NiSource Inc. (NYSE: NI) 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.
