NiSource Inc. (NYSE: NI) today announced that it has entered into a definitive agreement with an affiliate of Blackstone Infrastructure Partners, Blackstone's (NYSE: BX) dedicated Infrastructure group, for the Blackstone Infrastructure affiliate to acquire a 19.9% equity interest in NIPSCO for $2.150 billion.
Blackstone Infrastructure is an active perpetual capital investor across the utility, energy transition, transportation, digital infrastructure, water and waste infrastructure sectors. Blackstone Infrastructure seeks to apply a long-term buy-and-hold approach to large-scale infrastructure assets and is focused on responsible stewardship and stakeholder engagement to create value for its investors and the communities it serves. Blackstone Infrastructure is committed to investing behind NIPSCO's energy transition and decarbonization programs, as well as helping to increase gas and electric grid resiliency for the customers of Indiana.
The transaction is a highly attractive and efficient form of equity financing. NiSource intends to use the capital infusion to support its fastest growing utility and its ability to serve customers, de-lever its balance sheet and fund ongoing capital needs associated with the renewable generation transition underway. Since 2018, NIPSCO has been executing on one of the fastest transitions from coal-fired electricity in the U.S. utilities sector, targeting 0% coal-fired generation mix by 2028 (compared to 75% coal generation mix in 2018). Through 2030, NIPSCO expects to invest approximately $3.5 billion in electric generation transition investments, with this investment primarily focused on installing new renewable generation to replace coal-fired generation retirements. NIPSCO also intends to support the continued growth and modernization of its gas and electric transmission and distribution systems, which will play critical roles in the energy transition as NIPSCO continues to deliver a reliable, diverse and sustainable energy mix, bringing customer, environmental and economic benefits.
The transaction implies an equity value of $10.8 billion and enterprise value of $14.3 billion for 100% of NIPSCO. Upon closing of the transaction, which is expected by the end of 2023, NIPSCO will remain a vital part of NiSource, which will retain an 80.1% stake in NIPSCO. NiSource will continue to operate NIPSCO; Blackstone will receive minority rights that are commensurate with its 19.9% equity ownership interest. As part of the transaction, Blackstone is committed to funding its pro rata share of ongoing capital requirements, which is supported by a $250 million equity commitment letter and contractual obligations.
"We're pleased to reach this agreement at a compelling valuation following a robust and competitive process and are confident that Blackstone is the right partner for NIPSCO and NiSource going forward, given its global footprint and deep infrastructure experience, including in renewable development and procurement," said NiSource president and CEO Lloyd Yates. "With this transaction, our commitment to Indiana remains unchanged, and we will be able to drive further sustainable growth for our stakeholders. This financing transaction will have no impact on NIPSCO's current strategic direction or on our commitment to our gas and electric customers in Indiana."
"This agreement underscores Blackstone's commitment to decarbonization to create value for our investors and our desire to help facilitate the reindustrialization of the Midwest," said Sean Klimczak, Global Head of Infrastructure, Blackstone. "Our belief in Indiana remains steadfast and we are excited to partner with NiSource and NIPSCO, one of the fastest growing utilities in the country, to support the vital role that NIPSCO plays in communities across Northern Indiana."
"This transaction is a significant step in our execution against our strategy, and the progress we are making to create value for all of our stakeholders as we continue to navigate the current challenging interest rate backdrop," said Shawn Anderson, NiSource's executive vice president and CFO. "We are confident this is the right path forward to strengthen our balance sheet, support our financing plan and provide greater flexibility to execute on high-quality capital investments that will enhance the safety, reliability and sustainability of our systems for the benefit of our customers."
NIPSCO is Indiana's largest vertically integrated electric and gas distribution company, providing critical utility service to almost 1.3 million customers in an economically robust service territory, with a proven track record of providing value for its customers. NIPSCO is at the forefront of the energy transition and is developing one of the lowest-cost portfolios of renewable energy projects, the majority of which are utility-owned, and intends to retire all coal-fired generation by the end of 2028. These near-term renewable and generation transition investments add to a multi-decade capital plan with the goal to significantly grow NIPSCO's rate base through investments across gas, electric transmission and distribution and electric generation, which should drive significant continued value for NIPSCO's customers. NIPSCO operates in Indiana, one of the most constructive utility jurisdictions in the United States, with strong support for utility-owned generation and affordable energy, and a strong economic service territory benefitting from on-shoring and migration trends as well as robust development.
