NiSource Inc (NI) Cash Flow Statement

Operating cash flow has been remarkably stable, ranging from $340M to $713M over the past ten quarters, with the strongest quarters in Q1 and Q4 aligning with winter heating demand. This stability is a hallmark of regulated gas utilities, where decoupling mechanisms and cost trackers smooth revenue recognition. The OCF-to-interest coverage appears robust, though interest payments were only reported in one quarter, suggesting the metric may understate true leverage costs.

NiSource's capital program is running at roughly $1.1 billion per quarter, far outpacing depreciation and OCF, which is typical for a utility in a growth phase. The Indiana coal-to-renewables transition and gas main replacement programs are the primary drivers, and this investment is expected to fuel future rate base growth. However, the persistent gap between CapEx and OCF means the company must rely on external capital, which could pressure credit metrics if not managed carefully.

The company has issued debt in most quarters, with occasional equity infusions, but the scale of issuance appears insufficient to cover the FCF gap, suggesting a reliance on existing credit facilities. The debt-to-EBITDA of 5.8x is elevated relative to peers, and while regulated utilities can sustain higher leverage, the lack of reported interest payments in most quarters raises questions about the true cost of debt. Investors should monitor the company's ability to access capital markets on favorable terms, especially if interest rates remain high.

The utility's working capital is heavily influenced by the timing of gas purchases and customer collections, with winter months generating higher cash inflows. Regulatory assets and liabilities, such as deferred fuel costs, can also create timing differences that smooth or amplify cash flow. The absence of explicit working capital line items in the data limits deeper analysis, but the pattern suggests that NiSource's cash flow is not purely driven by earnings but also by these regulatory timing mechanisms.

Dividend payments have grown steadily, from $119M in Q2 2024 to $144M in Q2 2026, but OCF has kept pace, maintaining coverage above 3x in all quarters. This suggests that the dividend is well-supported by operating cash flow, even as the company funds a large CAPEX program. However, if OCF were to decline due to regulatory lag or warmer winters, the coverage could tighten, making the dividend more vulnerable than it appears.

The gap between net income and OCF is typical for utilities, driven by large depreciation charges and deferred tax liabilities. However, the magnitude of the gap suggests that earnings quality is high, as cash generation exceeds reported profits. The use of regulatory assets may also inflate earnings relative to cash, but the data does not allow for a precise breakdown. Investors should focus on OCF as the more reliable indicator of financial health.