Thank you for joining us for the Q3 2020 NiSource Earnings Conference Call. I would like to introduce your first speaker, Mr. Nick Drew, Director of Investor Relations. Please proceed.

Thanks, Amy. Good morning, and welcome to the NiSource Third Quarter 2020 Investor Call. Joining me today are Joe Hamrock, our Chief Executive Officer; Donald Brown, our Chief Financial Officer; Shawn Anderson, our Chief Strategy and Risk Officer; and Randy Hulen, our Vice President, Investor Relations and Treasurer. The purpose of this presentation is to review NiSource's financial performance for the third quarter of 2020, as well as provide an update on our operations, growth drivers, and financing plans. Following our prepared remarks, we'll open the call to your questions. Slides for today's call are available on nisource.com. Before turning the call over to Joe, Donald, Shawn, and Randy, just a quick reminder. Some of the statements made during this presentation will be forward-looking. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. Information concerning such risks and uncertainties is included in the MD&A and Risk Factors sections of our periodic SEC filings. Additionally, some of the statements made on this call relate to non-GAAP measures. For additional information on the most directly comparable GAAP measure and a reconciliation of these measures, please refer to the supplemental slides and segment information, including our full financial schedules available at nisource.com. With all of that out of the way, I'd now like to turn the call over to Joe.

Thanks, Nick. Good morning, everyone, and thank you for joining us. Hopefully, you've all had a chance to read our third quarter earnings release, which was issued earlier this morning. With 2020 in its home stretch, NiSource continues to execute on a path to deliver premium value from our 100% regulated electric and gas utility platform. Our teams are focused on continued execution of our safety and asset modernization programs and our transition to renewable energy in our electric business. These investments are expected to drive compound annual growth of 7% to 9% in net operating earnings per share from 2021 through 2024, while reducing greenhouse gas emissions by 90% by 2030. Sustaining this level of execution, while maintaining safe, reliable energy service through the COVID-19 pandemic, is a testament to the thousands of dedicated employees throughout NiSource. With the announcement of additional solar and storage energy projects in Indiana, and the closing of the sale of Columbia Gas of Massachusetts last month, we have strengthened our foundation for future growth. So let's dive into the update, starting on Slide 3. We delivered non-GAAP net operating earnings of $0.09 per share in the third quarter compared to $0 in the same quarter a year ago. Our continued cost management and regulatory mitigation efforts are reducing the financial impacts of COVID-19, which we continue to monitor closely. Our transformational NiSource Next initiative is well underway and designed to enhance organizational capabilities, drive efficiencies and maintain affordable service for our customers. Despite challenges related to the pandemic, we continue to expect to make $1.7 billion to $1.8 billion in capital investments in 2020 as our safety and asset modernization investments remain among our top priorities. We advanced our renewable generation strategy last month by reaching build transfer agreements with NextEra for three Indiana solar and storage projects, representing an $850 million capital investment for NIPSCO. On the regulatory front, we received approval of the sale of Columbia Gas of Massachusetts assets to Eversource, and the transaction closed on October 9. We also reached a settlement in our gas base rate case in Maryland and received approval of our latest capital expenditure program tracker update in Ohio. We are also today reaffirming non-GAAP net operating earnings per share guidance for 2021 in the range of $1.28 to $1.36, which includes an expected COVID impact of $0.05, and we are reaffirming the financial guidance that we provided at our Investor Day on September 29. These include investments of $1.9 billion to $2.2 billion per year in safety, modernization, and growth from 2021 through 2024, $1.8 billion to $2 billion in incremental renewable generation investment opportunities across 2022 and 2023, and compound annual earnings per share growth of 7% to 9% from 2021 through 2024, with 5% to 7% annual growth in the near term. Now I'd like to turn the call over to Donald, who will discuss our third quarter financial performance in more detail.

