NiSource, the Merrillville, Indiana-based energy holding company, might just be the sleeping giant of the data center boom. While headlines focus on the explosive growth of data centers in traditional hubs like Northern Virginia, NiSource's Q1 2024 earnings call transcript reveals a potential seismic shift in the landscape. The company, best known for its natural gas distribution across six states, quietly hinted at an underappreciated opportunity brewing in its Northern Indiana electric service territory - a veritable goldmine for future data center development.

Now, you might be wondering, why Indiana? What makes this traditionally manufacturing-centric region suddenly appealing to data-hungry giants? The answer lies in a potent combination of factors: robust electric transmission infrastructure, ample energy capacity, plentiful land (a lot of it readily available farmland), minimal physical disaster risk, enticing tax incentives, and a pro-business policy environment. In short, Indiana presents itself as an attractive, and crucially, *under-the-radar* alternative to the increasingly crowded and expensive data center hubs.

NiSource CEO, Lloyd Yates, fueled the intrigue during the earnings call, mentioning "robust inquiries" and ongoing discussions with "several data center developers." He expressed clear optimism about the potential for significant load growth driven by this emerging sector. This subtle yet significant revelation signals a potentially transformative shift for NiSource. Imagine: a traditionally stable, regulated utility suddenly propelled into a high-growth trajectory, fueled by the insatiable demand for data in our digital age.

But here's where things get really interesting. While NiSource is understandably tight-lipped about specifics, refusing to include any data center load growth assumptions in its current long-term plan, a deeper look at the financials provides compelling clues.

The company reaffirmed its commitment to 6% to 8% annual EPS growth and 8% to 10% annual rate base growth from 2023 to 2028. This reaffirmation, despite a $400 million increase in its base capital expenditure plan due to full ownership of the Fairbanks and Gibson solar projects, hints at an underlying confidence in future revenue streams, likely from sources beyond its traditional business lines.

The key lies in how NiSource achieved this without modifying its external equity needs. They accomplished this through the positive cash flow attributes of owning the solar projects outright, substituting tax equity funding with upfront cash that receives favorable treatment from credit agencies. This financial maneuvering creates a cushion, a degree of flexibility that could absorb the initial capital-intensive demands of data center infrastructure development without upsetting the delicate balance of its current financial plan.

In other words, NiSource is quietly preparing for something big. They're laying the groundwork, ensuring financial flexibility while simultaneously engaging in active negotiations with data center developers. They're acting like a company strategically positioning itself for a potential influx of capital-intensive, high-growth projects.

Now, this is not just blind optimism. The potential scale of this opportunity is underscored by recent media reports suggesting major players like Amazon are considering Indiana for significant data center investments. If even a fraction of these materialize, the impact on NiSource's growth trajectory could be substantial.

Hypothetical Impact of Data Centers on NiSource's Rate Base Growth

Let's assume a hypothetical scenario where data center development in Northern Indiana adds just 2% to NiSource's annual rate base growth over the next five years. This seemingly small increment, when compounded annually, would result in a total rate base increase of over 10% by 2028 - a significant boost to the company's already robust growth projections.

This is not to say there aren't challenges. NiSource acknowledges the complexities of economic development, emphasizing the need for stakeholder alignment, particularly in ensuring equitable benefits for all customer classes. The company is already exploring rate design options and potential special tariffs for hyperscalers, demonstrating a proactive approach to this delicate balance.

While uncertainties remain, one thing is clear: NiSource is strategically positioning itself to capitalize on the data center boom. They are quietly developing a potential growth engine that could transform the company from a stable utility to a dynamic player in the rapidly evolving digital infrastructure landscape. And that, dear reader, is something worth paying very close attention to.

"Fun Fact: Indiana is quickly becoming a hub for renewable energy projects. NiSource's Fairbanks and Gibson solar projects are just two examples of the state's commitment to clean energy. This shift towards renewables will not only benefit the environment, but also attract data center developers who are increasingly seeking sustainable energy sources to power their operations."