trending Market Intelligence /marketintelligence/en/news-insights/trending/cvjwzokghqpnu0qst45kka2 content esgSubNav
In This List

Mass. blasts could cost NiSource $825M, mostly covered by insurance, execs say

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Mass. blasts could cost NiSource $825M, mostly covered by insurance, execs say

NiSource Inc. expects to spend up to $825 million on restoration and other costs related to the deadly series of explosions and fire in Massachusetts, most of which would be covered under the company's insurance, according to a Nov. 1 presentation.

Officials at the utility conglomerate said they expect the accelerated pipeline replacement project to cost between $135 million and $165 million. The company is also preparing for third-party claims — related to emergency response, personal injury, property and infrastructure damage, temporary housing, and legal fees — of between $415 million and $450 million. NiSource estimated paying an additional $180 million to $210 million in other related costs, including for employee and contractor housing and legal and consulting expenses.

The total estimated range of expenses falls between $730 million and $825 million, according to the company's quarterly earnings presentation.

NiSource's total liability insurance coverage is about $800 million, Donald Brown, executive vice president and CFO, said during the Nov. 1 call. The $135 million to $165 million of infrastructure-focused capital spending would not be eligible for insurance coverage, but Brown said the company expects "substantially all" of the other incident-related costs to be recovered through the insurance process.

"From a financing standpoint, obviously, it's a large event that we are financing now," Brown said. "We have significant liquidity to finance this event. However, we are looking at ensuring that we hit our metrics that we promised ... and assessing any needs to make sure that we hit that. But again, it's all timing around financing because we do expect to recover the claims expenses through insurance."

Excessive gas pipeline pressure caused the Sept. 13 fires and blasts in Lawrence, Andover and North Andover, Mass., that killed one person, sent at least 21 people to the hospital and damaged 131 structures, according to a preliminary federal investigation report. The report indicated that human error during a pipeline replacement project likely played a key role. Thousands of customers were left without service after the explosions and fires.

NiSource subsidiary Columbia Gas of Massachusetts has completed the gas pipeline replacement project that it undertook after the explosions, upgrading 43.5 miles of gas main lines and 5,086 service lines to remove outdated, largely low-pressure pipe in the communities affected by the blasts.

Columbia Gas, formally known as Bay State Gas Co., also double-checked the quality of 12.3 miles of plastic main as a part of its infrastructure project. The utility said this phase of the project was finished three weeks before it expected. However, what the utility has termed the "house-ready" repairs — the work required to restore the damaged houses and appliances to make them ready to receive gas — has fallen behind schedule.

Originally, the utility said customers could expect to be back in their homes with gas service in mid-November, but it revised that to Dec. 2-16. Given the expected delay, the company and state officials have encouraged residents to find alternative housing, especially as winter approaches and furnaces and boilers remain unusable.

Columbia Gas previously requested a base rate increase from state regulators but withdrew that request in September in light of the explosions and fires. Still, NiSource said it has $20 billion in long-term gas infrastructure investments in the works and has filed for rate increases in other states.

Columbia Gas of Virginia Inc. filed a base rate case in August to recover ongoing infrastructure investment program costs and to incorporate federal tax code changes, aiming to increase annual revenue by $22.2 million. Columbia Gas of Pennsylvania Inc. filed a settlement agreement in its base rate case in August, also to recover distribution pipeline upgrades and replacements and to address tax changes. The settlement would raise annual rates by $26 million, and NiSource expects a state commission decision in the fourth quarter. Columbia Gas of Ohio Inc. has a rider application pending that would apply a $74.5 million charge to customer bills to cover capital investments but would offset customers' base rates by $23 million to account for tax code changes.

NiSource on Nov. 1 posted net operating earnings of $35.3 million, or 10 cents per share, compared to $23.3 million, or 7 cents per share, in the comparable quarter of 2017. On a GAAP basis, NiSource reported a third-quarter 2018 net loss available to common shareholders of $345.1 million, or 95 cents per share, down from net income of $14 million, or 4 cents per share, in the same quarter of 2017.

"Third-quarter GAAP results include our current estimates of the emergency response, system restoration and other expenses associated with the greater Lawrence event, and we will likely see additional incident-related expenses in subsequent quarters," Brown said during the call.

NiSource on Nov. 1 also launched an at-the-market equity program that allows it to issue up to $500 million of common stock.