Thanks, Joe, and good morning, everyone. Looking at our third quarter results from Slide 4, we had non-GAAP net operating earnings of about $36 million or $0.09 per share, compared to a net loss operating loss of nearly $2 million or $0.00 per share in 2019. The year-over-year increase was driven primarily by increased gas segment results with relatively flat electric results in the quarter. For the year, our net operating earnings are up about $52 million or $0.11 per share compared to the same period of 2019. Looking more closely at our segment results on Slide 5, operating earnings were up about $36 million for the quarter in our gas segment, driven primarily by infrastructure investment revenue and cost management measures put in place to offset the COVID-19 impact. In our electric segment, operating earnings were down by $2.5 million, driven primarily by slightly higher revenues, excluding the cost of sales, with COVID-driven decreases in commercial and industrial sales, offset by increased residential sales. This net increase in revenue was offset by higher depreciation as a result of the accelerated depreciation of our coal-fired generation assets. Turning to Slide 6, we provide additional details about the financial impact of COVID-19. As you can see, we're seeing lower commercial and industrial sales, which are partially offset by increased residential sales. We're also seeing reduced late payment and reconnection fees as well as higher bad debt and other expenses. The total impact of COVID-19 in the third quarter was approximately $0.01 per share and $0.07 per share year-to-date. As I mentioned, this impact was reduced by non-safety-related expense reductions as well as regulatory mitigation efforts. We currently expect COVID to reduce EPS by $0.05 in 2021 under our base case scenario, and that amount has already been factored into our 2021 non-GAAP EPS guidance range. While we're monitoring the pandemic closely, to date, it has not presented significant barriers to our safety and infrastructure modernization programs or our long-term growth. As Joe mentioned earlier, we continue to expect to invest $1.70 to $1.8 billion of capital in 2020. We are reaffirming the guidance for long-term CapEx and EPS CAGR guidance that we outlined at Investor Day. Now turning to Slide 7, I'd like to briefly touch on our debt and credit profile. Our debt level as of September 30 was about $10.6 billion, of which about $9.1 billion was long-term debt. The weighted average maturity on our long-term debt was approximately 15 years and a weighted average interest rate was approximately 3.68%. I will note that the liability management transaction that we completed during the quarter lowered our weighted average interest rate by more than 60 basis points and removed the need for any significant long-term debt refinancing through 2024. As Joe mentioned earlier, we closed on the sale of our Columbia Gas of Massachusetts assets on October 9. This produced net proceeds of $1.1 billion, which we used to pay down our term loan and other short-term debt in October. At the end of the third quarter, we maintained net available liquidity of about $1.6 billion, consisting of cash and available capacity under our credit facility and our accounts receivable securitization program. Our credit ratings from all three major rating agencies are investment grade, and we're committed to maintaining our current investment-grade ratings. Taken together, this represents a solid financial foundation to support our long-term safety and infrastructure investments. Now I'd like to turn the call back over to Joe, who will provide some infrastructure investment and regulatory updates from our gas and electric businesses.

Thank you, Donald. Now let's look at some NiSource utilities highlights for the third quarter and early fourth quarter of 2020, starting with our gas operations on Slide 9. In Pennsylvania, our base rate case remains pending before the Public Utility Commission. The application filed in April seeks an annual revenue increase of $100.4 million to invest in, modernize and upgrade our existing natural gas distribution system as well as maintain the continued safety of the system. An order is expected in the first quarter of 2021, with new rates expected to become effective in January 2021. In Maryland, we reached a settlement with parties to the base rate case request we filed in May. The settlement supports further upgrading and replacement of our pipelines and would result in an annual revenue increase of $3.3 million, including $1.3 million of current tracker revenue, if approved as filed. A Maryland Public Service Commission order is expected in November 2020, with new rates effective in December 2020. In Ohio, the Public Utilities Commission approved our annual application for adjustment to our capital expenditure program rider, and new rates went into effect in September 2020. The order allows us to begin recovery of approximately $185 million in capital invested under the CEP in 2019. In Indiana, our latest tracker update is pending in our long-term gas infrastructure modernization program. The application covers $26 million in incremental capital invested under the program between January and June 2020. Earlier in the quarter, the Indiana Utility Regulatory Commission approved a six-year extension of the program, including nearly $950 million in planned capital investments through 2025 to be recovered through semiannual adjustments to the existing transmission, distribution, and storage improvement charge or TDSIC tracker. Now let's look at our electric operations on Slide 10. Shawn will update you in a moment on our progress transitioning our generation portfolio. Before then, I'll note that we continue to execute on our long-term electric infrastructure modernization plan in Indiana. This well-established program includes enhancements to our electric transmission and distribution system designed to further enhance safety and reliability. The program, originally approved by the IURC in 2016, includes approximately $1.2 billion in electric infrastructure investments expected to be made through 2022. In September, we filed our latest electric TDSIC tracker update request, covering more than $122 million in incremental capital investments made between July 2019 and June 2020. We expect an IURC order in January 2021, with new rates effective in February 2021. And now I'll ask Shawn to talk about our renewable generation projects.

