |
| Cash and cash equivalents | | | | | |
| Restricted cash | | | | | |
| Accounts receivable | | | | | |
| Allowance for credit losses | () | | | () | |
| Accounts receivable, net | | | | | |
Gas storage | | | | | |
| Materials and supplies, at average cost | | | | | |
| Electric production fuel, at average cost | | | | | |
| |
| Exchange gas receivable | | | | | |
| |
| Regulatory assets | | | | | |
| |
| |
| Deposits to renewable generation asset developer | | | | | |
| Prepayments and other | | | | | |
Total Current Assets(1) | | | | | |
| Other Assets | | | |
| |
| Regulatory assets | | | | | |
| Goodwill | | | | | |
| |
| |
| |
| Deferred charges and other | | | | | |
| Total Other Assets | | | | | |
| Total Assets | $ | | | | $ | | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| (in millions, except share amounts) | December 31, 2023 | | December 31, 2022 |
| CAPITALIZATION AND LIABILITIES | | | |
| Capitalization | | | |
| Stockholders’ Equity | | | |
Common stock - $ par value, shares authorized; and shares outstanding, respectively | $ | | | | $ | | |
Preferred stock - $ par value, shares authorized; and shares outstanding, respectively | | | | | |
| Treasury stock | () | | | () | |
| Additional paid-in capital | | | | | |
| Retained deficit | () | | | () | |
| Accumulated other comprehensive loss | () | | | () | |
| Total NiSource Stockholders' Equity | | | | | |
| Noncontrolling interest in consolidated subsidiaries | | | | | |
| Total Stockholders’ Equity | | | | | |
| Long-term debt, excluding amounts due within one year | | | | | |
| Total Capitalization | | | | | |
| Current Liabilities | | | |
| Current portion of long-term debt | | | | | |
| Short-term borrowings | | | | | |
| Accounts payable | | | | | |
| |
| Customer deposits and credits | | | | | |
| Taxes accrued | | | | | |
| Interest accrued | | | | | |
Asset retirement obligations | | | | | |
| Exchange gas payable | | | | | |
| |
| Regulatory liabilities | | | | | |
| |
| |
| |
| Accrued compensation and employee benefits | | | | | |
| |
| Obligations to renewable generation asset developer | | | | | |
| Other accruals | | | | | |
Total Current Liabilities(1) | | | | | |
| Other Liabilities | | | |
| |
| Deferred income taxes | | | | | |
| |
| |
| Accrued liability for postretirement and postemployment benefits | | | | | |
| |
| Regulatory liabilities | | | | | |
| Asset retirement obligations | | | | | |
| |
| Other noncurrent liabilities and deferred credits | | | | | |
Total Other Liabilities(1) | | | | | |
Commitments and Contingencies (Refer to Note 19, "Other Commitments and Contingencies") | | | |
| Total Capitalization and Liabilities | $ | | | | $ | | |
(1)Includes $ million and $ million in 2023 and 2022, respectively, of current liabilities and $ million and $ million in 2023 and 2022, respectively, of other liabilities of consolidated VIEs that creditors do not have recourse to our general credit. Refer to Note 4, "Noncontrolling Interest," for additional information.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
| | | | | | | | | | | | | | | | | |
Year Ended December 31, (in millions) | 2023 | | 2022 | | 2021 |
| Operating Activities | | | | | |
Net Income | $ | | | | $ | | | | $ | | |
| Adjustments to Reconcile Net Income to Net Cash from Operating Activities: | | | | | |
| | | |
| Depreciation and amortization | | | | | | | | |
| | | |
| Deferred income taxes and investment tax credits | | | | | | | | |
| | | |
| Stock compensation expense and 401(k) profit sharing contribution | | | | | | | | |
| | | |
| | | |
| Loss (gain) on sale of assets | | | | () | | | | |
| | | |
| | | |
| Other adjustments | () | | | | | | () | |
| Changes in Assets and Liabilities: | | | | | |
| Accounts receivable | | | | () | | | () | |
| | | |
Gas storage and other inventories | | | | () | | | () | |
| Accounts payable | () | | | | | | | |
| | | |
| | | |
| | | |
| Exchange gas receivable/payable | | | | | | | () | |
| Other accruals | () | | | | | | | |
| Prepayments and other current assets | | | | () | | | () | |
| Regulatory assets/liabilities | () | | | () | | | | |
| Postretirement and postemployment benefits | () | | | | | | () | |
| | | |
| Deferred charges and other noncurrent assets | () | | | () | | | () | |
| Other noncurrent liabilities and deferred credits | () | | | () | | | () | |
| | | |
| Net Cash Flows from Operating Activities | | | | | | | | |
| Investing Activities | | | | | |
| Capital expenditures | () | | | () | | | () | |
| Insurance Recoveries | | | | | | | | |
| Cost of removal | () | | | () | | | () | |
| | | |
| Purchases of available-for-sale securities | () | | | () | | | () | |
| Sales of available-for-sale securities | | | | | | | | |
Milestone and final payments to renewable generation asset developer | () | | | () | | | () | |
| Other investing activities | () | | | | | | () | |
| | | |
| Net Cash Flows used for Investing Activities | () | | | () | | | () | |
| Financing Activities | | | | | |
| Proceeds from issuance of long-term debt | | | | | | | | |
| Repayments of long-term debt and finance lease obligations | () | | | () | | | () | |
Issuance of short term credit agreements | | | | | | | | |
| | | |
Net change in commercial paper and other short-term borrowings | | | | | | | | |
| Issuance of common stock, net of issuance costs | | | | | | | | |
| | | |
| Payment of obligation to renewable generation asset developer | () | | | | | | | |
| Equity costs, premiums and other debt related costs | () | | | () | | | () | |
Contributions from noncontrolling interests | | | | | | | | |
| Distributions to noncontrolling interest | () | | | () | | | () | |
| Issuance of equity units, net of underwriting costs | | | | | | | | |
Redemption of preferred stock | () | | | | | | | |
| Dividends paid - common stock | () | | | () | | | () | |
Preferred stock redemption premium | () | | | | | | | |
| Dividends paid - preferred stock | () | | | () | | | () | |
| Contract liability payment | () | | | () | | | () | |
Net Cash Flows from Financing Activities | | | | | | | | |
| Change in cash, cash equivalents and restricted cash | | | | () | | | () | |
| Cash, cash equivalents and restricted cash at beginning of period | | | | | | | | |
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | | | |
| Reconciliation to Balance Sheet | 2023 | | 2022 | | 2021 |
| Cash and cash equivalents | | | | | | |
| Restricted Cash | | | | | | |
| Total Cash, Cash Equivalents and Restricted Cash | | | | | | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | Common
Stock | | Preferred Stock(1) | | Treasury
Stock | | Additional
Paid-In
Capital | | Retained Deficit | | Accumulated
Other
Comprehensive
Loss | | Noncontrolling Interest in Consolidated Subsidiaries | | Total |
| Balance as of January 1, 2021 | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | |
| Comprehensive Income: | | | | | | | | | | | | | | | |
| Net Income | | | | | | | | | | | | | | | | | | | | | | | |
| Other comprehensive income, net of tax | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Dividends: | | | | | | | | | | | | | | | |
Common stock ($ per share) | | | | | | | | | | | | | () | | | | | | | | | () | |
Preferred stock (See Note 6) | | | | | | | | | | | | | () | | | | | | | | | () | |
| Contributions from noncontrolling interest | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions to noncontrolling interest | | | | | | | | | | | | | | | | | | | () | | | () | |
| Stock issuances: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Equity Units | | | | | | | | | | | | | | | | | | | | | | | |
| Employee stock purchase plan | | | | | | | | | | | | | | | | | | | | | | | |
| Long-term incentive plan | | | | | | | | | | | | | | | | | | | | | | | |
| 401(k) and profit sharing | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| ATM Program | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2021 | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | |
| Comprehensive Income: | | | | | | | | | | | | | | | |
| Net Income (Loss) | | | | | | | | | | | | | | | | | | | () | | | | |
| Other comprehensive income, net of tax | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends: | | | | | | | | | | | | | | | |
Common stock ($ per share) | | | | | | | | | | | | | () | | | | | | | | | () | |
Preferred stock (See Note 6) | | | | | | | | | | | | | () | | | | | | | | | () | |
| Contributions from noncontrolling interest | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions to noncontrolling interest | | | | | | | | | | | | | | | | | | | () | | | () | |
| Stock issuances: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Employee stock purchase plan | | | | | | | | | | | | | | | | | | | | | | | |
| Long-term incentive plan | | | | | | | | | | | | | | | | | | | | | | | |
| 401(k) and profit sharing | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| ATM Program | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of December 31, 2022 | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | |
| Comprehensive Income: | | | | | | | | | | | | | | | |
| Net Income (Loss) | | | | | | | | | | | | | | | | | | | () | | | | |
| Other comprehensive income, net of tax | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends: | | | | | | | | | | | | | | | |
Common stock ($ per share) | | | | | | | | | | | | | () | | | | | | | | | () | |
Preferred stock (See Note 6) | | | | | | | | | | | | | () | | | | | | | | | () | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Noncontrolling Interests: | | | | | | | | | | | | | | | |
Issuance of noncontrolling interest(2) | | | | | | | | | | | | | | | | | | | | | | | |
Contributions from noncontrolling interest (3) | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions to noncontrolling interest | | | | | | | | | | | | | | | | | | | () | | | () | |
Stock issuances (redemptions): | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Equity Units | | | | () | | | | | | | | | | | | | | | | | | | |
Series A Preferred stock redemption | | | | () | | | | | | | | | | | | | | | | | | () | |
Series A Preferred stock redemption premium | | | | | | | | | | | | | () | | | | | | | | | () | |
| Employee stock purchase plan | | | | | | | | | | | | | | | | | | | | | | | |
| Long-term incentive plan | | | | | | | | | | | | | | | | | | | | | | | |
| 401(k) and profit sharing | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Balance as of December 31, 2023 | $ | | | | $ | | | | $ | () | | | $ | | | | $ | () | | | $ | () | | | $ | | | | $ | | |
(1) M and $M, respectively. Series B has an aggregate liquidation preference of $M See Note 6, "Equity," for additional information.
(2) Relates to the NIPSCO Minority Interest Transaction. See Note 4, "Noncontrolling Interest," for additional discussion.
(3) Contributions from noncontrolling interest is net of transaction costs.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY (continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Preferred | | Common |
| (in thousands) | Shares | | Shares | | Treasury | | Outstanding |
| Balance as of January 1, 2021 | | | | | | | () | | | | |
| Issued: | | | | | | | |
| | | | | |
Equity Units(1) | | | | | | | | | | | |
| Employee stock purchase plan | | | | | | | | | | | |
| Long-term incentive plan | | | | | | | | | | | |
| 401(k) and profit sharing plan | | | | | | | | | | | |
| | | | | |
| ATM Program | | | | | | | | | | | |
| Balance as of December 31, 2021 | | | | | | | () | | | | |
| | | | | |
| Issued: | | | | | | | |
| | | | | |
| | | | | |
| Employee stock purchase plan | | | | | | | | | | | |
| Long-term incentive plan | | | | | | | | | | | |
| 401(k) and profit sharing plan | | | | | | | | | | | |
| | | | | |
| ATM Program | | | | | | | | | | | |
| Balance as of December 31, 2022 | | | | | | | () | | | | |
Issued/(Redeemed): | | | | | | | |
| | | | | |
| | | | | |
| Employee stock purchase plan | | | | | | | | | | | |
| Long-term incentive plan | | | | | | | | | | | |
| 401(k) and profit sharing plan | | | | | | | | | | | |
| | | | | |
Equity Units(1) | () | | | | | | | | | | |
Series A Preferred Stock | () | | | | | | | | | | |
| Balance as of December 31, 2023 | | | | | | | () | | | | |
(1) )See Note 6, "Equity," for additional information.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
1. Nature of Operations and Summary of Significant Accounting Policies
million customers in six states. We generate substantially all of our operating income through these rate-regulated businesses. The consolidated financial statements include the accounts of us, our majority-owned subsidiaries, and VIEs of which we are the primary beneficiary after the elimination of all intercompany accounts and transactions.B.
C.
D.
E. material impairment charges were recorded for the years ended December 31, 2023, 2022 or 2021. Refer to Note 14, "Fair Value," for additional information.
F.
G.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
Generally, our subsidiaries follow the practice of charging maintenance and repairs, including the cost of removal of minor items of property, to expense as incurred. When our subsidiaries retire regulated property, plant and equipment, original cost plus the cost of retirement, less salvage value, is charged to accumulated depreciation. However, when it becomes probable a regulated asset will be retired substantially in advance of its original expected useful life or is abandoned, the cost of the asset and the corresponding accumulated depreciation is recognized as a separate asset. If the asset is still in operation, the gross amounts are classified as "Non-Utility and Other " as described in Note 9, "Property, Plant and Equipment." If the asset is no longer operating but still subject to recovery, the net amount is classified in "Regulatory assets" on the Consolidated Balance Sheets. If we are able to recover a full return of and on investment, the carrying value of the asset is based on historical cost. If we are not able to recover a full return on investment, a loss on impairment is recognized to the extent the net book value of the asset exceeds the present value of future revenues discounted at the incremental borrowing rate.
H.
I.
J.
K. million and $ million at December 31, 2023 and 2022, respectively. Based on the average cost of gas using the LIFO method, the estimated replacement cost of gas in storage was less than the stated LIFO cost by $ million at December 31, 2023 and was greater than the stated LIFO cost by $ million at December 31, 2022. As all LIFO inventory costs are collected from customers through our rate-regulated subsidiaries, no inventory impairment has been recorded. Gas inventory valued using the weighted average cost methodology was $ million at December 31, 2023 and $ million at December 31, 2022.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
L.
M.
N.
O.
P.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
R.
