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NiSource Inc.’s (NI - Analyst Report) ancillary NiSource Finance Corp. concluded the sale of $750 million, 4.80% Series 1, long-term notes due Feb 15, 2044. The company will utilize the net proceeds to finance its short-term obligations under the commercial paper program and for general corporate purposes. In addition, the proceeds will be used for supporting NiSource’s infrastructure investments.

As of Dec 31, 2012 NiSource’s long-term debt increased 8.8% to $6,819.1 million from $6,267.1 million in 2011. The current debt to capital ratio of the company stands at 44.8%. With the current issuance, the debt to capital ratio would increase to 61.45%. It often engages in notes issuance especially to repay its short-term borrowings.

In 2012, the company issued long-term debt worth $991.4 million and redeemed debt worth $331.6 million. In addition, NiSource is already experiencing higher interest expenses on its long-term debts which increased 9.7% from 2011 levels.  We believe the current issuance would further add to the company’s interest expense.

However, the company’s strong operating cash flow growth of 46.6% to $1,275.5 million in 2012 from $870.2 million in 2011, as well as a whopping 215.6% increase in cash balance in 2012 will aid in effectively tackling the interest burden.

Presently, the company carries a Zacks Rank #3 (Hold). Other utility stocks we presently prefer are Zacks Ranked #1 (Strong Buy) Brookfield Infrastructures Partners L.P. (BIP - Snapshot Report), Pike Electric Corporation (PIKE - Snapshot Report) and Empresa Nacional Electricidad SA (EOC - Snapshot Report).

Headquartered in Merrillville, Ind., NiSource is an energy holding company the subsidiaries of which provide natural gas, electricity and other products and services in the U.S. Its operating subsidiaries deliver energy to customers within the high-demand energy corridor, stretching from the Gulf Coast through the Midwest to New England.

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