NEW YORK--()--Fitch Ratings has affirmed the outstanding ratings for NiSource Inc. (NI) and its subsidiaries as fully listed at the end of this release. The affirmations include NiSource Finance Corp. (NiSource Finance) and NiSource Capital Markets Inc., NI's two financing subsidiaries and Northern Indiana Public Service Co. (NIPSCO), an electric and gas utility. The Rating Outlooks are maintained at Stable. Approximately $7.2 billion of long-term debt is affected by the rating actions.
KEY RATING DRIVERS: NI's rating and Stable Outlook reflect the low business risk and consistent operating performance generated by its geographically diverse mix of regulated operations. Other considerations include the long-term financial impact of aggressive pipeline and gas utility system modernization programs and electric environmental capital expenditures, with a substantial portion of recoveries expected to be received through tracking mechanisms and relatively weak credit metrics at NI.
FORWARD EXPECTATIONS: NI's financial profile is expected to remain consistent with its current rating though its current multi-year infrastructure-build cycle. Fitch projects NI's 2012 debt to EBITDA to be approximately 5.0x. Typically NI's leverage peaks at the end of the year as a result of seasonal gas storage purchases at its gas utilities and drops during the following months as gas costs are recovered. Leverage ratios modestly strengthened during 2012 primarily benefiting from new electric rates effective Dec. 27, 2011, $339 million forward equity sale in September 2012, and the timely financial recovery under tracking mechanisms of a significant portion of NI's capital expenditures.
LIQUIDITY: NI's liquidity is expected to be adequate. NiSource Finance has a $1.5 billion revolving credit facility that matures in May 2017. The company also issues 'F3' rated commercial paper under a $500 CP program that is backstopped by the revolver. The revolver has one financial covenant which sets a maximum consolidated debt-to-cap ratio of 70%. The revolver also includes limitations on liens and restrictions on asset sales. At the end of the third quarter of 2012 NI had approximately $1.439 billion in net available liquidity. NI also has a total of $515 million of accounts receivable securitization facilities as follows: $240 million at Columbia Gas of Ohio; $200 at NIPSCO; and $75 million at Columbia Gas of Pennsylvania. Upcoming debt maturities at NiSource Finance include $420 million of notes due 2013 and at NIPSCO $68 million due 2013.
Positive: Future developments that may, individually or collectively, lead to a positive rating action include: reduced regulatory risk with expanded revenue tracking mechanisms and improving credit metrics through some combination of earnings growth and/or debt reduction.
Negative: Future developments that may, individually or collectively, lead to a negative rating action include: unfavorable regulatory decisions and higher than anticipated leverage which could result should NI not issue adequate equity to help fund its significant capital program. Debt to EBITDA above 5.5x on a sustained basis would be a catalyst for a negative rating action.
The following ratings have been affirmed with a Stable Outlook:
--Issuer Default Rating (IDR) at 'BBB-'.
NiSource Finance Corp.
--IDR at 'BBB-';
--Senior unsecured 'BBB-'
--Short term IDR 'F3';
--Commercial paper 'F3.
NiSource Capital Markets
--Senior unsecured 'BBB-'.
Northern Indiana Public Service Co.
--Senior unsecured and revenue bonds 'BBB'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'2013 Outlook: Natural Gas Pipelines and MLPs' (Nov. 30, 2012);
--'Pipelines, Midstream, and MLP Stats Quarterly - Second Quarter 2012' (Sept. 27, 2012);
--'Marcellus Shale Report: Midstream and Pipeline Sector Challenges and Opportunities' (June 10, 2012);
--'Top Ten Questions Asked by Pipeline, Midstream, and MLP Investors' (May 1, 2012);
--'Natural Gas Pipelines: Hot Topics' (Oct. 13, 2011).
Applicable Criteria and Related Research:
Corporate Rating Methodology
2013 Outlook: Natural Gas Pipelines & MLPs
Pipelines, Midstream, and MLP Stats Quarterly -- Second-Quarter 2012 (Second-Quarter Review)
Marcellus Shale Report: Midstream and Pipeline Sector -- Challenges/Opportunities
Top Ten Questions Asked by Pipeline, Midstream and MLP Investors
Natural Gas Pipelines: Hot Topics -- Long-Term Trends Affecting Pipeline Risk