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10-K 1 ni-20171231x10k.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, 2017
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, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12-b-2 of the Exchange Act.
| Large accelerated filer þ | Accelerated filer ¨ | Emerging growth company ¨ | ||
| Non-accelerated filer ¨ | Smaller reporting company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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 $8,237,384,461 based upon the June 30, 2017, closing price of $25.36 on the New York Stock Exchange.
There were 337,410,827 shares of Common Stock outstanding as of February 12, 2018.
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 8, 2018.
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. | |
| 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 | |
| NIPSCO | Northern Indiana Public Service Company LLC | |
| NiSource | NiSource Inc. | |
| NiSource Corporate Services | NiSource Corporate Services Company | |
| NiSource Finance | NiSource Finance Corporation | |
| Abbreviations | ||
| AFUDC | Allowance for funds used during construction | |
| AMRP | Accelerated Main Replacement Program | |
| AOCI | Accumulated Other Comprehensive Income | |
| ASC | Accounting Standards Codification | |
| ASU | Accounting Standards Update | |
| ATM | At-the-market | |
| Board | Board of Directors | |
| CAA | Clean Air Act | |
| CCGT | Combined Cycle Gas Turbine | |
| CCRs | Coal Combustion Residuals | |
| CEP | Capital Expenditure Program | |
| 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 | |
| ECR | Environmental Cost Recovery | |
| ECT | Environmental Cost Tracker | |
| EERM | Environmental Expense Recovery Mechanism | |
| EGUs | Electric utility steam generating unit | |
| ELG | Effluence limitations guidelines |
| DEFINED TERMS | ||
|---|---|---|
| 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 | |
| OCC | Ohio Consumers' Counsel | |
| 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 | |
| PISCC | Post-in-service carrying charges | |
| 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 | |
| RDAF | Revenue decoupling adjustment factor |
| DEFINED TERMS | ||
|---|---|---|
| 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 | |
| TCJA | Tax Cuts and Jobs Act of 2017 | |
| 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 to the credit rating of NiSource or certain of its subsidiaries; 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 NiSource's 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; the ability of NiSource to manage new initiatives and organizational changes; the performance of certain third-party suppliers upon which NiSource relies; NiSource's ability to obtain sufficient insurance coverage; 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 3.5 million customers in seven states and operate approximately 60,000 miles of pipeline located in our service areas described below. 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 830,000 customers in northern Indiana through its wholly-owned subsidiary NIPSCO.
Electric Operations
NiSource generates, transmits and distributes electricity through its subsidiary NIPSCO to approximately 469,000 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: four units at R.M. Schahfer located in Wheatfield, IN, two units at Bailly located in Chesterton, IN and one unit at Michigan City located in Michigan City, IN. The three operating facilities have a net capability of 2,540 mw. NIPSCO also owns and operates Sugar Creek, a CCGT plant located in West Terre Haute, IN 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: Oakdale located at Lake Freeman in Carroll County, IN and Norway located at Lake Schahfer in White County, IN. These facilities provide for a total system operating net capability of 3,281 mw.
Refer to Note 18, "Other Commitments and Contingencies," and Note 25, "Subsequent Event," in the Notes to Consolidated Financial Statements for additional information on NIPSCO's long-term generation strategy.
NIPSCO’s transmission system, with voltages from 69,000 to 345,000 volts, consists of 2,843 circuit miles. NIPSCO is interconnected with five neighboring electric utilities. During the year ended December 31, 2017, NIPSCO generated 65.2% and purchased 34.8% 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.