Earnings Call Transcript - NI Q3 2021

Operator, Conference Operator

Good morning, my name is Chilly (ph), and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2021 NiSource Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Mr. Turnure, you may begin your conference.

Chris Turnure, Investor Relations

For Joe Hamrock, Chief Executive Officer, Donald Brown, our Chief Risk Officer, and Randy Hugen, our VP of Investor Relations and Treasurer. The purpose of this presentation is to review NiSource's financial performance for the third quarter of 2021, as well as provide an update on our operations and growth drivers. 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, and Shawn, 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 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 on NiSource.com. With all of that out of the way, I'd like to turn the call over to Joe.

Joe Hamrock, Chief Executive Officer

Thanks, Chris. Good morning, everyone, and thank you for joining us. Hopefully you've all had a chance to read our third quarter earnings release which we issued earlier today. Strong execution of NiSource's significant renewable energy investments continues to be the highlight of our foundation for future growth. We continue to expect that our core infrastructure programs and renewable generation investments will drive industry-leading compound annual growth of 7% to 9% in diluted net operating earnings per share through 2024. Growth is driven by our commitment to safety, reliability, customer affordability, and sustainability. As we begin to refine our outlook for longer-term growth, the preferred path from NIPSCO's 2021 integrated resource plan identifies additional investment opportunities while advancing the retirement of remaining coal-fired generation between 2026 and 2028. It supports our plan to reduce greenhouse gas emissions 90% by 2030. Let's turn now to Slide 3, and take a closer look at our key takeaways. We are updating our guidance for 2021 to target the top end of the range of $1.32 to $1.36 per share in non-GAAP diluted net operating earnings or EPS. We are also initiating guidance for 2022 of $1.42 to $1.48, and that is consistent with our 5% to 7% near-term growth commitment. Our long-term diluted EPS guidance of 7% to 9% through 2024 is now based on the expected top end of our 2021 guidance range. And we reaffirm 5% to 7% growth in 2023. As I mentioned a moment ago, the preferred plan from NIPSCO's 2021 IRP advances our plans to retire remaining coal-fired generation between 2026 and 2028 as we shift to lower-cost, clean, and reliable generation. Investments of up to $750 million will be required to replace retiring coal-fired generation. The NIPSCO portion of this investment will be better understood following further evaluation of the proposals we solicited associated with the IRP. Our regulatory execution progresses with a proposed order approving a settlement in Pennsylvania, a settlement filed in Kentucky, and a proposed order in Maryland. In addition, we filed a gas rate case in Indiana in September. We achieved non-GAAP diluted net operating earnings per share of $0.11 in the third quarter of 2021 versus $0.09 in 2020. Now let's look at some NiSource Utilities' highlights for the third quarter. Starting with our gas operations on Slide 9. The Columbia Gas of Ohio rate case continues to progress. Net of the trackers being rolled into base rates, the filing requests an annual revenue increase of approximately $221 million pending its decision next year from the Public Utilities Commission of Ohio. New rates would be effective in mid-2022. NIPSCO filed a gas rate case on September 29th, requesting a revenue increase of $115 million annually. The case is focused on infrastructure modernization and providing safe, reliable service while remaining in compliance with state and federal safety requirements. In Pennsylvania an administrative law judge issued a proposed order recommending that the Pennsylvania Public Utility Commission approve a settlement in our rate case. The settlement would increase revenue by $58.5 million with new rates effective December 29 of this year. The adjusted rates will help to continue investments in infrastructure upgrades, system reliability, and maintenance enhancements. We expect the commission's final order by mid-December. In Kentucky, we have filed a proposed settlement of our rate case. The settlement includes an overall increase in revenues of $18.6 million to support continued investments in safety and replacing aging infrastructure. Columbia Gas of Maryland received a proposed order from an administrative law judge on Friday recommending an increase of approximately $2.56 million in revenues as compared to our request of approximately $4.8 million. We expect a final order from the Maryland Public Service Commission in December. Before we move on, I'd like to note that Columbia Gas of Ohio, our largest LDC, is ranked number one in the Midwest region in J.D. Power's 2021 Gas Utility Business Customer Satisfaction Study. Also, congratulations to our customer experience team for the successful launch of the Columbia Gas and NIPSCO mobile apps. They're an important step forward in building our connected digital customer experience. Let's now turn to our electric operations on Slide 10. NIPSCO's electric T-DSIC plan is pending before the Indiana Utility Regulatory Commission or IURC. This is a five-year, $1.6 billion proposal that would replace the previous plan, which NIPSCO filed in April to terminate. The pending plan includes newly identified projects aimed at enhancing service and reliability for customers, as well as some previously identified projects. The other items on this slide relate to our renewable generation strategy. And I'll turn it over to Shawn Anderson to give more detail.