S. Noncontrolling Interest
% equity interest in NIPSCO Holdings II, the sole owner of NIPSCO, was issued to an affiliate of Blackstone. NIPSCO Holdings II does not meet the criteria of a VIE and instead is consolidated under the voting interest model in accordance with ASC 810 as we maintain control through a majority interest in NIPSCO Holdings II. Refer to Note 4, "Noncontrolling Interest," for further discussion on the NIPSCO Minority Interest Transaction.We fund a significant portion of our renewable generation assets through JVs with tax equity partners. We consolidate these JVs in accordance with ASC 810 as they are VIEs in which we hold a variable interest, and we control decisions that are significant to the JVs' ongoing operations and economic results (i.e., we are the primary beneficiary).
These JVs are subject to profit sharing arrangements in which the allocation of the JVs' cash distributions and tax benefits to members is based on factors other than members' relative ownership percentages. As such, we utilize the HLBV method to allocate proceeds to each partner at the balance sheet date based on the liquidation provisions of the related JV's operating agreement and adjusts the amount of the VIE's net income attributable to us and the noncontrolling tax equity member during the period.
In each reporting period, the application of HLBV to our consolidated VIEs results in a difference between the amount of profit from the consolidated JVs and the amount included in regulated rates. As discussed above in "F. Basis of Accounting for Rate-Regulated Subsidiaries," we are subject to the accounting and reporting requirements of ASC 980. In accordance with these principles, we recognize a regulatory liability or asset for amounts representing the timing difference between the profit earned from the JVs and the amount included in regulated rates to recover our approved investments in consolidated JVs. The amounts recorded in income will ultimately reflect the amount allowed in regulated rates to recover our investments over the useful life of the projects. The offset to the regulatory liability or asset associated with our renewable investments included in regulated rates is recorded in "Depreciation expense" on the Statements of Consolidated Income.
2. Recent Accounting Pronouncements
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
3. Revenue Recognition
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
Other Revenues. As permitted by accounting principles generally accepted in the United States, regulated utilities have the ability to earn certain types of revenue that are outside the scope of ASC 606. These revenues primarily represent revenue earned under alternative revenue programs. Alternative revenue programs represent regulator-approved mechanisms that allow for the adjustment of billings and revenue for certain approved programs. We maintain a variety of these programs, including demand side management initiatives that recover costs associated with the implementation of energy efficiency programs, as well as normalization programs that adjust revenues for the effects of weather or other external factors. Additionally, we maintain certain programs with future test periods that operate similarly to FERC formula rate programs and allow for recovery of costs incurred to replace aging infrastructure. When the criteria to recognize alternative revenue have been met, we establish a regulatory asset and present revenue from alternative revenue programs on the Statements of Consolidated Income as “Other revenues”. When amounts previously recognized under alternative revenue accounting guidance are billed, we reduce the regulatory asset and record a customer account receivable.
| | $ | | | | $ | | | | $ | | |
| Commercial | | | | | | | | | | | |
| Industrial | | | | | | | | | | | |
| Off-system | | | | | | | | | | | |
| | | | | |
| | | | | |
Wholesale | | | | | | | | | | | |
Public Authority | | | | | | | | | | | |
| | | | | |
Miscellaneous(4) | | | | | | | | | | | |
| Total Customer Revenues | $ | | | | $ | | | | $ | | | | $ | | |
| Other Revenues | | | | | | | | | | | |
| Total Operating Revenues | $ | | | | $ | | | | $ | | | | $ | | |
(1)Customer revenue amounts exclude intersegment revenues. See Note 21, "Business Segment Information," for discussion of intersegment revenues.
(2)Amounts included in Gas Distributions Operations Other revenues primarily related to weather normalization adjustment mechanisms.
(3)Amounts included in Electric Operations Other revenues primarily relate to MISO multi-value projects and revenue from non-jurisdictional transmission assets.
(4)Amounts included in Gas Distributions are primarily related to earnings share mechanisms and late fees. Amounts included in Electric Operations are primarily related to late fees, property rentals, revenue refunds and adjustments.
| | | | | | | | | | | | | | | | | | | | | | | |
Year Ended December 31, 2022 (in millions) | Gas Distribution Operations(2) | | Electric Operations(3) | | Corporate and Other(4) | | Total |
Customer Revenues(1) | | | | | | | |
| Residential | $ | | | | $ | | | | $ | | | | $ | | |
| Commercial | | | | | | | | | | | |
| Industrial | | | | | | | | | | | |
| Off-system | | | | | | | | | | | |
| | | | | |
| | | | | |
Wholesale | | | | | | | | | | | |
Public Authority | | | | | | | | | | | |
| | | | | |
Miscellaneous(5) | | | | () | | | | | | | |
| Total Customer Revenues | $ | | | | $ | | | | $ | | | | $ | | |
| Other Revenues | | | | | | | | | | | |
| Total Operating Revenues | $ | | | | $ | | | | $ | | | | $ | | |
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | $ | | | | Commercial | | | | | | | | | | | |
| Industrial | | | | | | | | | | | |
| Off-system | | | | | | | | | | | |
| | | | | |
| | | | | |
Wholesale | | | | | | | | | | | |
Public Authority | | | | | | | | | | | |
| | | | | |
|
|
|
|
| | | 4. Noncontrolling Interest
MW and MW of nameplate capacity, respectively. NIPSCO also owns two solar facilities, Indiana Crossroads Solar and Dunns Bridge I, which went into service in June 2023, with a combined MW of nameplate capacity. During August 2023, NIPSCO and the tax equity partners made final cash contributions in accordance with the equity capital contribution agreement. In August 2023, Indiana Crossroads Solar and Dunns Bridge I reached substantial completion, resulting in NIPSCO making a combined $ million in developer payments. We control decisions that are significant to these entities' ongoing operations and economic results. Therefore, we have concluded that NIPSCO is the primary beneficiary and have consolidated all four entities. Members of each respective JV include NIPSCO (who is the managing member) and a tax equity partner. Earnings, tax attributes and cash flows are allocated to both NIPSCO and the tax equity partner in varying percentages by category and over the life of the partnership. Since 2021, NIPSCO and the tax equity partner have contributed $ million and $ million, respectively. For the two wind facilities, NIPSCO assumed an obligation to the developers of each facility, representing the remaining economic interest. NIPSCO resolved this obligation by acquiring the developers' economic interests in June 2023 for $ million which includes the December 31, 2022 obligation of $ million and interest of $ million. Once the tax equity partner has earned their negotiated rate of return and have reached a stated contractual date, NIPSCO has the option to purchase the remaining interest in the respective JV, at fair market value from the tax equity partner. NIPSCO has an obligation to purchase % of the electricity generated by our in service JVs.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | |
| Current assets | | | | | |
| |
Total assets(1) | | | | | |
| Current liabilities | | | | | |
| Asset retirement obligations | | | | | |
| |
| Total liabilities | $ | | | | $ | | |
(1)The assets of each VIE represent assets of a consolidated VIE that can be used only to settle obligations of the respective consolidated VIE. The creditors of the liabilities of the VIEs do not have recourse to the general credit of the primary beneficiary.
Voting Interest Entities. On June 17, 2023, NiSource and its wholly-owned subsidiary, NIPSCO Holdings II, entered into the BIP Purchase Agreement. NIPSCO Holdings II is the % owner of all issued and outstanding membership interests of NIPSCO. Under the terms of the BIP Purchase Agreement, we agreed to issue a % equity interest in NIPSCO Holdings II to BIP, an affiliate of Blackstone, in exchange for a cash contribution of $ billion at closing, subject to adjustment based on the timing of closing and the amount of NiSource capital contributions made prior to closing.
The closing of the NIPSCO Minority Equity Interest Transaction was subject to the satisfaction of certain customary closing conditions described in the Blackstone Purchase Agreement, including receipt of authorization by FERC. FERC approval was received on October 19, 2023.
% indirect equity interest in NIPSCO to BIP in exchange for a capital contribution of $ billion in cash. The difference between the $ billion consideration received and the $ billion carrying value of the noncontrolling interest claim on net assets was recorded to additional paid-in capital, net of $ million million income tax benefit. Approximately $ million of the transaction costs remain unpaid at December 31, 2023. No gain or loss was recognized by the parties in connection with the contributions of property in exchange for membership interests in NIPSCO Holdings II. Upon consummation of the minority interest transaction, NiSource owns an % controlling indirect equity interest in NIPSCO while BIP, owns the remaining % indirect equity interest. See Note 19, "Other Commitments and Contingencies - E. Other Matters," for a detailed discussion of the NIPSCO Holdings II LLC Agreement and governance structure.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
5. Earnings Per Share
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | Less: Income allocated to participating securities | | | | | | | | |
| Net Income Available to Common Shareholders - Basic | $ | | | | $ | | | | $ | | |
| Add: Dilutive effect of Equity Units | | | | | | | | |
| Net Income Available to Common Shareholders - Diluted | $ | | | | $ | | | | $ | | |
| Denominator: | | | | | |
| Average common shares outstanding - Basic | | | | | | | | |
| Dilutive potential common shares: | | | | | |
| Equity Units purchase contracts | | | | | | | | |
| Equity Units purchase contract payment balance | | | | | | | | |
| Shares contingently issuable under employee stock plans | | | | | | | | |
| Shares restricted under employee stock plans | | | | | | | | |
| ATM Forward agreements | | | | | | | | |
| Average Common Shares - Diluted | | | | | | | | |
| Earnings per common share: | | | | | |
| Basic | $ | | | | $ | | | | $ | | |
| Diluted | $ | | | | $ | | | | $ | | |
6. Equity
million of our common stock. On December 31, 2023 the ATM program and the associated equity distribution agreements expired. | | | | | Average price per share | $ | | | | $ | | |
Proceeds, net of fees (in millions) | $ | | | | $ | | |
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | | $ | | | $ | | | $ | | | $ | | | | $ | | |
| 6.500% Series B | | | | | | | | | | | | | | | |
Series C(1) | $ | | | | | | | | | | | $ | | | | $ | | |
(1) The Series C Mandatory Convertible Preferred Stock did not bear any dividends. We recorded the initial present value of the purchase contract payments as a liability with a corresponding reduction to preferred stock.
(2) Dividends declared per share for the twelve months ended December 31, 2023 reflects the dividend declared on the Series A Preferred Stock on March 14, 2023. The dividend was paid on June 15, 2023.
Series A Preferred Stock. On June 11, 2018, we completed the sale of shares of % Series A Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock (the "Series A Preferred Stock") at a price of $ per share. The transaction resulted in $ million of gross proceeds or $ million of net proceeds, after deducting commissions and sale expenses. Dividends on the Series A Preferred Stock accrued and were cumulative from the date the shares of Series A Preferred Stock were originally issued to, but not including, June 15, 2023 at a rate of % per annum of the $ liquidation preference per share. As of December 31, 2022, Series A Preferred Stock had $ million of cumulative preferred dividends in arrears, or $ per share.
On June 15, 2023, we redeemed all outstanding shares of Series A Preferred Stock for a redemption price of $ per share or $ million in total. Following the redemption, dividends ceased to accrue on such shares of Series A Preferred Stock, and the shares of Series A Preferred Stock are no longer deemed outstanding and all rights of the holders of the shares of Series A Preferred Stock were terminated. In conjunction with the redemption, we recorded a million preferred stock redemption premium, calculated as the difference between the carrying value on the redemption date of the Series A Preferred Stock and the total amount of consideration paid to redeem, which was recorded as a reduction to retained earnings during 2023. The preferred stock redemption premium included the recognition of an excise tax liability under the IRA of $ million. This liability is net of the fair value of common shares issued during 2023.
In June 2023, we filed a certificate of elimination to our Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to eliminate from the Amended and Restated Certificate of Incorporation all matters set forth in the Certificate of Designations with respect to the Series A Preferred Stock. As a result, the shares that were previously designated as Series A Preferred Stock were returned to the status of authorized but unissued shares of preferred stock, par value $ per share, without designation as to series. The certificate of elimination does not change the total number of authorized shares of capital stock of NiSource or the total number of authorized shares of preferred stock.
Series B Preferred Stock. On December 5, 2018, we completed the sale of depositary shares with an aggregate liquidation preference of $ under the Company’s registration statement on Form S-3. Each depositary share represents 1/1,000th ownership interest in a share of our % Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, liquidation preference $ per share (equivalent to $ per depositary share) (the “Series B Preferred Stock"). The transaction resulted in $ million of gross proceeds or $ million of net proceeds, after deducting commissions and sale expenses.
Dividends on the Series B Preferred Stock accrue and are cumulative from the date the shares of Series B Preferred Stock were originally issued to, but not including, March 15, 2024 at a rate of % per annum of the $ liquidation preference per share. On and after March 15, 2024, dividends on the Series B Preferred Stock will accumulate for each five year period at a percentage of the $ liquidation preference equal to the five-year U.S. Treasury Rate plus (i) in respect of each five year period commencing on or after March 15, 2024 but before March 15, 2044, a spread of % (the “Initial Margin”), and (ii) in respect of each five year period commencing on or after March 15, 2044, the Initial Margin plus %. The Series B Preferred Stock may be redeemed by us at our option on March 15, 2024, or on each date falling on the fifth anniversary thereafter, or in connection with a ratings event (as defined in the Certificate of Designation of the Series B Preferred Stock).
As of December 31, 2023 and 2022, Series B Preferred Stock had $ million of cumulative preferred dividends in arrears, or $ per share.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
Holders of Series B Preferred Stock generally have no voting rights, except for limited voting rights with respect to (i) potential amendments to our certificate of incorporation that would have a material adverse effect on the existing preferences, rights, powers or duties of the Series B Preferred Stock, (ii) the creation or issuance of any security ranking on a parity with the Series B Preferred Stock if the cumulative dividends payable on then outstanding Series B Preferred Stock are in arrears, or (iii) the creation or issuance of any security ranking senior to the Series B Preferred Stock. In addition, if and whenever dividends on any shares of Series B Preferred Stock shall not have been declared and paid for at least six dividend periods, whether or not consecutive, the number of directors then constituting our Board of Directors shall automatically be increased by two until all accumulated and unpaid dividends on the Series B Preferred Stock shall have been paid in full, and the holders of Series B-1 Preferred Stock, voting as a class together with the holders of any outstanding securities ranking on a parity with the Series B-1 Preferred Stock and having like voting rights that are exercisable at the time and entitled to vote thereon, shall be entitled to elect the two additional directors. The Series B Preferred Stock does not have a stated maturity and is not subject to mandatory redemption or any sinking fund. The Series B Preferred Stock will remain outstanding indefinitely unless repurchased or redeemed by us. Any such redemption would be effected only out of funds legally available for such purposes and will be subject to compliance with the provisions of our outstanding indebtedness.
