Citizens Energy reports steady quarterly results; updates on Lebanon water project, lead-line replacements and Deep Rock tunnel

Citizens Energy Group executives told the board May 28 that the company remains broadly on track financially for fiscal 2025 and provided operational updates on major capital programs.

Why it matters: The trust is advancing multi-year, capital-intensive projects that affect regional water supply, wastewater control, and customer service; project timing, funding sources and contract negotiations shape future rates and service reliability.

Financial snapshot

- Combined net income for the quarter was reported at just over $84,000,000, roughly comparable to the $85,000,000 recorded a year earlier. Gas and wastewater units contributed approximately $59,000,000 of the combined net income for the quarter, according to the controller's presentation.

- The company reported no material or unexpected financial results in the quarter; Deloitte completed a review of the second-quarter financial statements and reported no difficulties or disagreements with management during the review process.

Operational and capital updates

- Lebanon regional water program: Executives said the Lebanon water program is progressing on budget and on schedule. The board materials and presenters described plans to expand system capacity; the finances for the Lebanon project are expected to be funded with non-recourse debt and forgivable loans rather than borne directly by current or future Citizens customers.

- Lead service line replacement: Sarah Mamuska Morris, newly introduced in her capacity as vice president of Capital Programs and Engineering, reported that more than 3,100 customer-owned lead service lines had been replaced as of March 2025, and the board heard an estimate that more than 7,000 additional replacements are planned over the next three years.

- Deep Rock tunnel / combined sewer overflow (CSO) work: The board was told the Deep Rock tunnel project is near completion, remains under budget and ahead of schedule. Presenters noted a milestone of over 6 billion gallons of combined-sewer-overflow reduction attributed to the project to date.

- Steam business: Committee reports noted that steam operations face unfavorable economics driven by higher capital needs, inflation, dated equipment and loss of load from two major customers. Steam is in planning for a potential base-rate filing targeted for a future winter (planning stages discussed for a potential filing in 2026 with rate changes effective later). Citizens reported negotiating a new contract with a major steam supplier that currently provides about two-thirds of annual steam supply.

- Natural gas operations: The natural gas business reported improved storage withdrawals and enhanced supply flexibility using expanded assets, including storage fields in Greene County. Actual winter commodity costs were reported at $2.89 per Mcf versus a projected $3.02 per Mcf for the period. Citizens noted it has consistently had among the lowest natural-gas bills in a 19-utility comparison conducted by the Indiana Utility Regulatory Commission (IURC) since 2020.

- Wastewater and STEP (septic tank elimination program): Wastewater financials remain challenged and will not be sufficient to cover capital needs until the consent-decree work is completed, according to the committee report. Long-term debt for the wastewater unit was reported at $1.9 billion with a roughly 78% debt ratio compared with a target ratio of 40%. Operational highlights included steady system growth of about 1% per year over the last 12 years and national recognition for the Belmont Treatment Plant's permit compliance and performance.

Funding and market access

- Finance update: Chief Financial Officer Craig Jackson reported that market appetite for high-quality issuers remains strong; a recent thermal financing raised $40 million in new money and refinanced $23 million (total $63 million) and was oversubscribed about 4.5 times, attracting more than 25 unique investors.

What the board heard about risks and process improvements

- Audit and risk committee: The Audit and Risk Committee reported completion of an enterprise risk management (ERM) review documenting mitigation strategies for 83 risks; 30 top risks were discussed and ranked with watch-list items. Increased risk rankings included public perceptions around social and environmental justice, inflation impacts and public perception of water-resource management. Internal audit reported progress on planned audits and on a completed security review with recommendations being addressed.

Next steps and follow-up

- The board approved committee charters where presented and accepted the second-quarter financial statements after committee review and auditor presentation.

- Staff flagged ongoing contract negotiations (steam supply and AES natural-gas agreement), planned base-rate discussions for steam, and continued capital timing adjustments for the Lebanon program; specific dates for filings and final contract terms were discussed as in-progress items.

Direct quotes from executives in the meeting included President and CEO Jeffrey Harrison saying the Lebanon water project "is on budget and on time," and the CFO noting that market demand for Citizens' debt remains strong following the recent financing.