Mike Hooper, president and chief operating officer of NIPSCO said, "This partnership with Blackstone is a reflection of NIPSCO's potential as an industry leader as we continue to meet the increasing and evolving needs of our gas and electric customers across Northern Indiana. Once completed, this transaction will also strengthen our ability to invest in major renewable generation projects and make capital enhancements to existing electric and gas infrastructure to add resiliency to our system. We will be better positioned than ever to provide safe, reliable and diverse sources of energy to our customers and support the future growth and development of the communities we are privileged to serve."
Sebastien Sherman, Senior Managing Director, Blackstone Infrastructure, said, "We are excited to invest behind NIPSCO, which is leading the transformation of energy infrastructure in the U.S., advancing new, cleaner technologies and building increasingly advanced systems to meet customer needs. They are at the forefront of the transition to low-cost renewable energy and have one of the nation's fastest decarbonization plans."
The transaction is expected to close by year-end 2023, subject to customary closing conditions, including receiving FERC approvals and clearances.
Reaffirming 2023 and Long-term Earnings Guidance
NiSource also reaffirmed its non-GAAP NOEPS guidance of $1.54 to $1.60 in 2023, growth of 6-8% through 2027 and its FFO/debt target of 14-16%. Annual rate base growth of 8-10% is driven by $15 billion of planned capital expenditures during the 2023-2027 period.
NiSource reminds investors that it does not provide a GAAP equivalent of its earnings guidance due to the impact of unpredictable factors such as fluctuations in weather and other unusual and infrequent items included in GAAP results.
Advisors
Lazard Frères & Co. LLC is serving as lead financial advisor, Goldman Sachs & Co. LLC is serving as co-financial advisor and McGuireWoods LLP is serving as legal counsel to NiSource. Barclays is serving as financial advisor and Latham & Watkins LLP is serving as legal counsel to Blackstone. Sumitomo Mitsui Banking Corporation provided committed financing for the transaction.
Investor Conference Call and Webcast Details
NiSource will host a conference call at 8 a.m. ET (7 a.m. CT) on Tuesday, June 20, 2023, to discuss the transaction and related information and to answer questions.
All interested parties may listen to the conference call live on June 20 by logging onto the NiSource website at www.nisource.com. A link on the home page will provide access to the webcast, the press release and the additional information. Interested parties also may listen to the conference call toll-free by calling (888) 550-5438 and entering conference ID 4883153, or by calling (646) 960-0817 and entering the same conference ID 4883153.
A replay of the call will be available through 11:59 p.m. ET on June 27, 2023. A recording of the call will also be archived on the NiSource website.
Additional information regarding the transaction, NiSource's 2023 and long-term earnings guidance and other relevant information, will be available on the Investors section of www.nisource.com prior to the June 20, 2023, conference call.
About NiSource
NiSource Inc. (NYSE: NI) is one of the largest fully regulated utility companies in the United States, serving approximately 3.3 million natural gas customers and 500,000 electric customers across six states through its local Columbia Gas and NIPSCO brands. The mission of our approximately 7,200 employees is to deliver safe, reliable energy that drives value to our customers. NiSource is a member of the Dow Jones Sustainability - North America Index and is on Forbes lists of America's Best Employers for Women and Diversity. Learn more about NiSource's record of leadership in sustainability, investments in the communities it serves and how we live our vision to be an innovative and trusted energy partner at www.NiSource.com. NI-F
About Blackstone
Blackstone is the world's largest alternative asset manager. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, and the communities in which we work. We do this by using extraordinary people and flexible capital to help companies solve problems. Our $991 billion in assets under management include investment vehicles focused on private equity, real estate, private and liquid credit, infrastructure, life sciences, growth equity, public securities and secondary funds, all on a global basis. Further information is available at www.blackstone.com. Follow @blackstone on LinkedIn, Twitter, and Instagram.