Thank you, Joe. As Joe shared earlier, within the last month, we announced build transfer agreements with NextEra Energy Resources on three Indiana solar projects, representing a capital investment of approximately $850 million for NIPSCO. The Dunns Bridge I and II and Cavalry Solar Energy Centers are expected to be under construction by 2022 and placed into service across 2022 and 2023. NextEra will construct the solar and storage facilities, and we plan to form joint ventures with unrelated financial partners to own, operate and maintain some facets of these assets. We will request the addition of these new projects to our supply portfolio in filings with the IURC by the end of this year. Construction is already underway on IURC approved wind projects, representing about $400 million in capital investment. Rosewater wind, a joint venture with EDP renewables North America, and Wells Fargo as the tax equity partner, is on track to be placed into service by the end of this year, and construction has begun on Indiana Crossroads, also a joint venture project with EDP, and is expected to be in service by the end of 2021. We continue to expect $1.8 billion to $2 billion of renewable generation investments through 2023. Inclusive of the aforementioned joint venture projects, we currently have executed agreements, representing approximately $1.25 billion of this anticipated investment and are well underway in negotiating additional agreements, which we expect will complete the balance of need for replacement capacity at an anticipated $550 million to $750 million in capital investments. We are also well underway to complete purchase power agreements to fill out the balance of our capacity needs. Our Jordan Creek project is IURC-approved, under construction and is expected to be in service by the end of this year. Our Brickyard and Greensboro Solar and storage PPAs are pending before the IURC. NextEra Energy Resources will develop Brickyard and Greensboro, which are expected in-service in mid-2023. In addition to the remaining JVs under negotiation, we are engaged in additional solar and wind PPA negotiations, all of which are anticipated to go into service in 2022 and 2023. These renewable projects are consistent with our 2018 integrated resource plan, which provides a preferred pathway to retire nearly 80% of our remaining coal-fired generation by 2023 and retire all coal generation by 2028 to be replaced by low-cost, reliable and cleaner options. The plan is designed to drive a 90% reduction in our greenhouse gas emissions by 2030 and is expected to save our electric customers an estimated $4 billion over 30 years. Now I will turn the call back over to Joe.

Thank you, Shawn. As you can see from what we've covered today, we're continuing to execute on our plan to deliver long-term value for all of our stakeholders. I want to touch on our foundational commitment to safety. We're continuing to make progress on our safety initiatives across our gas and electric businesses, including our accelerated safety management system, or SMS implementation, which follows American Petroleum Institute's RP 1173 and provides a comprehensive approach to managing safety, emphasizing continual assessment and improvement as well as proactively identifying and mitigating potential risks. We can highlight a few areas of accomplishment thus far in 2020, including continued deployment of our upgraded service line maps and records, with significant progress made in Kentucky, Pennsylvania, and Virginia, and we're on track for achieving this milestone in all of our states by the end of the year. We received regulatory approval in Ohio for a pilot of advanced mobile leak detection technology to perform quality assurance in our construction work. We have also continued to install automatic shutoff devices and enhanced monitoring on our low-pressure gas distribution systems, with work completed in Maryland, Kentucky, and Virginia. If you missed Investor Day, I encourage you to visit nisource.com to view the safety video we introduced, which brings our SMS work to life and which provides specific examples of these and other steps we're taking to help ensure safety for our customers, employees, business partners, and the public. I'm also pleased to note that our work to enhance customer service and make it easier to do business with us online has received national recognition. The American Business Awards recognized NiSource with its Gold Stevie Award for the work we did in 2019 to combine our utility website into a seamless customer experience, including a customer portal with bill payment and account management services. Our customer experience team is hard at work on other benefits that we hope to bring customers in the future, including digital service requests, high usage alerts, outage map improvements, and enhanced views of their energy usage history. Our customers should expect more from us in the future and know that we are aiming higher to meet their needs. Before opening the call to your questions, I'll share and reiterate a few key takeaways. Our teams are focused on continued execution of our safety and asset modernization programs and our transition to renewable energy in our electric business. We continue to expect to deliver non-GAAP net operating earnings per share in the range of $1.28 to $1.36 in 2021, which reflects an expected COVID-19 impact of $0.05. The guidance that we provided at our Investor Day on September 29 remains in place. These include $1.9 billion to $2.2 billion in annual safety, modernization, and growth investments from 2021 through 2024, $1.8 billion to $2 billion in incremental renewable generation investments across 2022 and 2023, and compound annual earnings per share growth of 7% to 9% from 2021 through 2024, with near-term growth of 5% to 7% from 2021 to 2023. Our transformational NiSource Next initiative is well underway to enhance organizational capabilities, drive efficiencies, and continued affordability for our customers. This effort is designed to ensure that we are optimally positioned to support both the significant capital investments we will be making in renewable generation and our ongoing asset modernization and safety enhancement investments. With the completion of the sale of our Massachusetts assets, we are firmly focused on the future in delivering premium value from our 100% regulated electric and gas utility platform across our six states. Thank you all for participating today and for your ongoing interest in and support of NiSource. We're now ready to take your questions. Amy?