On February 9, 2024, we announced that we will redeem all outstanding shares of our Series B Preferred Stock and Series B-1 Preferred Stock and the corresponding depositary shares representing interests in the outstanding shares of the Series B Preferred and Series B-1 Preferred Stock on March 15, 2024 for a redemption price of $ per depositary share. On and after the redemption date, dividends on the redeemed Series B Preferred Stock and the corresponding depositary shares will cease to accumulate.
million Equity Units, initially consisting of Corporate Units, each with a stated amount of $. The offering generated net proceeds of $ million, after underwriting and issuance expenses. Each Corporate Unit consisted of a forward contract to purchase shares of our common stock in the future and a 1/10th, or %, undivided beneficial ownership interest in one share of Series C Mandatory Convertible Preferred Stock, par value $ per share, with a liquidation preference of $ per share. The Series C Mandatory Convertible Preferred Stock was pledged upon issuance as collateral to secure the purchase of common stock under the related purchase contracts. The Series C Mandatory Convertible Preferred Stock did not bear any dividends and the liquidation preference did not accrete. Selected information about the Equity Units is presented below:
| | | | | | | | | | | | | | | | | |
| (in millions except contract rate) | Issuance Date | Units Issued | Total Net Proceeds(1) | Purchase Contract Annual Rate | Purchase Contract Liability |
| Equity Units | April 19, 2021 | | $ | | | | % | $ | | |
(1)Issuance costs of $ million were recorded on a relative fair value basis as a reduction to preferred stock of $ million and a reduction to the purchase contract liability of $ million.
Pursuant to the Purchase Contract and Pledge Agreement, we were required to attempt a remarketing of the Series C Mandatory Convertible Preferred Stock prior to December 1, 2023. On November 17, 2023, we announced the unsuccessful final remarketing of our Series C Mandatory Convertible Preferred Stock. On December 1, 2023, we issued shares of our common stock under the purchase contract component of the Corporate Units based upon the per-share daily volume weighted average of our common stock over a consecutive 40-day trading period ending on November 29, 2023. As of December 1, 2023, each holder of Corporate Units was deemed to have automatically delivered to us the related Series C Mandatory Convertible Preferred Stock that were components of the Corporate Units in full satisfaction of such holder’s obligations under the related purchase contract, and all shares of Series C Mandatory Convertible Preferred Stock were returned to the status of authorized but unissued preferred stock, par value of $ per share, without designation as to series. We voluntarily delisted the Corporate Units from the New York Stock Exchange.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
We accounted for the Corporate Units as a single unit of account and recorded the initial present value of the purchase contract payments as a liability with a corresponding reduction to preferred stock. As of December 31, 2023, the balance of the Series C Mandatory Convertible Preferred Stock was $ and during the fourth quarter of 2023 we recorded the settlement of the forward purchase contract as an increase to common stock and additional paid-in capital.
Noncontrolling Interest in Consolidated Subsidiaries. As of December 31, 2023 and 2022, NIPSCO and tax equity partners have completed their cash contributions into Indiana Crossroads Wind, Rosewater, Indiana Crossroads Solar and Dunns Bridge I JVs. Earnings, tax attributes and cash flows are allocated to both NIPSCO and the respective tax equity partners in varying percentages by category and over the life of the partnership. The tax equity partner's contributions, net of these allocations, is represented as a noncontrolling interest within total equity on the Consolidated Balance Sheets. Refer to Note 4, "Noncontrolling Interest," for more information.
On December 31, 2023, we consummated the closing of the NIPSCO Minority Interest Transaction and issued a % equity interest in NIPSCO Holdings II LLC to BIP in exchange for a capital contribution of $ billion in cash. Transaction costs and deferred tax impacts of $ million and $ million were recorded during the period ending December 31, 2023. Refer to Note 15, "Income Taxes," and Note 19, "Other Commitments and Contingencies - E. Other Matters," in the Notes to the Consolidated Financial Statements for more information on this transaction.
7. Short-Term Borrowings
billion and is comprised of a syndicate of banks. At December 31, 2023 and 2022, we had outstanding borrowings under this facility. Commercial Paper Program. At December 31, 2023, our commercial paper program had a program limit of up to $ billion. On February 9, 2024, we increased the program limit to $ billion. We had $ million and $ million of commercial paper outstanding with weighted-average interest rates of % and % as of December 31, 2023 and 2022, respectively.
Accounts Receivable Transfer Programs. Columbia of Ohio, NIPSCO, and Columbia of Pennsylvania each maintain a receivables agreement whereby they transfer their customer accounts receivables to third party financial institutions through consolidated special purpose entities. The three agreements expire between May 2024 and October 2024 and may be further extended if mutually agreed to by the parties thereto.
All receivables transferred to third parties are valued at face value, which approximates fair value due to their short-term nature. The amount of the undivided percentage ownership interest in the accounts receivables transferred is determined in part by required loss reserves under the agreements.
Transfers of accounts receivable are accounted for as secured borrowings resulting in the recognition of short-term borrowings on the Consolidated Balance Sheets. As of December 31, 2023, the maximum amount of debt that could be recognized related to our accounts receivable programs is $ million.
We had $ million and $ million short-term borrowings related to the securitization transactions as of December 31, 2023 and 2022, respectively.
For the year ended December 31, 2023, $ million was recorded as cash flows used for financing activities related to the change in short-term borrowings due to securitization transactions. For the year ended December 31, 2022, $ million was recorded as cash flows from financing activities related to the change in short-term borrowings due to securitization
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
Term Credit Agreements. On December 20, 2022, we entered into a $ billion term credit agreement with a syndicate of banks. On October 5, 2023, we entered into an amendment with the syndicate of banks to, among other things, extend the maturity date of the agreement from December 19, 2023 to March 15, 2024. With the amendment, we triggered extinguishment accounting and recorded an immaterial loss on extinguishment of debt in the fourth quarter of 2023. Interest charged on the borrowings depended on the variable rate structure elected at the time of each borrowing. The available variable rate structures from which we could choose were defined in the agreement. Under the agreement, we borrowed $ billion on December 20, 2022 with an interest rate of SOFR plus 105 basis points. We had $ billion outstanding under this agreement with interest rates of % and % as of December 31, 2023 and 2022, respectively.
On November 9, 2023, we entered into a $ million term credit agreement with a bank. The agreement had a maturity date of November 7, 2024 and interest charged on the borrowings depended on the variable rate structure elected at the time of each borrowing. The available variable rate structures from which we could choose were defined in the agreement. On December 6, 2023, we entered into an augmenting lender supplement to the agreement with a syndicate of banks for an additional $ million. Under the agreement, we borrowed $ million on November 9, 2023 and $ million on December 6, 2023 with an interest rate of SOFR plus 115 basis points. We had $ million outstanding under this agreement with an interest rate of % as of December 31, 2023.
On January 3, 2024, we terminated and repaid in full our $ billion term credit agreement and our $ million term credit agreement.
Items listed above, excluding the term credit agreements, are presented net in the Statements of Consolidated Cash Flows as their maturities are less than 90 days.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
8. Long-Term Debt
% | | $ | | | | $ | | | | NiSource | May 2027 | | % | | | | | | |
| NiSource | December 2027 | | % | | | | | | |
NiSource | March 2028 | | % | | | | | |
| NiSource | September 2029 | | % | | | | | | |
| NiSource | May 2030 | | % | | | | | | |
| NiSource | February 2031 | | % | | | | | | |
NiSource | June 2033 | | % | | | | | |
| NiSource | December 2040 | | % | | | | | | |
| NiSource | June 2041 | | % | | | | | | |
| NiSource | February 2042 | | % | | | | | | |
| NiSource | February 2043 | | % | | | | | | |
| NiSource | February 2044 | | % | | | | | | |
| NiSource | February 2045 | | % | | | | | | |
| NiSource | May 2047 | | % | | | | | | |
| NiSource | March 2048 | | % | | | | | | |
| NiSource | June 2052 | | % | | | | | | |
| Total senior notes | | | | $ | | | | $ | | |
| Medium term notes: | | | | | | |
| NiSource | May 2027 | | % | | $ | | | | $ | | |
| NIPSCO | June 2027 to August 2027 | | % | | | | | | |
| Columbia of Massachusetts | December 2025 to February 2028 | | % | | | | | | |
| Total medium term notes | | | | $ | | | | $ | | |
| Finance leases: | | | | | | |
| NiSource Corporate Services | February 2024 to September 2027 | | % | | $ | | | | $ | | |
| NIPSCO | December 2027 to November 2035 | | % | | | | | | |
| Columbia of Ohio | December 2025 to March 2044 | | % | | | | | | |
| Columbia of Virginia | July 2029 to November 2039 | | % | | | | | | |
| Columbia of Kentucky | May 2027 | | % | | | | | | |
| Columbia of Pennsylvania | July 2027 to May 2035 | | % | | | | | | |
| Total finance leases | | | | $ | | | | $ | | |
| Unamortized issuance costs and discounts | | | | $ | () | | | $ | () | |
| Total Long-Term Debt | | | | $ | | | | $ | | |
Details of our 2023 long-term debt related activity are summarized below:
•On March 24, 2023, we completed the issuance sale of $ million of % senior unsecured notes maturing in 2028, which resulted in approximately $ million of net proceeds after discount and debt issuance costs.
•On June 8, 2023, we completed the issuance and sale of $ million of % senior unsecured notes maturing in 2028 (the "2028 Notes"). The terms of the 2028 Notes, other than the issue date and the price to the public, are identical to the terms of, and constitute as a reopening of, our % senior unsecured notes due 2028 issued on March 24, 2023. With the incremental issuance, we now have $ billion of % senior unsecured notes maturing in 2028. On June 8, 2023, we also completed the issuance and sale of $ million of % senior unsecured notes maturing in 2033. These issuances resulted in approximately $ million of total net proceeds after discount and debt issuance costs.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
•On June 10, 2022, we completed the issuance and sale of $ million of % senior unsecured notes maturing in 2052, which resulted in approximately $ million of net proceeds after discount and debt issuance costs.
•On August 30, 2022, NIPSCO repaid $ million of % medium term notes at maturity.
See Note 19, "Other Commitments and Contingencies - A. Contractual Obligations," for the outstanding long-term debt maturities at December 31, 2023.
Unamortized debt expense, premium and discount on long-term debt applicable to outstanding bonds are being amortized over the life of such bonds.
We are subject to a financial covenant under our revolving credit facility which requires us to maintain a debt to capitalization ratio that does not exceed %. As of December 31, 2023, the ratio was %.
We are also subject to certain other non-financial covenants under the revolving credit facility. Such covenants include a limitation on the creation or existence of new liens on our assets, generally exempting liens on utility assets, purchase money security interests, preexisting security interests and an additional subset of assets equal to $ million. An asset sale covenant generally restricts the sale, conveyance, lease, transfer or other disposition of our assets to those dispositions that are for a price not materially less than fair market of such assets, that would not materially impair our ability to perform obligations under the revolving credit facility, and that together with all other such dispositions, would not have a material adverse effect. The covenant also restricts dispositions to no more than % of our consolidated total assets on December 31, 2022. Additionally, the revolving credit facility requires us to own directly or indirectly at least % of NIPSCO. The revolving credit facility also includes a cross-default provision, which triggers an event of default under the credit facility in the event of an uncured payment default relating to any indebtedness of us or any of our subsidiaries in a principal amount of $ million or more.
Our indentures generally do not contain any financial maintenance covenants. However, our indentures are generally subject to cross-default provisions ranging from uncured payment defaults of $ million to $ million, and limitations on the incurrence of liens on our assets, generally exempting liens on utility assets, purchase money security interests, preexisting security interests and an additional subset of assets capped at % of our consolidated net tangible assets.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
9. Property, Plant and Equipment
| | $ | | | Electric Utility | | | | | |
| Corporate | | | | | |
| Construction Work in Process | | | | | |
Renewable Generation Assets(1) | | | | | |
| Non-Utility and Other | | | | | |
| Total Property, Plant and Equipment | $ | | | | $ | | |
| Accumulated Depreciation and Amortization | | | |
Gas Distribution Utility | $ | () | | | $ | () | |
Electric Utility | () | | | () | |
| Corporate | () | | | () | |
Renewable Generation Assets(1) | () | | | () | |
| Non-Utility and Other | () | | | () | |
| Total Accumulated Depreciation and Amortization | $ | () | | | $ | () | |
| Net Property, Plant and Equipment | $ | | | | $ | | |
(1)Our renewable generation assets are part of our electric segment and represent Non-Utility Property, owned and operated by JVs between NIPSCO and unrelated tax equity partners, and depreciated straight-line over 30 years. Refer to Note 4, "Noncontrolling Interest," for additional information.
% | | | % | | | % | | Gas Distribution Operations | | % | | | % | | | % |
We recognized depreciation expense of $ million, $ million and $ million for the years ended 2023, 2022 and 2021, respectively. The 2023, 2022 and 2021, depreciation expense includes $ million, $ million, and $ million related to the regulatory deferral of income associated with our JVs, which is not included in current rates. See Note 1, "Nature of Operations and Summary of Significant Accounting Policies - S. Noncontrolling Interest," for additional details.
Amortization of on-premise Software Costs. We amortized $ million, $ million and $ million in 2023, 2022 and 2021, respectively, related to software recorded as intangible assets. Our unamortized software balance was $ million and $ million at December 31, 2023 and 2022, respectively.
million, $ million and $ million in 2023, 2022 and 2021, respectively, related to cloud computing costs to "Operation and maintenance" expense. Our unamortized cloud computing balance was $ million and $ million at December 31, 2023 and 2022, respectively.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
10. Goodwill
million as of December 31, 2023 and 2022. All of our goodwill has been allocated to the Gas Distribution Operations segment.