Shawn Anderson, President, NIPSCO

Thank you, Joe. The selection of the preferred path from NIPSCO's 2021 IRP is a significant milestone in our transition from coal-fired generation toward cleaner and reliable forms of generation, all of which are expected to save NIPSCO customers approximately $4 billion over the long term. The preferred path from the 2021 IRP refines the timelines to retire coal-fired generation at the Michigan City Generating Station to between 2026 and 2028. It also calls for retirement of two vintage gas peaking units, 16A and 16B, which are both located at the Schahfer Generating Station site. The most viable replacement option calls for a portfolio of resources including incremental solar, standalone battery storage, and natural gas peaking resources. We estimate that investment of up to $750 million will be required to support the retirement of these units. We expect to be able to quantify the NIPSCO portion of this investment opportunity in the first half of next year after further evaluating bids and the request for proposals and completing due diligence on projects which align with the preferred path. Meanwhile, we continue to execute on a plan for retirement of remaining coal-fired generation at Schahfer. Units 14 and 15 retired as of October 1st, and units 17 and 18 are on track to retire by 2023. We're making steady progress on the renewables project build-out, informed by the preferred path from NIPSCO's 2018 IRP. Our partners on these projects are some of the strongest developers in the renewable energy space, and we remain in close contact regarding the progress of these projects. We continue to expect to invest approximately $2 billion in renewable generation by 2023 to replace the retiring capacity. As part of the execution of this plan, construction continues on the Indiana Crossroads One wind project, which is on track to become operational in the fourth quarter of this year. Construction has also started on a pair of solar projects. Dunns Bridge Solar I is being constructed by a subsidiary of NextEra Energy Resources under a build-transfer agreement. EDP Renewables North America is building the Indiana Crossroads solar project, which will be operated as a joint venture. Both are expected to enter service next year. The IURC provided regulatory approval of the Indiana Crossroads II wind project on September 1. With that action, all 14 renewables projects needed to replace the retiring capacity of Schahfer Generating Station have now received approval. In addition to the slate of renewables projects we have announced, NiSource plans to evaluate hydrogen and emerging storage technologies. It's important for us to gain a risk-informed understanding of the options and technologies that may emerge as pathways toward further decarbonization. Now, I'd like to turn the call over to Donald, who will discuss our third quarter financial performance in more detail.

