NISOURCE INC.

Current report

DATA CENTER OPERATIONS AND STRATEGY RISKS

Current report

Data center growth in our service territories, including a focus on northern Indiana, while providing growth opportunities that enhance our business strategy, provides significant financial, operational, and regulatory risks that must be effectively managed.

Current report

As we continue to evaluate new business opportunities presented by the data center development in our territories, including a focus on northern Indiana, we face a variety of challenges including accurately predicting future power needs of data centers due to rapidly changing technology and market dynamics, managing the potential power demand, generation sources, and transmission capabilities to meet potential load growth from any data center customer, financing the capital investment needed to build and maintain the necessary infrastructure to support data center development, obtaining permitting and siting approval for necessary infrastructure, managing the possible environmental impact of the potential increased power demand, and evaluating and complying with evolving regulations related to data center development.

Current report

Although the state legal and regulatory environment in Indiana is currently supportive of data center development, federal, state, and local governments are increasingly considering or adopting moratoria, permitting restrictions, reporting obligations, environmental and water-use standards, tax-incentive limitations, and other similar requirements applicable to data centers and other large electric loads. For example, in July and August 2026, the governors of New York and Texas implemented temporary moratoria restricting data center development in those states, and the governor of Pennsylvania issued an executive order placing significant constraints on data center development in that state. In addition, although at present NIPSCO’s service territory has not been significantly affected, a number of counties and municipalities in Indiana have passed or proposed moratoria or ordinances relating to data center development. If similar measures are adopted at a state level in Indiana or by counties or municipalities in NIPSCO’s service territory, or other jurisdictions in which we operate or may seek to develop generation or transmission assets, this could delay, condition, limit, or prevent the development of data center projects or related utility infrastructure, increase the cost of serving data center customers, or affect our ability to recover costs and earn expected returns. Even where such measures do not directly affect us or our service territories, they could reduce or redirect data center development activity (if such measures make our service territories less attractive for data center customers as compared to other jurisdictions), increase public and regulatory scrutiny of large-load service arrangements, and adversely affect the timing, scope, profitability, or viability of data center-related opportunities.

Current report

In addition, throughout the U.S., the data center industry has recently experienced numerous delayed, withdrawn or canceled projects as a result of permitting, financing, litigation, community opposition, water, air-quality, and other infrastructure constraints. These developments have affected data center projects announced by major hyperscaler companies, and they may make it more difficult for us to predict whether announced or anticipated data center load will materialize, when such load will commence, and whether customers will require the full amount of capacity initially expected.

Current report

Our Current Data Center Contracts require us to invest significant capital to develop generation sources and transmission capabilities before we receive the full return of on the capital invested, and it is likely that any future data center contracts we enter into similarly will require significant investment before receiving returns. Although our Current Data Center Contracts provide cost recovery mechanisms and termination payments, if our data center customers delay, reduce, cancel, or relocate their projects after we have incurred development, financing, procurement, construction, or other costs, we may be unable to fully recover those costs, redeploy related assets, or earn our expected return, which could adversely affect our results of operations, cash flows, financial condition, credit metrics, and reputation.

Current report

For the reasons described above, among others, we face challenges in predicting the demand of potential data center customers in our service territories. It is possible that we may overestimate such demand, causing us to invest in generation and transmission assets in excess of those needed to serve data center customers. If we are not able to utilize such assets to serve other customers, this could negatively affect our reputation, cash flows, financial position and/or results of operations. We also may underestimate the potential demand of data center customers, in which case we may not be able to develop necessary generation and transmission assets within a timeframe that is acceptable to potential customers, resulting in the loss of potentially profitable opportunities. We must effectively manage these financial, operational and regulatory risks.

Current report

Our construction of the generation and transmission assets we develop to support our current and any future data center contracts involves significant risks. In addition, we are reliant on third parties to construct certain capacity resources related to our capacity agreements (such as ESAs, tolling agreements or similar agreements) that we expect to rely on for capacity to serve our data center customers. Construction delays, cost overruns or performance issues with any such assets could reduce our returns under our Current Data Center Contracts or other future data center contracts and could require us to obtain additional financing.

