NISOURCE INC.

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("Management’s Discussion") includes management’s analysis of past financial results and certain potential factors that may affect future results, potential future risks and approaches that may be used to manage those risks. See "Note regarding forward-looking statements" at the beginning of this report for a list of factors that may cause results to differ materially.

Management's Discussion is designed to provide an understanding of our operations and financial performance and should be read in conjunction with our Condensed Consolidated Financial Statements (unaudited) included in this report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

We are an energy holding company under the Public Utility Holding Company Act of 2005 whose primary subsidiaries are fully regulated natural gas and electric utility companies serving customers in six states. We generate substantially all of our operating income through these rate-regulated businesses, which are summarized for financial reporting purposes into two primary reportable segments: Columbia Operations and NIPSCO Operations. Refer to ''Note 15, "Business Segment Information," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for further discussion of our business segments.

Our vision is to be a premier, innovative and trusted energy partner. We exist to deliver safe, reliable and competitive energy that drives value to our customers. In order to achieve this goal, we seek to develop strategies that benefit all stakeholders as we (i) support long-term infrastructure investment and safety programs to better serve our customers, (ii) align our tariff structures and regulatory programs with our cost structure, and (iii) create value and enable growth in an evolving energy ecosystem. These strategies focus on improving safety and reliability, enhancing customer experience, pursuing regulatory and legislative initiatives to increase accessibility for customers currently not on our gas and electric service, ensuring customer value and reducing emissions while generating sustainable returns. The safety of our customers, communities and employees remains our focus. Serving as a guiding practice for our SMS, NiSource is certified in conformance to the American Petroleum Institute Recommended Practice 1173, which is the foundation to our journey towards operational excellence.

Data Center Contracts and Strategy: NIPSCO recently entered into a data center contract with a new customer and entered into amendments to its ADS Contract. Set forth below is a discussion of recent developments relating to our data center contracts and strategy. This discussion is supplemental to, and should be read in conjunction with, our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, in particular Part I, Item 1A, "Risk Factors—Data Center Operations and Strategy Risk" and Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary—ADS Contract and Data Center Strategy."

Alphabet Contract

In March 2026, NIPSCO entered into an agreement with a wholly owned subsidiary of Alphabet, under which NIPSCO will provide electricity to the subsidiary’s data center(the “Alphabet Contract”). Under the Alphabet Contract, which is pending IURC approval, NIPSCO will provide service to Alphabet’s subsidiary pursuant to a capacity commitment beginning in summer 2026 and increasing to 300 MW commencing in 2030. The initial term of the Alphabet Contract is 15 years. Prior to receipt of applicable regulatory approvals from the IURC and FERC, NIPSCO will bill the customer for electric service under its base tariff. Following receipt of regulatory approvals, the customer will pay monthly capacity charges that are based on negotiated rates and actual consumption (subject to certain minimums), together with certain pass-through charges and an existing system charge which will be used to pass savings back to existing customers. The amounts we are entitled to receive from the customer are subject to adjustments including but not limited to resulting from tariff events or MISO accreditation changes. The customer's parent will provide credit support for the customer's payment obligations. Either party may terminate the Alphabet Contract upon certain defaults or failure to obtain necessary related approvals from the IURC and FERC. The Alphabet Contract contains other termination provisions which may be exercised following certain notice periods. If the customer terminates the Alphabet Contract, it is required to make certain termination payments that we believe will be sufficient to reimburse us for our investment costs and NIPSCO has certain obligations to mitigate.

The customer's electricity supply under the Alphabet Contract will be provided through a portfolio of electric generation assets and related assets owned or contracted for by NIPSCO and/or its affiliates (primarily including GenCo) and designed to serve the needs of the customer under the Alphabet Contract and other data center customers (the "Pool Resource Assets"). See “Data Center Strategy & Pool Resource Assets” below for additional information on the Pool Resource Assets. NIPSCO has entered into a PPA with GenCo in connection with the Alphabet Contract, which is pending IURC approval.

Amendments to ADS Contract

In March 2026, NIPSCO entered into an amendment to its ADS Contract to accelerate the delivery of capacity to ADS, resulting in increased committed capacity in the years 2027 through 2031. The amendment does not increase NIPSCO’s 2,400 MW maximum capacity commitment to ADS under the original ADS Contract but increases the amounts of power to be delivered before the maximum commitment is reached. The amendment is pending IURC approval. Pursuant to the amendment, ADS will regularly pay NIPSCO a fixed capacity charge (not subject to adjustment) from 2027 through 2031, regardless of any termination of the ADS Contract or reduction of capacity. The payment structure under this amendment is distinct from and does not alter the payment structure or the payments NIPSCO will receive under the original ADS Contract. Demand under this amendment is expected to be served through Pool Resource Assets (rather than Contract Assets under the ADS Contract).

