NiSource announced Sunday it plans to create a separate company for its burgeoning gas transportation business, while keeping NIPSCO and utilities in six other states under the NiSource umbrella.
Under the plan, NiSource subsidiary Columbia Pipeline Group will be spun off into a separate company by mid-2015. NiSource stockholders will maintain their shares in the company and receive shares in the new, publicly traded Columbia Pipeline Group.
"Separating our regulated utilities and pipeline businesses is a significant and logical step in our proven long-term strategy that has delivered substantial value to investors and enhanced service for our customers," NiSource CEO Robert Skaggs Jr. said Sunday.
NiSource's split into two companies would represent the biggest change at the Fortune 500 corporation since a $6 billion deal under which it acquired Columbia Energy Group 14 years ago.
The new Columbia Pipeline Group is expected to be publicly traded on the New York Stock Exchange, according to NiSource. The deal is still subject to NiSource receiving favorable opinions on the tax-free nature of the distribution. The board of directors also must give final approval.
NiSource headquarters will remain in Merrillville, and no layoffs are planned as a result of the split, according to the company. All union contracts will be honored.
The new Columbia Pipeline Group will be headquartered in Houston, just as the current NiSource subsidiary is now.
"As a pure-play utilities company, we expect NiSource will continue to be well capitalized, with significant customer and rate base scale, and a deep inventory of infrastructure investment opportunities," Skaggs said.
NiSource will have 3.4 million natural gas customers in seven states and 450,000 electric customers at its NIPSCO subsidiary.
Columbia Pipeline Group owns 15,000 miles of natural gas transmission pipeline with 300 billion cubic feet of underground storage. The NiSource subsidiary has been undergoing rapid growth as it capitalizes on booming natural gas production in Ohio and other states.
There have been recent reports that NiSource's utility business is for sale, but company spokesman Mike Banas said that is not the purpose of the proposed separation.
"We are focused on creating two premier companies that can stand on their own, and this is a great opportunity to do that," Banas said.
NiSource does not expect charitable giving or local taxes paid by NIPSCO and other utilities to be impacted by the deal. It also expects current regulatory proceedings, such as NIPSCO's energy efficiency proposals, to go forward.
Projects such as NIPSCO's $1.1 billion electric modernization plan and $800 million natural gas modernization plan appear unaffected by the deal, with NiSource still planning to spend $1.2 billion per year in capital improvements at utilities.
The new Columbia Pipeline Group will issue long-term debt to make a one-time payment to NiSource, which the company will use to reduce its net debt. NiSource carries $7.6 billion in long-term debt, which is one of the chief legacies of the deal to buy Columbia Energy Group 14 years ago.
The new company will use the financing mechanism of a master limited partnership, or MLP, in which NiSource will own the general partner.
NiSource on Monday plans to file with the U.S. Securities and Exchange Commission a registration statement for an initital public offering of common units representing limited partner interests in the new master limited partnership. It will be named Columbia Pipeline Partners LP.
The MLP's initial assets are expected to consist of a 14.6 percent interest in CPG OpCo LP, which will own substantially all of the natural gas transmission, midstream and storage assets of NiSource.