NiSource sheds 2 companies

Move comes 9 months after failed NIPSCO sale
BY KEITH BENMAN
kbenman@nwitimes.com
219.933.3326
Date posted online: Wednesday, February 20, 2008

MERRILLVILLE || NiSource Inc. has an agreement to sell off a small New England utility and a gas tranmission company, both of which it acquired nine years ago in its drive to become a super-regional energy company.

NiSource announced Tuesday it had struck a deal to spin off Northern Utilities Inc. and Granite State Gas Corp. to Unitil Corp., of Hampton, N.H., in a deal valued at $185 million.

"We expect this transaction to provide benefits to the customers, employees and shareholders of both companies," said NiSource CEO Robert Skaggs Jr.

NiSource stock fell about 20 cents in early morning trading after the agreement was announced, but recovered by noon when it was trading at $18.17 per share, up about 8 cents from Monday's close.

The move comes nine months after NiSource's effort to sell its NIPSCO electric subsidiary in Northern Indiana fell through. At that time, Skaggs said the company was unable to strike a deal for the 435,000-customer utility that met company goals.

New Hampshire-based Unitil Corp. will pay NiSource $160 million for the two companies, plus an estimated $25 million for inventory and other working capital.

The Unitil transaction is expected to close by year's end, pending state regulatory approvals in Maine and New Hampshire, as well as federal approvals. The transaction will result in a $65 million after-tax book loss for NiSource in the first quarter.

Northern Utilities is a natural gas distribution utility with 52,000 customers in Maine and New Hampshire. Granite State Gas has 86 miles of regulated gas transmission pipeline, primarily in the same two states.

NiSource will use the proceeds from the deal to pay down debt, according to the company. The deal also is expected to contribute a small amount to NiSource earnings.

NiSource acquired Northern Utilities and Granite State Gas in 1999 as part of its $1.1 billion acquisition of Bay State Gas Co., which has 300,000 customers in Massachusetts.

NiSource in a prepared release stated it will retain Bay State Gas as "a core component of the company's long-term, investment-driven growth strategy."

NiSource has 3.8 million energy customers in nine states in the Midwest, New England and Mid-Atlantic regions.

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