NiSource Expands Long-Term Infrastructural Investment Plan

Christel Deskins

NiSource Inc. NI provided an update on its long-term growth strategy for next 20 years on virtual investor day. The company outlined its efforts to generate energy via renewable sources along with discussing its capital plans and cost-reduction initiatives. Notably, it has a strong, sustainable growth platform with supportive fundamentals […]

NiSource Inc. NI provided an update on its long-term growth strategy for next 20 years on virtual investor day. The company outlined its efforts to generate energy via renewable sources along with discussing its capital plans and cost-reduction initiatives.

Notably, it has a strong, sustainable growth platform with supportive fundamentals and will have nearly $14 billion of regulated rate base following the sale of Columbia Gas of Massachusetts.

Capex Plans

NiSource expects to invest nearly $40 billion in infrastructure during the 2021-2024 period, up $10 billion from its prior projections. This raised estimate is owing to increased investments in renewable generation and asset modernization enhancements across both gas and electric operations, totaling $9.9-$10.5 billion for the aforementioned period. Besides, stable, rate base-driven revenue streams and the utility’s core business strategy are likely to drive long-term revenues and dividend growth.

NiSource’s Next Initiative

This is a comprehensive program designed to identify the company’s long-term, sustainable capabilities as well as cost efficiencies. The aim of this strategy is to boost the utility’s operating performance and reduce operations and maintenance (O&M) costs by 8% in 2021 from the expected 2020 levels. This cost reduction is expected to offset future inflationary pressures to keep the O&M expenses relatively flat through 2024.

Proper execution of the strategy is expected to witness a CAGR of 10-12% for the rate base, which is likely to result in a 7-9% NOEPS CAGR and an annual dividend growth rate to maintain the company’s targeted 60-70% payout ratio during the 2021-2024 forecast period.

Efforts to Drive Safety

NiSource implemented a safety management system across its gas and electric businesses to drive robust operating standards, risk identification and mitigation capabilities. The utility’s $1.9-$2.2 billion planned annual capital investment is aimed at enhancing its system safety and reliability.

Transition to Renewable Energy

The utility has been making extensive efforts to meet its target of retiring 100% of coal generation assets by 2028 and replacing them with cleaner sources through its NIPSCO gas and electric distribution company in Indiana. It anticipates achieving this goal in 2023 by exiting 1,400 MW of coal-fired generation.

To this end, NiSource plans to invest in the range of $1.8-$2 billion, primarily during 2022 and 2023, to offer more affordable and cleaner energy resources to its customers. Remarkably, this shift to the renewables will likely create cost-savings of more than $4 billion during the next 30 years compared to NIPSCO’s current-generation fleet. Further, this conversion will reduce greenhouse gas emissions by 90% within 2030 from the 2005 baseline.  

With the whole world inclining toward renewable energy, other electric utilities like Duke Energy DUK, DTE Energy DTE and Xcel Energy Inc. XEL are also adopting measures to supply absolute clean and reliable energy to its customers by 2050.

Zacks Rank & Price Performance

NiSource currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have lost 26.6% in the past year compared with the industry’s decline of 14.1%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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