MERRILLVILLE, Ind.,
Feb. 20, 2019 /PRNewswire/
-- NiSource Inc. (NYSE: NI) today announced, on a GAAP basis,
a net loss to common shareholders for the three months ended
December 31, 2018, of $19.8
million, or $0.05 per share,
compared to a net loss to common shareholders of $52.4 million, or $0.16 per share, for the same period of 2017. For
the twelve months ended December 31, 2018, NiSource's net loss
to common shareholders was $65.6
million, or $0.18 per share,
compared to net income available to common shareholders of
$128.5 million, or $0.39 per share, for the same period of 2017.
NiSource also reported net operating earnings available to
common shareholders (non-GAAP) of $141.9
million, or $0.38 per share,
for the three months ended December 31, 2018, compared to
$110.3 million, or $0.33 per share, for the same period of 2017. For
the twelve months ended December 31, 2018, NiSource's net
operating earnings available to common shareholders (non-GAAP) were
$463.3 million, or $1.30 per share, compared to $397.5 million, or $1.21 per share, for the same period of 2017.
NiSource's fourth quarter and full-year GAAP results include
approximately $426 million and
$888 million, respectively, in
expenses associated with the September 13,
2018 incident on its gas distribution system in the
Greater Lawrence, Mass., area.
These expenses are net of $135
million of insurance recoveries recorded during 2018.
Current estimates for these claims and other expenses are higher
than estimates provided with third quarter results. Schedule 1 of
this press release contains a complete reconciliation of GAAP
measures to non-GAAP measures. Schedule 2 of this press release
provides total current estimates of costs and expenses related to
the Greater Lawrence Incident.
"We reached a major milestone in Greater Lawrence with gas service restored to
nearly all customers in mid-December, and our focus on supporting
our customers in those communities continues," said NiSource
President and CEO Joe
Hamrock. "We're in the next phase of the restoration,
with commitments to restoring property and streets and continued
engagement with the communities. We remain humbled by the event,
and we're engaged in extensive efforts to enhance the safety and
reliability of our gas distribution systems across our seven-state
footprint."
While supporting significant restoration efforts in Massachusetts, the company delivered on a
number of key objectives in 2018, including:
- Accelerating implementation of a safety management system (SMS)
aligned with a framework developed for pipeline operators by the
American Petroleum Institute. SMS was initially launched in
Indiana and Virginia, and is being implemented across the
NiSource footprint.
- Repositioning its Indiana
electric business, with submission of a long-term plan to
transition its generating fleet away from coal to lower-cost
renewable energy resources by 2028, saving customers an estimated
$4 billion over the long-term.
- Investing $1.8 billion in its gas
and electric utilities, including the accelerated mainline
replacement in Greater Lawrence.
NiSource replaced over 430 miles of natural gas pipeline including
302 miles of priority pipeline as well as 64 miles of underground
electric circuits and more than 1,300 electric poles, to enhance
system safety and reliability.
- Adding approximately 27,000 net new gas customers, driven by
increased conversions to natural gas from other fuels and a healthy
housing market.
- Successfully implementing federal tax reform, with all
customers now enjoying savings made possible by lower corporate
income tax rates.
- Opening state-of-the-art training centers in Massachusetts and Virginia, completing the four centers it
announced in 2016 and enhancing training for gas operations
employees and first responders.
- Securing regulatory approval of a new Capital Expenditure
Program rider in Ohio, allowing
for cost recovery to begin on significant capital investments not
being recovered through the existing infrastructure modernization
tracker.
- Solid execution of regulatory initiatives, including gas base
rate case settlements in Indiana,
Maryland and Pennsylvania, and filing a gas base rate case
in Virginia and an electric base
rate case in Indiana.
"While the restoration in Massachusetts has been a major focus since
mid-September, the NiSource team continues to execute and deliver
results for all customers and stakeholders," Hamrock said. "We're
advancing our electric generation strategy in Indiana, investing in our systems in all seven
states and taking prudent steps to ensure the long-term
sustainability of our business."
2019 earnings, capital guidance initiated; long-term growth
forecast extended through 2022
In 2019, NiSource expects to make capital investments of
$1.6 to $1.7
billion and to deliver net operating earnings per share
(non-GAAP) in the range of $1.27 to
$1.33. The earnings guidance and
previously announced dividend increase reflect the near-term impact
of financing the Greater Lawrence
restoration, expenses associated with accelerating the
enterprise-wide SMS implementation and increased pension costs
related to late-in-the-year market volatility.