11. Asset Retirement Obligations
| | $ | | | | Accretion recorded as a regulatory asset/liability | | | | | |
| Additions | | | | | |
| Settlements | () | | | () | |
| Change in estimated cash flows | | | | () | |
| |
| Ending Balance | $ | | | | $ | | |
Certain non-legal costs of removal that have been, and continue to be, included in depreciation rates and collected in the customer rates of the rate-regulated subsidiaries are classified as "Regulatory liabilities" on the Consolidated Balance Sheets.
12. Regulatory Matters
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | Deferred pension and other postretirement benefit costs (see Note 16) | | | | | |
Environmental costs (see Note 19-D.) | | | | | |
Regulatory effects of accounting for income taxes (see Note 1-N. and Note 15) | | | | | |
Under-recovered gas and fuel costs (see Note 1-J.) | | | | | |
| Depreciation | | | | | |
| |
| Post-in-service carrying charges | | | | | |
| |
| |
| |
| Safety activity costs | | | | | |
| DSM programs | | | | | |
| Retired coal generating stations | | | | | |
Losses on commodity price risk programs (See Note 13) | | | | | |
| Deferred property taxes | | | | | |
Renewable energy investments (See Note 1-S. and Note 4) | | | | | |
| Other | | | | | |
| Total Regulatory Assets | $ | | | | $ | | |
| Less: Current Portion | | | | | |
| Total Noncurrent Regulatory Assets | $ | | | | $ | | |
| | $ | | | Cost of removal (see Note 11) | | | | | |
Regulatory effects of accounting for income taxes (see Note 1-N. and Note 15) | | | | | |
Deferred pension and other postretirement benefit costs (see Note 16) | | | | | |
Gains on commodity price risk programs (See Note 13) | | | | | |
| Customer Assistance Programs | | | | | |
Off-Systems sales sharing | | | | | |
HLBV Adjustments under ASC 980 | | | | | |
| Rate Refunds | | | | | |
| Other | | | | | |
| Total Regulatory Liabilities | $ | | | | $ | | |
| Less: Current Portion | | | | | |
| Total Noncurrent Regulatory Liabilities | $ | | | | $ | | |
Regulatory assets, including under-recovered gas and fuel costs and depreciation, of approximately $ million and $ million as of December 31, 2023 and 2022, respectively, are not earning a return on investment. These costs are recovered over a remaining life, the longest of which is years.
Assets:
Unrecognized pension and other postretirement benefit costs. Represents the deferred other comprehensive income or loss of the actuarial gains or losses and the prior service costs or credits that arise during the period but that are not immediately
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
13. Risk Management Activities
| | $ | | | | $ | | | | $ | | | | Total | $ | | | | $ | | | | $ | | | | $ | | |
Noncurrent(2) | | | | | | | |
| | | | | |
| Derivatives not designated as hedging instruments | $ | | | | $ | | | | $ | | | | $ | | |
| Total | $ | | | | $ | | | | $ | | | | $ | | |
(1) Current assets and liabilities are presented in "Prepayments and other" and "Other accruals", respectively, on the Consolidated Balance Sheets.
(2) Noncurrent assets and liabilities are presented in "Deferred charges and other" and "Other noncurrent liabilities and deferred credits", respectively, on the Consolidated Balance Sheets.
Our derivative instruments are subject to enforceable master netting arrangements or similar agreements. No collateral was either received or posted related to our outstanding derivative positions at December 31, 2023. If the above gross asset and liability positions were presented net of amounts owed or receivable from counterparties, we would report a net asset position of $ million and $ million at December 31, 2023 and 2022, respectively.
Derivatives Not Designated as Hedging Instruments
Commodity price risk management. We, along with our utility customers, are exposed to variability in cash flows associated with natural gas purchases and volatility in natural gas prices. We purchase natural gas for sale and delivery to our retail, commercial and industrial customers, and for most customers the variability in the market price of gas is passed through in their rates. Some of our utility subsidiaries offer programs whereby variability in the market price of gas is assumed by the respective utility. The objective of our commodity price risk programs is to mitigate the gas cost variability, for us or on behalf of our customers, associated with natural gas purchases or sales by economically hedging the various gas cost components using a combination of futures, options, forwards or other derivative contracts. As of December 31, 2023 and 2022, we had MMDth and MMDth, respectively, of net energy derivative volumes outstanding related to our natural gas hedges.
NIPSCO has received IURC approval to lock in a fixed price for its natural gas customers using long-term forward purchase instruments and is limited to % of NIPSCO’s average annual GCA purchase volume. As of December 31, 2023, the remaining terms of these instruments range from one to . Likewise, Columbia of Pennsylvania has received approval for a 24-month rolling hedge program. The hedging program was executed in December 2023, with an effective date of April 1, 2024 and will continue in perpetuity. The program is designed to financially hedge approximately % of the customer’s annual demand. All gains and losses on these derivative contracts are deferred as regulatory liabilities or assets and are remitted to or collected from customers through the relevant cost recovery mechanism.
Derivatives Designated as Hedging Instruments
Interest rate risk management. As of December 31, 2023 and 2022, we had no forward-starting interest rate swaps outstanding.
The overall net gain related to our multiple settled interest rate swaps is recorded to AOCI. We amortize the net gain over the life of the debt associated with these swaps as we recognize interest expense. These amounts are immaterial in 2023, 2022 and 2021 and are recorded in "Interest expense, net" on the Statements of Consolidated Income.
Cash flows for derivative financial instruments are generally classified as operating activities.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
14. Fair Value
| | $ | | | | $ | | | | $ | | | | | | | | |
| Available-for-sale debt securities | | | | | | | | | | | |
| Total | $ | | | | $ | | | | $ | | | | $ | | |
| Liabilities | | | | | | | |
| | | | | |
| | | | | |
| Risk management liabilities | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | |
| Total | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Recurring Fair Value Measurements December 31, 2022 (in millions) | Quoted Prices
in Active Markets
for Identical Assets
(Level 1) | | Significant Other
Observable Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) | | Balance as of December 31, 2022 |
| Assets | | | | | | | |
| | | | | |
| | | | | |
| Risk management assets | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | |
| | | | | |
| Available-for-sale debt securities | | | | | | | | | | | |
| Total | $ | | | | $ | | | | $ | | | | $ | | |
| Liabilities | | | | | | | |
| | | | | |
| Risk management liabilities | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | |
| Total | $ | | | | $ | | | | $ | | | | $ | | |
Risk Management Assets and Liabilities. Risk management assets and liabilities include interest rate swaps, exchange-traded NYMEX futures and NYMEX options and non-exchange-based forward purchase contracts.
Level 1- When utilized, exchange-traded derivative contracts are based on unadjusted quoted prices in active markets and are classified within Level 1. These financial assets and liabilities are secured with cash on deposit with the exchange; therefore, nonperformance risk has not been incorporated into these valuations. These financial assets and liabilities are deemed to be cleared and settled daily by NYMEX as the related cash collateral is posted with the exchange. As a result of this exchange rule, NYMEX derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes, and are presented in Level 1 net of posted cash; however, the derivatives remain outstanding and are subject to future commodity price fluctuations until they are settled in accordance with their contractual terms.
Level 2- Certain non-exchange-traded derivatives are valued using broker or over-the-counter, on-line exchanges. In such cases, these non-exchange-traded derivatives are classified within Level 2. Non-exchange-based derivative instruments include swaps, forwards, and options. In certain instances, these instruments may utilize models to measure fair value. We use a similar model to value similar instruments. Valuation models utilize various inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NIPSCO and Columbia of Pennsylvania have entered into long-term forward natural gas purchase instruments to lock in a fixed price for their natural gas customers. We value these contracts using a pricing model that incorporates market-based information when available, as these instruments trade less frequently and are classified within Level 2 of the fair value hierarchy. For additional information, see Note 13, “Risk Management Activities.”
Available-for-Sale Debt Securities. Available-for-sale debt securities are investments pledged as collateral for trust accounts related to our wholly-owned insurance company. We value U.S. Treasury, corporate debt and mortgage-backed securities using a matrix pricing model that incorporates market-based information. These securities trade less frequently and are classified within Level 2.
Our available-for-sale debt securities impairments are recognized periodically using an allowance approach. At each reporting date, we utilize a quantitative and qualitative review process to assess the impairment of available-for-sale debt securities at the individual security level. For securities in a loss position, we evaluate our intent to sell or whether it is more-likely-than-not that we will be required to sell the security prior to the recovery of its amortized cost. If either criteria is met, the loss is recognized in earnings immediately, with the offsetting entry to the carrying value of the security. If both criteria are not met, we perform an analysis to determine whether the unrealized loss is related to credit factors. The analysis focuses on a variety of factors that include, but are not limited to, downgrade on ratings of the security, defaults in the current reporting period or projected defaults in the future, the security's yield spread over treasuries, and other relevant market data. If the unrealized loss is not related to credit factors, it is included in other comprehensive income. If the unrealized loss is related to credit factors, the loss is recognized as credit loss expense in earnings during the period, with an offsetting entry to the allowance for credit losses. The amount of the credit loss recorded to the allowance account is limited by the amount at which the security's fair value is less than its amortized cost basis. If certain amounts recorded in the allowance for credit losses are deemed uncollectible, the allowance on the uncollectible portion will be charged off, with an offsetting entry to the carrying value of the security. Subsequent improvements to the estimated credit losses of available-for-sale debt securities will be recognized immediately in earnings. As of December 31, 2023 and December 31, 2022, we recorded $ million and $ million, respectively, as an allowance for credit losses on available-for-sale debt securities as a result of the analysis described above. Continuous credit monitoring and portfolio credit balancing mitigates our risk of credit losses on our available-for-sale debt securities.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | () | | | $ | | | | $ | | | | Corporate/Other debt securities | | | | | | | () | | | () | | | | |
| Total | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
| | | | | | | | | |
December 31, 2022 (in millions) | Amortized
Cost | | Gross
Unrealized
Gains | | Gross Unrealized Losses(2) | | Allowance for Credit Losses | | Fair Value |
| Available-for-sale debt securities | | | | | | | | | |
| U.S. Treasury debt securities | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | |
| Corporate/Other debt securities | | | | | | | () | | | () | | | | |
| Total | $ | | | | $ | | | | $ | () | | | $ | () | | | $ | | |
(1) Fair value of U.S. Treasury debt securities and Corporate/Other debt securities in an unrealized loss position without an allowance for credit losses is $ and $ million, respectively, at December 31, 2023.
(2) Fair value of U.S. Treasury debt securities and Corporate/Other debt securities in an unrealized loss position without an allowance for credit losses is $ million and $ million, respectively, at December 31, 2022.
Realized gains and losses on available-for-sale securities was $ million for the year ended December 31, 2023 and immaterial for 2022.
The cost of maturities sold is based upon specific identification. At December 31, 2023, approximately $ million of U.S. Treasury debt securities and approximately $ million of Corporate/Other debt securities have maturities of less than a year.
There are material items in the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2023 and 2022.
Non-recurring Fair Value Measurements
We measure the fair value of certain assets, including goodwill, on a non-recurring basis, typically when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Purchase Contract Liability. The purchase contract liability underlying the Equity units was valued at its April 19, 2021 value and categorized as a Level 2 instrument at December 31, 2022. The purchase contract liability was fully settled as of December 31, 2023. Refer to Note 6, "Equity," for additional information.
B. Other Fair Value Disclosures for Financial Instruments. The carrying amount of cash and cash equivalents, restricted cash, notes receivable, customer deposits and short-term borrowings is a reasonable estimate of fair value due to their liquid or short-term nature. Our long-term borrowings are recorded at historical amounts.
The following method and assumptions were used to estimate the fair value of each class of financial instruments.
Long-term debt. The fair value of outstanding long-term debt is estimated based on the quoted market prices for the same or similar securities. Certain premium costs associated with the early settlement of long-term debt are not taken into consideration in determining fair value. These fair value measurements are classified within Level 2 of the fair value hierarchy. For the years ended December 31, 2023 and 2022, there was no change in the method or significant assumptions used to estimate the fair value of long-term debt.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | $ | | | 15. Income Taxes
% of the excess deferred income tax regulatory balances as described below. NIPSCO Holdings I’s income tax balances are based on the difference between the financial statement amount and the tax basis of its investment in NIPSCO Holdings II.
Income Tax Expense.
| | $ | | | | $ | () | | | State | | | | | | | | |
| Total Current | | | | | | | | |
| Deferred | | | | | |
| Federal | | | | | |
Taxes before operating loss carryforwards and investment credits | | | | | | | | |
Tax utilization expense of operating loss carryforwards | | | | | | | | |
Investment tax credits | () | | | | | | | |
| State | | | | () | | | | |
| Total Deferred | | | | | | | | |
| Deferred Investment Credits | () | | | () | | | () | |
| Income Taxes | $ | | | | $ | | | | $ | | |
In connection with the NIPSCO Minority Interest Transaction, NiSource recognized a $ million income tax benefit in additional paid in capital related to % of NIPSCO’s excess deferred income taxes attributable to Blackstone’s noncontrolling interest. This benefit does not impact NIPSCO’s regulatory books or the excess deferred taxes that will benefit customers through lower future rates in accordance with applicable regulatory orders. See Note 4, "Noncontrolling Interest," for further discussion of the NIPSCO Minority Interest Transaction.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | | | $ | | | | | | $ | | | | | Tax expense at statutory federal income tax rate | | | | | % | | | | | | % | | | | | | % |
| Increases (reductions) in taxes resulting from: | | | | | | | | | | | |
| State income taxes, net of federal income tax benefit | | | | | | | | | | | | | | | | | |
| Amortization of regulatory liabilities | () | | | () | | | () | | | () | | | () | | | () | |
| | | | | | | | | |
| Fines and penalties | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Employee stock ownership plan dividends and other compensation | () | | | () | | | () | | | () | | | () | | | () | |
| | | | | | | | | |
| | | | | | | | | |
| Tax accrual adjustments | | | | | | | | | | | | | () | | | | |
| Federal tax credits | () | | | () | | | () | | | () | | | () | | | () | |
| Other adjustments | () | | | () | | | | | | | | | () | | | () | |
| Income Taxes | $ | | | | | % | | $ | | | | | % | | $ | | | | | % |
The difference in tax expense of $ million in 2023 versus 2022 was primarily due to lower pre-tax income.
