01—Abstract
Summary
Summary of the 10-K filed February 28, 2020. Cited figures are marked; the original filing is the authoritative source.
NiSource Inc. is an energy holding company whose subsidiaries are fully regulated natural gas and electric utilities serving approximately 4.0 million customers in seven states, with substantially all operating income generated by rate-regulated businesses in two segments: Gas Distribution Operations and Electric Operations.
Net income available to common shareholders was $328.0 milliona, or $0.88 per basic share, in 2019, compared with a loss of $65.6 million in 2018, with operating income of $890.7 million versus $124.7 million. The improvement reflected lower Greater Lawrence Incident expenses, $665 million of insurance recoveries recorded in 2019, and new rates, partially offset by $414.5 million of goodwill and intangible impairment charges related to Columbia of Massachusetts. The filing is dominated by the Greater Lawrence Incident of September 13, 2018, which resulted in one fatality.
Through December 31, 2019, the company recorded $1,041 millionb of third-party claims and government fines, penalties and settlements, with an estimated total of $1,041 million to $1,065 million, plus $420 million of other incident-related costs. Insurance coverage of $800 million has been fully collected, and expenses have exceeded that coverage. On February 26, 2020, the company agreed to sell Columbia of Massachusetts to Eversource for $1,100 million in cash, subject to adjustment, and entered into agreements with the U.S. Attorney's Office, including a plea agreement by Columbia of Massachusetts and a deferred prosecution agreement for the company.
The company estimates a pre-tax loss of approximately $360 millionc on the sale, and expects to close by September 30, 2020. Financially, total debt was $9,642.8 million at year-end 2019, the debt-to-capitalization ratio was 61.7% against covenant limits of 70% and 75%, and net available liquidity was $1,409.1 million.
Capital expenditures were $1,867.8 milliond in 2019, with 2020 projected at $1.8 to $1.9 billion. The company also reported a quarterly common dividend of $0.21 per share.
02—Key points
Key Highlights
- Net income available to common shareholders of $328.0 million ($0.88 per basic share) in 2019, versus a loss of $65.6 million in 2018
- Greater Lawrence Incident: $1,041 million of third-party claims and government-related costs recorded to date, plus $420 million of other incident-related costs; $800 million of insurance collected, which has been fully exhausted
- Pending sale of Columbia of Massachusetts to Eversource for $1,100 million in cash, with an estimated pre-tax loss of approximately $360 million and expected closing by September 30, 2020
- Goodwill impairment of $204.8 million and franchise rights impairment of $209.7 million for Columbia of Massachusetts recorded in Q4 2019
- Total consolidated indebtedness of $9,642.8 million; debt-to-capitalization ratio of 61.7% versus covenant maximums of 70% and 75%
- Capital expenditures of $1,867.8 million in 2019; 2020 projected at $1.8 to $1.9 billion, within an estimated $30 billion long-term infrastructure program
- Credit ratings of BBB+ (S&P), Baa2 (Moody's) and BBB (Fitch) for NiSource, with S&P outlook revised to Negative
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, NiSource kept $0.08.
- Revenue$5.05B100.0%
- Cost of revenue$155.5M3.1%
- Gross profit$5.21B103.1%
- Operating costs−$4.32B85.5%
- Operating income$890.7M17.6%
- Interest, other & tax−$507.6M10.0%
- Net income$383.1M7.6%
Where FY2019 revenue went
$5.05B- Operating costs: $2.63B, 52% of revenue
- Cost of revenue: $1.53B, 30% of revenue
- Net income: $383.1M, 7.6% of revenue
- Interest, other & tax: $507.6M, 10% of revenue
Kept 7.6% as net incomeNet income $383.1M · 7.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 28, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $5.05B$4.99B | +1.2% |
| Cost of Revenue | $1.53B$1.76B | −12.9% |
| Gross Profit | $5.21B$5.11B | +1.8% |
| Operating Expenses | $4.32B$4.99B | −13.5% |
| Operating Income | $890.70M$124.70M | +614.3% |
| Interest Expense | $378.90M$353.30M | +7.2% |
| Net Income | $383.10M-$50.60M | +857.1% |
| EPS (Basic) | $0.88$-0.18 | +588.9% |
| EPS (Diluted) | $0.87$-0.18 | +583.3% |
| Shares Outstanding (Basic) | 374.60M356.49M | +5.1% |
| Shares Outstanding (Diluted) | 376.00M356.49M | +5.5% |
05—Questions
Frequently Asked Questions
What is the financial impact of the Greater Lawrence Incident on NiSource?
Through December 31, 2019, NiSource recorded $1,041 million of third-party claims and government fines, penalties and settlements, plus $420 million of other incident-related costs, totaling $1,461 million, against $800 million of insurance recoveries. The company estimates third-party and government-related costs will range from $1,041 million to $1,065 million and other incident-related costs will total $450 million to $460 million. Expenses have exceeded the available insurance coverage.
What are the terms of the Columbia of Massachusetts sale to Eversource?
The Asset Purchase Agreement, dated February 26, 2020, provides for a cash purchase price of $1,100 million, subject to adjustment for net working capital at closing. Eversource will assume certain liabilities but not those arising from the Greater Lawrence Incident or certain pre-closing civil claims. Closing is subject to Hart-Scott-Rodino clearance, regulatory approvals including the Massachusetts DPU, and other conditions, and is expected by September 30, 2020.
How is NiSource's balance sheet and liquidity positioned?
Total consolidated indebtedness was $9,642.8 million at December 31, 2019, and the debt-to-capitalization ratio was 61.7%, within covenant limits of 70% and 75%. Net available liquidity was $1,409.1 million, up from $974.6 million a year earlier. The company stated that expenses above insurance coverage have primarily been funded through short-term borrowings, and it plans to pursue long-term financing and potential sale proceeds in 2020.
What risks does the filing highlight for investors?
Key risks include the possibility that the Massachusetts sale does not close by the October 26, 2020 outside date, further Greater Lawrence Incident costs beyond current estimates, the possibility of disallowance of approximately $258 million of pipeline replacement capital spending, potential penalties under the U.S. Attorney's Office agreements, and a possible credit rating downgrade that could increase borrowing costs and collateral requirements.
What is NiSource's plan for electric generation in Indiana?
NIPSCO's 2018 Integrated Resource Plan calls for retiring R.M. Schahfer Generating Station Units 14, 15, 17 and 18 by 2023 and Michigan City Unit 12 by 2028, representing 2,080 MW of capacity. The replacement plan includes renewable wind, solar and battery storage through NIPSCO ownership and power purchase agreements. The IURC approved the Indiana Crossroads and Rosewater build-transfer agreements, and NIPSCO has filed notice not to proceed with one approved power purchase agreement due to local zoning restrictions.
06—Continue