NiSource has agreed to sell a 19.9% stake in its subsidiary Northern Indiana Public Service Co., for $2.15 billion to an affiliate of private equity firm Blackstone Infrastructure Partners. Blackstone committed to providing another $250 million for capital spending by the utility, NiSource said Tuesday.
The planned transaction is “yet another example of a utility looking to raise capital by strategically selling part of its business as opposed to having a large public stock offering,” Paul Patterson, an equity analyst with Glenrock Associates, said Wednesday. FirstEnergy and Duke Energy, for example, have entered into similar transactions.
Tyson Slocum, energy program director for Public Citizen, a consumer watchdog group, said the deal is part of a risky trend, partly because it gives private equity firms seats on utility company boards.
“Allowing private equity to steer management of America’s utilities places consumers, workers and the climate at risk,” Slocum said Wednesday in an email. “Private equity’s opaque financing model shields it from transparency relative to publicly traded companies — and regulators from [the Federal Energy Regulatory Commission] to the [Securities and Exchange Commission] need to recognize that this impenetrable financial structure is incompatible for public utilities.”
The Merrillville, Indiana-based company said its transaction with Blackstone is “a highly attractive and efficient form of equity financing.”
The deal, slated to close late this year, provides NIPSCO with funding for its energy transition strategy, company officials said Tuesday in an investor presentation.
NIPSCO, with about 1.3 million electric and gas customers in northern Indiana, expects to invest about $15 billion on infrastructure over five years starting this year, up from $10 billion over five years beginning in 2018, according to the investor presentation. NiSource expects NIPSCO’s rate base will grow 13% to 14% at a compounded annual average rate over the next five years.
NIPSCO plans to retire its two coal-fired power plants totaling 1,177 MW before 2029. It expects to spend about $3.5 billion to replace them, mainly with renewable generation.
The drivers of NIPSCO’s growth include: decarbonization; FERC-regulated transmission; electrification and the electric vehicle build-out; gas and electric grid modernization; pipeline safety compliance and modernization; and economic development and system expansion, according to the presentation.
NiSource said in November it planned to launch a solicitation to find a buyer for a minority stake in NIPSCO.