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10-K 1 ni-20181231x10k.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, 2018
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 every Interactive Data File required to be submitted 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 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 $9,506,346,286 based upon the June 29, 2018, closing price of $26.28 on the New York Stock Exchange.
There were 372,494,365 shares of Common Stock outstanding as of February 12, 2019.
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 7, 2019.
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 (former subsidiary) | NiSource Capital Markets, Inc. | |
| Columbia (former subsidiary) | 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 (former subsidiary) | Columbia Pipeline Group, Inc. | |
| NIPSCO | Northern Indiana Public Service Company LLC | |
| NiSource ("we," "us" or "our") | NiSource Inc. | |
| NiSource Corporate Services | NiSource Corporate Services Company | |
| NiSource Finance (former subsidiary) | NiSource Finance Corporation | |
| Abbreviations | ||
| ACE | Affordable clean energy | |
| AFUDC | Allowance for funds used during construction | |
| AMR | Automatic meter reading | |
| 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 | |
| BTA | Build-transfer agreement | |
| CAA | Clean Air Act | |
| CAP | Compliance Assurance Process | |
| 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 | |
| CPP | Clean Power Plan | |
| DPU | Department of Public Utilities | |
| DSIC | Distribution System Investment Charge | |
| DSM | Demand Side Management | |
| ECT | Environmental Cost Tracker | |
| EERM | Environmental Expense Recovery Mechanism | |
| EGUs | Electric Utility Steam Generating Units |
| DEFINED TERMS | ||
|---|---|---|
| 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 | |
| FMCA | Federally Mandated Cost Adjustment | |
| FTRs | Financial Transmission Rights | |
| GAAP | Generally Accepted Accounting Principles | |
| GCA | Gas cost adjustment | |
| GCR | Gas cost recovery | |
| GHG | Greenhouse gas | |
| GSEP | Gas System Enhancement Program | |
| GWh | Gigawatt hours | |
| IRIS | Infrastructure Replacement and Improvement Surcharge | |
| IRP | Infrastructure Replacement Program | |
| IRS | Internal Revenue Service | |
| IURC | Indiana Utility Regulatory Commission | |
| LDCs | Local distribution companies | |
| LIBOR | London inter-bank offered rate | |
| LIFO | Last-in, first-out | |
| MGP | Manufactured Gas Plant | |
| MISO | Midcontinent Independent System Operator | |
| Mizuho | Mizuho Corporate Bank Ltd. | |
| MMDth | Million dekatherms | |
| MW | Megawatts | |
| MWh | Megawatt hours | |
| NOL | Net Operating Loss | |
| NTSB | National Transportation Safety Board | |
| NYMEX | The New York Mercantile Exchange | |
| NYSE | The New York Stock Exchange | |
| OPEB | Other Postretirement and Postemployment Benefits | |
| PCB | Polychlorinated biphenyls | |
| PHMSA | U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration | |
| PISCC | Post-in-service carrying charges | |
| PPA | Purchase plan agreement | |
| PSC | Public Service Commission | |
| PTC | Production Tax Credits | |
| PUC | Public Utility Commission | |
| PUCO | Public Utilities Commission of Ohio | |
| RCRA | Resource Conservation and Recovery Act | |
| ROU | Right of use | |
| SAB | Staff accounting bulletin | |
| SAVE | Steps to Advance Virginia's Energy Plan |
| DEFINED TERMS | ||
|---|---|---|
| Separation | The separation of our natural gas pipeline, midstream and storage business from our natural gas and electric utility business accomplished through a pro rata distribution to holders of our 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 | |
| STRIDE | Strategic Infrastructure Development and Enhancement | |
| Sugar Creek | Sugar Creek electric generating plant | |
| TCJA | Tax Cuts and Jobs Act of 2017 | |
| TDSIC | Transmission, Distribution and Storage System Improvement Charge | |
| VIE | Variable Interest Entity | |
| VSCC | Virginia State Corporation Commission | |
| WCE | Whiting Clean Energy |
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 our plans, strategies, objectives, expected performance, expenditures, recovery of expenditures through rates, stated on either a consolidated or segment basis, and any and all underlying assumptions and other statements that are other than statements of historical fact. All forward-looking statements are based on assumptions that management believes to be reasonable; however, there can be no assurance that actual results will not differ materially.