The increase in tax expense of $ million in 2022 versus 2021 was primarily due to increased pre-tax income, offset by the flow-through of the reduction of the Pennsylvania corporate income tax rate and the state jurisdictional mix tax effected at statutory rates.
Net Deferred Income Tax Liability Components.
| | $ | | | Partnership basis differences | | | | | |
| Other regulatory assets | | | | | |
| |
| Total Deferred Tax Liabilities | | | | | |
| Deferred tax assets | | | |
| Other regulatory liabilities and deferred investment tax credits (including TCJA) | | | | | |
| |
| Pension and other postretirement/postemployment benefits | | | | | |
Loss and credit carryforwards | | | | | |
| Environmental liabilities | | | | | |
| Other accrued liabilities | | | | | |
| |
| Other, net | | | | | |
| Total Deferred Tax Assets | | | | | |
| |
| |
| Valuation Allowance | () | | | () | |
| Net Deferred Tax Assets | | | | | |
| Net Deferred Tax Liabilities | $ | | | | $ | | |
In connection with closing the NIPSCO Minority Interest Transaction, NIPSCO’s deferred taxes were removed from its GAAP books and were reconstituted as deferred taxes on the outside basis difference of NiSource’s investment in NIPSCO Holdings II. These deferred taxes are reflected as partnership basis differences above.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | 2037 | Federal investment tax credits | — | | | | | | | | | 2043 |
Federal production tax credits | — | | | | | | | | | 2040-2043 |
Federal other credit | — | | | | | | | | | 2029-2043 |
State losses, net of federal benefit | | | | | | | () | | | 2031-2037 |
| | | | | |
| | | | | |
Total | | | $ | | | | $ | () | | | |
We believe it is not more likely than not that a portion of the benefit from certain state net operating loss carryforwards will be realized. We have recorded a valuation allowance of $ million (net of federal benefit) on the deferred tax assets related to sale of Massachusetts Business assets reflected in the state net operating loss carryforward presented above.
Unrecognized Tax Benefits.
| | $ | | | | $ | | | | | | |
| Gross decreases - tax positions in prior period | | | | | | | | |
| Gross increases - current period tax positions | | | | | | | | |
| Ending Balance | $ | | | | $ | | | | $ | | |
| | | |
| Offset for net operating loss carryforwards | () | | | () | | | () | |
| Balance, Less Net Operating Loss Carryforwards | $ | | | | $ | | | | $ | | |
We are subject to income taxation in the United States and various state jurisdictions, primarily Indiana, Pennsylvania, Kentucky, Massachusetts, Maryland and Virginia.
We participate in the IRS CAP, which provides the opportunity to resolve tax matters with the IRS before filing each year's consolidated federal income tax return. As of December 31, 2023, tax years through 2021 have been audited and are closed to further assessment. The Company has transitioned to the Bridge Phase of the IRS CAP for the year ended December 31, 2022 and participated in the Bridge Plus pilot program. Although NiSource has not received a final acceptance letter from the IRS for its 2022 return, no adjustments are expected, and the year is effectively closed to further assessment.
The statute of limitations in each of the state jurisdictions in which we operate remains open between 3-4 years from the date the state income tax returns are filed. As of December 31, 2023, there were no state income tax audits in progress that would have a material impact on the consolidated financial statements.
NiSource is obligated to report adjustments resulting from IRS audits or settlements to state taxing authorities. In addition, if NiSource utilizes net operating losses or tax credits generated in years for which the statute of limitations has expired, such amounts are generally subject to examination.
On April 14, 2023, the IRS issued Revenue Procedure 2023-15 which provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve linear property and non-linear natural gas transmission and distribution property must be capitalized as improvements or are allowable as deductions. The Company is planning to elect this change in tax accounting method with its 2023 consolidated tax return filing in the upcoming year and continues to analyze and quantify the provisions of the safe harbor method of accounting.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
16. Pension and Other Postemployment Benefits
% | % | | % | | % | | International Equities | % | | % | | % | | % |
| Fixed Income | % | | % | | % | | % |
| | | | | |
| Real Estate | % | | % | | % | | % |
| Private Equity | % | | % | | % | | % |
| Short-Term Investments | % | | % | | % | | % |
| | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2022 | Defined Benefit Pension Plan | | Postretirement Benefit Plan |
| Asset Category | Minimum | | Maximum | | Minimum | | Maximum |
| Domestic Equities | % | | % | | % | | % |
| International Equities | % | | % | | % | | % |
| Fixed Income | % | | % | | % | | % |
| | | | | |
| Real Estate | % | | % | | % | | % |
| Private Equity | % | | % | | % | | % |
| Short-Term Investments | % | | % | | % | | % |
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | | % | | $ | | | | | % | | International Equities | | | | | % | | | | | | % |
| Fixed Income | | | | | % | | | | | | % |
| | | | | |
| Real Estate | | | | | % | | | | | | |
| Cash/Other | | | | | % | | | | | | % |
| Total | $ | | | | | % | | $ | | | | | % |
| | | | | | | | |
| Defined Benefit Pension Assets(1) | | December 31,
2022 | | Postretirement Benefit Plan Assets | | December 31,
2022 |
Asset Class (in millions) | Asset Value | | % of Total Assets | | Asset Value | | % of Total Assets |
| Domestic Equities | $ | | | | | % | | $ | | | | | % |
| International Equities | | | | | % | | | | | | % |
| Fixed Income | | | | | % | | | | | | % |
| Real Estate | | | | | % | | | | | | |
| Cash/Other | | | | | % | | | | | | % |
| Total | $ | | | | | % | | $ | | | | | % |
(1)Total includes accrued dividends and pending trades with brokers.
The categorization of investments into the asset classes in the tables above are based on definitions established by the Committee.
Fair Value Measurements. The following table sets forth, by level within the fair value hierarchy, the pension and other postretirement benefits investment assets at fair value as of December 31, 2023 and 2022. Assets are classified in their entirety based on the observability of inputs used in determining the fair value measurement. There were no investment assets in the pension and other postretirement benefits trusts classified within Level 3 for the years ended December 31, 2023 and 2022.
We use the following valuation techniques to determine fair value. For the year ended December 31, 2023, there were no significant changes to valuation techniques to determine the fair value of our pension and other postretirement benefits' assets.
Level 1 Measurements
Most common and preferred stocks are traded in active markets on national and international securities exchanges and are valued at closing prices on the last business day of each period presented. Cash is stated at cost, which approximates fair value, with the exception of cash held in foreign currencies which fluctuates with changes in the exchange rates. Short-term bills and notes are priced based on quoted market values.
Level 2 Measurements
Most U.S. Government Agency obligations, mortgage/asset-backed securities, and corporate fixed income securities are generally valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. To the extent that quoted prices are not available, fair value is determined based on a valuation model that includes inputs such as interest rate yield curves and credit spreads. Securities traded in markets that are not considered active are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Other fixed income includes futures and options which are priced on bid valuation or settlement pricing.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | $ | | | | Equity securities | | | | | | | |
| | | | | |
| International equities | | | | | | | | | | | |
| Fixed income securities | | | | | | | |
| Government | | | | | | | | | | | |
| Corporate | | | | | | | | | | | |
| Mortgages/ Asset Backed Securities | | | | | | | | | | | |
| | | | | |
| Mutual Funds | | | | | | | |
| U.S. multi-strategy | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| | | | | |
Private equity limited partnerships(1) | | | | | | | |
U.S. multi-strategy(2) | | | | | | | | | | | |
International multi-strategy(3) | | | | | | | | | | | |
| Distressed opportunities | | | | | | | | | | | |
Real estate(1) | | | | | | | | | | | |
Commingled funds(1) | | | | | | | |
| Short-term money markets | | | | | | | | | | | |
| U.S. equities | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| Fixed income | | | | | | | | | | | |
| Pension plan assets subtotal | $ | | | | $ | | | | $ | | | | $ | | |
| Other postretirement benefit plan assets: | | | | | | | |
| Mutual funds | | | | | | | |
| U.S. multi-strategy | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| Fixed income | | | | | | | | | | | |
Commingled funds(1) | | | | | | | |
| Short-term money markets | | | | | | | | | | | |
| U.S. equities | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| | | | | |
| Other postretirement benefit plan assets subtotal | $ | | | | $ | | | | $ | | | | $ | | |
Due to brokers, net(4) | () | | | | | | () | | | | |
| | | | | |
| Accrued income/dividends | | | | | | | | | | |
| Total pension and other postretirement benefit plan assets | $ | | | | $ | | | | $ | | | | $ | | |
(1))This class of investments is measured at fair value using the net asset value per share and has not been classified in the fair value hierarchy.
(2)This class includes limited partnerships that invest in a diverse portfolio of private equity strategies, including buy-outs, growth capital, special situations and secondary markets, primarily inside the United States.
(3)This class includes limited partnerships that invest a in diverse portfolio of private equity strategies, including buy-outs, growth capital, special situations and secondary markets, primarily outside the United States.
(4)This class represents pending trades with brokers.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | | | day | | U.S. equities | | | | | | | | | day - days |
| International equities | | | | | | | | | days- days |
| Fixed income | | | | | | | | | days |
Private Equity and Real Estate Limited Partnerships(1) | | | | | | | N/A | | N/A |
| Total | $ | | | | $ | | | | | | |
(1)Private equity and real estate limited partnerships typically call capital over a 3-5 year period and pay out distributions as the underlying investments are liquidated. The typical expected life of these limited partnerships is 0-15 years, and these investments typically cannot be redeemed prior to liquidation.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | $ | | | | Equity securities | | | | | | | |
| International equities | | | | | | | | | | | |
| | | | | |
| Fixed income securities | | | | | | | |
| Government | | | | | | | | | | | |
| Corporate | | | | | | | | | | | |
| Mortgages/Asset backed securities | | | | | | | | | | | |
| Other fixed income | | | | | | | | | | | |
| Mutual Funds | | | | | | | |
| U.S. multi-strategy | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| Fixed income | | | | | | | | | | | |
Private equity limited partnerships(1) | | | | | | | |
U.S. multi-strategy(2) | | | | | | | | | | | |
International multi-strategy(3) | | | | | | | | | | | |
| Distressed opportunities | | | | | | | | | | | |
Real estate(1) | | | | | | | | | | | |
Commingled funds(1) | | | | | | | |
| Short-term money markets | | | | | | | | | | | |
| U.S. equities | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| Fixed income | | | | | | | | | | | |
| Pension plan assets subtotal | $ | | | | $ | | | | $ | | | | $ | | |
| Other postretirement benefit plan assets: | | | | | | | |
| Mutual funds | | | | | | | |
| U.S. multi-strategy | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| Fixed income | | | | | | | | | | | |
Commingled funds(1) | | | | | | | |
| Short-term money markets | | | | | | | | | | | |
| U.S. equities | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| Other postretirement benefit plan assets subtotal | $ | | | | $ | | | | $ | | | | $ | | |
Due to brokers, net(4) | () | | | | | | () | | | | |
| Receivables/payables | () | | | | | | () | | | | |
| Accrued income/dividends | | | | | | | | | | | |
| Total pension and other postretirement benefit plan assets | $ | | | | $ | | | | $ | | | | $ | | |
(1)This class of investments is measured at fair value using the net asset value per share and has not been classified in the fair value hierarchy.
(2)This class includes limited partnerships/fund of funds that invest in a diverse portfolio of private equity strategies, including buy-outs, growth capital, special situations and secondary markets, primarily inside the United States.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | | | day | | U.S. equities | | | | | | | | | day - days |
| International equities | | | | | | | | | days - days |
| Fixed income | | | | | | | | | days |
Private Equity and Real Estate Limited Partnerships(1) | | | | | | | N/A | | N/A |
| Total | $ | | | | $ | | | | | | |
(1)Private equity and real estate limited partnerships typically call capital over a 3-5 year period and pay out distributions as the underlying investments are liquidated. The typical expected life of these limited partnerships is 0-15 years, and these investments typically cannot be redeemed prior to liquidation.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | $ | | | | Service cost | | | | | | | | | | | |
| Interest cost | | | | | | | | | | | |
| Plan participants’ contributions | | | | | | | | | | | |
| Plan amendments | | | | | | | | | | | |
Actuarial loss (gain)(2) | | | | () | | | | | | () | |
| | | | | |
| Benefits paid | () | | | () | | | () | | | () | |
| Estimated benefits paid by incurred subsidy | | | | | | | | | | | |
| | | | | |
| Projected benefit obligation at end of year | $ | | | | $ | | | | $ | | | | $ | | |
| Change in plan assets | | | | | | | |
| Fair value of plan assets at beginning of year | $ | | | | $ | | | | $ | | | | $ | | |
| Actual return on plan assets | | | | () | | | | | | () | |
| Employer contributions | | | | | | | | | | | |
| Plan participants’ contributions | | | | | | | | | | | |
| Benefits paid | () | | | () | | | () | | | () | |
| | | | | |
| Fair value of plan assets at end of year | $ | | | | $ | | | | $ | | | | $ | | |
| Funded Status at end of year | $ | | | | $ | () | | | $ | () | | | $ | () | |
| Amounts recognized in the statement of financial position consist of: | | | | | | | |
| Noncurrent assets | | | | | | | | | | | |
| Current liabilities | () | | | () | | | () | | | () | |
| Noncurrent liabilities | () | | | () | | | () | | | () | |
Net amount recognized at end of year(3) | $ | | | | $ | () | | | $ | () | | | $ | () | |
Amounts recognized in accumulated other comprehensive income or regulatory asset/liability(4) | | | | | | | |
| | | | | |
| Unrecognized prior service credit | $ | | | | $ | | | | $ | | | | $ | () | |
| Unrecognized actuarial loss | | | | | | | | | | | |
| Net amount recognized at end of year | $ | | | | $ | | | | $ | | | | $ | | |
(1)The change in benefit obligation for Pension Benefits represents the change in Projected Benefit Obligation while the change in benefit obligation for Other Postretirement Benefits represents the change in accumulated postretirement benefit obligation.