"Our resilient infrastructure investment program continues to
deliver value to all stakeholders with safety enhancements for
customers and communities and long-term financial growth for
investors," Hamrock said. "I would add that I am proud of the
NiSource team's continued focus, dedication and execution through a
very challenging period."
NiSource expects to grow its non-GAAP earnings and dividend by 5
to 7 percent annually from 2019 through 2022, a two-year extension
to its prior long-term growth forecast. The company expects to make
capital investments of $1.6 to
$2.0 billion annually from 2020
through 2022. NiSource remains committed to maintaining
investment-grade credit ratings. The company has investment-grade
ratings with Fitch Ratings (BBB), Moody's (Baa2) and Standard &
Poor's (BBB+). As of December 31, 2018, NiSource had
approximately $1.0 billion in net
available liquidity, consisting of cash and available capacity
under its credit facility and accounts receivable
securitizations.
NiSource reminds investors that it does not provide a GAAP
equivalent of its earnings guidance due to the impact of
unpredictable factors such as fluctuations in weather, asset sales
and impairments, and other items included in GAAP results.
Fourth Quarter 2018 and Recent Business Highlights
Gas Distribution Operations
- The Pennsylvania Public Utility Commission approved a
settlement in Columbia Gas of Pennsylvania's base rate case, with new
rates effective in December 2018. The
settlement supports upgrades and replacement of the company's
natural gas distribution pipelines, provides customers with the
benefits of federal tax reform and is expected to increase annual
revenues by $26 million.
- New rates went into effect, subject to refund, on February 1, 2019 in Columbia Gas of
Virginia's base rate case,
which remains pending before the Virginia State Corporation
Commission. Filed in August 2018, the
request seeks to recover costs associated with ongoing
infrastructure investment programs and to address the impacts of
federal tax reform. If approved as filed, the request would
increase annual revenues by $22.2
million, including $8.0
million of current infrastructure tracker revenue. A
commission order is expected in the second half of 2019.
- The Maryland Public Service Commission approved a settlement of
Columbia Gas of Maryland's
base rate case, with new rates effective in November 2018. The settlement authorizes the
company to increase annual revenues by $3.8
million, including $1.6
million of current infrastructure tracker revenue, and
supports continued replacement of gas pipelines and pipeline safety
upgrades.
- The Public Utilities Commission of Ohio approved a settlement of Columbia Gas
of Ohio's Capital Expenditure
Program (CEP) rider application, with new rates effective
November 29, 2018. The approved
$74.5 million CEP rider allows the
company to begin recovering capital investments and related
deferred expenses incurred between 2011 and 2017 that are not
currently recovered through its infrastructure modernization
tracker. The settlement also provided benefits to customers through
base rate reductions and bill credits related to federal tax
reform.
- On March 1, 2019, Northern
Indiana Public Service Company (NIPSCO) will implement the
second of three steps in new rates authorized by Indiana Utility
Regulatory Commission (IURC) in the company's most recent gas base
rate case. New rates initially went into effect in October 2018 following approval of a settlement
supporting continued investment in system upgrades, technology
improvements and other measures to increase pipeline safety and
system reliability. When new rates are fully implemented in
January 2020, annual revenue is
expected to increase by $107.3
million, reflecting the impact of federal tax reform.
- Also in Indiana, NIPSCO
continues to execute on its long-term gas infrastructure
modernization program with plans for investments through 2020. The
IURC in December 2018 approved a
settlement agreement in the latest Transmission, Distribution
and Storage System Improvement Charge (TDSIC) tracker update
request, covering $54.4 million of
investments made in the first half of 2018. The company is
evaluating whether to submit a new seven-year TDSIC program later
this year.
Electric Operations
- On February 1, 2019, NIPSCO made
filings with the IURC seeking approval to develop three wind farms
in Indiana in partnership with
experienced renewable energy developers. The three projects --
Jordan Creek, Roaming
Bison and Rosewater -- have nameplate capacity totaling
800 megawatts and are expected to be in operation by late 2020.
This filing is consistent with NIPSCO's 2018 Integrated Resource
Plan, submitted in October 2018,
which calls for the retirement of nearly 80 percent of its
remaining coal-fired generation in the next five years, and all
coal generation to be retired by 2028. The replacement plan is
being fully defined, and options point toward lower-cost renewable
energy resources such as wind, solar and battery storage
technology. NIPSCO expects to announce additional renewable
projects and issue a second Request for Proposals later this year.
