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NiSource Inc.’s (NI - Analyst Report) Columbia Gas Transmission unit received the consent from the Federal Energy Regulatory Commission (“FERC”) to upgrade its pipeline infrastructures located in Columbia's service areas. The company estimates a total capital outlay of around $4 billion over the period of 10 to 15 years for the program.

Filed on Sep 4, 2012, the plan entailed an initial five-year investment initiative related to the modernization of pipelines with an option for further extension. As per the settlement, NiSource will spend around $300 million per year for system upgrade and a supplementary $100 million for maintenance purposes for the period 2013 to 2017.

The scheme highlights individual infrastructure programs and means to recover revenue requisites to carry on the investment plans. The modernization and upgrade programs will involve facility engineering, design, permitting, project management and construction trades.  

The program’s objectives are to replace roughly 1,000 miles of current interstate transmission pipelines which include a tentative target of replacing 400 miles in the first five years. In addition, the plan identifies improvement and substitution of about 50 critical natural gas compressors in the pipelines that will boost efficiency as well as serve environmental needs.

Other goals which the company will act on are improving pressures and looping systems as well as bringing in cutting-edge inspection and maintenance technology to enhance the safety and reliability of natural gas services without interruptions.

The approval from the regulatory body was considered crucial in the wake of the pipeline accident suffered by NiSource’s Columbia pipeline in Dec 2012. We anticipate the company to bear significant cost headwinds in the upcoming quarter related to the restoration and modernization projects.

However, we believe NiSource will stand to benefit from natural gas prices which look encouraging in the near term. The company retains a short-term Zacks Rank #3 (Hold).

Utility companies like Avista Corporation (AVA - Snapshot Report), The AES Corporation (AES - Analyst Report) and CMS Energy Corporation (CMS - Analyst Report) are also engaged in modernizing and upgrading their ageing pipelines.

Based in Merrillville, IN, NiSource is an energy holding company providing natural gas, electricity, and other products and services through its subsidiaries. With a market capitalization of $8.26 billion, the company at present has a total 7,957 employees.

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