(2)The pension actuarial loss (gain) was primarily driven by the decrease in discount rates, interest rate movements. The postretirement benefit actuarial loss (gain) was also primarily driven by a decrease in discount rates and claims experience changes in trend rates.
(3)We recognize our Consolidated Balance Sheets underfunded and overfunded status of our various defined benefit postretirement plans, measured as the difference between the fair value of the plan assets and the benefit obligation.
(4)We determined that for certain rate-regulated subsidiaries the future recovery of pension and other postretirement benefits costs is probable. These rate-regulated subsidiaries recorded regulatory assets and liabilities of $ million and , respectively, as of December 31, 2023, and $ million and , respectively, as of December 31, 2022 that would otherwise have been recorded to accumulated other comprehensive loss.
Our accumulated benefit obligation for our pension plans was $ million and $ million as of December 31, 2023 and 2022, respectively. The accumulated benefit obligation at each date is the actuarial present value of benefits attributed by the pension benefit formula to employee service rendered prior to that date and based on current and past compensation levels. The accumulated benefit obligation differs from the projected benefit obligation disclosed in the table above in that it includes no assumptions about future compensation levels.
We are required to reflect the funded status of our pension and postretirement benefit plans on the Consolidated Balance Sheet. The funded status of the plans is measured as the difference between the plan assets' fair value and the projected benefit obligation. We present the noncurrent aggregate of all underfunded plans within "Accrued liability for postretirement and postemployment benefits." The portion of the amount by which the actuarial present value of benefits included in the projected
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | Funded Status | | | |
| Fair Value of Plan Assets | $ | | | | $ | | |
| Projected Benefit Obligation | | | | | |
Funded Status of Underfunded Pension Plans at End of Year | $ | () | | | $ | () | |
The following table sets forth the year end accumulated benefit obligation, projected benefit obligation and fair value of plan assets for pension plans with plan assets in excess of the projected benefit obligation:
| | | | | | | | | | | |
| December 31, |
| 2023 | | 2022 |
| Accumulated Benefit Obligation | $ | | | | $ | | |
| Funded Status | | | |
| Fair Value of Plan Assets | $ | | | | $ | | |
| Projected Benefit Obligation | | | | | |
| Funded Status of Overfunded Pension Plans at End of Year | $ | | | | $ | | |
Our pension plans were overfunded, in aggregate, by $ million at December 31, 2023 compared to being underfunded by $ million at December 31, 2022. The improvement in the funded status was primarily due to favorable asset returns offset by a decrease in discount rates. We contributed $ million and $ million to our pension plans in 2023 and 2022, respectively.
Our other postretirement benefit plans were underfunded, in aggregate by $ million and $ million at December 31, 2023 and 2022, respectively. The decline in funded status was primarily due to increased health care trend rates and discount rates, which was partially offset by actual return on plan assets exceeding expected return. We contributed $ million and $ million to our other postretirement benefit plans in 2023 and 2022, respectively.
In 2023 and 2022, our NiSource Pension Restoration and Columbia Energy Group pension plans paid lump sum payouts in excess of the respective plan's service cost plus interest cost, thereby meeting the requirement for settlement accounting. We recorded settlement charges of $ million and $ million in 2023 and 2022, respectively. Net periodic pension benefit cost increased by $ million in December 31, 2022 as the result of the remeasurement. In 2023, no remeasurement occurred related to lump sum payouts.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
% | | | % | | | % | | | % | | Rate of Compensation Increases | | % | | | % | | N/A | | N/A |
| Interest Crediting Rates | | % | | | % | | N/A | | N/A |
| Health Care Trend Rates | | | | | | | |
| Trend for Next Year | N/A | | N/A | | | % | | | % |
| Ultimate Trend | N/A | | N/A | | | % | | | % |
| Year Ultimate Trend Reached | N/A | | N/A | | | | |
We expect to make contributions of approximately $ million to our pension plans and approximately $ million to our postretirement medical and life plans in 2024.
The following table provides benefits expected to be paid in each of the next five fiscal years, and in the aggregate for the five fiscal years thereafter.
| | $ | | | | $ | | | | 2025 | | | | | | | | |
| 2026 | | | | | | | | |
| 2027 | | | | | | | | |
| 2028 | | | | | | | | |
| 2028-2032 | | | | | | | | |
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Interest cost | | | | | | | | | | | | | | | | | |
| Expected return on assets | () | | | () | | | () | | | () | | | () | | | () | |
| | | | | | | | | |
| Amortization of prior service cost (credit) | | | | | | | | | | () | | | () | | | () | |
| Recognized actuarial loss | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Settlement loss | | | | | | | | | | | | | | | | | |
| Total Net Periodic Benefits (Income) Cost | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | | | $ | | |
(1)Service cost is presented in "Operation and maintenance" on the Statements of Consolidated Income. Non-service cost components are presented within "Other, net."
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
% | | | % | | | % | | | % | | | % | | | % | | Discount rate - interest cost | | % | | | % | | | % | | | % | | | % | | | % |
| Expected Long-Term Rate of Return on Plan Assets | | % | | | % | | | % | | | % | | | % | | | % |
| Rate of Compensation Increases | | % | | | % | | | % | | N/A | | N/A | | N/A |
| Interest Crediting Rates | | % | | | % | | | % | | N/A | | N/A | | N/A |
We assumed a % and % rate of return on pension and other postretirement plan assets, respectively, for our calculation of 2023 pension benefits and other postretirement benefits costs. These rates were primarily based on asset mix and historical rates of return and were adjusted in 2023 due to changes in asset allocation and projected market returns.
| | | | | |
| |
|
| |
| | | | | $ | | |
| $ | | |
|
| | | $ | | |
| | | | |
| | | | |
| | | | |
| | | | |
| |
| | | | |
| | | | |
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | | |
| Granted | | | | | |
| Forfeited | () | | | | |
| Vested | () | | | | |
Non-vested at December 31, 2023 | | | | | |
Non-employee Director Awards. As of May 19, 2020, awards to non-employee directors may be made only under the 2020 Omnibus Plan. Currently, restricted stock units are granted annually to non-employee directors, subject to a non-employee director’s election to defer receipt of such restricted stock unit award. The non-employee director’s annual award of restricted stock units vest on the first anniversary of the grant date subject to special pro-rata vesting rules in the event of retirement or disability (as defined in the award agreement), or death. The vested restricted stock units are payable as soon as practicable following vesting except as otherwise provided pursuant to the non-employee director’s deferral election. Certain restricted stock units remain outstanding from the 2010 Omnibus Plan and the Director Plan. All such awards are fully vested and shall be distributed to the directors upon their separation from the Board.
As of December 31, 2023, restricted stock units are outstanding to non-employee directors under either the 2020 Omnibus Plan, the 2010 Omnibus Plan or the Director Plan. Of this amount, restricted stock units are unvested and expected to vest.
401(k) Match, Profit Sharing and Company Contribution. Eligible salaried employees hired after January 1, 2010 and hourly and union employees hired after January 1, 2013 receive a non-elective company contribution of % of eligible pay payable in cash or shares of NiSource common stock. We also have a voluntary 401(k) savings plan covering eligible union and nonunion employees that allows for periodic discretionary matches as a percentage of each participant’s contributions payable in cash or shares. Further, we have a retirement savings plan that provides for discretionary profit sharing contributions to eligible employees. For the years ended December 31, 2023, 2022 and 2021, we recognized 401(k) match, profit sharing and non-elective contribution expense of $ million, $ million and $ million, respectively.
18. Leases
and years with options to renew the leases for up to years. We lease railcars to transport coal to and from our electric generation facilities in Indiana. Our railcars are specifically identified in the lease agreements which have remaining lease terms between 1 and years with options to renew for year. Our fleet vehicles include trucks, trailers and equipment that have been customized specifically for use in the utility industry. We lease fleet vehicles for year terms, after which we have the option to extend on a month-to-month basis or terminate with written notice. We elected the short-term lease practical expedient, allowing us to not recognize ROU assets or lease liabilities for all leases with a term of 12 months or less. ROU assets and liabilities on our Consolidated Balance Sheets do not include obligations for possible fleet vehicle lease renewals beyond the initial lease term. While we have the ability to renew these leases beyond the initial term, we are not reasonably certain to do so. We have not provided material residual value guarantees for our leases, nor do our leases contain material restrictions or covenants. Lease contracts containing renewal and termination options are mostly exercisable at our sole discretion. Certain of our real estate and railcar leases include renewal periods in the measurement of the lease obligation if we have deemed the renewals reasonably certain to be exercised.
With respect to service contracts involving the use of assets, if we have the right to direct the use of the asset and obtain substantially all economic benefits from the use of an asset, we account for the service contract as a lease. Unless specifically provided to us by the lessor, we utilize NiSource's collateralized incremental borrowing rate commensurate to the lease term as the discount rate for all of our leases. ASC 842 permits a lessee, by class of underlying asset, not to separate nonlease
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | Interest on lease liabilities | Interest expense, net | | | | | |
| Total finance lease cost | | | | | | |
| Operating lease cost | Operation and maintenance | | | | | |
| | |
| | |
| Total lease cost | | $ | | | | $ | | |
| | $ | | | | Operating leases | Deferred charges and other | | | | |
| Total leased assets | | $ | | | | |
| Liabilities | | | | |
| Current | | | | |
| Finance leases | Current portion of long-term debt | $ | | | | |
| Operating leases | Other accruals | | | | |
| Noncurrent | | | | |
| Finance leases | Long-term debt, excluding amounts due within one year | | | | |
| Operating leases | Other noncurrent liabilities | | | | |
| Total lease liabilities | | $ | | | | $ | | |
| | $ | | | | Operating cash flows used for operating leases | | | | |
| Financing cash flows used for finance leases | | | | |
| Right-of-use assets obtained in exchange for lease obligations | | | |
| Finance leases | | | | |
| Operating leases | $ | | | | $ | | |
| | | | | | | | | | | |
| December 31, 2023 | | December 31, 2022 |
| Weighted-average remaining lease term (years) | | | |
| Finance leases | | | |
| Operating leases | | | |
| Weighted-average discount rate | | | |
| Finance leases | | % | | | % |
| Operating leases | | % | | | % |
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| $ | | | $ | | | | 2025 | | | | | | |
| 2026 | | | | | | |
| 2027 | | | | | | |
| 2028 | | | | | | |
| Thereafter | | | | | | |
| Total lease payments | | | | | | |
| Less: Imputed interest | () | | () | | () | |
| |
Total | $ | | | $ | | | $ | | |
Reported as of December 31, 2023 | | | |
| Short-term lease liabilities | | | | | | |
| Long-term lease liabilities | | | | | | |
| Total lease liabilities | $ | | | $ | | | $ | | |
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
19. Other Commitments and Contingencies
A.
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Interest payments on long-term debt | | | | | | | | | | | | | | | | | | | | |
Finance leases(2) | | | | | | | | | | | | | | | | | | | | |
Operating leases(3) | | | | | | | | | | | | | | | | | | | | |
| Energy commodity contracts | | | | | | | | | | | | | | | | | | | | |
| Service obligations: | | | | | | | | | | | | | |
| Pipeline service obligations | | | | | | | | | | | | | | | | | | | | |
| IT service obligations | | | | | | | | | | | | | | | | | | | | |
Other liabilities(4) | | | | | | | | | | | | | | | | | | | | |
| Total contractual obligations | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
(1) Long-term debt balance excludes unamortized issuance costs and discounts of $ million.
(2) Finance lease payments shown above are inclusive of interest totaling $ million.
(3) Operating lease payments shown above are inclusive of interest totaling $ million. Operating lease balances do not include obligations for possible fleet vehicle lease renewals beyond the initial lease term. While we have the ability to renew these leases beyond the initial term, we are not reasonably certain to do so as they are renewed month-to-month after the first year.
(4)Other liabilities shown above are primarily related to the Indiana Crossroads Solar and Dunns Bridge I Developer payments due in 2024 and ongoing maintenance service agreements for our renewable joint ventures.
Purchase and Service Obligations. We have entered into various purchase and service agreements whereby we are contractually obligated to make certain minimum payments in future periods. Our purchase obligations are for the purchase of physical quantities of natural gas, electricity and coal. Our service agreements encompass a broad range of business support and maintenance functions which are generally described below.
Our subsidiaries have entered into various energy commodity contracts to purchase physical quantities of natural gas, electricity and coal. These amounts represent the minimum quantity of these commodities we are obligated to purchase at both fixed and variable prices. To the extent contractual purchase prices are variable, obligations disclosed in the table above are valued at market prices as of December 31, 2023.
NIPSCO has power purchase arrangements representing a total of MW of wind power, with contracts expiring between 2024 and 2040. No minimum quantities are specified within these agreements due to the variability of electricity generation from wind, so no amounts related to these contracts are included in the table above. Upon early termination of one of these agreements by NIPSCO for any reason (other than material breach by the counterparties), NIPSCO may be required to pay a termination charge that could be material depending on the events giving rise to termination and the timing of the termination.
We have pipeline service agreements that provide for pipeline capacity, transportation and storage services. These agreements, which have expiration dates ranging from to , require us to pay fixed monthly charges.
NIPSCO has contracts with major rail operators providing coal transportation services for which there are certain minimum payments. These service contracts extend for various periods through .
We have executed agreements with multiple IT service providers. The agreements extend for various periods through .