NIPSCO's goal is to transition to the most economical, cleanest
electric supply mix available while maintaining reliability,
diversity and flexibility for technology and market changes.
- NIPSCO's electric base rate case remains pending before
the IURC. Filed in October 2018, the
request seeks changes to the company's depreciation schedules
related to the early retirements of coal fired generation plants
called for in the IRP, as well as changes in tariffs to provide
service flexibility for industrial customers to remain competitive
in the global marketplace. The proposal also reflects the impact of
federal tax reform. If approved as filed, the request is expected
to increase annual base rate revenues by $21.4 million. An IURC order is anticipated in
the third quarter of 2019, with rates effective in September 2019.
- NIPSCO's approximately $193
million Coal Combustion Residuals (CCR) capital
projects are progressing. Two of the units with the largest CCR
projects are in service, with the last unit scheduled to be in
service in the first quarter of 2019. These projects include
environmental upgrades at NIPSCO's generating facilities to meet
current EPA standards. The IURC in December
2017 approved a settlement authorizing these projects and
recovery of associated costs.
- NIPSCO continues to execute on its seven-year electric
infrastructure modernization program, which includes enhancements
to its electric transmission and distribution system designed to
further improve system safety and reliability. The IURC-approved
program represents approximately $1.2
billion of electric infrastructure investments expected to
be made through 2022. The IURC in November
2018 approved a settlement in NIPSCO's tracker update
request, filed in July 2018, which
sought a semi-annual incremental rate decrease of $11.8 million, due primarily to a $14.1 million base rate refund to customers for
the January through April 2018 tax
savings related to federal tax reform. The company filed its latest
tracker update request in January
2019, covering approximately $58.8
million in incremental capital investments made from
June 2018 through November 2018.
Additional information for the quarter ended
December 31, 2018, is available on the Investors section of
www.nisource.com, including segment and financial information and
our presentation to be discussed at our fourth quarter 2018
earnings conference call scheduled for February 20, 2019 at 9:00
a.m. ET.
About NiSource
NiSource Inc. (NYSE: NI) is one of the
largest fully-regulated utility companies in the United States, serving approximately 3.5
million natural gas customers and 500,000 electric customers across
seven states through its local Columbia Gas and NIPSCO brands.
Based in Merrillville, Indiana,
NiSource's approximately 8,000 employees are focused on safely
delivering reliable and affordable energy to our customers and
communities we serve. NiSource has been designated a World's Most
Ethical Company by the Ethisphere Institute since 2012 and is a
member of the Dow Jones Sustainability - North America Index and
was named by Forbes magazine as the top-rated utility among
America's Best Large Employers in 2017. Additional information
about NiSource, its investments in modern infrastructure and
systems, its commitments and its local brands can be found at
www.nisource.com. Follow us at www.facebook.com/nisource,
www.linkedin.com/company/nisource or www.twitter.com/nisourceinc.
NI-F
Forward-Looking Statements
This press release contains
forward-looking statements within the meaning of federal securities
laws. Investors and prospective investors should understand that
many factors govern whether any forward-looking statement contained
herein will be or can be realized. Any one of those factors could
cause actual results to differ materially from those projected.
