NiSource Inc. NI announced that its board of directors has approved to spin off its pure-play natural gas pipeline, midstream and storage unit – Columbia Pipeline Group (“CPG”) – through distribution of CPG common stock to NiSource shareholders. Along with the board’s approval, NiSource has confirmed the distribution ratio, record date and distribution date of the separation.
The distribution of CPG common stock will be executed after the close bell on the New York Stock Exchange on Jul 1, 2015. Shareholders of NiSource will receive one share of CPG common stock in exchange of one share of NiSource common stock. With this, CPG will be an independent, publicly traded company under the trading symbol CPGX, in which NiSource will not have any ownership interest.
NiSource decided to spin off CPG in September last year. The motive behind the spinoff was to take advantage of shale gas boom in the U.S. and growth opportunities in midstream operations of the oil and gas sector.
Separation of CPG would provide tax-advantageous funding opportunities for NiSource’s midstream assets as the former holds an ownership interest in Columbia Pipeline Partners LP CPPL, a master limited partnership (“MLP”). MLPs have lower cost of capital as they are not required to pay federal income taxes in general. Moreover, assets within MLPs generate steady cash flows.
CPG, headquartered in Houston, TX, post separation will include Columbia Gas Transmission, Columbia Gulf Transmission, Columbia Midstream Group, its ownership in Columbia Pipeline Partners, and other natural gas pipeline, storage and midstream operations presently owned by NiSource. CPG will operate more than 15,000 miles of natural gas transmission pipelines, roughly 300 billion cubic feet of underground natural gas storage capacity and a growing portfolio of midstream and related facilities.
Meanwhile, NiSource, headquartered in Merrillville, IN, will continue to serve more than 3.4 million customers in seven states under the Columbia Gas and NIPSCO brands. It provides electric distribution, generation and transmission services to roughly 450,000 NIPSCO electric customers in northern Indiana.
Currently, NiSource carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include National Grid plc NGG and RWE AG RWEOY. Both of them sport a Zacks Rank #1 (Strong Buy).
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