Factors that could cause actual results to differ materially from the projections, forecasts, estimates and expectations discussed in this Annual Report on Form 10-K include, among other things, our debt obligations; any changes to the credit rating of our or certain of our subsidiaries; our ability to execute our growth strategy; changes in general economic, capital and commodity market conditions; pension funding obligations; economic regulation and the impact of regulatory rate reviews; our ability to obtain expected financial or regulatory outcomes; our ability to adapt to, and manage costs related to, advances in technology; any changes in our assumptions regarding the financial implications of the Greater Lawrence Incident; 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, incidents, claims and litigation; any damage to our 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; the reliability of customers and suppliers to fulfill their payment and contractual obligations; potential impairments of goodwill or definite-lived intangible assets; changes in taxation and accounting principles; the impact of an aging infrastructure; the impact of climate change; potential cyber-attacks; construction risks and natural gas costs and supply risks; extreme weather conditions; the attraction and retention of a qualified workforce; the ability of our subsidiaries to generate cash; uncertainties related to the expected benefits of the Separation; our 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” of this report, many of which risks are beyond our control. 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. We undertake 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 4.0 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 September 13, 2018, a series of fires and explosions occurred in Lawrence, Andover and North Andover, Massachusetts related to the delivery of natural gas by Columbia of Massachusetts (referred to herein as the “Greater Lawrence Incident”). The Greater Lawrence Incident resulted in one fatality and a number of injuries, damaged multiple homes and businesses, and caused the temporary evacuation of significant portions of each municipality. The Massachusetts Governor’s Office declared a state of emergency, authorizing the Massachusetts DPU to order another utility company to coordinate the restoration of utility services in Lawrence, Andover and North Andover. The incident resulted in the interruption of gas for approximately 7,500 gas meters, the majority of which serve residences and of which approximately 700 serve businesses, and the interruption of other utility service more broadly in the area. Columbia of Massachusetts has replaced the cast iron and bare steel gas pipeline system in the affected area and restored service to nearly all of the gas meters. Refer to Note 18-C. "Legal Proceedings," and E. "Other Matters," in the Notes to Consolidated Financial Statements for more information.
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
Our 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 our wholly-owned subsidiary NiSource Gas Distribution Group, Inc., we own 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, we distribute natural gas to approximately 832,000 customers in northern Indiana through our wholly-owned subsidiary NIPSCO.
Electric Operations
We generate, transmit and distribute electricity through our subsidiary NIPSCO to approximately 472,000 customers in 20 counties in the northern part of Indiana and engage in wholesale and transmission transactions. NIPSCO owns and operates two coal-fired electric generating stations: four units at R.M. Schahfer located in Wheatfield, IN and one unit at Michigan City located in Michigan City, IN. The two operating facilities have a generating capacity of 2,080 MW. NIPSCO also owns and operates Sugar Creek, a CCGT plant located in West Terre Haute, IN with generating capacity of 571 MW, three gas-fired generating units located at NIPSCO’s coal-fired electric generating stations with a generating capacity of 186 MW and two hydroelectric generating plants with a generating capacity of 16 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 generating capacity of 2,853 MW.
In May 2018, NIPSCO completed the retirement of two coal-burning units (Units 7 and 8) at Bailly Generating Station, located in Chesterton, IN. These units had a generating capacity of approximately 460 MW. Refer to Note 18-E, "Other Matters," in the Notes to Consolidated Financial Statements for additional information on these retirements.
NIPSCO’s transmission system, with voltages from 69,000 to 765,000 volts, consists of 2,963 circuit miles. NIPSCO is interconnected with five neighboring electric utilities. During the year ended December 31, 2018, NIPSCO generated 69.4% and purchased 30.6% of its electric requirements.
NIPSCO participates in the MISO transmission service and wholesale energy market. 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, 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 MISO, and transmission service for NIPSCO occurs under the MISO Open Access Transmission Tariff.