Our first question today comes from Shar Pourreza with Guggenheim Partners.

So just a couple of quick questions. First, looking at sort of the 2021 COVID impact, you obviously reaffirmed the $0.05 impact at the midpoint, but usage and cost mitigation in the third quarter seemed fairly strong. So wondering how you're seeing this trend progressing into Q4 since we're already into it, and also, how you're sort of thinking about 2021 progressing? So is there a scenario where we could potentially see an updated guidance in 2021 at sort of the year-end results? Or are you looking to sort of maintain the numbers in the near-term to keep some contingency in place, assuming that COVID realities are better than sort of your internal planning assumptions. So how do we sort of think of that?

Shar, it's Donald. Considering COVID, we have $0.05 in our guidance for 2021, which is based on our previously outlined base case scenario. At this time, we aren't seeing any changes to that scenario, though we are continuing to observe lower revenues from our commercial industrial customers, balanced by revenues from residential customers. We are also experiencing an increase in bad debt expenses. As we look ahead to this quarter and the heating season, this will be the first time we encounter COVID during our heating season in the gas business, and we will keep an eye on that. Throughout this quarter, we will provide updates if any significant changes arise. I can assure you we are closely monitoring the impacts on our customers as we move forward during this time.

Got it, Donald. So just to reiterate, the few weeks we're into the fourth quarter, you're not seeing any sort of variation in your current assumptions?

No, not at this point.

And Shar, it's Joe. One of the things I would note is that, as Donald mentioned, we haven't experienced the heating season yet with the impacts of COVID. Keep in mind that in our gas business, most of our residential rate structures are mostly decoupled, so we don't experience the same volumetric shifts that have occurred on the electric side during the second and third quarters. This consideration is factored into our analysis as we approach both Q4 and Q1, which are the two main heating season quarters for the gas side of the business.

Perfect. And then Joe and Donald, in your sort of prepared remarks, you obviously highlighted that 8 to 10 renewable projects were sort of in advanced commercial negotiations, you highlighted that. Obviously, three were announced very recently with NextEra. Wondering what the timeline looks like for the announcement of the remaining projects, could we get an update on this as soon as EEI?

Good morning, Shar. This is Shawn Anderson. Great to hear from you. Thanks for the question. We continue to advance all facets of our generation transition journey. First and foremost, we're focused on the continued progress of the existing agreements that our teams have worked tirelessly to advance. So specifically, those under construction or in the regulatory process. For example, we look forward to Rosewater and Jordan Creek facilities to become operational and anticipate it even by the end of this year, perhaps. As it relates to the commercial negotiations underway, we do expect to have additional information by the end of this year and perhaps early into next year as well as we step toward both the commercial agreements and any potential to file through the regulatory process simultaneously. So we're well underway focused on this. Meanwhile, we also expect to file for CPCN approval for the three projects just announced, Dunns Bridge I, II and Cavalry by the end of this year. So a lot going on just across the team and across the board, but we're excited for what the fourth quarter will bring for us and plan to have more to share very soon.