Donald Brown, Chief Financial Officer

Thanks, Shawn. And good morning, everyone. Before getting into the specific results, I'd like to highlight the solid execution and progress that now has us guiding to the top end of our 2021 guidance range of $1.32 to $1.36. This new 2021 expectation also serves as the starting point for both our near-term and long-term growth commitment. We have also initiated 2022 guidance of $1.42 to $1.48, which at its midpoint represents a growth rate of over 6.6% from the 2021 top end. Turning to our third quarter 2021 results on Slide 4, we had non-GAAP net operating earnings of about $47 million or $0.11 per diluted share, compared to non-GAAP net operating earnings of about $36 million or $0.09 per diluted share in the third quarter of 2020. The 2021 results reflect our ongoing execution of infrastructure investments, offset somewhat by the sale of Columbia Gas of Massachusetts, which closed in October of 2020. Looking more closely at our segment three-month non-GAAP results from Slide 5, Gas Distribution operating earnings were about $18 million for the quarter, representing an increase of approximately $8 million versus last year. Operating revenue, net of the cost of energy and tracked expenses, was down nearly $18 million due to the sale of CMA. Operating expenses, also net of the cost of energy and tracked expenses, were lower by about $26 million, mostly due to the CMA sale, offset slightly by higher employee-related costs and outside services spending. In our Electric segment, three-month non-GAAP operating earnings were about $130 million, which was nearly $3 million lower than the third quarter of 2020. Net of the cost of energy and tracked expenses, operating revenues decreased slightly by about $2 million due to slightly lower residential usage, offset by increased TDSIC revenues. Operating expenses, net of the cost of energy and tracked expenses, were nearly flat compared to 2020. Now, turning to Slide 6, I'd like to briefly touch on our debt and credit profile. Our debt level as of June 30 was about $9.6 billion, of which about $9.2 billion was long-term debt. The weighted average maturity on our long-term debt was approximately 14 years, and the weighted average interest rate was approximately 3.7%. At the end of the third quarter, we maintained net available liquidity of about $1.7 billion consisting of cash and available capacity under our credit facility and other accounts receivable securitization programs. As we noted last quarter, all three major rating agencies have reaffirmed our investment-grade credit ratings with stable outlooks in 2021. Taken together, this represents a solid financial foundation to continue to support our long-term safety and infrastructure investments. As you can see on Slide 7, we've narrowed our 2021 capital investment estimate to approximately $2 billion, and reiterated our 2022 capital forecast of $2.4 to $2.7 billion. Taking a quick look at Slide 8, which highlights our financing plan. There are no changes to our plans since April's equity unit issuance. I would highlight that this balanced financing plan continues to be consistent with all of our earnings growth and credit commitments. As I mentioned earlier, we have updated our 2021 earnings guidance, issued guidance for 2022, and reaffirmed our long-term growth commitments. I would also remind everyone that we're planning to provide an extension to our growth plan at an Investor Day during the first half of next year. So please stay tuned. Thank you all for participating today and for your ongoing interest in and support of NiSource. We're ready now to take your questions.

Operator, Conference Operator

Thank you. At this time, I would like to remind everyone, your first question comes from Richard Sunderland from JPMorgan. Please go ahead.

Richard Sunderland, Analyst, JPMorgan

Good morning. Thanks for taking my questions. Maybe starting with the IRP here. Curious to get an outline of the guardrails on the potential investment in any gating items here as we progress to the update in the first half of next year in terms of the high-low and where that could realistically fall in the $750 million?

Shawn Anderson, President, NIPSCO

Thanks for that question. Good morning, this is Shawn. Ultimately, as you can imagine the range will be informed by the actual project selected. What we know now are the tranches of technology that we believe will provide the capacity. We need to step through the due diligence now to better understand those projects, and that will inform in some way, shape, or form the specifics of the range. The selection of technology, the actual projects themselves, how efficiently they can be constructed — those types of things will have a bearing on the ultimate CapEx. I'd also note that MISO's resource adequacy rules, as those are finalized, could come into play as well. We think we've modeled those out and incorporated that in the indicative pathway.

Joe Hamrock, Chief Executive Officer

Thanks, Shawn. Rich, let me just add. All else being comparable through that analysis, we have a bias to own these assets as we step through this next progression, and we believe we'll have a strong case and a value proposition for doing that. As Shawn noted the factors, or guardrails as you said, do include the MISO seasonal capacity factor and ultimate requirements in the evaluation of the proposals that are still underway. But also the federal policy landscape is a bit unpredictable right now, and that could shape timing and mix of investments as well. We look forward to working through that in the next quarter or two.

Richard Sunderland, Analyst, JPMorgan

Thanks, Shawn. Maybe just following up on the federal aspects, could you unpack that a little bit more in terms of what could specifically impact the 2021 IRP considerations or maybe even more broadly, whether it's the financing plan? How could something like direct pay change those plans now?

Donald Brown, Chief Financial Officer

Hi. I can take the direct pay question. Certainly, I think that provides some additional flexibility on how we finance our renewable investments. It's certainly positive if it allows us to reduce any equity needs for those future investments or external financing needs in terms of tax equity. But we certainly need to understand how direct pay would be treated by our six jurisdictions from a rate base and deferred tax standpoint.

