BP, NIPSCO jostle for power plant

NiSource fourth-quarter earnings increase 23%
BY KEITH BENMAN
kbenman@nwitimes.com
219.933.3326
Date posted online: Thursday, January 31, 2008

MERRILLVILLE | BP wants to buy NiSource's Whiting Clean Energy electric generating station, short-circuiting NIPSCO's plan to buy the 525-megawatt plant to make up for looming energy shortages.

NiSource CEO Robert Skaggs Jr. told Wall Street analysts on a Wednesday morning conference call that BP has exercised its right of "first refusal" on plans to sell the plant. BP is now negotiating to buy the gas-fired generating station.

"It's in BP's court at this point," Skaggs told analysts.

Skaggs made it clear NIPSCO will move swiftly on other options for making up its electric energy shortfall if BP buys the plant. NiSource is the parent company of NIPSCO.

BP spokesman Tom Keilman on Wednesday confirmed the London-based company was now negotiating to buy the Whiting Clean Energy plant.

The gas-fired generating plant is located at the sprawling BP refinery in Whiting. In addition to producing electricity for sale on the open market, it also produces steam BP uses in its refining process.

BP now has the right to buy the plant for the same price as that offered by NiSource, Skaggs said.

In November, NIPSCO announced it had agreements to buy the Whiting Clean Energy plant for $210 million and the Sugar Creek generating station in southern Indiana for $329 million. The two plants were expected to make up for a 1,060 megawatt generating shortfall NIPSCO will experience in coming years.

NIPSCO currently has three operating coal-fired generating plants which produce up to 2,694 megawatts.

BP's action also complicates NIPSCO's plans to file its first rate case in more than 20 years this summer. The addition of the BP and Sugar Creek plants to NIPSCO were to be an integral part of that case.

The rate case will set electric charges for NIPSCO's 435,000 residential, commercial and industrial customers.

For that reason, Skaggs said NiSource has "fast-fowarded" the process for gaining Indiana Utility Regulatory Commission approval of the Sugar Creek purchase. NiSource also plans to win approval for any alternatives to Whiting by fall, if that becomes necessary, Skaggs said.

NiSource on Friday reported fourth-quarter profits of $77 million, a 23 percent increase over the year-ago period. The improvement was due to higher revenues in both the natural gas and electric businesses, as well as the improved financial performance of Whiting Clean Energy, Skaggs said.

Basic earnings per share for the fourth quarter were 28 cents per share, as compared to 23 cents per share in the fourth quarter of 2006.

Excluding some one-time items, net operating earnings were $118.5 million, or 43 cents per share. Analysts had been expecting a net operating profit of 39 cents per share once one-time items were excluded.

NiSource's stock price received a mild jolt from the profit report, gaining 25 cents per share in early morning trading.

The company realized profits of $331.4 million for all of 2007, a 17 percent improvement as compared to 2006 profits of $282.2 million.

NiSource also confirmed net operating earnings guidance of $1.25 to $1.35 per share for 2008.

HOME