Current report

In connection with our Current Data Center Contracts and any future data center contracts, we expect to construct significant generation and transmission assets. Our ability to construct such assets in a timely manner and within budget is contingent upon many variables and subject to substantial risks. See Part I, Item 1A, "Risk Factors—Operational Risks—Our capital projects and programs subject us to construction and supply risks, and are subject to regulatory oversight, including requirements for permits, approvals and certificates from various governmental agencies” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for additional information. In addition to the factors discussed therein, the construction of generation, transmission, interconnection, and related infrastructure required to serve data center customers depends on the timely availability of specialized equipment and materials, including natural gas turbines, transformers, substation equipment, transmission equipment, batteries, battery components, critical minerals, steel, copper, and other grid equipment. Market-wide demand from data centers, utilities, industrial electrification, renewable generation, and other infrastructure projects has contributed to extended lead times, cost increases, and limited production slots for key equipment. Tariffs, trade remedies, forced-labor enforcement, critical-mineral restrictions, geopolitical developments, and dependence on foreign supply chains may further increase costs, delay procurement, or limit availability of battery energy storage components, batteries, processed minerals, and other materials required for our projects. Moreover, any federal, state, or local legal or regulatory developments directly affecting us or our service territory could adversely affect our ability to construct the generation and transmission assets required to serve our customers in a timely manner and within budget.

Current report

Our return under our Current Data Center Contracts will be, and our return under any future data center contracts is expected to be, affected by our ability to construct, develop and place into service these assets on time or at all and consistent with initial cost estimates, as well as the performance of these assets once constructed and placed into service. Under certain of our Current Data Center Contracts, if the applicable generation and transmission assets our subsidiaries have undertaken to construct are delivered into service late or do not achieve certain other performance-related milestones, our counterparties would be entitled to liquidated damages, which would be offset against NIPSCO’s billings to its customers and reduce the rate of return earned under the applicable Data Center Contract. In addition, our actual costs to construct such generation and transmission assets may exceed the budgets contemplated by the applicable Data Center Contract, which could result from delays in construction or from other factors. For example, the target cost and project scope and schedule under our F-Frames EPC Contract are subject to change, and the target cost and schedule may exceed the amount and time initially planned for construction of the F-Frames CTs. Cost overruns in connection with any of the generation and transmission assets we develop to support our current and any future data center customers will need to be funded initially by us, either through our cash flows from operating activities or additional debt or equity financing. Although our ADS EPC Contracts and F-Frames EPC Contract provide certain protections against cost overruns under those contracts, and our Current Data Center Contracts provide certain protections against any excess costs not recoverable through the applicable EPC contracts, any recoveries from our EPC contractors and/or our data center customers would occur over an extended period of time (and may be subject to contractual dispute resolution frameworks). The need for us to fund these expenses in the first instance may reduce our ability to use our operating cash flows for other purposes or may require us to obtain additional debt or equity financing, which may not be available on favorable terms or at all. These costs, if incurred, could negatively impact our return under our Current Data Center Contracts or adversely affect our future results and financial condition. In addition, we expect that construction delays, performance shortfalls or cost overruns in connection with construction of generation and transmission assets supporting any future data center contracts could similarly have a negative effect on our return under such contracts and our financial condition.

Current report

In addition, certain of the capacity agreements we have entered into with third parties to provide capacity for our data center customers will be served by capacity resources to be constructed by the counterparties to these agreements. We will be reliant on these third parties to construct these capacity resources effectively and on time, which may be subject to uncertainty. For example, AGP, which has agreed to develop and operate a 600 MWAC / 2,400 MWh stand-alone battery energy storage system under a tolling agreement, is a special purpose entity that will be required to provide certain credit support and will be required to obtain project financing to complete the project. It is expected that AGP’s assets relating to the project will be subject to security interests in favor of AGP’s financing counterparties. In order to perform under the tolling agreement, AGP also must obtain a satisfactory interconnection agreement and execute an EPC agreement. Although our capacity agreements generally entitle us to certain compensation if our counterparties fail to perform, our ability to recover compensation from our counterparties will depend on their financial strength and the existence of any competing claims on our counterparties’ assets (among other factors) and could take significant time to enforce (especially if disputes arise). A default by one of our counterparties under our capacity agreements could require us to obtain replacement capacity, which may take the form of market capacity purchases and/or bilateral capacity agreements, either of which may not may not be available on favorable terms, and may impair our performance under our Current Data Center Contracts, any of which could negatively impact our return under our Current Data Center Contracts or adversely affect our future results and financial condition.

Current report

We will be required to obtain significant additional financing in order to construct the generation or transmission assets we develop to support current and any future data center contracts. Such financing may not be available on favorable terms, if at all.

