filings.toolsCover and table of contents
21K characters. Original on sec.gov · Markdown
Cover and table of contents
10-K 1 ni-20161231x10k.htm 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-16189
NiSource Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 35-2108964 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 801 East 86th Avenue Merrillville, Indiana | 46410 | |
| (Address of principal executive offices) | (Zip Code) |
(877) 647-5990
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |||
| Common Stock | New York |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b-2 of the Exchange Act.
| Large accelerated filer þ | Accelerated filer ¨ | |
| Non-accelerated filer ¨ | Smaller reporting company ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
The aggregate market value of the registrant's common stock, par value $0.01 per share (the "Common Stock") held by non-affiliates was approximately $8,497,589,485 based upon the June 30, 2016, closing price of $26.52 on the New York Stock Exchange.
There were 323,445,821 shares of Common Stock outstanding as of February 14, 2017.
Documents Incorporated by Reference
Part III of this report incorporates by reference specific portions of the Registrant’s Notice of Annual Meeting and Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 9, 2017.
CONTENTS
DEFINED TERMS
The following is a list of abbreviations or acronyms that are used in this report:
| NiSource Subsidiaries, Affiliates and Former Subsidiaries | ||
| Capital Markets | NiSource Capital Markets, Inc. | |
| CGORC | Columbia Gas of Ohio Receivables Corporation | |
| Columbia | Columbia Energy Group | |
| Columbia of Kentucky | Columbia Gas of Kentucky, Inc. | |
| Columbia of Maryland | Columbia Gas of Maryland, Inc. | |
| Columbia of Massachusetts | Bay State Gas Company | |
| Columbia of Ohio | Columbia Gas of Ohio, Inc. | |
| Columbia of Pennsylvania | Columbia Gas of Pennsylvania, Inc. | |
| Columbia of Virginia | Columbia Gas of Virginia, Inc. | |
| Company | NiSource Inc. and its subsidiaries, unless otherwise indicated by the context | |
| CPG | Columbia Pipeline Group, Inc. | |
| CPPL | Columbia Pipeline Partners LP | |
| CPRC | Columbia Gas of Pennsylvania Receivables Corporation | |
| NARC | NIPSCO Accounts Receivable Corporation | |
| NIPSCO | Northern Indiana Public Service Company | |
| NiSource | NiSource Inc. | |
| NiSource Corporate Services | NiSource Corporate Services Company | |
| NiSource Development Company | NiSource Development Company, Inc. | |
| NiSource Finance | NiSource Finance Corporation | |
| Abbreviations | ||
| AFUDC | Allowance for funds used during construction | |
| AOCI | Accumulated Other Comprehensive Income | |
| ASC | Accounting Standards Codification | |
| ASU | Accounting Standards Update | |
| BNS | Bank of Nova Scotia | |
| Board | Board of Directors | |
| BTMU | The Bank of Tokyo-Mitsubishi UFJ, LTD. | |
| CAA | Clean Air Act | |
| CAP | Compliance Assurance Process | |
| CCGT | Combined Cycle Gas Turbine | |
| CCRs | Coal Combustion Residuals | |
| CERCLA | Comprehensive Environmental Response Compensation and Liability Act (also known as Superfund) | |
| CO2 | Carbon Dioxide | |
| Columbia OpCo | CPG OpCo LP | |
| CPP | Clean Power Plan | |
| DPU | Department of Public Utilities | |
| DSM | Demand Side Management | |
| Dth | Dekatherm | |
| ECR | Environmental Cost Recovery |
| DEFINED TERMS | ||
|---|---|---|
| ECT | Environmental Cost Tracker | |
| EERM | Environmental Expense Recovery Mechanism | |
| EFV | Excess flow valve | |
| EGUs | Electric utility steam generating unit | |
| ELG | Effluence limitations guidelines | |
| EPA | United States Environmental Protection Agency | |
| EPS | Earnings per share | |
| FAC | Fuel adjustment clause | |
| FASB | Financial Accounting Standards Board | |
| FERC | Federal Energy Regulatory Commission | |
| FTRs | Financial Transmission Rights | |
| GAAP | Generally Accepted Accounting Principles | |
| GCA | Gas cost adjustment | |
| GCR | Gas cost recovery | |
| GHG | Greenhouse gases | |
| GSEP | Gas System Enhancement Program | |
| gwh | Gigawatt hours | |
| IBM | International Business Machines Corp. | |
| IPO | Initial Public Offering | |
| IRP | Infrastructure Replacement Program | |
| IRS | Internal Revenue Service | |
| IURC | Indiana Utility Regulatory Commission | |
| LDCs | Local distribution companies | |
| LIFO | Last-in, first-out | |
| MGP | Manufactured Gas Plant | |