Got it. So just to reiterate, so the 8 to 10 that are currently in advanced negotiations, the next update should be at the year-end results.

Yes, that's correct. And that 8 to 10 was 3 heat-free agreements that we didn't describe, so probably in that 5 to 7 range at this point.

Shar, this is Randy. Just to interject something. You won't necessarily have to wait until the year-end results. We'll be announcing progress as this takes place, and you'll likely see a press release with the next set of projects that we would announce done at the NIPSCO level. So although you'll probably not going to see something new in a week when EEI starts, but as Shawn mentioned, certainly by year-end, a lot of things are in-flight to be announced. So it won't necessarily be February of next year; it will be more likely before the end of this year.

Your next question today comes from the line of Andres Sheppard with Crédit Suisse.

It's Mike Weinstein actually. Just to be clear on the CPCN process, when you get a CPCN for Dunns and Cavalry, that just establishes prudence later for the rate case, right? I mean, it's not a guarantee of anything?

That's correct. That's correct.

Got you. So, is this the same thing you are waiting for regarding the PPAs for Greensboro and Brickyard?

Yes. Yes. We are still waiting for CPCN approval for those projects and expect those by year-end.

Got you. Got you. And the block equity needs that you're citing for 2022 to 2023, just to be clear, that's intended to finance these projects, right? That's why the timing is 2022 to 2023?

That's correct. As you consider the timing of those investments, we will need to make the investments in those joint ventures during the 2022 to 2023 period. We will complete the block equity deal based on any remaining equity content we need once we finalize our hybrid or convertible in 2021.

Got it. Regarding the rate case matter, are Columbia Gas and Maryland expecting to receive something this month? Is it coming up soon or within the next week or two?

We have a settlement filed there. Yes, that's correct. We're awaiting an order.

Your next question today comes from the line of Harry Pollans with Bank of America.

It's Julien here, actually. Just wanted to follow-up real quickly, if you can. A couple nuanced ones and then just following up more conceptually on the strategy side. How do you think about the timing of potential equity or equity-like solutions, especially in 2021, relative to any evolution on strategic desires when you think about asset monetization? And where are you in that thought process? Just think about the timing more than anything else here around some of the ideas you floated at the time of your Analyst Day a few weeks back.

We have flexibility regarding the timing of our entry into the market for hybrid or convertible securities next year. At this time, we cannot specify a timeline, but it will definitely be by the end of 2021, and we are aiming for equity content greater than 50% in those securities. As for portfolio optimization, we are continuously analyzing our plans. If we have any updates or significant information to share, we will communicate that to our investors.

Got it. But basically, if I'm hearing you right, it's just too early to really say one way or another how serious of an intention is for asset sales rather than equity alternatives right now, if I'm hearing you right?

It is. We're just continuing to look at the full plan and how we finance that. The plan that we outlined on Investor Day is still the same plan from a financing standpoint, and we're continuing to look at what the pricing is of those potential securities. As we look at those securities, we'll evaluate portfolio optimization and see what drives the highest shareholder value.

Got it. And sorry to go back to come back and clarify Shar's question a little bit if I can. You alluded to it. When you think about this $0.05 COVID impact, how much of that is the gas business and the fact that we haven't been through the winter season yet in the context of an LDC and seeing COVID impacts versus, say, just ongoing impacts from electric year-over-year here?

Yes, we probably haven't provided that level of detail. As we assess the overall impacts on gas and electric, I would estimate it to be around $0.03 for gas and $0.02 for electric. However, we will ultimately need to see how this plays out.

Right. Hence, why we might be a little early here in saying where you are against that range despite some nice tailwinds on COVID year-to-date already?

That's right. Yes. I mean, we're really going to have to look at sales as we get into the heating season. And then again, bad debt and see from a customer standpoint, what's the impact there. We do have really good regulatory programs in terms of our bad debt, and that has limited the impact so far this year, but it's something we continue to watch.

Your next question comes from the line of Richard Sunderland with JPMorgan.

Just following up real quick on the COVID impact question. One, are there any items specifically included or excluded from that $0.05 that you just stated for 2021? And then two, any regulatory proceedings that could impact that number.