In addition, in March and May of 2026, NIPSCO entered into amendments to the ADS Contract, subject to IURC and FERC approval, to increase the committed capacity that NIPSCO will provide beginning in 2029 and increasing to a total capacity commitment of 2,800 MW by the end of 2032 and through the end of the initial term of the ADS Contract. ADS will pay NIPSCO both a fixed capacity charge and an existing system charge designed to pass savings back to existing customers, for the increased capacity. Demand under these amendments is expected to be served through Pool Resource Assets (rather than Contract Assets under the ADS Contract).

Construction Update

GenCo continues to advance development of its new combined‑cycle natural gas‑fired generation facility to support the ADS Contract. During the period, the EPC contractor progressed engineering, procurement, and planning activities in support of construction mobilization currently anticipated in mid‑2026. The equipment supply contract for the CCGT units is progressing in accordance with planned delivery schedules.

GenCo is also advancing the development of a combined 400 MW and 100MW BESS installation. The battery equipment supply contract was awarded in February 2026, and the EPC contractor continues engineering, procurement, and planning activities to support the anticipated start of on-site construction in mid‑2026.

Data Center Strategy & Pool Resource Assets

We continue to experience strong demand from potential data center customers in our northern Indiana service territory and are engaged in negotiations with potential additional counterparties. Agreements we enter into with additional counterparties will be served by means of customized, dedicated generation assets, Pool Resource Assets, or a combination.

With respect to customers to be served by Pool Resource Assets, NIPSCO will retain discretion to select and dispatch Pool Resource Assets to meet committed customer demand in a way that maintains reliability and efficiency without direct involvement or approval from specific customers. We believe this model will enable us to allocate generation resources more efficiently and provide us with greater flexibility to serve a broader range of potential customers.

We evaluate potential transactions with Pool Resource Asset customers in the context of existing demand and resources within the pool in order to promote a sustainable alignment between committed customer demand within the pool and capacity available from Pool Resource Assets. We will add capacity resources to the Pool Resource Assets to maintain resource adequacy requirements and promote efficient resource utilization based on contracts with customers (subject to IURC approval). We anticipate that the total accredited capacity from the pool will be large enough to support the total load requirements of our data center customers taking into consideration MISO requirements. Pool Resource Assets may include generation assets that we develop or contract for (for example, via a BTA), as well as capacity agreements, ESAs, market capacity purchases or other similar agreements. In order to provide initial Pool Resource Assets to serve contracted demand, GenCo plans to construct new battery storage with 100MW nameplate capacity, which is expected to be completed in 2028, and has entered into a number of ESA contracts (including with respect to the Tipton BESS Project, which we intend to convert into a BTA) and other capacity purchase agreements. For more information on these agreements, see Note 13, "Other Commitments and Contingencies - D. Other Matters" – Pool Resource Asset Agreements.” We expect that the capacity provided by these initial Pool Resource Assets will suffice to meet substantially all contracted demand from the second half of 2028 through the expiration of the initial terms of our existing data center contracts.

Our ability to recover our investments and earn a return under our contracts with customers served by Pool Resource Assets will be driven by, among other factors, the terms of our contracts with these customers (including the charges we receive from customers and any potential adjustments to such charges), our ability to construct or procure sufficient Pool Resource Assets in a timely and cost-effective manner, and the performance by us and our customers under the contracts, rather than a traditional rate-making process.

Through certain of our subsidiaries, we have entered into certain construction and equipment supply contracts in relation to additional generation and transmission assets that may be used to serve potential future data center customers. As we continue to evaluate our potential data center opportunities, we will continue to focus on the community, financial, operational and regulatory factors that must be managed effectively in order to succeed with our data center strategy. We believe data center development can enhance our local tax base, diversify the employment base across the state of Indiana, and provide greater value to existing customers and shareholders. We continually evaluate ways to effectively manage the potential power demand, generation sources, and transmission capabilities to meet potential further load growth from additional data center customers, while at the same time focusing on our environmental goals.