Shawn Anderson, President, NIPSCO

And then I just add on as it relates to how federal policy could shape the technology costs. We can't speculate exactly, but the $750 million is a derivative of what we saw come through the RFP in May related to the capacity and the technology required to meet that capacity. To the extent the marketplace changes that efficiency, it again could lead to a different selection of technologies to comprise the capacity necessary. But you'd have to see how that federal policy landscape would impact the marketplace versus the due diligence, which we're performing on actionable projects that came through the RFP that we expect to be able to execute against.

Richard Sunderland, Analyst, JPMorgan

Thank you. Thank you for the time here. Thanks.

Operator, Conference Operator

Your next question comes from Insoo Kim from Goldman Sachs. Please go ahead.

Insoo Kim, Analyst, Goldman Sachs

Yeah. Thank you. My first question is just going back to the IRP, that $750 million potential. Is that the total opportunity set whether it's just PPA or owned or does it contemplate some percentage of ownership there? And then the follow-up to that is, if we're taking the more accelerated retirement options in the 2026 retirements, how much of that potential investment could come in the 2025 time period?

Shawn Anderson, President, NIPSCO

Thank you for that. The $750 million is the total inclusive number of investments expected to be able to functionally deliver the capacity once the capacity gap is created through the retirement of Michigan City and units 16A and 16B. So it's everything included, also inclusive of the transmission that we anticipate necessary to construct to enable that to occur. In terms of timing, there is some flexibility because these projects in some ways can be modular in nature. It provides us a fair amount of flexibility to optimize that. The transmission work, for example, will begin immediately, and it could take up to three years to complete the transmission work necessary to take those units offline. So the other resources could be feathered in, likely starting in that 2024 time horizon. But we'll know a lot more through the first half of 2022 after we've gone through the due diligence process and started to select the exact projects that we think can deliver that capacity.

Insoo Kim, Analyst, Goldman Sachs

Got it. That's good color. My second question is on the dividend policy. Over the past couple of years, the growth in the dividend has been a little bit more modest versus history, and as we get back into this more robust EPS growth cycle, and I think you had a 60% to 70% payout ratio target as of the last disclosure. How should we think about some of the future dividend growth trends that we could see over the next few years?

Donald Brown, Chief Financial Officer

Good morning. The 60% to 70% payout ratio is still our guidance at this point. We will revisit our dividend in January as we normally do with the board. But when you look at our long-term plan and 7% to 9% EPS growth that we've indicated, you would certainly expect to see dividend growth in that range, roughly in line with earnings growth, given the payout ratio of 60% to 70%. Again, we'll provide an update in January.

Insoo Kim, Analyst, Goldman Sachs

Got it. Thank you so much.

Operator, Conference Operator

Your next question comes from Julien Dumoulin-Smith with Bank of America. Please go ahead.

Cody Clark, Analyst, Bank of America (on behalf of Julien Dumoulin-Smith)

Hey, good morning, this is actually Cody Clark on for Julien. Thanks for taking my questions.

Joe Hamrock, Chief Executive Officer

Good morning, Cody.

Cody Clark, Analyst, Bank of America (on behalf of Julien Dumoulin-Smith)

First, a housekeeping item and just to clarify, if I'm thinking about 2023 EPS, what base should I be using for the 5% to 7% growth? Is it the top end of '21 or the midpoint of the new '22 guidance?

Donald Brown, Chief Financial Officer

I would use the top end of 2021 as the guidance going forward for 2022 and for long-term 7% to 9% EPS.

Cody Clark, Analyst, Bank of America (on behalf of Julien Dumoulin-Smith)

Okay. Got it. And then one of the main variables on NIPSCO's share would be the breakdown of ownership versus PPA, and certainly understand the bias to own here. We're wondering if you can talk about how you, other stakeholders, and your regulators are thinking about ownership percentage of the resources? Have you had any conversations here or how do you think that's going to shake out?