Thanks for the question. Let me start with the regulatory. At this point, we're not pursuing any additional regulatory items that would impact that number. Obviously, if there were any significant changes in our outlook that we could pursue regulatory mechanisms, we would. And so what we've got baked into that $0.05 is based upon the programs that we've got in hand right now. And the second question, I'm sorry, I missed that.

Just any specifics to bid related items that are, I guess, really excluded from that impact? Or just kind of definitionally, anything that might see the COVID impact but wouldn't actually be included in the $0.05?

No, for us, we're really tracking sales impacts, bad debt expense, other fees that we might collect from customers and any kind of cleaning and safety expenses. Those are the key categories that we're tracking.

Your next question comes from the line of Durgesh Chopra with Evercore ISI.

Most of my questions have been answered. Just one big picture, can you talk about hydrogen? And a lot of your peers are doing some test projects. Obviously, you have extensive assets and gas LDCs. Maybe just what your view and outlook is there and are you going to be collaborating with others or projects of your own as it relates to blending hydrogen to your gas system?

Thanks, Durgesh. That's something we're closely monitoring. It's not yet part of our investment plan, and our programs, as we've outlined, are driven by safety, asset modernization, and growth programs as well as our renewable transition on the electric side. But as we look forward at the role of natural gas in a decarbonizing economy, we certainly see opportunities, both for increased renewable natural gas and for hydrogen blending. So it's an area we're watching. I would expect to see more information on that, more insight on that in terms of additional investment opportunities in the future. But at this time, it's what I would consider something that we're closely monitoring and very well positioned. The other thing I'd stress there is one of the things that's always a key factor is just the fundamental economics of supply and demand. And you look at our territories where we sit across shale belts and the low basis cost and low volatility has really not been conducive to introducing much renewables or blending alternative fuels. But if you've kind of flipped that over, it also creates quite a bit of headroom for those kinds of policies as we look forward. So we're very bullish on natural gas going forward in both environments, the current environment and a decarbonizing environment, because we have such strong fundamentals to work from across our territories.

That's helpful, Joe. I just have a quick follow-up. Can you provide any update on the insurance proceeds in Massachusetts and a timeline for when we might expect something?

Yes, thanks. This is Shawn. No update from what's reported, and no anticipated time line. We're still working through that process.

Your next question comes from the line of Charles Fishman with Morningstar.

I believe my questions regarding the quarterly results and guidance have been addressed. However, I would like to follow up on a question I posed during your Investor Day last month about the potential election outcomes. Specifically, I’m curious about the implications if corporate income taxes were to rise or if fracking restrictions led to increased natural gas prices. I received some insightful responses from Joe and Donald, which I appreciated. Since then, I've noticed that one candidate has suggested a phase-out of gas. As someone who owns an electric and gas utility in Northern Indiana, where winters can be extremely harsh, I am concerned about the feasibility of relying solely on electric heating. Even considering NIPSCO’s competitive electric rates, electric heating can be quite costly. My question is, as the owner of an electric facility in that region, do you have the capacity to deliver the required BTUs on particularly cold days using electricity? Is this a practical solution? Additionally, although you don't operate utilities or generation assets in Ohio or Pennsylvania, I wonder if similar challenges would arise in those areas regarding the delivery of BTUs currently supplied by gas facilities during severe cold weather.

Thank you, Charles, for your question and the follow-up from the Investor Day discussion. It's a very insightful question. If you look at the energy needs on a peak winter day, particularly in our territory, NIPSCO serves as a good test case due to our dual role in providing both electricity and gas. We observe the complete customer demand profile during both winter and summer peaks. Even as the grid becomes greener and incorporates more renewable energy, we still need to meet the demand on those peak winter days. One can envision scenarios where the gas system acts as a battery or storage solution for such days. However, based on our experience, the current configuration of the electric grid may not be adequately equipped to handle those peak demands. Significant engineering efforts will be necessary to envision a future without natural gas. We believe it is more important to consider how to integrate natural gas with renewables, such as renewable natural gas and potential hydrogen blending, to decarbonize the gas supply and ensure resilience with multiple fuel options. This presents a complex engineering challenge, and the economic aspects are tough as well. You've raised an insightful point. Studies have explored the modernization of the grid and its associated costs compared to the amount of carbon emissions avoided through renewable energy and upgrades, showing that it can be an expensive way to reduce carbon emissions, especially in the regions we serve.