Examples of forward-looking statements in this press release
include statements and expectations regarding NiSource's or any of
its subsidiaries' business, performance, growth, commitments,
investment opportunities, and planned, identified, infrastructure
or utility investments. All forward-looking statements are based on
assumptions that management believes to be reasonable; however,
there can be no assurance that actual results will not differ
materially. Factors that could cause actual results to differ
materially from the projections, forecasts, estimates, plans,
expectations and strategy discussed in this press release include,
among other things, NiSource's debt obligations; any changes in
NiSource's credit rating; NiSource's ability to execute its growth
strategy; changes in general economic, capital and commodity market
conditions; pension funding obligations; economic regulation and
the impact of regulatory rate reviews; NiSource's ability to obtain
expected financial or regulatory outcomes; NiSource's ability to
adapt to, and manage costs related to, advances in technology; any
changes in our assumptions regarding the financial implications of
the Greater Lawrence Incident; potential incidents and other
operating risks associated with our business; our ability to obtain
sufficient insurance coverage; the outcome of legal and regulatory
proceedings, investigations, inquiries, claims and litigation; any
damage to NiSource's reputation, including in connection with the
Greater Lawrence Incident; compliance with environmental laws and
the costs of associated liabilities; fluctuations in demand from
residential and commercial customers; economic conditions of
certain industries; the success of NIPSCO's electric generation
strategy; the price of energy commodities and related
transportation costs or an inability to obtain an adequate,
reliable and cost-effective fuel supply to meet customer demands;
the reliability of customers and suppliers to fulfill their payment
and contractual obligations; potential impairments of goodwill or
definite-lived intangible assets; changes in taxation and
accounting principles; the impact of an aging infrastructure; the
impact of climate change; potential cyber-attacks; construction
risks and natural gas costs and supply risks; extreme weather
conditions; the attraction and retention of a qualified work force;
the ability of NiSource's subsidiaries to generate cash; tax
liabilities associated with the separation of Columbia Pipeline
Group, Inc.; NiSource's ability to manage new initiatives and
organizational changes; the performance of third-party suppliers
and service providers; and other matters set forth in Item 1A,
"Risk Factors" section of NiSource's Annual Report on Form 10-K for
the fiscal year ended December 31,
2018 and in other filings with the Securities and Exchange
Commission. A credit rating is not a recommendation to buy, sell or
hold securities, and may be subject to revision or withdrawal at
any time by the assigning rating organization. In addition,
dividends are subject to board approval. NiSource expressly
disclaims any duty to update, supplement or amend any of its
forward-looking statements contained in this press release, whether
as a result of new information, subsequent events or otherwise,
except as required by applicable law.
Regulation G Disclosure Statement
This press release
includes financial results and guidance for NiSource with respect
to net operating earnings available to common shareholders, which
is a non-GAAP financial measure as defined by the SEC's Regulation
G. The company includes this measure because management believes it
permits investors to view the company's performance using the same
tools that management uses and to better evaluate the company's
ongoing business performance. With respect to such guidance, it
should be noted that there will likely be a difference between this
measure and its GAAP equivalent due to various factors, including,
but not limited to, fluctuations in weather, the impact of asset
sales and impairments, and other items included in GAAP results.
The company is not able to estimate the impact of such factors on
GAAP earnings and, as such, is not providing earnings guidance on a
GAAP basis.
Schedule 1 -
Reconciliation of Consolidated Net Income (Loss) Available to
Common
|
Shareholders to Net
Operating Earnings Available to Common Shareholders
(Non-GAAP)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
|
|
|
December
31,
|
December
31,
|
(in millions,
except per share amounts)
|
2018
|
2017
|
2018
|
2017
|
GAAP Net Income
(Loss) Available to Common Shareholders
|
$
(19.8)
|
$
(52.4)
|
$
(65.6)
|
$
128.5
|
Adjustments to
Operating Income (Loss):
|
|
|
|
|
|
Operating
Revenues:
|
|
|
|
|
|
|
Weather - compared to
normal
|
(10.6)
|
(6.9)
|
(32.5)
|
30.2
|
|
|
Greater Lawrence
Incident(1)
|
3.9
|
-
|
3.9
|
-
|
|
Operating
Expenses:
|
|
|
|
|
|
|
Plant retirement
costs(2)
|
-
|
-
|
3.3
|
1.5
|
|
|
IT service provider
transition costs(3)
|
-
|
8.3
|
-
|
21.6
|
|
|
Greater Lawrence
Incident(4)
|
379.0
|
-
|
830.6
|
-
|
|
|
Loss on sale of
assets and impairments, net
|
0.8
|
0.1
|
1.2
|
-
|
Total adjustments to
operating income (loss)
|
373.1
|
1.5
|
806.5
|
53.3
|
|
Other Income
(Deductions):
|
|
|
|
|
|
|
Greater Lawrence
Incident - Charitable contribution(4)
|
10.4
|
-
|
20.7
|
-
|
|
|
Interest rate swap
settlement gain
|
(25.0)
|
-
|
(46.2)
|
-
|
|
|
Loss on early
extinguishment of long-term debt
|
-
|
-
|
45.5
|
111.5
|
|
Income
Taxes:
|
|
|
|
|
|
|
Tax effect of above
items
|
(79.8)
|
0.1
|
(180.6)
|
(56.9)
|
|
|
Income taxes -
discrete items(5)
|
(117.0)
|
161.1
|
(117.0)
|
161.1
|
Total adjustments to
net income (loss)
|
161.7
|
162.7
|
528.9
|
269.0
|
Net Operating
Earnings Available to Common Shareholders (Non-GAAP)
|
$
141.9
|
$
110.3
|
$
463.3
|
$
397.5
|
Basic Average
Common Shares Outstanding
|
369.4
|
337.5
|
356.5
|
329.4
|
GAAP Basic
Earnings (Loss) Per Share
|
$
(0.05)
|
$
(0.16)
|
$
(0.18)
|
$
0.39
|
Adjustments to basic
earnings (loss) per share
|
0.43
|
0.49
|
1.48
|
0.82
|
Non-GAAP Basic Net
Operating Earnings Per Share
|
$
0.38
|
$
0.33
|
$
1.30
|
$
1.21
|
(1) Represents
revenues not billed to impacted customers as a result of the
Greater Lawrence Incident.