Current report

In order to finance the construction of the generation and transmission assets we develop to support our current and any future data center contracts, we expect to incur significant additional long-term debt and issue additional equity in NiSource, in addition to the financing we otherwise would seek to support investments in our existing businesses and refinance existing indebtedness. The NIPSCO Holdings II LLC Agreement and Generation Holdings II LLC Agreement will allow for additional capital contributions from affiliates of Blackstone to NIPSCO Holdings II and Generation Holdings II in connection with such Blackstone affiliates’ minority interest investments in those entities. In addition, we may consider other funding sources, structures, or partnerships such as JVs or off-balance sheet arrangements such as BTAs, as market conditions and strategic considerations evolve, or as may be necessary to support maintenance of our investment grade credit ratings. The amount of additional long-term debt or NiSource equity needed to support construction of the generation and transmission assets we develop to support our current and any future data center contracts could increase, potentially significantly, from our current expectations if we experience construction delays or cost overruns.

Current report

External factors such as inflation, monetary policy or other market conditions could impact our cost of borrowing and could make it more difficult to obtain the financing that is required to construct the generation and transmission assets we develop to support our current and any future data center contracts on favorable terms, or at all. The issuance of additional debt could negatively impact our credit ratings and overall cost of capital, which could in turn adversely affect our future results and liquidity. In addition, an economic downturn or uncertainty, market turmoil, changes in interest rates, changes in tax policy, challenges faced by financial institutions, or any negative investor sentiment toward us or the utilities industry or the cloud-computing, artificial intelligence and data center industry generally could adversely affect our ability to raise the necessary capital. For example, major cloud computing and artificial intelligence companies have announced raising hundreds of billions of dollars in debt and equity financing in 2026 and are expected to raise significant additional financing in connection with their planned capital expenditures in the coming years, which have been reported to exceed a trillion dollars. If investors’ perceived risk of investing in cloud computing and/or artificial intelligence infrastructure increases, or if investors seek to limit their exposure to these industries for any other reasons, investors may be less willing to invest in our debt and equity securities to the extent our operations are perceived as being related to the cloud computing and/or artificial intelligence industries. Reduced access to capital markets, increased borrowing costs, and/or lower equity valuation levels could jeopardize our ability to complete construction of the generation and transmission assets we develop to support our current and any future data center contracts on-time and within budget, and could reduce future earnings per share and cash flows. In addition, any rise in interest rates may lead to higher borrowing costs, which may adversely impact reported earnings, cost of capital and capital holdings.

Current report

Pursuit of our partnerships with our data center customers creates significant opportunity costs and reduces our strategic and financial flexibility in the near term.

Current report

We expect to incur significant indebtedness to fund our construction of the generation and transmission assets we develop to support our current and any future data center contracts. Doing so will reduce our ability to incur further indebtedness to pursue other strategic opportunities, such as partnerships with other large data center customers or strategic mergers and acquisitions, while at the same time maintaining our investment grade credit ratings, which may require us to rely to a greater degree on equity financing in connection with future data center contracts and also may increase our reliance on equity financing for future investments in our existing traditionally regulated utility business, each of which could lead to substantial dilution of our existing shareholders. In addition, our credit rating agencies consider the percentage of our business comprised of traditionally regulated utility operations in their analysis of our credit quality and determination of our downgrade thresholds.

Current report

In addition to these factors relating to our financing and credit ratings, our partnerships with our data center customers are expected to employ a significant amount of our existing excess transmission infrastructure, which will limit our ability to use these assets for other opportunities, including additional data center opportunities. Furthermore, effectively overseeing the construction and financing of the generation and transmission assets we develop to support our current and any future data center contracts has required and will continue to require significant time and attention of our management, which could detract from their oversight of our existing business and ability to pursue other strategic opportunities.

Current report

The return structure and risk profile of our Current Data Center Contracts and any future data center contracts will differ from those of NIPSCO’s traditionally regulated utility operations.

Current report

NIPSCO’s and GenCo’s operations under our Current Data Center Contracts will be, and under future data center contracts are expected to be, regulated by the IURC in a different way from the regulatory mechanisms applicable to NIPSCO’s historical operations, which affects the manner in which we recover our investment costs and earn a return on our investment. NIPSCO’s electric utility rates historically have been determined and approved in regulatory proceedings with the IURC based on an analysis of NIPSCO’s costs to provide utility service and a return on, and recovery of, NIPSCO’s investment in the utility business. Through the IURC rate-making process, retail rates may be adjusted over time, and NIPSCO may request additional revenue, in order to cover ongoing costs and investment and earn an adequate return.

