NiSource receives IURC approval for data center-focused generation unit

MERRILLVILLE, Ind. - NiSource Inc. (NYSE:NI), a utility company with a market capitalization of approximately $20 billion and impressive 25% stock return over the past year, announced Wednesday that the Indiana Utility Regulatory Commission (IURC) has approved its petition for NIPSCO Generation LLC (GenCo), a separate entity designed to serve the growing data center industry in Northern Indiana. According to InvestingPro analysis, the company appears to be trading above its Fair Value, reflecting investor optimism about its growth initiatives.

The newly approved structure aims to separate the costs of serving new data center customers from existing retail customers of Northern Indiana Public Service Company (NIPSCO). According to the company, this separation will allow NiSource to pursue growth opportunities while protecting current customers from bearing costs associated with data center development. This strategic move comes as NiSource demonstrates strong revenue growth of nearly 17% over the last twelve months.

"This is an important step forward to position Northern Indiana at the center of a fast-growing, economically essential industry," said NiSource President and CEO Lloyd Yates in the press release statement.

The GenCo structure is built around four strategic elements: protecting existing retail customers from new costs, positioning the company to meet data center demands quickly, enabling prudent investments with predictable cash flows, and maintaining flexibility to adapt to evolving energy markets.

The approval comes as data centers continue to drive significant energy demand across the United States, requiring utilities to develop new generation capacity and transmission infrastructure.

NiSource serves approximately 3.3 million natural gas customers and 500,000 electric customers across six states through its local Columbia Gas and NIPSCO brands.

The company did not disclose specific investment amounts or timelines for new generation projects that might result from this regulatory approval.

In other recent news, NiSource Inc. has been in the spotlight following several key developments. The company disclosed a new contract through its subsidiary, Northern Indiana Public Service Company LLC (NIPSCO), to provide electric service to a large investment-grade data center customer. This agreement, which will begin in 2027 and extend through 2032, includes a mechanism to return savings to customers and awaits approval from the Indiana Utility Regulatory Commission. UBS has reiterated its Buy rating for NiSource, maintaining a price target of $45.00, in light of this new contract.

Conversely, Jefferies downgraded NiSource from Buy to Hold, adjusting the price target to $44.00 due to regulatory uncertainties in Indiana. These changes include the departure of two Indiana Utility Regulatory Commission commissioners and the appointment of a new head at the Office of Utility Consumer Counselor. Citigroup analyst Ryan Levine noted that these regulatory shifts might delay the company’s Genco spinoff application, maintaining a neutral rating with a $44 price target. Meanwhile, Wolfe Research raised its price target for NiSource to $46.00, citing the company’s strong rate base growth and projected annual earnings per share growth through 2029.

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