Nisource Hold Rating: Balancing CIAC Impact and Competitive ROE Challenges

Analyst Ryan Levine of Citi maintained a Hold rating on Nisource (NI – Research Report), with a price target of $41.00.

Ryan Levine has given his Hold rating due to a combination of factors affecting Nisource’s financial outlook. One significant consideration is the potential impact of the Contribution in Aid of Construction (CIAC) structure on the company’s earnings per share (EPS). While the CIAC structure can reduce investment risk for utilities by having customers prepay for infrastructure, it also diminishes the EPS accretion, particularly when large amounts of CIAC are utilized. This structure could potentially use up some of Nisource’s net operating loss (NOL) position, further impacting financial performance.
Another factor influencing Levine’s Hold rating is the competitive environment for return on equity (ROE) negotiations related to the GenCo structure in Indiana. Although there is room for negotiating above-market ROEs, practical challenges and political considerations may limit the extent of these negotiations. Additionally, the competition from other locations for datacenter loads adds pressure on Nisource to offer attractive terms. These dynamics suggest that while there is potential for positive financial outcomes, uncertainties and competitive pressures warrant a cautious approach, justifying the Hold rating.

Levine covers the Utilities sector, focusing on stocks such as Evergy, American Electric Power, and Atmos Energy. According to TipRanks, Levine has an average return of 6.9% and a 59.09% success rate on recommended stocks.