NiSource plans new company

Initial public offering set to raise $235M; 12.5M shares
BY KEITH BENMAN
kbenman@nwitimes.com
219.933.3326
Date posted online: Tuesday, December 25, 2007

MERRILLVILLE || NiSource Inc. is spinning off a major natural gas pipeline into a new company that will make an initial public offering of 12.5 million shares to raise $235 million.

The new company, NiSource Energy Partners L.P., will have as its initial asset the Columbia Gulf Transmission Co., which operates 3,400 miles of pipeline stretching from the Gulf of Mexico to West Virginia, NiSource said in a press release.

Following the public offering, NiSource will own a 58.9 percent limited partnership interest in NiSource Energy Partners.

The move to form a separate company to handle the pipeline system grew out of a strategic review last year, which also put NiSource subsidiary NIPSCO on the sales block.

The NIPSCO sale fell through in May. But NiSource CEO Robert Skaggs Jr. has been telling Wall Street analysts the company intended to follow through on plans to spin off certain transmission assets.

In reporting third-quarter earnings on Nov. 2, Skaggs affirmed the company would be moving down that path.

"We believe the formation of a master limited partnership is a natural complement to our gas transmission and storage growth strategy, and should provide access to competitively priced capital to support future growth investment," Skaggs said.

Gas transmission and storage assets, of which Columbia Gulf is a part, produce about 34 percent of NiSource operating revenues, according to a recent company presentation.

NiSource has operations in 19 states and delivers energy to 3.8 million customers.

The spinning off of natural gas and other assets into master limited partnerships is becoming common in the energy industry. A year ago, Duke Energy completed the spin-off of pipeline assets into a new publicly traded company called Spectra Energy Corp.

Master limited partnerships confer significant tax advantages on companies, as they are not subject to corporate income taxes. Instead, each owner of such a partnership is personally responsible for paying taxes on their portion of income, gains, losses and deductions.

NiSource Energy Partners will trade on the New York Stock Exchange under the symbol "NIA."

The $235 million to be raised is based on an assumed initial public offering price of $20 per unit. NiSource also plans to raise $250 million more in borrowings to finance the new company.

Lehman Brothers Inc. and Citigroup Global Markets Inc. are acting as representatives of the underwriters and lead book-running mangers for the offering.

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