Shawn Anderson, President, NIPSCO

Thanks for that question. We have not had any discussions regarding ownership percentages. We've focused on the tranche of technology needed to deliver the capacity. That's been the main focus to understand the solutions and the pathway we expect to transpire. We would need to complete full due diligence on the projects themselves to better understand that ownership percentage. Certain asset classes tend toward higher ownership percentage; for example, a SugarCreek upgrade would make a lot of sense for us to own at our own plant. So there is a bias toward ownership in some classes. We expect to have a final point of view in the midpoint of next year after completing due diligence.

Joe Hamrock, Chief Executive Officer

I'd only add that a key driver is the cost to customers over the life of the projects. That's probably the first variable we look at for comparability across different ownership structures.

Cody Clark, Analyst, Bank of America (on behalf of Julien Dumoulin-Smith)

So, looking forward to the first half update then, and we've seen some of your peers introduced longer-term capex and growth plans to highlight the runway for spending. Do you see yourself in a position to be able to provide that level of disclosure when some of these spending items around generation become a little bit clearer in the first half of next year?

Donald Brown, Chief Financial Officer

Absolutely. We are intending to have an Analyst Day somewhere in the first half of next year. The goal of that Analyst Day would be to provide more clarity around the next-generation investments to replace Michigan City, as well as to extend the long-range plan for both our gas and electric businesses.

Cody Clark, Analyst, Bank of America (on behalf of Julien Dumoulin-Smith)

Got it. That's very helpful. Thanks so much for the time and looking forward to seeing you all next week.

Joe Hamrock, Chief Executive Officer

Thank you.

Operator, Conference Operator

And your next question comes from Travis Miller from Morningstar. Please go ahead.

Travis Miller, Analyst, Morningstar

Good morning, everyone. Thank you.

Joe Hamrock, Chief Executive Officer

Hey, good morning, Travis.

Travis Miller, Analyst, Morningstar

Question on the electric side of NIPSCO back to the IRP. How do you think about the timing and relationship between the IRP as you go through the process, the RFPs, etc., and the T-DSIC? Are regulators thinking about these in terms of the need for new transmission and distribution to supply and support the IRP? And how does that work?

Joe Hamrock, Chief Executive Officer

Yes, that's a good question, Travis. The T-DSIC really operates on existing transmission assets focused on maintenance and reliability improvements, not so much on new capacity related to new generation or retiring generation. So there's not a direct relationship between the T-DSIC and the IRP in that regard. The projects we're looking at from the RFP within the integrated resource plan are tied to specific transmission investments that are inside the bids that we solicited, so they don't crossover in a meaningful way to the T-DSIC.

Travis Miller, Analyst, Morningstar

Okay. So, we could see more transmission investment as you roll out some of the IRP steps?

Joe Hamrock, Chief Executive Officer

That's right. Just like we have in the current cycle, our $2 billion includes healthy transmission investment as well.

Travis Miller, Analyst, Morningstar

Okay. Great. And then on the gas side, what are your latest thoughts on all the discussion about methane emissions? Where does that fit into your capex plan? Obviously, we've heard domestically and internationally.

Joe Hamrock, Chief Executive Officer

The EPA methane rule is out now. We see clearly opportunities to improve the emissions profile, particularly those focused on upstream assets, exploration and production, transmission, and storage. There's a relatively light touch on our distribution asset portfolio. Overall, we believe the right way to drive a cleaner profile for the gas business and the gas supply chain is through effective regulation like the EPA methane rule. I would note that one of the provisions inside the proposed legislation is a methane tax, which we think is a poor mechanism because it would drive cost to customers without having the same effectiveness as the EPA methane rule. Those two certainly work together, but the methane rule is a better mechanism and helps drive sustainability of natural gas in an affordable way.

Travis Miller, Analyst, Morningstar

Is there any upside to the gas capex if the U.S. or international regulators were to come down really hard on methane?

Joe Hamrock, Chief Executive Officer

Yes, we would handle the methane rule implications for the distribution entities, but it still remains to be seen how that rule plays out.

Travis Miller, Analyst, Morningstar

Okay. Great. Thanks so much.

Joe Hamrock, Chief Executive Officer

Thank you.

