NiSource Mostly Dodges The Falling Market Anvil

Mar. 10, 2020 5:12 AM ETNiSource Inc. (NI)2 Comments


  • NiSource is a $10.6 billion holding company for seven utilities, six of which are local distribution companies (LDCs) supplying natural gas and one supplying both gas and electricity.
  • In February 2020, NiSource announced an agreement to sell one of its LDCs, Columbia Gas of Massachusetts, to Eversource for $1.1 billion to help settle its Merrimack Valley issues.
  • While no investments are safe in the tough market decline, utilities like NiSource offer a dividend (yield of 3.0%), long-term growth from an established customer base, and cheap natural gas.
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After a large decline in the market today, investors may want to compare the drops between the overall market, the utilities, and NiSource (NYSE:NI) specifically. This is shown below.

NiSource has been resolving issues around the September 2018 Merrimack Valley explosions, including by selling its Columbia Gas of Massachusetts utility, where the explosions occurred.

After the sale, NiSource will comprise five gas local distribution utilities and one gas and electric utility, NIPSCO.

The company offers investors a 3% dividend, a low beta (0.20) and inexpensive fuel costs both for direct gas sales and as electrical generation fuel. Due to its debt it also benefits from the just-reduced Fed funds rate, while its dividend yield compares favorably to the current 10-year Treasury rate of 0.56%.

ChartData by YCharts

Macro Factors

Factors pressing on the stock market now are the global halts in business, travel, and trade from the coronavirus pandemic and, secondarily, the oil price war between Russia and OPEC. This resulted in a 2000+ point drop in the Dow Jones Industrial Average today, or about -7.8%.

* The West Texas Intermediate oil price closed an astonishingly -$11.33/barrel down (-27.2%) to $30.24/barrel after being off about 10% the last trading day. The Henry Hub natural gas price, which has been quite low, was up slightly to $1.78/MMBTU.

Moreover, stock market gyrations during the past week prompted the U.S. Federal Reserve to cut the Fed funds rate by 0.5%, to 1.0-1.25%.

For NiSource specifically, lower business and industrial activity (and exports) are negative, low gas prices are positive, and given its substantial debt load, lower interest rates are positive.

Natural Gas Supply And Prices

For both its retail gas distribution and its electrical generation, NiSource is advantaged by its proximity to the giant Marcellus and large Utica natural gas fields in Pennsylvania, Ohio, and West

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This article was written by

Laura Starks profile picture
Long ideas for energy investors

Do you want to understand and invest in volatile energy markets? We bring fundamentals-based insights to oil, gas, utilities, renewables, and gasoline companies for real-world investors.

Disclosure: I am/we are long SRE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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