|
|
|
|
||
NiSource says Mass. gas utility sale 'potential net negative' for 2021 earnings from SNL Energy Finance Daily NiSource says Mass. gas utility sale 'potential net negative' for 2021 earningsByline: Darren Sweeney NiSource Inc. will no longer issue up to $700 million in common equity this year and acknowledged that the sale of its Massachusetts gas utility could be a "net negative" for 2021 earnings. NiSource on Feb. 26 announced the sale of Columbia Gas of Massachusetts, officially known as Bay State Gas Co., to Eversource Energy for $1.1 billion. The deal was presented the same day as the FBI and the U.S. Attorney's Office for the District of Massachusetts announced that the NiSource utility pleaded guilty to violating federal pipeline safety laws leading up to the 2018 Merrimack Valley natural gas distribution system fires and explosions. NiSource agreed to pay a record $53 million fine, sell its Massachusetts utility business, permanently leave the state and surrender any profits from the sale to the U.S. government in a settlement. NiSource on Feb. 27 withdrew its 2020 net operating earnings EPS guidance of $1.36 to $1.40 tied to the sale, which is expected to enable NiSource to eliminate its previously planned 2020 block equity issuance. Upon deal closing, the company expects to initiate 2021 net operating EPS guidance and establish a 5% to 7% long-term growth rate for both net operating EPS and dividend with 2021 as the base year. "The purchase price represents a loss compared to the book value of Columbia Gas of Massachusetts," NiSource Executive Vice President and CFO Donald Brown said Feb. 27 on the company's fourth-quarter 2019 earnings call. "As we work through the impact of the sale by factoring in the elimination of the block equity dilution, the loss of [the gas utility's] earnings and the expected dis-synergy, we believe that at a minimum,the 2021 baseline is expected to be at or above our withdrawn 2020 guidance." NiSource told analysts and investors in late October that it planned to issue $500 million to $700 million in common equity in 2020 to permanently finance pipeline replacement and restoration, third-party claims and other expenses tied to the deadly blasts. In response to an analyst's question, NiSource executives said, "There are opportunities to mitigate" any earnings dilution from the sale of Columbia Gas of Massachusetts. "We are starting to work on that plan," Brown said. "But as I stated, when you look at the loss of the earnings, although [Columbia Gas of Massachusetts] was not earning allowed return on its rate base, we do lose the impact of those earnings. We will have some dis-synergies and we'll start working on a plan there to offset and mitigate some of those dis-synergies." "Obviously, you can't eliminate them all because we have loss ... we will lose scale in our business," Brown added. "But what we're attempting to do is build a plan that offsets and mitigates that." The CFO, however, acknowledged that "there is a potential net negative from this transaction" for 2021 earnings. "That, as I said, is part of what we're working through to develop a plan, and it's really too early to give specific guidance around 2021," Brown said. "But otherwise, we would have expected to meet our 5[%] to 7% earnings per share and dividend per share growth guidance off of 2020." NiSource said it still plans to maintain capital investments of $1.8 billion to $1.9 billion in 2020 based on the "strong" performance of its remaining operating companies. "They are earning their allowed returns. We're continuing to make the investments," Brown said. "And that's actually why we didn't change our capital investment guidance. We continue to invest in our program of about $1.9 billion, and that will continue going forward, and ultimately, that's what drives our earnings growth." |
return to message board, top of board |