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
We provide guarantees related to our future performance under BTAs for our renewable generation projects. At December 31, 2023 and 2022, our guarantees for multiple BTAs totaled $ million and $ million, respectively. The amount of each guaranty will decrease upon the substantial completion of the construction of the facilities. See “- E. Other Matters - Generation Transition,” below for more information.
million and NIPSCO is to disgorge $ million. The full amount of disgorgements will be returned to customers. NIPSCO has recovered more than 50% of its costs.Other Claims and Proceedings. We are also party to certain other claims, regulatory and legal proceedings arising in the ordinary course of business in each state in which we have operations, and based upon an investigation of these matters and discussion with legal counsel, we believe the ultimate outcome of such other legal proceedings to be individually, or in aggregate, not material at this time.
million and $ million, respectively, to cover environmental remediation at various sites. This liability is included in "Other accruals" and "Other noncurrent liabilities" in the Consolidated Balance Sheets. We recognize costs associated with environmental remediation obligations when the incurrence of such costs is probable and the amounts can be reasonably estimated. The original estimates for remediation activities may differ materially from the amount ultimately expended. The actual future expenditures depend on many factors, including laws and regulations, the nature and extent of impact and the method of remediation. These expenditures are not currently estimable at some sites. We periodically adjust our liability as information is collected and estimates become more refined. See Note 11, "Asset Retirement Obligations," for a discussion of all obligations, including those discussed below. CERCLA. Our subsidiaries are potentially responsible parties at waste disposal sites under the CERCLA and similar state laws. Under CERCLA, each potentially responsible party can be held jointly, severally and strictly liable for the remediation costs as the EPA, or state, can allow the parties to pay for remedial action or perform remedial action themselves and request
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
We utilize a probabilistic model to estimate our future remediation costs related to MGP sites. The model was prepared with the assistance of a third party and incorporates our experience and general industry experience with remediating MGP sites. We complete an annual refresh of the model in the second quarter of each fiscal year. No material changes to the estimated future remediation costs were noted as a result of the refresh completed as of June 30, 2023. Our total estimated liability related to the facilities subject to remediation was $ million and $ million at December 31, 2023 and 2022, respectively. The liability represents our best estimate of the probable cost to remediate the MGP sites. We believe that it is reasonably possible that remediation costs could vary by as much as $ million in addition to the costs noted above. Remediation costs are estimated based on the best available information, applicable remediation standards at the balance sheet date, and experience with similar facilities.
CCRs. NIPSCO continues to meet the compliance requirements established by the EPA for the regulation of CCRs. The CCR rule requirements currently in effect required revisions to previously recorded legal obligations associated with the retirement of certain NIPSCO facilities. The actual asset retirement costs related to the CCR rule may vary substantially from the estimates used to record the increased asset retirement obligation due to the uncertainty about the requirements that will be established by environmental authorities, compliance strategies that will be used and the preliminary nature of available data used to estimate costs. As allowed by the rule, NIPSCO will continue to collect data over time to determine the specific compliance solutions and associated costs and, as a result, the actual costs may vary.
million in additional capital contributions over a three-year period after the closing, which the obligation is backed by an Equity Commitment Letter from an affiliate of Blackstone. Under the LLC Agreement, Blackstone is entitled to appoint two directors to the board of directors of NIPSCO Holdings II (the “Board”) so long as Blackstone (together with any approved affiliate) holds at least a % percentage interest (as defined in the LLC Agreement). In connection with the closing, Blackstone appointed two directors to the Board, such that the Board is now comprised of seven directors, two appointed by Blackstone and five appointed by NiSource. The LLC Agreement also contains certain investor protections, including, among other things, requiring Blackstone approval for Holdings II to take certain major actions. In addition, the LLC Agreement contains certain terms regarding transfer rights and other obligations applicable to both Blackstone and NiSource. The LLC Agreement establishes, among other things, governance rights, exit rights, requirements for additional capital contributions, mechanics for distributions, and other arrangements for Holdings II from and following the closing.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
20. Accumulated Other Comprehensive Loss
| | $ | () | | | $ | () | | | $ | () | | Other comprehensive (loss) income before reclassifications | () | | | | | | | | | | |
| Amounts reclassified from accumulated other comprehensive loss | () | | | | | | | | | | |
Net current-period other comprehensive (loss) income | () | | | | | | | | | | |
| | | | | |
| Balance as of December 31, 2021 | $ | | | | $ | () | | | $ | () | | | $ | () | |
Other comprehensive (loss) income before reclassifications | () | | | | | | () | | | | |
| Amounts reclassified from accumulated other comprehensive loss | | | | | | | | | | | |
Net current-period other comprehensive (loss) income | () | | | | | | () | | | | |
| Balance as of December 31, 2022 | $ | () | | | $ | () | | | $ | () | | | $ | () | |
| Other comprehensive income (loss) before reclassifications | | | | () | | | () | | | | |
| Amounts reclassified from accumulated other comprehensive loss | | | | | | | | | | | |
| Net current-period other comprehensive income (loss) | | | | () | | | () | | | | |
| | | | | |
| Balance as of December 31, 2023 | $ | () | | | $ | () | | | $ | () | | | $ | () | |
(1)All amounts are net of tax. Amounts in parentheses indicate debits.
21. Business Segment Information
primary reportable segments, the Gas Distribution Operations and the Electric Operations segments. The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as "Corporate and Other" and primarily are comprised of interest expense on holding company debt and unallocated corporate costs and activities. Refer to Note 3, "Revenue Recognition," for additional information on our segments and their sources of revenues. The following table provides information about our reportable segments. We use operating income as our primary measurement for each of the reported segments and make decisions on finance, dividends and taxes at the corporate level on a consolidated basis. Segment revenues include intersegment sales to affiliated subsidiaries, which are eliminated in consolidation. Affiliated sales are recognized on the basis of prevailing market, regulated prices or at levels provided for under contractual agreements. Operating income is derived from revenues and expenses directly associated with each segment.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | Intersegment | | | | | | | | |
| Total | | | | | | | | |
| Electric Operations | | | | | |
| Unaffiliated | | | | | | | | |
| Intersegment | | | | | | | | |
| Total | | | | | | | | |
| Corporate and Other | | | | | |
| Unaffiliated | | | | | | | | |
| Intersegment | | | | | | | | |
| Total | | | | | | | | |
| Eliminations | () | | | () | | | () | |
| Consolidated Operating Revenues | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | | | |
Year Ended December 31, (in millions) | 2023 | | 2022 | | 2021 |
| Operating Income (Loss) | | | | | |
Gas Distribution Operations | $ | | | | $ | | | | $ | | |
| Electric Operations | | | | | | | | |
| Corporate and Other | | | | () | | | | |
| Consolidated Operating Income | $ | | | | $ | | | | $ | | |
| Depreciation and Amortization | | | | | |
| Gas Distribution Operations | $ | | | | $ | | | | $ | | |
| Electric Operations | | | | | | | | |
| Corporate and Other | | | | | | | | |
| Consolidated Depreciation and Amortization | $ | | | | $ | | | | $ | | |
| Assets | | | | | |
| Gas Distribution Operations | $ | | | | $ | | | | $ | | |
| Electric Operations | | | | | | | | |
| Corporate and Other | | | | | | | | |
| Consolidated Assets | $ | | | | $ | | | | $ | | |
Capital Expenditures(1) | | | | | |
| Gas Distribution Operations | $ | | | | $ | | | | $ | | |
| Electric Operations | | | | | | | | |
| Corporate and Other | | | | | | | | |
| Consolidated Capital Expenditures | $ | | | | $ | | | | $ | | |
(1)Amounts differ from those presented on the Statements of Consolidated Cash Flows primarily due to the inclusion of capital expenditures in current liabilities, the capitalized portion of the Corporate Incentive Plan payout, and AFUDC Equity.
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
22. Other, Net
| | $ | | | | $ | | | | AFUDC equity | | | | | | | | |
| Charitable contributions | () | | | () | | | () | |
Pension and other postretirement non-service cost(1) | () | | | | | | | |
| | | |
Interest rate swap settlement gain | | | | | | | | |
| Miscellaneous | () | | | () | | | () | |
| Total Other, net | $ | | | | $ | | | | $ | | |
(1) See Note 16, "Pension and Other Postemployment Benefits," for additional information.
23. Interest Expense, Net
| | $ | | | | $ | | | | Interest on short-term borrowings | | | | | | | | |
| Debt discount/cost amortization | | | | | | | | |
| Accounts receivable securitization fees | | | | | | | | |
| Allowance for borrowed funds used and interest capitalized during construction | () | | | () | | | () | |
| Debt-based post-in-service carrying charges | () | | | () | | | () | |
| Other | | | | | | | | |
| Total Interest Expense, net | $ | | | | $ | | | | $ | | |
NISOURCE INC.
Notes to Consolidated Financial Statements
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
24. Supplemental Cash Flow Information
| | $ | | | | $ | | | | Assets acquired under a finance lease | | | | | | | | |
| Assets acquired under an operating lease | | | | | | | | |
Reclassification of other property to regulatory assets(1) | | | | | | | | |
Assets recorded for asset retirement obligations(2) | | | | | | | | |
Obligation to developer at formation of JV(3) | | | | | | | | |
Purchase contract liability, net of fees and payments(4) | | | | | | | | |
| Schedule of interest and income taxes paid: | | | | | |
Cash paid for interest on debt, net of interest capitalized amounts | $ | | | | $ | | | | $ | | |
| Cash paid for interest on finance leases | | | | | | | | |
Cash paid for income taxes, net of refunds | | | | | | | | |
(1)See Note 12, "Regulatory Matters," for additional information.
(2)See Note 11, "Asset Retirement Obligations," for additional information.
(3)Represents investing non-cash activity. See Note 4, "Noncontrolling Interest," for additional information.
(4)Refer to Note 6, "Equity," for additional information.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
| | $ | | | | $ | | | | | $ | | | | $ | | | | | | | | | | | |
| Reserve for deferred charges and other | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | |
| Twelve months ended December 31, 2022 |
| | | | Additions | | | | | |
| ($ in millions) | Balance Jan. 1, 2022 | | Charged to Costs and Expenses | | Charged to Other Account (1) | | | Deductions for Purposes for which Reserves were Created | | Balance Dec. 31, 2022 |
| Reserves Deducted in Consolidated Balance Sheet from Assets to Which They Apply: | | | | | | | | | | |
| Reserve for accounts receivable | $ | | | | $ | | | | $ | | | | | $ | | | | $ | | |
| Reserve for deferred charges and other | | | | | | | () | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | |
| Twelve months ended December 31, 2021 |
| | | | Additions | | | | | |
| ($ in millions) | Balance
Jan. 1, 2021 | | Charged to Costs and Expenses | | Charged to Other Account (1) | | | Deductions for Purposes for which Reserves were Created | | Balance
Dec. 31, 2021 |
| Reserves Deducted in Consolidated Balance Sheet from Assets to Which They Apply: | | | | | | | | | | |
| Reserve for accounts receivable | $ | | | | $ | | | | $ | | | | | $ | | | | $ | | |
| Reserve for deferred charges and other | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | | (1) Charged to Other Accounts reflects the deferral of bad debt expense to a regulatory asset or the movement of the reserve between short term and long term.
NISOURCE INC.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our chief executive officer and chief financial officer are responsible for evaluating the effectiveness of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act are accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our chief executive officer and chief financial officer concluded that, as of the end of the period covered by this report, disclosure controls and procedures were effective to provide reasonable assurance that financial information was processed, recorded and reported accurately.
Management’s Annual Report on Internal Control over Financial Reporting
Our management, including our chief executive officer and chief financial officer, are responsible for establishing and maintaining internal control over financial reporting, as such term is defined under Rule 13a-15(f) or Rule 15d-15(f) promulgated under the Exchange Act. However, management would note that a control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our management has adopted the 2013 framework set forth in the Committee of Sponsoring Organizations of the Treadway Commission report, Internal Control - Integrated Framework, the most commonly used and understood framework for evaluating internal control over financial reporting, as its framework for evaluating the reliability and effectiveness of internal control over financial reporting. During 2023, we conducted an evaluation of our internal control over financial reporting. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of the end of the period covered by this Annual Report on Form 10-K.
Deloitte & Touche LLP, our independent registered public accounting firm, issued an attestation report on our internal controls over financial reporting which is included herein.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting during the most recently completed quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9A. CONTROLS AND PROCEDURES
NISOURCE INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of NiSource Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of NiSource Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 21, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Columbus, Ohio
February 21, 2024
ITEM 9B. OTHER INFORMATION
NISOURCE INC.
Director and Officer Trading Arrangements
During the year ended December 31, 2023, no director or Section 16 officer of the Company adopted, terminated or modified a ‘Rule 10b5-1 trading arrangement’ or ‘non-Rule 10b5-1 trading arrangement,’ as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
NISOURCE INC.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except for the information required by this item with respect to our executive officers included at the end of Part I of this report on Form 10-K, the information required by this Item 10 is incorporated herein by reference to the discussion in "Proposal 1 Election of Directors," "Corporate Governance - Board Committee Composition," "Corporate Governance - Code of Business Conduct," and "Delinquent Section 16(a) Reports" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 2024.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by reference to the discussion in "Compensation and Human Capital Committee Interlocks and Insider Participation," "2023 Director Compensation," "2023 Executive Compensation," "Compensation Discussion and Analysis (CD&A)," "Assessment of Risk," "2023 Pay Versus Performance," and "Compensation and Human Capital Committee Report" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 2024.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item 12 is incorporated herein by reference to the discussion in "Security Ownership of Certain Beneficial Owners and Management," and "Equity Compensation Plan Information" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 2024.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 is incorporated herein by reference to the discussion in "Corporate Governance - Policies and Procedures with Respect to Transactions with Related Persons" and "Corporate Governance - Director Independence" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 2024.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item 14 is incorporated herein by reference to the discussion in "Independent Registered Public Accounting Firm Fees" of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 2024.
PART IV
NISOURCE INC.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial Statements and Financial Statement Schedules
The following financial statements and financial statement schedules filed as a part of the Annual Report on Form 10-K are included in Item 8, "Financial Statements and Supplementary Data."
Exhibits
The exhibits filed herewith as a part of this report on Form 10-K are listed on the Exhibit Index below. Each management contract or compensatory plan or arrangement of ours, listed on the Exhibit Index, is separately identified by an asterisk.