| MISO | Midcontinent Independent System Operator | |
| Mizuho | Mizuho Corporate Bank Ltd. | |
| MMDth | Million dekatherms | |
| MPSC | Maryland Public Service Commission | |
| mw | Megawatts | |
| mwh | Megawatt hours | |
| NAAQS | National Ambient Air Quality Standards | |
| NOL | Net Operating Loss | |
| NYMEX | The New York Mercantile Exchange | |
| NYSE | The New York Stock Exchange | |
| OPEB | Other Postretirement and Postemployment Benefits | |
| PATH | Protecting Americans from Tax Hikes Act of 2015 | |
| PCB | Polychlorinated biphenyls | |
| PHMSA | U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration | |
| PNC | PNC Bank N.A. | |
| ppb | Parts per billion | |
| PSC | Public Service Commission | |
| PUC | Public Utility Commission | |
| PUCO | Public Utilities Commission of Ohio | |
| RCRA | Resource Conservation and Recovery Act |
| DEFINED TERMS | ||
|---|---|---|
| RDAF | Revenue decoupling adjustment factor | |
| ROE | Return on Equity | |
| RTO | Regional Transmission Organization | |
| Separation | The separation of NiSource's natural gas pipeline, midstream and storage business from NiSource's natural gas and electric utility business accomplished through the pro rata distribution by NiSource to holders of its outstanding common stock of all the outstanding shares of common stock of CPG. The separation was completed on July 1, 2015. | |
| SEC | Securities and Exchange Commission | |
| Sugar Creek | Sugar Creek electric generating plant | |
| TDSIC | Transmission, Distribution and Storage System Improvement Charge | |
| TUAs | Transmission Upgrade Agreements | |
| VIE | Variable Interest Entity | |
| VSCC | Virginia State Corporation Commission |
Note regarding forward-looking statements
This Annual Report on Form 10-K contains “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Investors and prospective investors should understand that many factors govern whether any forward-looking statement contained herein will be or can be realized. Any one of those factors could cause actual results to differ materially from those projected. These forward-looking statements include, but are not limited to, statements concerning NiSource’s plans, strategies, objectives, expected performance, expenditures, recovery of expenditures through rates, stated on either a consolidated or segment basis, and any and all underlying assumptions and other statements that are other than statements of historical fact. All forward-looking statements are based on assumptions that management believes to be reasonable; however, there can be no assurance that actual results will not differ materially.
Factors that could cause actual results to differ materially from the projections, forecasts, estimates and expectations discussed in this Annual Report on Form 10-K include, among other things, NiSource’s debt obligations; any changes in NiSource’s credit rating; NiSource’s ability to execute its growth strategy; changes in general economic, capital and commodity market conditions; pension funding obligations; economic regulation and the impact of regulatory rate reviews; NiSource's ability to obtain expected financial or regulatory outcomes; any damage to NiSource's reputation; compliance with environmental laws and the costs of associated liabilities; fluctuations in demand from residential and commercial customers; economic conditions of certain industries; the success of NIPSCO's electric generation strategy; the price of energy commodities and related transportation costs; the reliability of customers and suppliers to fulfill their payment and contractual obligations; potential impairments of goodwill or definite-lived intangible assets; changes in taxation and accounting principles; potential incidents and other operating risks associated with our business; the impact of an aging infrastructure; the impact of climate change; potential cyber-attacks; construction risks and natural gas costs and supply risks; extreme weather conditions; the attraction and retention of a qualified workforce; advances in technology; the ability of NiSource's subsidiaries to generate cash; uncertainties related to the expected benefits of the Separation and other matters set forth in Item 1A, “Risk Factors” of this report, many of which risks are beyond the control of NiSource. In addition, the relative contributions to profitability by each business segment, and the assumptions underlying the forward-looking statements relating thereto, may change over time.
