NISOURCE INC. (NI) stock intrinsic value fair value estimate & owner earnings analysis

NiSource is a regulated utility holding company. Its NIPSCO subsidiary supplies electricity and natural gas across northern Indiana, and its Columbia Gas subsidiaries deliver natural gas to customers in Ohio, Pennsylvania, Virginia, Maryland and Kentucky. Nearly all of its revenue comes from state-regulated rates that are set to recover the company's investment in pipes, wires and generating plant plus an allowed return. How we think about its cash flow. We start from cash flow from operations, back out the swings from working-capital timing and stock-based compensation, and then subtract what it costs to keep the existing system running. For a normal company that last step is capital spending net of growth projects. NiSource is different: essentially none of its roughly $2.6-2.8 billion in annual construction spending is discretionary the way a retailer's new-store budget is. Almost all of it is state-approved infrastructure replacement -- aging pipe and wire replacement programs that regulators pre-approve and that earn a contractual return once completed (in Indiana this runs through tracker mechanisms the company has renewed repeatedly since 2013, most recently a gas-system plan covering 2026-2030 filed in December 2025). Because that spending is not a discretionary bet but a regulator-sanctioned investment earning a return, we treated depreciation as the proxy for the capital needed just to stand still, and let the additional investment show up as the growth in future years' owner earnings rather than as a further deduction from today's figure. Readers should know this is a judgment call: a mechanical growth-capex formula would have produced a different, more negative current-year number, but we think it would understate the business by penalizing investment that is expected to be repaid with a regulated return. On that basis, owner earnings per share ran between roughly $1.68 and $2.53 over 2021-2025, with a median around $1.92 -- our anchor. We excluded 2018-2020: 2018 and 2019 carried the costs and a related impairment tied to the September 2018 Merrimack Valley, Massachusetts gas explosions, and 2020 included a $410 million loss on selling the Massachusetts gas business afterward, none of which describe the business as it exists today. The most recent year, 2025, grew owner earnings 29% over 2024, but a meaningful piece of that came from favorable one-time working-capital timing rather than a repeatable trend, so we did not carry that pace into next year's forecast. Base case: we assume the currently approved and pending state infrastructure-recovery programs continue on their present trajectory, plus an early, modest contribution from a newly signed (September 2025) contract to supply electricity to Amazon data centers being built in NIPSCO's territory, with additional such contracts under discussion. Owner earnings grow 6% a year for three years, then 7% through year ten as the data-center-related generation investment ramps. Beyond year ten, we assume the business holds its year-ten earning power rather than continuing to grow it in real terms -- the regulatory franchise is durable, but we have no specific named program on record beyond the current decade, so we did not assume further growth past it. That produces a value of about $53.84 per share. Bear case: NiSource has told investors directly that funding its capital program may require it to rely more heavily on new stock issuance to protect its investment-grade credit rating, which dilutes existing shareholders per share. In this case, a rate-case decision comes in below what was requested in at least one state, and the company experiences another costly safety or regulatory event of the kind it saw in 2018, while continued equity issuance largely offsets the per-share benefit of rate-base growth. Owner earnings fall for two years and then grow only about 1% a year after that. That produces about $30.68 per share. Bull case: the Amazon contract and additional data-center agreements scale up on schedule, the full slate of pending infrastructure-recovery filings is approved close to as requested, and the company sustains something close to the roughly 10% annual per-share growth it actually delivered from 2021 through 2025. That produces about $65.18 per share. Given the real tail risk demonstrated by the 2018 Massachusetts explosions and the company's reliance on continued outside financing to fund its capital plan, the margin-of-safety price carries a meaningful discount to the base-case estimate -- around $33 per share, roughly 39% below our base-case value and close to the bear case itself.