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NiSource Issues $750M Notes to fund Capital Expansion


NiSource, Inc NI announced its finance subsidiary, NiSource Finance Corp., has completed the sale of $750-million aggregate principal amount of 3.950% Notes due 2048.

NiSource Finance, will utilize the proceeds from this offering to finance the capital expenditures and for general corporate purposes. The balance proceeds could be used to repay short-term borrowings.

NiSource’s Capital Expenditure Plan

NiSource previously announced plans to make planned utility infrastructure investments of about $1.6-$1.7 billion in 2017 and has identified long-term infrastructure investments worth $30 billion, with over 90% of it allocated to regulated pipes and wires.

In addition to the above actions, the company is also taking commendable steps to reduce the greenhouse gas emission to keep up with peers like Duke Energy Corporation DUK, Xcel Energy Inc. XEL, NRG Energy, Inc. NRG etc. All of these companies are striving to bring down their carbon footprint.

According to the projected figures, its coal usage is expected to drop to 42% of its generation mix by 2023, from the current level of 78%. The company will do the same by retrofitting emission control equipment in its existing coal plants, retiring old plants and replacing the coal fired units by renewable sources.

Northern Indiana Public Service Company (NIPSCO) continues to execute its seven-year, $845 million gas infrastructure modernization program to further improve system reliability and safety. NIPSCO is also working to execute its seven-year electric infrastructure modernization program, which includes enhancements to its electric transmission and distribution system designed to further improve system safety and reliability.

Rising Debt Level

NiSource’s long-term debt was $6,777.4 million for the period ended Jun 30, 2017, compared to $6,058.2 million for the period ended Dec 31, 2016.

The rise in long-term debt level is a matter of concern as it can lead to rise in interest expense and can erode the company’s profit margin. This newly issued debt will increase interest expenditure by approximately $30 million.

Interestingly, during the second quarter the company was able to successfully refinance about $1 billion of near-term maturity debt with lower-rate debt. This would help in saving a good amount on interest expense in the next few years. NiSource also expects that its strategic investments will allow the company to deliver its targeted earnings and dividend growth of 5-7% through 2020.

Price Movement

In the last six months, shares of NiSource have gained 15.3% outperforming the Zacks categorized industry's gain of 5.1%.

This outperformance could be attributed to NiSource’s consistent investment to strengthen existing infrastructure and focus on clean energy.

Zacks Rank

NiSource carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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