NiSource on Monday disclosed a plan to sell up to 19.9% of its regulated subsidiary Northern Indiana Public Service Co., or NIPSCO, to fund long-term growth plans that include a 2040 net-zero emissions goal and $15 billion in grid modernization, clean energy and other spending from 2023 to 2027.
“In the past, because of our constrained balance sheet, we’ve had to issue stock to grow the company,” NiSource President and CEO Lloyd Yates said in an interview. Selling a portion of NiSource’s regulated utility will allow for growth “with no equity issuances between now and 2025.” A “minor” issuance could come after 2025, he added.
"Our commitment to Indiana remains unchanged,” Yates said, noting that the sale would be the least-cost way to fund growth.
NiSource plans to launch a sale process in the first quarter of 2023.
“Essentially, we're using cash from operations and debt to finance to growth, which is a lot less risky and should result in higher growth for us,” Yates said. “We have a lot of growth opportunities,” he said, pointing to the company’s plan to spend roughly $3 billion annually over five years.
The utility’s plan includes building renewable energy and modernizing infrastructure, replacing pipelines and adding leak-detection equipment as well as retiring all of NiSource’s coal generation by the end of the decade.
NiSource plans to install $2.2 billion in renewable generation facilities by 2025, setting up a “next wave” of investments that will include $1 billion for battery storage and gas peaking plants, NiSource Chief Risk Officer Shawn Anderson said. Anderson is also the company’s senior vice president of strategy.
Renewables will make up 51% of the utility’s 2030 portfolio, according to an investor-day presentation NiSource executives gave Monday. Gas-fired generation will remain a key part of the utility’s portfolio, at about 35%. Demand response, efficiency and short-term capacity purchases make up the balance.
The company expects it will continue to need 350 MW to 400 MW of gas-peaking capacity to meet electricity demand, particularly during winter in Northwest Indiana. Battery storage “would be too costly for customers,” when you consider how much would be needed, Anderson said.
“The winter hours, at night, are extremely difficult to generate our capacity requirements ... and battery storage continues to be a pretty expensive set of technology solutions,” Anderson said. “The [gas] peaking units ... become a much more efficient solution for customers.”
The utility is also looking at hydrogen to potentially help fuel the gas peakers, said Anderson. NiSource has seen hydrogen compete in response to all-source requests for proposals, but so far “it is still too expensive to utilize for our customers.” Both hydrogen and renewable natural gas could also be blended into the utility’s gas distribution system, he said, “to reduce overall greenhouse gas emissions.”
Sierra Club recently gave NIPSCO an “A” rating for its energy transition plan as part of a broader report on utility climate pledges.
It is still too soon to tell the impacts of the utility’s net-zero goal, said Anderson. “It’s too far out to project,” he said, adding that help from the federal government may play a role.
U.S. lawmakers passed the Inflation Reduction Act in August, including $369 billion in incentives for clean energy like battery storage, electric vehicles, nuclear power and clean hydrogen. The Infrastructure Investment and Jobs Act, passed in 2021, also included incentives for clean energy technologies.
“I think we would need to see more constructive policies, like the IIJA and the IRA that we've seen recently from the federal government, to help support and offset some of these costs for our customers,” Anderson said.