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NiSource (NI) to Sell $2.15B Stake in NIPSCO to Blackstone
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NiSource Inc. (NI - Free Report) announced that it has signed a binding contract with Blackstone Infrastructure Partners’ affiliate Blackstone Inc.’s (BX - Free Report) Infrastructure group. Per the agreement, Blackstone Infrastructure Partners’ affiliate will pay $2.150 billion for a 19.9% equity stake in NIPSCO. The private equity firm also has committed an additional $250 million to fund the ongoing capital expenditures.
NIPSCO, which is currently providing utility service to nearly 1.3 million customers, will continue to be operated by NiSource, which retains an 80.1% stake. According to the deal, 100% of NIPSCO would have an enterprise value of $14.3 billion and an equity value of $10.8 billion.
Benefits of the Transaction
NiSource, with an 80.1% interest in NIPSCO, intends to pay off debt and fund the switch to renewable energy sources using the money raised from the transaction. Additionally, the business will keep running the utility segment, which expects to invest around $3.5 billion mostly in installing new renewable production to completely phase out coal-fired generating by the end of 2028.
The deal highlights NIPSCO’s industry-leading value proposition. The multi-decade rate base investment opportunity and customer growth lead to a $2.1 billion expected 2023 capital expenditure opportunity and long-term 13-14% rate base CAGR at NIPSCO. It is based in Indiana, one of the most progressive utility jurisdictions in the country, which has strong support for utility-owned generation and affordable energy and benefits from trends in migration and onshoring as well as active growth.
NI aims for $15 billion of planned capital spending in the 2023–2027 time period, which will drive annual rate base growth of 8–10%.
Price Performance
Over the past six months, shares of NI have lost 7% compared with the industry’s decline of 4.9%.
Utilities such as Duke Energy (DUK - Free Report) and FirstEnergy Corp. (FE - Free Report) have also sold stakes in their subsidiaries this year as they seek to invest in cleaner sources of energy.
Duke Energy announced the sale of its unregulated utility scale Commercial Renewables business to Brookfield Renewable on Jun 12, 2023, at an enterprise value of approximately $2.8 billion, including non-controlling tax equity interests and the assumption of debt.
DUK’s long-term (three- to five-year) earnings growth rate is pegged at 6.1%. The Zacks Consensus Estimate for 2023 earnings per share (EPS) indicates an increase of 6.5%.
FirstEnergy announced on Feb 2, 2023, an agreement to sell an additional 30% interest in FirstEnergy Transmission LLC to Brookfield Super-Core Infrastructure Partners for $3.5 billion. This contract is expected to close in early 2024.
FE’s long-term earnings growth rate is pegged at 6.4%. The Zacks Consensus Estimate for 2023 EPS indicates an increase of 4.2%.
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NiSource (NI) to Sell $2.15B Stake in NIPSCO to Blackstone
NiSource Inc. (NI - Free Report) announced that it has signed a binding contract with Blackstone Infrastructure Partners’ affiliate Blackstone Inc.’s (BX - Free Report) Infrastructure group. Per the agreement, Blackstone Infrastructure Partners’ affiliate will pay $2.150 billion for a 19.9% equity stake in NIPSCO. The private equity firm also has committed an additional $250 million to fund the ongoing capital expenditures.
NIPSCO, which is currently providing utility service to nearly 1.3 million customers, will continue to be operated by NiSource, which retains an 80.1% stake. According to the deal, 100% of NIPSCO would have an enterprise value of $14.3 billion and an equity value of $10.8 billion.
Benefits of the Transaction
NiSource, with an 80.1% interest in NIPSCO, intends to pay off debt and fund the switch to renewable energy sources using the money raised from the transaction. Additionally, the business will keep running the utility segment, which expects to invest around $3.5 billion mostly in installing new renewable production to completely phase out coal-fired generating by the end of 2028.
The deal highlights NIPSCO’s industry-leading value proposition. The multi-decade rate base investment opportunity and customer growth lead to a $2.1 billion expected 2023 capital expenditure opportunity and long-term 13-14% rate base CAGR at NIPSCO. It is based in Indiana, one of the most progressive utility jurisdictions in the country, which has strong support for utility-owned generation and affordable energy and benefits from trends in migration and onshoring as well as active growth.
NI aims for $15 billion of planned capital spending in the 2023–2027 time period, which will drive annual rate base growth of 8–10%.
Price Performance
Over the past six months, shares of NI have lost 7% compared with the industry’s decline of 4.9%.
Image Source: Zacks Investment Research
Zacks Rank
NiSource currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Utlities Focus on Clean Energy
Utilities such as Duke Energy (DUK - Free Report) and FirstEnergy Corp. (FE - Free Report) have also sold stakes in their subsidiaries this year as they seek to invest in cleaner sources of energy.
Duke Energy announced the sale of its unregulated utility scale Commercial Renewables business to Brookfield Renewable on Jun 12, 2023, at an enterprise value of approximately $2.8 billion, including non-controlling tax equity interests and the assumption of debt.
DUK’s long-term (three- to five-year) earnings growth rate is pegged at 6.1%. The Zacks Consensus Estimate for 2023 earnings per share (EPS) indicates an increase of 6.5%.
FirstEnergy announced on Feb 2, 2023, an agreement to sell an additional 30% interest in FirstEnergy Transmission LLC to Brookfield Super-Core Infrastructure Partners for $3.5 billion. This contract is expected to close in early 2024.
FE’s long-term earnings growth rate is pegged at 6.4%. The Zacks Consensus Estimate for 2023 EPS indicates an increase of 4.2%.