Current report

In contrast, the terms of our Data Center Contracts were, and the terms of any future contracts with other data center customers are expected to be, determined through commercial negotiations. In the case of our Current Data Center Contracts, these terms include the charges that we receive from our data center customers, which are designed to allow us to recover the costs that we incur to construct and operate the generation and transmission assets we develop to support our current and any future data center contracts and otherwise to secure the capacity needed to serve these customers (including through capacity agreements such as PPAs, ESAs and tolling agreements) and earn a return, and provisions that may result in adjustments to those charges such as, among other factors, those relating to certain liquidated damages that we may owe certain of our data center customers in the event of construction delays or capacity shortfalls and the parties’ responsibility to share or pay for cost overruns, among other provisions. Although the terms of any future data center contracts we enter into may differ in certain respects from the terms of our Current Data Center Contracts, the terms of any future data center contracts (including the charges we receive from customers and any potential adjustments to such charges) will inform our ability to recover our investments and earn a return. These terms of our Current Data Center Contracts do not, and the terms of any future data center contract are not expected to, guarantee a specific overall rate of return, and the overall return we earn under our Current Data Center Contracts or any future data center contracts may ultimately be lower than that of NIPSCO’s traditional utility operations. The IURC has not and will not determine the commercial terms of our Current Data Center Contracts or any future data center contracts; however, the IURC is expected to maintain oversight under our Current Data Center Contracts and any future data center contracts to ensure NIPSCO provides reliable service to our data center customers and any future data center customers at just and reasonable rates. In order to recover our investment costs and earn our return under our Current Data Center Contracts and any future data center contracts, our subsidiaries must efficiently perform their own obligations and must look to our existing and any future data center customers (or, if applicable, any parent guarantor) to perform their obligations, rather than the IURC making use of its traditional rate-making process. In addition, under our Current Data Center Contracts, NIPSCO has direct contractual obligations to its data center customers to, among other things, construct certain generation and transmission assets to support our current data center customers and deliver committed electric capacity in fixed amounts by certain dates. We expect our subsidiaries to have comparable contractual obligations to customers in connection with an…

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Current report

In addition, the IURC, through its review and approval of our Current Data Center Contracts and any future data center contracts, and the related PPAs between NIPSCO and GenCo, will have ultimate authority over the implementation of these agreements. In this context, we will need to continuously assess the applicability of ASC Topic 980 over the life of our Current Data Center Contracts and future data center contracts. It is possible that significant construction overruns, capacity shortfalls or other events that could result in NIPSCO or GenCo owing liquidated damages under our Current Data Center Contracts or any future data center contract could either preclude ongoing application of ASC Topic 980 or result in an immediate disallowance and impairment of the applicable generation and transmission assets we have developed to support the applicable data center contracts. In addition, early termination of a Data Center Contract or any future data center contract, as applicable, could result in such impairment and discontinuation of application of ASC Topic 980 with respect to the assets being constructed to serve the applicable data center contract, unless such assets can be used to support new or existing customers. If we incur significant costs that we are not able to recover from our current or any future data center customers (for example, greater than expected purchases of market capacity or operations and maintenance costs significantly exceeding those contemplated by an applicable current or future data center contract), this also could discontinue the application of ASC Topic 980 to the applicable data center contract and related generation and transmission assets.

Current report

Our partnerships with our data center customers expose us to significant customer and industry concentration risk.

Current report

Our three existing data center customers will be significant customers of our electric utility operations. For example, at full ramp (expected in 2032), we expect to employ approximately 4,920MW of capacity (representing the generation resources we plan to construct, combined with contracted capacity) to serve our existing data center customers. By comparison, as of December 31, 2025, we owned generating resources representing approximately 3,967 MW of capacity and had PPAs providing for approximately 1,200 MW of capacity.