In order to perform under any further data center contracts, we expect that we would need to develop additional generation and transmission assets, which may be significant, and obtain additional financing in connection with such development. For these and other reasons, our ability to successfully execute our data center strategy is subject to a number of risks and uncertainties. Refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Energy Transition: We continue to advance our energy transition strategy, primarily through the continuation and enhancement of existing programs, such as implementing our plan to retire and replace remaining coal-fired electric generation by 2028 with a balanced mix of low- or zero-emission electric generation, ongoing pipe replacement and modernization programs, and deployment of advanced leak detection and repair. We continue to make progress on our electric generation transition, initiated through our 2018 Plan, and we are continually adjusting to the dynamic energy landscape. Before the planned retirement of the R.M. Schahfer coal facility at the end of December 2025, NIPSCO received the first of successive emergency orders under section 202(c) of the Federal Power Act, to continue operating in 90-day increments, currently through June 21, 2026. The orders stated that continued operation of R.M. Schahfer is required to meet an energy emergency across MISO’s North and Central regions. Consistent with the Federal Power Act and the U.S. Department of Energy regulations, the order authorizes NIPSCO to obtain cost recovery pursuant to 16 U.S.C. § 824a(c). For additional information, see Note 8, "Regulatory Matters," and see Part I, Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

NIPSCO's 2021 Plan calls for a new natural gas peaking facility to replace existing vintage gas peaking facilities at the R.M. Schahfer Generating Station to support system reliability and resiliency, and upgrades to the electric transmission system. Following approval by the IURC in October 2024, the construction of a new 400 MW natural gas peaking generation facility is underway, which is expected to support the planned retirement of the existing vintage gas peaking facilities by the end of 2028. The 2021 Plan affirms the retirement of the Michigan City Generating Station by 2028 and calls for new natural gas peaking facilities. Final retirement dates for these units will be subject to MISO approval.

NIPSCO's 2024 Plan was submitted to the IURC on December 9, 2024. The 2024 Plan maintains the retirement decisions and capacity additions identified in the 2018 and 2021 Integrated Resource Plans and calls for additional generation resources through 2029 to support capacity requirements. The 2024 Plan informs future generation investments required to ensure reliability for NIPSCO’s customers and incorporates factors such as anticipated load growth from data centers and other economic development opportunities, EPA emissions rules, and evolving MISO resource accreditation rules. Given that the 90-day 202(c) order could continue to be issued every 90 days to keep R.M. Schahfer open for the foreseeable future, and given that MISO's resource accreditations for renewables and storage remain uncertain, it may be necessary to evaluate changes to our previously communicated resource timelines and alternative resource decisions. We plan to move as efficiently as possible while maintaining the integrity of our commercial, planning, regulatory, procurement and operational execution processes.

We continue to enhance safety and reduce methane emissions on our gas systems through modernization programs and utilization of advanced leak detection and repair. In addition, we plan to advance other low- or zero-emission energy resources and technologies, such as hydrogen and renewable natural gas.

Transformation: We are modernizing and unlocking efficiencies within our systems and processes on operational excellence, safety, operation and maintenance management. These efforts include investments in proven technologies backed with standardized processes that are changing the way we plan, schedule, and execute work in the field and how we engage and provide service to our customers. We continue to focus on our customer technology platforms. In addition to transforming technology to enhance our employee and customer experiences, we believe these programs will modernize systems and further reduce our enterprise risk related to end-of-life systems. During the first quarter, we also initiated a multi-year program, Value Captured, aimed at accelerating certain transformation activities in response to growing customer affordability concerns. This program is focused on operational efficiencies, evaluating target operating models and improving long-term scalability.

NIPSCO Union Contract Negotiations: On April 2, 2026, NIPSCO initiated a lockout of employees represented by the United Steelworkers following months of extensive negotiations to produce successor collective bargaining agreements by the contract expiration date of March 31, 2026. Agreements were reached and subsequently ratified by the physical and clerical bargaining units on April 24, 2026, and May 1, 2026, respectively, ending the lockout. During the lockout period, we incurred incremental costs to support our work continuity plans.

Economic Environment: We continue to monitor risks related to order and delivery lead times for construction and other materials, potential unavailability of materials due to global shortages in raw materials, and decreased construction labor productivity in the event of disruptions in the availability of materials. We continue to experience elevated material and supply costs in certain product sourcing categories driven by increased demand and tariffs. To the extent that work plan delays occur or our costs increase, our business operations, results of operations, cash flows, and financial condition could be materially adversely affected.

Summary of Consolidated Financial Results

A summary of our consolidated financial results for the three months ended March 31, 2026 and 2025 are presented below:

The majority of the costs of energy in both segments are tracked costs that are passed through directly to the customer, resulting in an equal and offsetting amount reflected in operating revenues.

The increase in net income available to common shareholders for the three months ended March 31, 2026 was primarily due to higher revenues associated with our capital investments, partially offset by higher operating expenses, including increased operation and maintenance expense and depreciation expense attributed to our net plant balances, as well as increased interest expense.

For additional information on operating income variance drivers see "Results and Discussion of Segment Operations" for Columbia Operations and NIPSCO Operations in this Management's Discussion.

Income Taxes

Refer to Note 11, "Income Taxes," in the Notes to the Condensed Consolidated Financial Statements (unaudited) for information on income taxes and the change in the effective tax rates for the periods presented.