At its Investor Day 2022, NiSource announced the results of its business review, an extension to its long-term growth plan and a 2040 net zero goal that puts it among the industry leaders.
To view other presentations, the full webcast, slides and other materials, visit our Investor Day 2022 page.
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Donald Eugene Brown
Executive Vice President & Chief Financial Officer, NiSource, Inc.
All right. Thank you, Shawn. It's great to see you all. I'd like to begin by touching on NiSource's third quarter earnings results released today. We had non-GAAP net operating earnings of about $45 million or $0.10 per diluted share compared to non-GAAP net operating earnings of about $47 million or $0.11 per diluted share in the third quarter of 2021. Year-to-date, we had non-GAAP net operating earnings of $427 million or $0.97 compared to non-GAAP net operating earnings of $405 million or $0.98 per diluted share in 2021.
With less than two months remaining in the year, we are [ph] narrowing (00:55:41) our 2022 guidance to $1.44 to
$1.46 net operating earnings per share and reaffirming our capital expenditure guidance of $2.4 billion to $2.7 billion. Additionally, we're initiating 2023 guidance of $1.50 to $1.57 per diluted share, and we expect to invest
$2.8 billion to $3.1 billion in modernization investments.
We've posted our typical supplemental slides and financial information on our website. Lloyd mentioned our team's strong regulatory execution, and we see that again highlighted in this quarter. In Ohio, we filed a settlement representing a $68 million revenue increase and a 9.6% ROE. Pending approval by the [indiscernible] (00:56:33), new rates will take effect in early 2023. In addition, we have settlements pending in Pennsylvania and Maryland and have implemented interim rates in Virginia. In Indiana, we filed a new base rate case for NIPSCO Electric, seeking an incremental $292 million in revenues net of riders. This case is primarily driven by our investments in rate base, including four of the eight renewable generation projects supporting the closing of the remaining Schahfer units in 2025. We expect new rates to go into effect by the beginning of the fourth quarter 2023.
If there are any questions or clarifications related to this quarter, please free feel free to ask them during our Q&A session or reach out to the IR team. So Lloyd showed this slide earlier, but I'm bringing it back, because it's the core of our plan and highlights item that provide us confidence on delivering on this 9% to 11% annual total shareholder value proposition. These include long-term visibility to rate-based investments growing at 8% to 10% across all of our jurisdictions, supportive regulatory mechanisms for the investments we're making where we recover about 75% of our capital within 18 months. And that provides us high predictability and high consistency of earnings and cash flows. But new and key to our plan is executing on the minority interest sale of NIPSCO which will provide us a much stronger balance sheet that reduces the capital markets risk in this current high-cost and volatile market and long term provides us additional flexibility or to finance our growth investments so our rate base growth more closely matches our earnings growth.
The earnings growth combined with a dividend target of 60% to 70% payout ratio provides a sustainable, top tier total annual shareholder return of 9% to 11%. Now, let's dig a little deeper into our financial plan. Throughout the day, we've talked about the strength of our diverse mix of jurisdictions and businesses. We believe having
multiple, strong operating companies to make these investments reduce overall risk and provide optionality and flexibility to support earnings growth.
Overall, we expect about a net 0.5% customer growth across our portfolio. Virginia continues to be our fastest growing company, but we also see growth in our other states including Ohio and Indiana, driven by steady economic development. Managing multiple companies provides flexibility for capital deployment and regulatory recovery but also means capital allocation is paramount to ensure we're maximizing investment returns and meeting our commitments. This is an area that we're keenly focused on to maximize shareholder value.
Lloyd also talked earlier about the need to drive operational excellence which drives safety, customer service and productivity. A few years ago, we kicked off our transformation efforts to initially reduce costs coming off the sale of our Massachusetts business, but long term to drive new capabilities and efficiencies across the business.
We've built a long-term plan to invest almost $1 billion in new processes and technologies to change how we plan, schedule and execute work in the field and how we engage and provide service to our customers. These investments will improve both the customer and employee experience, but are also intended to reduce our overall cost profile.
We expect these investments and process changes will allow us to maintain flat O&M across our plan which means we need to identify and deliver annual savings to offset inflation. Most importantly, this helps keep our customer rate sustainable with expected total annual rate increases that are in line with inflation. Additionally, customers' new rates will only be driven by investments supporting increased reliability and service. We've identified about $15 billion of investments to make over the next five years and $30 billion over 10 years to drive the modernization of our systems and to support customer growth. This includes over $3 billion in generation and transmission investments to replace all of our coal plants by 2028. Again, approximately 75% of our investments begin providing earnings and cash flows in less than 18 months. And this really does support the predictability of our confidence -- supports predictability of our earnings, and provide us confidence in meeting our earnings commitments.
We're planning for a rate base 8% to 10% annually through 2027, and we expect each of our companies to grow within this range. We've intentionally slowed our rate base growth from the prior plan, recognizing the higher cost of capital, inflation and higher commodity costs in order to reduce the impact on customers and mitigate potential regulatory risk during this period. However, 8% to 10% rate base growth remains a top tier growth strategy that drives our premium 6% to 8% annual earnings growth. Therefore, we're extending our guidance through 2027 and committing to 6% to 8% annual earnings growth. With the strengthened balance sheet due to the minority sale of NIPSCO, we expect to narrow the gap between rate-based growth and EPS growth than NiSource has delivered in recent years and reduce the financing risk inherent in our plan. This allows us to achieve sustainable, predictable annual earnings growth of 6% to 8% and provide a dividend in the 60% to 70% payout range.
Let's close by taking a look at our financing plan. We expect that the sale of up to 19.9% of NIPSCO will allow us to minimize capital market activities over the next couple of years, eliminate any discrete equity issuances, and redeem the $900 million of preferred equity while achieving FFO to debt metrics firmly within the 14% to 16% range. In the back half of our plan, we expect we will enter into a new ATM program to provide maintenance equities to support our credit metrics in that range, and support when we become a taxpayer once our NOLs are extinguished. However, we expect to finance our capital investments and dividends primarily, but from cash from operations and new debt. I'm very excited and have great confidence in our ability to deliver this plan. Thank you for your interest and your support.
Now, I'll turn it back over to Lloyd to close out the presentation.