|
(2) Represents costs
incurred associated with the planned retirement of Units 7 and 8 at
Bailly Generating Station.
|
(3) Represents
contract termination costs and external legal and consulting costs
associated with termination of the IBM IT services agreement and
the transition to a new multi-vendor strategy for IT service
delivery.
|
(4) Represents costs
incurred for estimated third-party claims and related other
expenses as a result of the Greater Lawrence Incident net of
insurance recoveries recorded to date.
|
(5) 2017 activity
represents the impact of adopting the provisions of the Tax Cuts
and Jobs Act of 2017. 2018 activity represents adjustments to the
impact of the Tax Cuts and Jobs Act of 2017 due to regulatory
actions in 2018.
|
Schedule 2 - Total
Current Estimated Amounts of Costs and Expenses Related to the
Greater
|
Lawrence
Incident
|
|
|
|
|
Cost or
Expense
|
Total Current
Estimated Amount(1)
($ in millions)
|
Capital
Cost(2)(3)
|
|
$220 -
$230
|
Incident Related
Expenses
|
|
|
Third Party
Claims-Related Expenses(3)(4)
|
$757 -
$790
|
|
Other
Expenses(3)(5)
|
$330 -
$345
|
Insurance
Recoveries(6)
|
$135
|
(1) Total estimated
amount includes costs or expenses for the year ended December 31,
2018 and estimated expected expenses in future periods in the
aggregate. Amounts shown are estimates made by management based on
currently available information. Actual results may differ
materially from these estimates as more information becomes
available.
|
(2) We incurred
approximately $167 million of capital spend for the pipeline
replacement during 2018. We estimate this replacement work will
cost between $220 million and $230 million in total. Columbia of
Massachusetts has provided notice to its property insurer of the
Greater Lawrence Incident and discussions around the claim and
recovery have commenced. The recovery of any capital investment not
reimbursed through insurance will be addressed in a future
regulatory proceeding. The outcome of such a proceeding is
uncertain.
|
(3) We maintain
liability insurance for damages in the approximate amount of $800
million and property insurance for gas pipelines in the approximate
amount of $300 million.Total expenses related to the incident have
exceeded the total amount of liability insurance coverage available
under our policies. Certain of these expenses may be covered under
our property insurance. While we believe that a substantial
amount of expenses related to the Greater Lawrence Incident will be
covered by insurance, insurers may raise defenses to coverage under
the terms and conditions of the respective insurance policies,
which contain various exclusions and conditions that could limit
the amount of insurance proceeds. We are not able to estimate the
amount of expenses that will not be covered or exceed insurance
limits, but these amounts could be material to our financial
statements. Certain types of damages, expenses or claimed costs,
such as fines or penalties, may be excluded under the
policies.
|
(4) Amount includes
approximately $757 million of expenses recorded in the year ended
December 31, 2018. Amount represents estimated third-party claims
related to the Greater Lawrence incident, including personal injury
and property damage claims, damage to infrastructure, and other
damage claims, which include mutual aid payments to other utilities
assisting with the restoration effort, gas-fueled appliance
replacement and related services for impacted customers, temporary
lodging for displaced customers, and claims-related legal fees. The
total amount incurred will depend on the final outcome of open
investigations and the number, nature, and value of third-party
claims.
|
(5) Amount shown
includes other incident related expenses of approximately $266
million recorded in the year ended December 31, 2018. Amount
represents certain consulting costs, administration costs,
charitable contributions, and other labor and related expenses in
connection with the incident.
|
(6) An amount of $135
million for insurance recoveries was recorded through December 31,
2018. Of this amount, $5 million was collected during 2018. We are
currently unable to predict the amount and timing of additional
future insurance recoveries.
|
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SOURCE NiSource Inc.