Operator, Conference Operator

Our next question comes from David Peter from Wolfe Research. Please go ahead.

David Peter, Analyst, Wolfe Research

Hey, good morning, guys.

Joe Hamrock, Chief Executive Officer

Good morning, David.

David Peter, Analyst, Wolfe Research

On the higher earnings outlook off the new base, could you talk about some of the factors that are underlying that better outlook in the interim and through 2024? You have a couple of bigger rate cases pending — just wondering how sensitive the plan is to some of the outcomes there. And then related to that, maybe you could comment where you are in those cases, specifically Ohio.

Donald Brown, Chief Financial Officer

Thank you for the questions. Our plan is really built on the modernization investments that we're making. Think about 75% of those investments being tracked, which gives us confidence on our year-to-year earnings guidance. This year is a heavy year from a rate case standpoint. We filed five base rate cases in our LDCs; we've got two supplements and one other in Maryland. We're expecting to get an order in Maryland in December and then the Ohio and NIPSCO cases that we filed will have significant impacts — Ohio by mid-next year and then the fourth quarter for NIPSCO. That gives us confidence in our earnings guidance and the strength of the overall growth plan. The 7% to 9% EPS growth includes $2 billion of generation investments that are already approved through the Indiana Commission this year. Otherwise, it comes down to O&M and managing that. We kicked off our transformation program a little over a year ago. That is going well and is intended to reduce costs to help offset inflation aspects for long-term customer affordability, but also improve the rigor of our processes and allow us to improve safety and customer service.

Joe Hamrock, Chief Executive Officer

Let me pick it up on the related question around the Ohio rate case. Donald touched on the mid-year expectation in terms of the filing itself with the $221 million asked net of riders. There's a rider interplay there as well. As we all know, there's not a lot to report at this time; the PUC has been very busy. Given the current workload, we would expect momentum to pick up. We're early in the schedule overall, but discovery activities have been heavy so far. This being the first base case since 2008 for Columbia Gas of Ohio, that's not a surprise. We believe parties to the case recognize the long duration between the cases and our strong investment history and commitment to the state. We remain confident in the mid-2022 resolution and that's all baked into our outlook for next year.

David Peter, Analyst, Wolfe Research

Great. Thank you, I appreciate all the detail. I just had one follow-up on the financing plan and around some of the things being proposed in Washington. Several of your peers have talked about how meaningful direct pay could be in helping fund future renewable investments and lowering equity needs. Assuming options included, it doesn't impact the approved projects at all since you've done the funding for that. But just in the RFP there's the $750 million you've outlined. Historically you've said something like 60% equity content for new generation investments, but we effectively expect that to be materially reduced with the direct pay option?

Donald Brown, Chief Financial Officer

Let me address the equity content first. For the future investments related to the $750 million potential, we would not need the same level of equity content. Our balance sheet will be in a stronger position by the end of 2023, and we'd be in a more typical regulatory capital structure of about 50-50. Direct pay does provide some flexibility and potentially reduce the need for external financing or reduce equity needs. It's a positive, but we need more detail to understand how it would impact rate base and deferred taxes to see the pure impact to our financing plan.

David Peter, Analyst, Wolfe Research

Okay. Great. Thank you, guys.

Donald Brown, Chief Financial Officer

Thanks, David.

Operator, Conference Operator

Your next question comes from Shar Pourreza from Guggenheim. Please go ahead.

James Moore, Analyst, Guggenheim (on behalf of Shar Pourreza)

Hey guys, it's James Moore here on for Shar. How are you doing?

Joe Hamrock, Chief Executive Officer

Good morning, James.

James Moore, Analyst, Guggenheim (on behalf of Shar Pourreza)

Just curious with the IRP. Is it taking into account cost inflation for renewables when determining what the actual project costs will be, and if the submitting parties are going to be held to a fixed cost, or if there's any allowance for cost inflation? I have a second question on the gas side as well.