Current report

Although we anticipate expanding our base of data center customers, we expect the total number of data center customers we serve to remain relatively small by comparison to our current customer base. The concentration of business with a small number of customers in a single industry based on emerging technologies, including artificial intelligence and machine learning, presents several risks for us. Our data center customers’ technologies and their related business applications have developed rapidly in recent years and continue to develop. In addition, our customers’ data center and cloud computing businesses may themselves serve concentrated customers, such as “frontier” artificial intelligence companies, which may have developing and uncertain business models. We cannot predict the rate at which or the extent to which these emerging technologies will be broadly adopted or successful as business models. It is possible our customers will reduce their investment in these new technologies or abandon them entirely. Many factors, including those outside our and our customers’ control, could contribute to such a decision, including, for example: (i) any decrease or lessening of current cloud-computing or artificial intelligence demand trends, (ii) reports of significant financial or business difficulties at a “frontier” artificial intelligence company, (iii) adverse legal or regulatory developments (in Northern Indiana or elsewhere) with respect to data centers, cloud-computing or artificial intelligence, which could result, for example, from concerns with respect to the safety of artificial intelligence (which have led to recent statements and proposals from U.S. federal lawmakers calling for federal oversight and pauses in development of artificial intelligence models), environmental concerns (such as those relating to the sourcing of natural gas to power data centers or supplying water from local resources to cool data centers), or other factors, and which could negatively impact the demand for data centers, and (iv) any business downturns or weakening financial condition that our data center customers may experience (whether or not resulting from the foregoing factors). In addition, even if our data center customers do not decide to reduce or abandon their investments in data center technologies, it is possible they may seek to reduce or end their relationship with us. This could occur if, among other potential causes: (i) we experience construction delays, cost overruns or capacity shortfalls in connection with our construction of the generation and transmission assets we plan to construct to serve our data center customers, (ii) our data center customers encounter similar problems connection with constructing their data centers that we will serve, (iii) technological or other advances relating to the design and operation of data centers reduce the amount of electricity needed to power data centers (which reduction could be significant) or (iv) …

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Current report

If, for any reason, one or more of our customers decide to reduce their investments in data centers generally or to reduce or end their relationship with us, it is possible such customer(s) could default under its contract with us. Our Current Data Center Contracts contain protections in the event of a customer default, including required termination payments designed to reimburse us for our costs related to the applicable data center contract and provide a return. However, it is possible disputes may arise in connection with termination payments. For example, a data center customer may dispute the existence of a customer default or the amount of a termination payment, or may assert that we are in default, among other tactics. If this were to occur, we may be significantly disadvantaged as a result of, among other factors, the significance of the applicable data center contract to us and the greater resources (financial and otherwise) available to the relevant customer.

Current report

In addition, ADS has the right to terminate the ADS Contract for convenience following certain notice periods and has a one-time option (exercisable no later than March 31, 2029) to reduce committed capacity under the ADS Contract by 1,200 MW commencing January 31, 2032. If ADS elects to terminate the ADS Contract during its initial term or reduce the committed capacity under the ADS Contract, we may not receive the full earnings we expect to receive over the life of the ADS Contract. Although the ADS Contract provides for reimbursement for our investment in the Contract Assets and related expenses in the event of a reduction in the committed capacity or early termination, the amount of any reimbursement is capped under the ADS Contract, with the amount of the caps being based on cost estimates determined as of signing. Furthermore, our ability to collect any reimbursable amounts will depend upon the willingness and ability of ADS or its parent guarantor to satisfy their payment obligations under the ADS Contract and related guarantee. Accordingly, we may not be able to recover our full investment, which may adversely affect our future results and financial condition.

Current report

Any future data center contracts our subsidiaries enter into may contain termination and/or capacity reduction provisions (which we expect would be accompanied by related reimbursement provisions), which would expose us to risks comparable to those described above.

Current report

If any of our data center customers defaults under, terminates or reduces capacity under its data center contract, we may not be able to replace such customer’s demand or otherwise fully utilize the assets constructed in connection with the such contract. We also may not receive the same level of return with respect to any alternative use of the assets we have constructed or contracted for to serve such customers. Any of such could adversely affect our future results, financial conditions and results of operations (the significance of which effect will be affected by the relative size of such contract and the costs we have incurred to develop resources supporting such contract).

Current report

In addition, as a result of our Current Data Center Contracts, and any further agreements we may sign with data center companies, our stock price may experience increased volatility as a result of factors outside our control. For example, our stock price may be negatively affected as a result of any actual or perceived slowdown in the adoption of artificial intelligence technology, the regulation or proposed regulation of such technology, or actual or perceived changes in the strategic or financial position of our data center customers, or “frontier” artificial intelligence companies more generally. The trading prices for shares of stock in a number of U.S. public companies operating or serving data centers have recently experienced significant volatility.

Current report

During the quarter ended September 30, 2026, none of our directors or executive officers adopted or terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

Previous report

ITEM 1A. RISK FACTORS

Previous report

The following table describes any contracts, instructions or written plans for the sale or purchase of NiSource securities that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act that were adopted by our directors and executive officers during the quarter ended June 30, 2026:

Previous report

(1)A trading plan may also expire on such earlier date that all transactions under the trading plan are completed.

Previous report

(2)Aggregate number may increase upon time of transacting in order to account for dividends.