The Federal Energy Regulatory Commission on Thursday approved NiSource’s plan to sell a 19.9% indirect stake in its subsidiary Northern Indiana Public Service Co. to an affiliate of private equity firm Blackstone Infrastructure Partners.
The $2.15 billion deal, which NiSource aims to close by the end of the year, won’t hurt competition or consumers, FERC said. Blackstone has also agreed to provide $250 million to NIPSCO for capital spending.
“Following the transaction close, NiSource’s balance sheet will be strengthened and positioned to support an ongoing robust capital expenditures program,” Shawn Anderson, NiSource's executive vice president and chief financial officer, said Thursday. FERC’s signoff was the only regulatory approval needed to complete the deal.
In its unanimous decision, FERC rejected concerns raised by Public Citizen and Citizens Action Coalition that the deal could lead to higher rates for the utility’s customers and leave Blackstone executives with seats on at least four public utility boards, including FirstEnergy, in which the private equity firm owns a 5% share. Executives also have seats on the boards of Cheniere Energy and Cheniere Energy Partners.
On the issue of Blackstone’s board seats, FERC said they wouldn’t hurt competition because FirstEnergy operates in the PJM Interconnection market and NIPSCO is in the Midcontinent Independent System Operator footprint.
Also, FERC said it lacks the jurisdiction to enforce the Clayton Antitrust Act, which generally bars people from serving on the boards of competing companies at the same time.
“The proposed transaction will not reduce the availability of inputs to electric generation or raise barriers to entry within the MISO market,” FERC said as part of its review of the deal’s effect on vertical competition.
In a concurrence, FERC Commissioner Mark Christie said he agreed with the decision because it aligned with the agency’s practices. However, FERC regulations require NiSource and Blackstone to file a vertical competitive analysis, which they did not do, Christie said.
The failure to have a complete market analysis comes in the face of increased partial acquisitions of public utilities and public utility holding companies, Christie said.
“There is an inherent tension between the profit-seeking motivations of large investment management entities and public utilities with the responsibility to provide reliable power at just and reasonable rates,” Christie said.
FERC may need to revisit its rules for reviewing merger and acquisition applications, according to Christie.
“It is the commission’s responsibility under [the Federal Power Act’s] section 203 to evaluate transactions involving these large investment management entities to determine whether they comport with the public interest,” he said.
Christie raised similar concerns last year when FERC reauthorized the ability of BlackRock and its affiliates and investment funds to buy utility securities.
Christie hit the “nail on the head” with his observation that FERC takes a narrow, limited approach to its statutory authority to review mergers and acquisitions, Tyson Slocum, director of Public Citizen’s energy program, said Friday.
Slocum said he plans to ask the Federal Trade Commission to enforce the Clayton act on the NIPSCO deal.