All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements. NiSource undertakes no obligation to, and expressly disclaims any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to the future results over time or otherwise, except as required by law.
ITEM 1. BUSINESS
NISOURCE INC.
NiSource Inc. is an energy holding company under the Public Utility Holding Company Act of 2005 whose subsidiaries are fully regulated natural gas and electric utility companies serving approximately 3.9 million customers in seven states. NiSource is the successor to an Indiana corporation organized in 1987 under the name of NIPSCO Industries, Inc., which changed its name to NiSource on April 14, 1999.
NiSource is one of the nation’s largest natural gas distribution companies, as measured by number of customers. NiSource’s principal subsidiaries include NiSource Gas Distribution Group, Inc., a natural gas distribution holding company, and NIPSCO, a gas and electric company. NiSource derives substantially all of its revenues and earnings from the operating results of these rate-regulated businesses.
On July 1, 2015, NiSource completed the Separation of CPG from NiSource. CPG's operations consisted of all of NiSource's Columbia Pipeline Group Operations segment prior to the Separation. Following the Separation, NiSource retained no ownership interest in CPG.
NiSource’s reportable segments are: Gas Distribution Operations and Electric Operations. The following is a summary of the business for each reporting segment. Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 22, "Segments of Business," in the Notes to Consolidated Financial Statements for additional information for each segment.
Gas Distribution Operations
NiSource’s natural gas distribution operations serve approximately 3.4 million customers in seven states and operate approximately 59,000 miles of pipeline. Through its wholly-owned subsidiary NiSource Gas Distribution Group, Inc., NiSource owns six distribution subsidiaries that provide natural gas to approximately 2.6 million residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland and Massachusetts. Additionally, NiSource also distributes natural gas to approximately 820,000 customers in northern Indiana through its wholly-owned subsidiary NIPSCO.
Electric Operations
NiSource generates, transmits and distributes electricity through its subsidiary NIPSCO to approximately 466,000 customers in 20 counties in the northern part of Indiana and engages in wholesale and transmission transactions. NIPSCO owns and operates three coal-fired electric generating stations. The three operating facilities have a net capability of 2,540 mw. NIPSCO also owns and operates Sugar Creek, a CCGT plant with net capability of 535 mw, three gas-fired generating units located at NIPSCO’s coal-fired electric generating stations with a net capability of 196 mw and two hydroelectric generating plants with a net capability of 10 mw. These facilities provide for a total system operating net capability of 3,281 mw. NIPSCO’s transmission system, with voltages from 69,000 to 345,000 volts, consists of 2,805 circuit miles. NIPSCO is interconnected with five neighboring electric utilities. During the year ended December 31, 2016, NIPSCO generated 66.4% and purchased 33.6% of its electric requirements.
NIPSCO participates in the MISO transmission service and wholesale energy market. The MISO is a nonprofit organization created in compliance with FERC regulations to improve the flow of electricity in the regional marketplace and to enhance electric reliability. Additionally, the MISO is responsible for managing energy markets, transmission constraints and the day-ahead, real-time, FTR and ancillary markets. NIPSCO transferred functional control of its electric transmission assets to the MISO, and transmission service for NIPSCO occurs under the MISO Open Access Transmission Tariff.
Business Strategy
NiSource focuses its business strategy on its core, rate-regulated asset-based businesses with most of its operating income generated from the rate-regulated businesses. NiSource’s utilities continue to move forward on core infrastructure and environmental investment programs supported by complementary regulatory and customer initiatives across all seven states in which it operates. NiSource’s goal is to develop strategies that benefit all stakeholders as it addresses changing customer conservation patterns, develops more contemporary pricing structures, and embarks on long-term investment programs. These strategies are intended to improve reliability and safety, enhance customer services and reduce emissions while generating sustainable returns.
Competition and Changes in the Regulatory Environment
The regulatory frameworks applicable to NiSource’s operations, at both the state and federal levels, continue to evolve. These changes have had and will continue to have an impact on NiSource’s operations, structure and profitability. Management continually seeks new ways to be more competitive and profitable in this environment.
The Gas Distribution Operations companies have pursued non-traditional revenue sources within the evolving natural gas marketplace. These efforts include the sale of products and services upstream of the companies’ service territory, the sale of products and services in the companies’ service territories, and gas supply cost incentive mechanisms for service to their core