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We reiterate our Neutral recommendation on NiSource Inc. (NI - Analyst Report). The electric utility presently carries a Zacks Rank #3 (Hold).

Why the Reiteration?

The reaffirmation is based on several generic risks that have been affecting the company’s operations for some time. NiSource’s transmission activities are vulnerable to accidents and unplanned outages, which lead to extensive operational headwinds as seen in the pipeline explosion which occurred in Columbia in late 2012.

However, the company has been aggressively investing in upgrading its midstream initiatives, which will boost its transportation and storage business. It has set aside a capital outlay of $700 million for enhancing its various pipeline and storage infrastructure units in 2013.

The company stands to gain from the high quality Big Pine Gathering system which will come into service this month. Further, the combined venture with Hilcorp is expected to be another major highlight for 2013.

On the flip side, varying weather patterns and commodity price volatilities would limit the company’s growth.

Going forward, NiSource’s sound financial position will continue to support the company’s ongoing development projects. NiSource is also taking steps to reduce its debt burden. In late Jan 2013, the company earned $120 million from a retail asset sale to pure natural gas utility provider AGL Resources Inc. (GAS - Analyst Report).

Nonetheless, stringent environmental legislations adopted by the U.S. government will continue to pose cost challenges to the company. Considering the pros and cons we have a cautious outlook on NiSource Inc.

Other Stocks to Consider

Other utility stocks performing well and warrant a look are Brookfield Infrastructure Partners L.P. (BIP - Snapshot Report) and Pike Electric Corp. (PIKE - Snapshot Report). Both the stocks retain a Zacks Rank #1 (Strong Buy).

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