NiSource CEO tamps down takeover talk

2014-02-18T12:00:00Z 2014-02-18T15:44:38Z NiSource CEO tamps down takeover talkBy Keith Benman, (219) 933-3326
February 18, 2014 12:00 pm  • 

NiSource Inc. reported 2013 earnings at the upper end of its forecast on Tuesday and CEO Robert Skaggs Jr. addressed persistent takeover rumors that arose last month.

NiSource net income for 2013 rose to $532.1 million as compared to $416.1 million in 2012, a 28 percent increase, according to the company. Basic earnings per share were $1.70 in 2013 as compared to $1.43 in 2012.

Net operating income from continuing operations on a non-GAAP basis came in at $1.58 per share in 2013 as compared to $1.46 per share in 2012.

On a morning conference call with Wall Street analysts, Skaggs noted the attainment of "a vital, significant milestone" at subsidiary NIPSCO on Monday, when state regulators approved a $1 billion electric system improvement plan.

“For NiSource, 2013 brought another year of solid execution, notable achievement and industry-leading growth in shareholder value,” Skaggs said.

NiSource stock popped in early morning trading on the New York Stock Exchange to over $36.50 per share before settling back to $35.78 in late morning trading, which was still 1.7 percent above Friday's close of $35.17.

Analysts peppered Skaggs with questions revolving around reports in January that Dominion Resources Inc., of Richmond, Va., might be eyeing NiSource as a takeover target.

Skaggs appeared to tamp down the takeover speculation and pledged the company will always do the right thing for shareholders.

But the CEO affirmed the company is seriously considering creation of a Master Limited Partnership for its valuable transmission and storage assets, including those in booming shale gas fields in Ohio and other states. He expects a decision by his board of directors in the third quarter of this year.

"We still consider the MLP vehicle to be very viable for NiSource," Skaggs said. "It's a viable approach. It's a valuable option."

Creation of an MLP would basically involve a spin-off of a major part of the company into a new ownership structure. There is the distinct possibility NiSource would take on an investment partner for the new company in order to raise capital, according to industry analysts.

NiSource has always walked a tightrope between its growth aspirations and its ability to fund those aspirations, said Philip Adams, a senior analyst with Gimme Credit, a provider of independent credit research. A 50/50 joint venture in the form of an MLP with another energy company could solve that problem for NiSource, he said.

The fact that NiSource's stock price increased 32 percent in 2013 and the market's current aversion for integrated energy companies appear to make an outside takeover of NiSource and all its subsidiaries a long shot, Adams said.

NiSource on Tuesday also issued earnings guidance for this year of between $1.61 to $1.71 per share. Skaggs also reiterated NiSource intends to maintain its investment grade credit rating, strong financial liquidity and dividend growth in the range of 3 to 5 percent annually.

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