Merrillville, Ind., utility operator NiSource Inc. announced Tuesday that it agreed to sell a 19.9 percent equity interest in Indiana electric and gas utility NIPSCO to an affiliate of Blackstone Infrastructure Partners for $2.15 billion.
The transaction implies an equity value of $10.8 billion and enterprise value of $14.3 billion for all of NIPSCO. Upon closing of the transaction, which is expected by year-end if FERC clears it, NIPSCO will remain a part of NiSource, which will keep an 80.1 percent stake, and will continue operating it, with Blackstone receiving minority rights commensurate with its interest.
As part of the transaction, Blackstone is committed to funding its share of ongoing capital requirements, which is supported by a $250 million equity commitment letter and contractual obligations.
Lazard Frères & Co. is lead financial advisor, Goldman Sachs & Co. is co-financial advisor and McGuireWoods is outside counsel to NiSource.
Blackstone used Barclays as financial advisor, including Sean Diskin, and Latham & Watkins as outside counsel. Sumitomo Mitsui Banking Corp. provided committed financing for the transaction. Max Wade led the deal as in-house counsel at Blackstone.
The Latham corporate deal team was led by Houston/New York partner Ravi Purohit and New York partner David Allinson with associates Michael Spirtos, Cody Conwell and Manu Vadlamudi.
Advice was also provided on tax matters by Bay Area partner Katharine Moir with associate Christine Mainguy; on finance matters by New York partner Stephanie Teicher and Los Angeles partner Nathan Whitaker with associate Jacob Sikora; on benefits and compensation matters by Chicago partner Benjamin Rosemergy with associates Samantha Voutyras and Kevin Matheny; on labor and employment matters by New York counsel Sandra Benjamin; and on federal energy regulatory matters by Washington, D.C., partner Tyler Brown with associate Richard Griffin.
Washington, D.C. counsel Kieran Dickinson advised on intellectual property matters with associate Kellye Quirk; environmental matters were handled by New York counsel David Langer with associate Brittany Curcuru; real estate matters by San Diego partner Robert Frances and San Diego counsel Aaron Friberg with associate Will Swanson; antitrust matters by Washington, D.C., partner Farrell Malone and Washington, D.C., counsel Britton Davis with associate Ethan Hoffman; litigation matters by Orange County partner Kristin Murphy with associates Kehaulani Jai, Helen Kirkby, and Scott Levinson; and representation and warranty insurance matters by Los Angeles partner Drew Levin with associate Harrison White.
NiSource said Blackstone is committed to investing behind NIPSCO’s energy transition and decarbonization programs as well as helping to increase gas and electric grid resiliency for Indiana customers.
The transaction is a highly attractive and efficient form of equity financing, NiSource continued. It 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), NiSource said. Through 2030, NIPSCO expects to invest $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 the utility continues to deliver a reliable, diverse and sustainable energy mix, bringing customer, environmental and economic benefits, NiSource continued.
NiSource president and CEO Lloyd Yates said in the release that the company is pleased to reach this agreement at a “compelling” valuation after a “robust and competitive process” and is 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.
“With this transaction, our commitment to Indiana remains unchanged and we will be able to drive further sustainable growth for our stakeholders,” he said. “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.”
Sean Klimczak, Blackstone’s global head of infrastructure, said the agreement underscores the private equity firm’s commitment to decarbonization to create value for its investors and its desire to help facilitate the “reindustrialization” of the Midwest.
“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,” he said.
NiSource CFO Shawn Anderson said the transaction is a significant step in its execution against its strategy and the progress it is making to create value for all of its stakeholders as it continue to navigate the “challenging” interest rate backdrop.
“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,” he said.
NIPSCO is Indiana’s largest vertically integrated electric and gas distribution company, providing utility service to almost 1.3 million customers. NIPSCO claims to be 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.
Indiana is one of the most constructive utility jurisdictions in the U.S., NiSource said, with strong support for utility-owned generation and affordable energy and a strong economic service territory benefiting from on-shoring and migration trends and robust development.