Today, NiSource Inc. (NYSE:NI), an energy holding company, announced the successful closure of a $500 million debt offering, specifically in the form of 6.375% Fixed-to-Fixed Reset Rate Junior Subordinated Notes due in 2055. The offering, which was finalized on Monday, was made under the company's existing shelf registration statement.
The notes, which began accruing interest on Monday, are set to pay semi-annual interest on March 31 and September 30 each year, starting from March 31, 2025. Initially, the notes bear a fixed interest rate of 6.375% per annum until March 31, 2035. Subsequently, the rate will reset every five years at a rate equal to the Five-year U.S. Treasury Rate plus a spread of 2.527%.
NiSource has the option to redeem the notes at specific times, and under certain conditions, as detailed in the prospectus supplement. Additionally, the company may defer interest payments for up to 20 consecutive semi-annual periods, provided no default has occurred.
During such deferral periods, NiSource is restricted from paying dividends, repurchasing stock, or making certain payments on other debts that rank equally or junior to these notes.
The notes were issued following a Terms Agreement with a group of underwriters led by BofA Securities, Inc., Goldman Sachs (NYSE:GS) & Co. LLC, J.P. Morgan Securities LLC, Morgan Stanley (NYSE:MS) & Co, LLC, and Wells Fargo (NYSE:WFC) Securities, LLC.
NiSource intends to use the net proceeds from this offering for general corporate purposes, which may include financing capital expenditures, providing working capital, and repaying existing indebtedness.
In other recent news, Northern Indiana Public Service Company (NIPSCO), a subsidiary of NiSource Inc., has expanded its solar capacity with the operational Cavalry Solar project.
This project, which is expected to power about 60,000 homes, is part of NIPSCO's long-term electric generation transition plan. Furthermore, NiSource announced a quarterly dividend of $0.26 per share and reported Q2 2024 earnings that exceeded expectations, leading BMO Capital to raise the share target to $34.
The company has also completed approximately $500 million of its 2024 equity issuance plan. NiSource projects a 6% to 8% adjusted EPS growth and 8% to 10% rate base growth from 2023 to 2028. It plans to issue up to $600 million of at-the-market equity in 2024.
BMO Capital maintains an Outperform rating for NiSource, highlighting the company's strategic growth initiatives, which include investing in solar projects and power purchase agreements. Despite potential challenges such as increased financing costs and regulatory outcomes, NiSource remains optimistic about load growth, particularly from data centers.
InvestingPro Insights
As NiSource Inc. (NYSE:NI) secures long-term financing through its recent debt offering, investors may find it beneficial to consider key financial metrics and analyst insights. According to InvestingPro data, NiSource boasts a market capitalization of $14.99 billion and a P/E ratio of 19.76, indicating a market valuation that is high relative to its earnings. The company's revenue for the last twelve months as of Q2 2024 stands at $5.24 billion, with a gross profit margin of 51.05%, showcasing its ability to retain a significant portion of its sales as profit.
InvestingPro Tips highlight that NiSource has a history of reliability in dividend payments, having maintained them for 38 consecutive years. This consistency is a testament to the company's stable financial standing and may be of interest to income-focused investors. Additionally, NiSource's stock is trading near its 52-week high, reflecting a strong performance over the last three months with a total return of 18.4%.
For investors seeking more in-depth analysis, InvestingPro offers additional tips on NiSource, which can be accessed at https://www.investing.com/pro/NI. These insights can provide a more comprehensive understanding of the company's financial health and future outlook.
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