Pursuant to Item 601(b), paragraph (4)(iii)(A) of Regulation S-K, certain instruments representing long-term debt of our subsidiaries have not been included as Exhibits because such debt does not exceed 10% of the total assets of ours and our subsidiaries on a consolidated basis. We agree to furnish a copy of any such instrument to the SEC upon request.
| | | | | |
EXHIBIT
NUMBER | DESCRIPTION OF ITEM |
| |
|
|
|
|
| (1.1) | |
| (1.2) | |
| (2.1) | Separation and Distribution Agreement, dated as of June 30, 2015, by and between NiSource Inc. and Columbia Pipeline Group, Inc. (incorporated by reference to Exhibit 2.1 to the NiSource Inc. Form 8-K filed on July 2, 2015). |
| |
| (3.1) |
|
| |
| (3.2) |
|
| |
| (3.3) | |
| |
| (3.4) |
|
| |
|
|
| (3.5) | Certificate of Designations of 6.50% Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock (incorporated by reference to Exhibit 3.1 of the NiSource Inc. Form 8-K filed on December 6, 2018). |
| |
| (3.6) | |
| |
| (4.1) | Indenture, dated as of March 1, 1988, by and between Northern Indiana Public Service Company ("NIPSCO") and Manufacturers Hanover Trust Company, as Trustee (incorporated by reference to Exhibit 4 to the NIPSCO Registration Statement (Registration No. 33-44193)). |
| |
| (4.2) | First Supplemental Indenture, dated as of December 1, 1991, by and between Northern Indiana Public Service Company and Manufacturers Hanover Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to the NIPSCO Registration Statement (Registration No. 33-63870)). |
| |
| (4.3) | Indenture Agreement, dated as of February 14, 1997, by and between NIPSCO Industries, Inc., NIPSCO Capital Markets, Inc. and Chase Manhattan Bank as trustee (incorporated by reference to Exhibit 4.1 to the NIPSCO Industries, Inc. Registration Statement (Registration No. 333-22347)). |
| |
| | | | | |
| (4.4) | Second Supplemental Indenture, dated as of November 1, 2000, by and among NiSource Capital Markets, Inc., NiSource Inc., New NiSource Inc., and The Chase Manhattan Bank, as trustee (incorporated by reference to Exhibit 4.45 to the NiSource Inc. Form 10-K for the period ended December 31, 2000). |
| |
| (4.5) | Indenture, dated November 14, 2000, among NiSource Finance Corp., NiSource Inc., as guarantor, and The Chase Manhattan Bank, as Trustee (incorporated by reference to Exhibit 4.1 to the NiSource Inc. Form S-3, dated November 17, 2000 (Registration No. 333-49330)). |
| |
| (4.6) | |
| |
| (4.7) | |
| |
| (4.8) | |
| |
| (4.9) | |
| |
| (4.10) | Third Supplemental Indenture, dated as of November 30, 2017, between NiSource Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.2 to the NiSource Inc. Form 8-K filed on December 1, 2017). |
| |
| (4.11) | Second Supplemental Indenture, dated as of February 12, 2018, between Northern Indiana Public Service Company and The Bank of New York Mellon, solely as successor trustee under the Indenture dated as of March 1, 1988 between the Company and Manufacturers Hanover Trust Company, as original trustee. (incorporated by reference to Exhibit 4.1 to the NiSource Inc. Form 10-Q filed on May 2, 2018).
|
| |
| (4.12) | Fourth Supplemental Indenture, dated as of December 18, 2023, between NiSource, Inc. and The Bank of New York Mellon, as trustee, relating to the 7.99% Medium-Term Notes due 2027 and the 6.78% Senior Notes due 2027 (incorporated by reference to Exhibit 10.1 to the NiSource Inc. Form 8-K filed on December 18, 2023). |
| |
| (4.13) | Deposit Agreement, dated as of December 5, 2018, among NiSource, Inc., Computershare Inc. and Computershare Trust Company, N.A., acting jointly as depositary, and the holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.1 of the NiSource Inc. Form 8-K filed on December 6, 2018).
|
| |
| (4.14) |
|
| |
| (4.15) | Amended and Restated Deposit Agreement, dated as of December 27, 2018, among NiSource, Inc., Computershare Inc. and Computershare Trust Company, N.A., acting jointly as depositary, and the holders from time to time of the depositary receipts described therein (incorporated by reference to Exhibit 4.1 to the NiSource Inc. Form 8-K filed on December 27, 2018).
|
| |
| (4.16) |
|
| |
| (4.17) |
|
| |
| (4.18) |
|
| |
| (4.19) | |
| |
| (4.20) | |
| |
| (4.21) | |
| |
| (4.22) | |
| |
| | | | | |
| (4.23) | |
| |
| (4.24) | |
| |
| (4.25) | |
| |
| (4.26) | |
| |
| (4.27) |
|
| |
| (4.28) | |
| |
| (4.29) | |
| |
| (4.30) | |
| |
| (4.31) | |
| |
| (10.1) | |
| |
| (10.2) | |
| |
| (10.3) | |
| |
| (10.4) | |
| |
| (10.5) | Form of Amendment to Restricted Stock Unit Award Agreement related to Vested but Unpaid NiSource Restricted Stock Unit Awards for Nonemployee Directors of NiSource entered into as of July 13, 2015 (incorporated by reference to Exhibit 10.3 to the NiSource Inc. Form 10-Q filed on November 3, 2015).* |
| |
| (10.6) | Supplemental Life Insurance Plan effective January 1, 1991, as amended, (incorporated by reference to Exhibit 2 to the NIPSCO Industries, Inc. Form 8-K filed on March 25, 1992).* |
| |
| (10.7) | Form of Restricted Stock Unit Award Agreement for Nonemployee Directors under the 2010 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to NiSource Inc. Form 10-Q filed on August 2, 2011).* |
| |
| (10.8) | |
| |
| (10.9) | |
| |
| (10.10) | |
| |
| (10.11) | Amendment No. 1, dated as of November 10, 2008, to the Note Purchase Agreement by and among NiSource Finance Corp., as issuer, NiSource Inc., as guarantor, and the purchasers whose names appear on the signature page thereto (incorporated by reference to Exhibit 10.30 to the NiSource Inc. Form 10-K filed on February 27, 2009). |
| |
| (10.12) | |
| |
| (10.13) | Registration Rights Agreement, dated as of May 2, 2018, by and among NiSource Inc. and the purchasers named therein (incorporated by reference to Exhibit 10.2 of the NiSource Inc. Form 8-K filed on May 2, 2018).
|
| |
| | | | | |
| (10.14) | |
| |
| (10.15) |
|
| |
| (10.16) | |
| |
| (10.17) | |
| |
| (10.18) | |
| |
| (10.19) | |
| |
| (10.20) | |
| |
| (10.21) | |
| |
| (10.22) | |
| |
| (10.23) | |
| |
| (10.24) | |
| |
| (10.25) | |
| |
| (10.26) | |
| |
| (10.27) | |
| |
| (10.28) | |
| |
| (10.29) | |
| |
| (10.30) | Sixth Amended and Restated Revolving Credit Agreement, dated as of February 18, 2022, among NiSource Inc., as Borrower, the Lenders party thereto, Barclays Bank PLC, as Administrative Agent, JPMorgan Chase Bank, N.A. and MUFG Bank, Ltd., as Co-Syndication Agents, Credit Suisse AG, New York Branch, Wells Fargo Bank, National Association, and Bank of America, National Association, as Co-Documentation Agents, Barclays Bank PLC and MUFG Bank, Ltd., as Co-Sustainability Structuring Agents, and Barclays Bank PLC, JPMorgan Chase Bank, N.A. MUFG Bank, Ltd., Credit Suisse Loan Funding LLC, Wells Fargo Securities, LLC, and BofA Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners (incorporated by reference to Exhibit 10.1 of the NiSource Inc. Form 8-K filed on February 18, 2022). |
| |
| (10.31) | Amendment No. 1 to the Sixth Amended and Restated Revolving Credit Agreement dated February 18, 2022, made as of August 23, 2023 by and among NiSource Inc., the financial institutions listed on the signature pages and Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.1 to the NiSource Inc. Form 8-K filed on August 23, 2023). |
| |
| (10.32) | |
| |
| | | | | |
| (10.33) | Credit Agreement, dated as of December 20, 2022, among NiSource Inc., as Borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, PNC Capital Markets LLC, as Syndication Agent, Bank of America, N.A. and Wells Fargo Bank, N.A., as Co-Documentation Agents and JPMorgan Chase Bank, N.A., PNC Capital Markets LLC, Bank of America, N.A. and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Bookrunners (incorporated by reference to Exhibit 10.1 of the NiSource Inc. Form 8-K filed on December 20, 2022).
|
| |
| (10.34) | Amendment No. 1 to the Credit Agreement dated December 20, 2022, made as of October 5, 2023 by and among NiSource Inc., the financial institutions listed on the signature pages and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the NiSource Inc. Form 8-K filed on October 5, 2023).
|
| |
| (10.35) | Credit Agreement, dated as of November 9, 2023, among NiSource Inc., as Borrower, the lenders party there to, and U.S. Bank National Association, as Administrative Agent, as Sole Lead Arranger and Bookrunner (incorporated by reference to Exhibit 10.1 to the NiSource Inc. Form 8-K filed on November 9, 2023).
|
| |
| (10.36) | Augmenting Lender Supplement, dated December 6, 2023, by and among NiSource Inc., Mizuho Bank, LTD, Bank of Montreal. and U.S. Bank National Association (incorporated by reference to Exhibit 10.1 to the NiSource Inc. Form 8-K filed on December 6, 2023). |
| (10.37) | |
| |
| (10.38) | |
| |
| (10.39) | |
| |
| (10.40) | |
| |
|
|
|
|
| (10.41) | Purchase and Sale Agreement, dated as of June 17, 2023, among NiSource Inc., as the Parent, NIPSCO Holdings II LLC, as the Company, and BIP BLUE BUYER L.L.C., as the Investor (incorporated by reference to Exhibit 10.1 to the NiSource Inc. Form 8-K filed on June 20, 2023). |
| |
| (10.42) | Amendment No. 1 to the Purchase and Sale Agreement, dated as of July 6, 2023, among NiSource Inc., as the Parent, NIPSCO Holdings II LLC, as the Company, and BIP BLUE BUYER L.L.C., as the Investor (incorporated by reference to Exhibit 10.2 of the NiSource Inc. Form 10-Q filed on August 2, 2023).****
|
| |
| (10.43) | Amended and Restated Limited Liability Company Agreement of NIPSCO Holdings II LLC, dated December 31, 2023 (incorporated by reference to Exhibit 10.1 of the NiSource Inc. Form 8-K filed on January 2, 2024).****
|
| |
| (10.44) |
|
| |
| (10.45) | |
| |
| (10.46) | |
| |
| (10.47) | |
| |
| (10.48) | |
| |
| (21) | |
| |
| (23) | |
| |
| (31.1) | |
| |
| (31.2) | |
| |
| (32.1) | |
| |
| | | | | |
| (32.2) | |
| |
| (97.1) | |
| |
| (101.INS) | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. ** |
| |
| (101.SCH) | Inline XBRL Schema Document.** |
| |
| (101.CAL) | Inline XBRL Calculation Linkbase Document.** |
| |
| (101.LAB) | Inline XBRL Labels Linkbase Document.** |
| |
| (101.PRE) | Inline XBRL Presentation Linkbase Document.** |
| |
| (101.DEF) | Inline XBRL Definition Linkbase Document.** |
| |
| (104) | Cover page Interactive Data File (formatted as inline XBRL, and contained in Exhibit 101.) |
| | | | | |
| * | Management contract or compensatory plan or arrangement of NiSource Inc. |
| | | | | |
| ** | Exhibit filed herewith. |
| | | | | |
| *** | Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. NiSource agrees to furnish supplementally a copy of any omitted schedules or exhibits to the SEC upon request. |
| | | | | |
**** | Schedules and similar attachments to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange Commission (the “SEC”) upon request. |
References made to NIPSCO filings can be found at Commission File Number 001-04125. References made to NiSource Inc. filings made prior to November 1, 2000 can be found at Commission File Number 001-09779.
ITEM 16. FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| | | | | | | | |
| | NiSource Inc. |
| | (Registrant) |
| | |
Date: February 21, 2024 | By: | /s/ LLOYD M. YATES |
| | Lloyd M. Yates |
| | President, Chief Executive Officer and Director |
| | (Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | | | | | | | |
| | /s/ | LLOYD M. YATES | | President, Chief | Date: February 21, 2024 |
| | | Lloyd M. Yates | | Executive Officer and Director
(Principal Executive Officer) | |
| | | | | | |
| | /s/ | SHAWN ANDERSON | | Executive Vice President and | Date: February 21, 2024 |
| | | Shawn Anderson | | Chief Financial Officer
(Principal Financial Officer) | |
| | | | | | |
| | /s/ | GUNNAR J. GODE | | Vice President and | Date: February 21, 2024 |
| | | Gunnar J. Gode | | Chief Accounting Officer
(Principal Accounting Officer) | |
| | | | | | |
| | /s/ | KEVIN T. KABAT | | Chairman of the Board | Date: February 21, 2024 |
| | | Kevin T. Kabat | | | |
| | | | | | |
| | /s/ | PETER A. ALTABEF | | Director | Date: February 21, 2024 |
| | | Peter A. Altabef | | | |
| | | | | | |
| | /s/ | SONDRA L. BARBOUR | | Director | Date: February 21, 2024 |
| | | Sondra L. Barbour | | | |
| | | | | | |
| | /s/ | THEODORE H. BUNTING, JR. | | Director | Date: February 21, 2024 |
| | | Theodore H. Bunting, Jr. | | | |
| | | | | | |
| | /s/ | ERIC L. BUTLER | | Director | Date: February 21, 2024 |
| | | Eric L. Butler | | | |
| | | | | | |
| | /s/ | ARISTIDES S. CANDRIS | | Director | Date: February 21, 2024 |
| | | Aristides S. Candris | | | |
| | | | | | |
| | /s/ | DEBORAH A. HENRETTA | | Director | Date: February 21, 2024 |
| | | Deborah A. Henretta | | | |
| | | | | | |
| | /s/ | DEBORAH A.P. HERSMAN | | Director | Date: February 21, 2024 |
| | | Deborah A. P. Hersman | | | |
| | | | | | |
| | /s/ | WILLIAM D. JOHNSON | | Director | Date: February 21, 2024 |
| | | William D. Johnson | | | |
| | | | | | |
| | /s/ | MICHAEL E. JESANIS | | Director | Date: February 21, 2024 |
| | | Michael E. Jesanis | | | |
| | | | | | |
| | /s/ | CASSANDRA S. LEE | | Director | Date: February 21, 2024 |
| | | Cassandra S. Lee | | | |
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