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NiSource sees no need for M&A in growth plan

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NiSource sees no need for M&A in growth plan

Witha sizable capital investment plan and pending rate cases in several states,NiSource Inc.executives on May 3 ruled out mergers and acquisitions as part of any growthstrategy.

"We remain committed to our plan. As we've watched thatplay out, we look at our plan and don't really need M&A to drive ouropportunities going forward," NiSource President and CEO Joseph Hamrocksaid on the first-quarter earnings call, adding that the company remains, "veryfocused on … the capital investments and the regulatory cadence that we've setup in our plan, and certainly don't see M&A as a part of that strategy.That said, with anything that would be compelling being introduced into themix, we would certainly take a look at that."

But while NiSource may not require acquisitions to fuel itsrobust growth plan, other companies may require utilities like NiSource fortheirs. With a market capitalization of about $7.4 billion and fully regulatedgas and electric utilities across seven states, NiSource fits the profile of anacquisition target at a time where large cap utilities are willing to paypremiums for businesses that can increase regulated earnings, .

Numerousrumors surfaced in2014 that NiSource was in talks with regarding apossible merger.

Dominion in February unveiled to acquire Salt Lake City-headquarteredQuestar Corp.

Executives for gas utility on the company'sfourth-quarter 2015 earnings call, noting the merger trend, struck a somewhatmore open tone toward the prospect of an acquisition, depending on the pricetag. "The multiples where the[acquired] companies are trading seem to be extremely rich, but we continue torepresent that we are an attractive opportunity for prudent investors … andthat the results that we're putting forth justify putting us in your portfolio,"Atmos President and CEO Kim Cocklin saidFeb. 3.

For small andmid-sized utilities with straightforward corporate structures, fielding M&Aquestions seems to have become routine. Asked about it during 's presentation atthe EEI Financial Conference in November 2015, Chairman, President and CEOPatricia Kampling said the subject comes up, "at every meeting," andwent on to add thatdebt aversion on the part of state regulators in Alliant's territories coulddeter potential buyers.

Thecomments by NiSource management followed a first quarter in which the companytopped consensus estimatesby 3 cents with operating earnings of $190.8 million, or 60 cents per share.NiSource plans $1.4 billion in system enhancement investments in 2016, brokendown as $1.0 billion on the gas distribution side and $400 million on the electricside.

AtNiSource's electric utilities, NorthernIndiana Public Service Co. electric filed a settlement with Indianaregulators Feb. 19for a $73 million rate increase. In March, NIPSCO on a seven-yearmodernization plan that represents an investment of $1.2 billion.

Onthe gas utility side, ColumbiaGas of Pennsylvania Inc. filed in March of $55 million.Columbia Gas of Virginia Inc.filed for a $37 million increasein April and Columbia Gas ofMaryland Inc. filed for a $6.5million increase.