I assume you are demonstrating to regulators, policymakers, and the government that the feasibility of these electrification mandates is not realistic in your service areas compared to milder climates that we observe. Is that correct?

Yes. I think it's not such an absolute thing. I think it's really a more complex picture than that in terms of what's the best role for natural gas, what's the best role for electric renewables, what's the best energy delivery system for the needs of our country. And so I don't think it's a yes or no question for gas. I don't think it's an all electrification solution either. I think we've got to solve this with the resources that are available to us to make sure that we keep our economy viable and rely on the resilience of the supply basin that we have.

Your next question comes from the line of Insoo Kim with Goldman Sachs.

I just have a quick question. I noticed in the presentation that in the third quarter, you reduced your average interest rate by over 60 basis points. How much of that reduction benefited your bottom line? Additionally, was this refinancing and rate reduction considered when you provided your longer-term guidance?

Great question. When you think about that financing, it did lower our long-term financing cost. It is embedded in our guidance for 2021 and beyond. And so it's embedded in there and does provide savings for us going forward.

Got it. How much of that allows you to keep your savings compared to what the utilities receive? I just haven't looked into it yet.

Well, I'd say that's a little bit more complex because we finance our utility separately. When they need cash, those savings don't necessarily transfer to the utilities. Their financing takes place throughout the year, not just when we access the external market for financing, which is why it's important to consider that those dollars and savings are included in the overall NiSource guidance and financing plans.

Got it. I know I said one question, but I have one more. Regarding your gas utilities in Virginia and Maryland, the revenue decoupling on the residential side—when we enter this winter season, will the benefits from increased residential demand be decoupled, as you suggested? Was part of that already included in your $0.05 overall impact for 2021?

That is correct.

Your next question comes from the line of Andrew Levi with HITE Hedge.

So just to follow-up on Julien's question, so on your Analyst Day, you definitely threw out and kind of threw out again today, the possibility of selling maybe it's an LDC, selling some assets, whatever it may be. And so I guess my first question just around that is, you wouldn't really bring that up unless it was a real possibility. Is that correct?

So our messaging hasn't changed at all from Analyst Day. We've got a track record of evaluating and executing on structural changes when that makes sense, the separation or spin of the pipeline business, the sale of CMA are good examples of that. And our financing plan, as we said on Investor Day, does not assume any portfolio changes, but our point is that we always evaluate the portfolio as a matter of normal course to make sure that we're doing what's in the best long-term interest of shareholders and in the most credit-supportive way. So just want to reiterate, that's the key message, that's what we're conveying.

And what would the process be as far as doing that? Meaning, obviously, you have to hire a banker, do all that type of stuff, but just can you kind of talk at a very high level what you're thinking about specifically on that because it is an event that would be significant to your company, even if it's a small LDC and, obviously, not having to issue as much equity and kind of the puts and takes around that, just be a little bit more specific, please?

Yes. We're not going to speculate about particular scenarios or anything like that, but it obviously involves evaluating the impact of the loss of earnings in cash flows as well as any costs to synergies that we'd have to manage as a result of a transaction like that. And all of that, as you all know, can influence credit and the earnings trajectory. So we look at the long-term value drivers for the business, and we look at the contribution of each of our companies toward that. And we look at the alternatives anytime we're looking at equity issuances.

Do you guys think there's a strong market out there for smaller LDC?

Don't really know.

Okay. And are any of your subsidiaries not earning their allowed return?

We have strong regulatory support in all our states. We expect that all our companies will earn their allowed return, and they have been doing so. While we recently sold CMA, that situation has a different profile.

Right. Right. And last question is, what is the timing of making the decision here? Is it kind of in step with the equity you have to issue next year, or is it hybrid you have to issue next year?

No, we haven't set any timetable for that.

And this concludes our question-and-answer session for today. I now turn the call back to Mr. Joe Hamrock.

Thank you, Amy. And thank you all for joining us today and for your continued interest in and support of NiSource. Please stay safe, and make it a great day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.