Date posted online: Thursday, May 31, 2007
NIPSCO sale called off -- for now
MERRILLVILLE | Months of anxiety for NIPSCO workers and consumers ended Wednesday with parent company NiSource Inc. announcing it had broken off sales talks with potential buyers.
The announcement that the NIPSCO sale had fallen through came as part of a long-promised update on a comprehensive strategic review that took well longer than one year.
"Of all those large transformational options we analyzed, the best option would be potentially separating or selling the NIPSCO electric business," NiSource CEO Robert Skaggs Jr. told Wall Street analysts on an 8 a.m. conference call.That left analysts and others wondering why that hadn't happened, especially when Skaggs said discussions with potential buyers had been at a "very advanced" stage. He was also plain that NiSource would still consider selling or "spinning off" the utility.
"It's a pile of nothing," said Jim Blythe, president of USW Local 12775. "I think they did try to sell, but I don't think they got what they wanted."
Blythe said some union members feel they might be better off under a new boss after having gone through years of downsizing at NiSource.
In January, media reports identified Duke Energy as the lead bidder for NIPSCO's electric business. Several other companies including Exelon and AEP were also said to be interested.
Interested companies may not have offered enough money to cover the significant taxes NiSource would have incurred on the sale of Northern Indiana Public Service Co., said Philip Adams, a senior bond analyst with Gimme Credit, a provider of independent credit research.
NIPSCO's reliance on large industrial customers, whose demand for electricity can swing widely with the ups and downs of the economy, may also be an impediment to a sale.
"It took them over a year to arrive at no decision," Adams said.
NIPSCO employees were told the news by managers at small meetings in power plants and other locations across northern Indiana Wednesday morning. Union chiefs like Blythe were given the news just before Skaggs spoke with Wall Street analysts.
Skaggs tried to link calling off the sale to issues other than price. He said no transaction would happen unless the interest of customers, workers and other stakeholders were taken into consideration.
NIPSCO employs 2,400 people in Northern Indiana, with about 1,750 represented by the USW.
NIPSCO was the foundation for NiSource's growth, which in the past decade has become a national player in energy markets, with 3.8 million customers.
Consumer groups expressed relief NIPSCO was not sold, but said they will remain vigilant.
"This electric utility has been built on the backs and wallets of Northwest Indiana residents and should be headquartered and controlled in this region," said LaPorte County Attorney Shaw Friedman.
Four years ago, LaPorte County and other local governments waged a successful battle to keep NIPSCO from closing service hubs.
A NiSource question-and-answer briefing circulated to NIPSCO employees Wednesday via newsletter assured them no broad staff or cost-cutting measures were imminent.
NIPSCO President Mark Maassel in a letter said the whole process demonstrated NIPSCO is "highly valued" and remains committed to its Indiana customer base.
Skaggs also told analysts the company is "aggressively in rate mode" across the nine states in which it operates. The focus includes NIPSCO, where the utility will apply for a change in its basic rates next year.
A sale could have had a significant effect on those rates.
The company is considering a wide array of options to increase its NIPSCO electric business, Skaggs told analysts. Although he chose his words carefully, those options basically boil down to reopening the closed Dean Mitchell Generating Station in Gary, buying power from other utilities or buying a power plant.
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