BY KEITH BENMAN, Times of Northwest Indiana
kbenman@nwitimes.com
Four days after the Indiana House passed a bill to study replacing NIPSCO with a public power authority, NiSource Inc. CEO Robert Skaggs Jr. acknowledged the utility may have "a tough row to hoe" in restructuring the company.
"Surely, for traditional, regulated entities, it's a tough go," Skaggs told the UBS Natural Gas & Electric Utilities Conference on Thursday in New York. "We've seen some notable successes, and we've seen some notable meltdowns.
"The political environment in many states is part and parcel of the process," Skaggs added.
In late January, reports surfaced that NIPSCO's electric business was for sale. Those reports prompted legislative proposals to give state regulators authority over any proposed merger, as well as the bill that passed the House this week.
NiSource, the nation's third-largest gas distributor, remains focused on a process it has designated "the path forward" and is on track to becoming the nation's premier regulated energy utility, Skaggs told the conference.
NiSource stock closed at $23.83 on Thursday, up 4 cents on volume of 1.2 million shares. The stock has risen 13 percent since early September.
NiSource has 3.8 million energy customers in the Midwest and East. It is the parent company of NIPSCO, Indiana's largest utility with 712,000 natural gas and 445,000 electric customers.
Questioners at Thursday morning's conference focused on the possible sale of NIPSCO and the NiSource restructuring, hoping to glean clues as to when and how that might happen. The conference was Webcast by UBS.
Skaggs again promised news on the restructuring "sooner rather than later."
The CEO gave some hints that appeared to reinforce an emerging view that the company may break into three pieces.
NIPSCO's electric business has been NiSource's strongest performer for some time and would draw the most interest from buyers on the open market, according to Paul Justice, an equities analyst at Morningstar Inc.
"They may be selling off the crown jewels, but that's because you can get the most money for them," Justice said.
When Skaggs was asked at the UBS conference about the view that NiSource may spin off its gas and pipeline business into a master limited partnership (MLP), the CEO said nothing was being ruled out.
Forming MLPs is an increasingly popular move with utilities. Master limited partnerships pay no corporate taxes and distribute profits to shareholders, including the companies that spin them off.
At the same time, Skaggs said NIPSCO is preparing for a rate case in the next year or two, with people working "around the clock" on preparing for that process.
He also pointed out that NiSource consummated its 2000 merger with Columbia Energy Group in record time because of "strong regulatory relationships that all companies had on the ground."
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