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 16, "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, Microsoft. Set forth below is a discussion of this new contract and other recent developments relating to our data center contracts and strategy. This discussion is supplemental to, and should be read in conjunction with, Part II Item 1A, "Risk Factors" of this report, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, in particular Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary—ADS Contract and Data Center Strategy" and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026, in particular Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary—Data Center Contracts and Strategy" in each such report.

Microsoft Contract

In October 2026, NIPSCO entered into an agreement with Microsoft, which will be submitted to the IURC for approval, under which NIPSCO will provide capacity and electricity services to Microsoft’s data center facility to be located in NIPSCO’s service territory pursuant to a capacity commitment beginning in 2028 and increases to 788 MW commencing in 2031 (the “Microsoft Contract”). The initial term of the Microsoft Contract ends 20 years after the initial energization of Microsoft’s data center. Microsoft will make an initial capacity payment in 2026, and commencing in the second quarter of 2027 through the end of the initial term, Microsoft will pay monthly capacity charges that are based on negotiated rates and actual consumption (subject to specified minimum amounts throughout the initial term), together with certain pass-through charges and an existing system charge which will be used to pass savings back to existing electric customers. These charges are structured to provide us with a return of and on our invested capital over the twenty-year initial term. The Microsoft Contract contains provisions for adjustment of the capacity charge designed to provide us with an unlevered internal rate of return on our invested capital over the initial term within a defined range, which we expect over the life of the Microsoft Contract to result in an overall realized return greater than that of NIPSCO’s current electric operations, driven by execution and financing. Our realized overall return may be impacted by factors such as construction costs, operating performance, financing costs and other variables. Either party may terminate the Microsoft Contract upon certain defaults or failure to obtain necessary related approvals from the IURC and FERC. If the Microsoft Contract is terminated (other than as a result of default by NIPSCO), the customer 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 Microsoft Contract will be provided through Pool Resource Assets. See “Data Center Strategy & Pool Resource Assets” below for additional information on our Pool Resource Assets model. NIPSCO will construct transmission infrastructure to connect Microsoft facilities to the grid. In addition, NIPSCO will enter into a PPA with GenCo in connection with the Microsoft Contract, which will be submitted to the IURC for approval.

Construction Update

GenCo continues to advance development of its new CCGT facility to support the ADS Contract. During the period, key project milestones included receipt of major permits, issuance of Full Notice to Proceed to our EPC contractor, continued engineering and procurement activities, and commencement of site construction. Current field activities include site preparation, mass grading, and other civil works supporting future power block construction. Following a change to construction plans for the CCGT facilities, it is now expected to reach commercial operation during 2030 (and technical and conforming amendments have been made to the ADS Contract).

GenCo is also advancing the development of a combined 400 MW and 100 MW BESS installation. Engineering, procurement, and construction activities are progressing, with project mobilization completed and on-site work underway. Current activities include site preparation, roadway improvements, and other civil work supporting future battery system installation.

NIPSCO continues to advance development activities supporting the planned data center, including permitting and other site development activities related to transmission infrastructure.

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. GenCo also plans to construct two 239 MW F-frame CTs to be added to the Pool Resource Assets. GenCo has entered into the F-Frames EPC Contract with Quanta, and certain equipment supply contracts, including a contract to acquire turbines, with respect to the construction of these F-frame CTs. The target price, project scope and project schedule under the F-Frames EPC Contract are subject to change; however, based on our initial assessment, we believe that the F-frame CTs should reach commercial operation by the end of 2029. Our updated estimates of capital investments for GenCo for the period 2027 - 2031 set forth below under “Liquidity and Capital Resources—Cash Flow Activities—Investing Activities” include the amounts we currently expect to invest to construct the F-frame CTs; however such amounts are subject to change as we finalize the target price, scope and schedule for the related EPC contract. The F-frame CTs will be subject to approval by the IURC.

In October 2026, GenCo entered into the AGP Tolling Agreement with AGP, pursuant to which AGP will develop, construct, own, and operate a 600 MWAC / 2,400 MWh stand-alone battery energy storage system (the "AGP Project") interconnected to the MISO electric transmission system. Under the AGP Tolling Agreement, GenCo will supply, at its expense, the electricity used to power the AGP Project and, in exchange for storage payments based on a fixed rate (subject to certain adjustments) and the AGP Project’s actual power capacity, will have the right to instruct dispatch of the AGP Project and receive the economic benefits of its available capacity, discharged energy, energy storage services, ancillary services and (if applicable) environmental attributes, including revenues generated from the sale of such products into the applicable MISO markets (the “Products”). See Note 14, "Other Commitments and Contingencies - D. Other Matters," for additional information.

As we evaluate data center opportunities, we focus on community, financial, operational, and regulatory factors to support our strategy. We believe this development can enhance Indiana's tax base, diversify employment, and add value for customers and shareholders. Simultaneously, we remain committed to responsibly managing power demand and environmental goals.

In order to perform under any further data center contracts, we expect that we would need to develop or contract for 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 II, Item 1A, "Risk Factors" of this report and Part I, Item 1A, “Risk Factors” of 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 coal-fired electric generation 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. 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 December 18, 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 9, "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 called 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. 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 prior 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 Section 202(c) emergency 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, we are evaluating changes to our previously communicated resource timelines and alternative resource decisions. NIPSCO began its 2026 Plan in August that is expected to be completed in the first quarter of 2027. The 2026 Plan will evaluate the impacts of existing unit retirement dates and new resource decisions under various policy and market scenarios. NIPSCO conducted its first public stakeholder meeting for the 2026 Plan in September 2026, followed by its second public stakeholder meeting in October 2026. 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 intend 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, which we believe will not only transform technology to enhance our employee and customer experiences, but also modernize systems and further reduce our enterprise risk related to end-of-life systems.

Value Captured: During the first quarter of 2026, we 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. In the second quarter of 2026, we began our first phase of internal functional re-organization, resulting in involuntary employee separations. The separation benefits provided fall under our existing severance policy. The re-organization is ongoing and is expected to result in additional impacts.

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 and nine months ended September 30, 2026 and 2025 is 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 September 30, 2026 was primarily due to higher revenues associated with the impact of new rates, lower property taxes, and lower income taxes partially offset by higher operation and maintenance expense, including costs associated with increased storm activity, depreciation expense and higher interest expense.

The increase in net income available to common shareholders for the nine months ended September 30, 2026 was primarily due to higher revenues associated with the impact of new rates, lower property taxes, lower income taxes partially offset by higher operation and maintenance expense, including work continuity and costs associated with increased storm activity, depreciation expense and higher 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 12, "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.