Shawn Anderson, President, NIPSCO

Thanks, James. I'll take that. The estimate we shared derives from the RFP process, which was for actionable projects toward the mid-part of this decade that align with the contemplated retirement of 16A/16B and Michigan City. We asked for a period of time for us to evaluate those projects. We're still within that window, so we would be able to execute against those bids into 2022 and continue through the refinement and due diligence process thereafter.

James Moore, Analyst, Guggenheim (on behalf of Shar Pourreza)

Once the winners have been decided, is there any potential for pass-through for higher commodity costs, higher other input costs, delays on components, or is it a fixed price regardless of who the winners end up being?

Shawn Anderson, President, NIPSCO

It's not decided yet. Generally, you'd think about it as a fixed cost that would relate to that project and that technology, provided the bid is executed within the window that was bid. Projects are executable through a window that extends through 2024, 2025, maybe 2026 depending on the project, and you'd have that fixed cost related to the project. To the extent we continue due diligence, you might understand more about total investment needs, most notably transmission to action those projects.

James Moore, Analyst, Guggenheim (on behalf of Shar Pourreza)

Got it. Thank you for the clarification there. The second question on the LDCs: you've mentioned a number of times you're seeing excess of 10% rate-base growth. First, how long should we think of that level of growth as being sustainable?

Joe Hamrock, Chief Executive Officer

If you look at the $40 billion of identified investments that we rolled out on Investor Day a little over a year ago, that's predominantly investments already in flight in the gas business. Electric is a little different with the transition from coal to renewables and clean energy. Many of these are long-dated programs. If you look at underlying regulatory mechanisms like T-DSIC and Gas Plan in NIPSCO, there's almost $1 billion of identified investment approved beyond our 2024 guidance horizon. Similarly, the Ohio IRP and our other state programs are annualized programs with trackers that support them and run beyond our current 2024 long-term guidance horizon. I'm not going to guide to a specific point in time where 10% rate-base growth is predictable. We'll give that update at Analyst Day next year. The core point is the underlying fundamental investment thesis is very long dated across all of the LDCs.

James Moore, Analyst, Guggenheim (on behalf of Shar Pourreza)

Perfect. That leads into the second part of the question: given recent attractive valuation data points for where gas assets have been transacting, how do you think strategically about your 10%+ rate-base growers versus long-term horizon decisions to spin or sell assets or use other types of financing over your forecast horizon?

Joe Hamrock, Chief Executive Officer

It's a strategic question about long-term growth first and foremost. When we look at a portfolio of companies with that kind of fundamental, long-dated growth opportunity in constructive jurisdictions, any rotation would have to be accretive to a plan that reflects that growth engine. We're open-minded and analytical about such opportunities and work closely with our board to continuously assess them. As it comes to capital rotation and alternative forms of financing, I'll ask Donald to touch on that.

Donald Brown, Chief Financial Officer

It's a good question and certainly one we've gotten in the past. We'll continue to evaluate all financing forms to fund our growth programs and growth plan. It's a strategic question and we want to think about how we enhance the plan long-term. As you think about the next level of generation investments, we'll evaluate what makes the best sense for us long-term.

James Moore, Analyst, Guggenheim (on behalf of Shar Pourreza)

Perfect. Thank you very much for the color and for taking my questions.

Joe Hamrock, Chief Executive Officer

Thanks, James.

Operator, Conference Operator

And there are no further questions at this time. I will turn the call back over to the presenters for closing remarks.

Joe Hamrock, Chief Executive Officer

Hey, thanks, Julien. Thank you all for your questions. Let me just close by reiterating a few of the key takeaways from our release today. We are targeting the top end of our guidance range for 2021 and the investments needed to replace retiring capacity will be evaluated in the coming months with an expectation to roll out more clarity and precision on that at an Investor Day to be held in the latter part of the first half of next year. Our progress on the gas rate cases continues. We've got settlements on the table or orders awaited in three states and filings of new cases in Indiana and Ohio. Finally, we look forward to the steps between now and Investor Day at the end of the first half of 2022 as a key opportunity for us to extend this long-term growth trajectory. We appreciate you joining us this morning. Please stay safe and make it a good day. Thank you.

Operator, Conference Operator

This concludes today's conference call and you may now disconnect.