NiSource Inc. (NI)
Utilities — gas y electricidad reguladas
NiSource is a fully regulated gas and electric utility across six states, with two segments (Columbia Operations and NIPSCO Operations) that bill via regulator-approved tariffs. Traditional regulated rate base growth (guided 9%-11% annually 2026-2033) now adds a new line: a long-term contract with Amazon (through its subsidiary ADS) and Alphabet to supply electricity to data centers, requiring a US$28,600 million capital plan between 2026 and 2030. At a price of $41, the market pays 24× against earnings that the company itself guides to grow 9%-10% annually through 2033 — a high pace for a utility, sustained by that contract. The verdict is Fairly valued, with an estimated 5-year total return of +5%.
- Price
- $40.77
- Intrinsic value (5y, base)
- $45
- Total annual return (5y)
- 5.3%
- Status (nominal)
- Fairly valued
- Margin of safety
- +4%
The essentials
- Exclusive regulated franchise across six states via Columbia Gas and NIPSCO, with cost and investment recovery through tariffs approved by state commissions and the FERC.
- Long-term contract with Amazon (ADS) and Alphabet to power data centers: committed capacity growing from 2027, backed by a dedicated capital plan (GenCo) of US$7,600 million.
- Consolidated debt of US$16,300 million (debt-to-capitalization ratio of 51.0% against a 70% debt covenant) funds a total 2026-2030 capital plan of US$28,600 million — elevated leverage typical of the deployment phase.
Intrinsic value — two valuation methods
Total return at 5 years: 5.4%/year = 2.0% appreciation + 3.4% dividend. The target price ($45) is ex-dividend; the $7 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $57 · Multiples $42) exceeds the market price ($41).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $41 trades ~3.8% below its value discounted to today (~$42); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($45) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$27.
Thesis
The business
Fully regulated gas and electric distributor, with an exclusive franchise across six states and a wide, stable regulatory moat, boosted by new data center electricity demand.
The valuation
Valued by multiples (adjusted P/E on earnings attributable to NiSource), at 24× against the projected year 5, with the growth path anchored in current guidance (9%-10% adjusted EPS CAGR 2026-2033). The 5-year value is $45.
The margin of safety
It trades close to intrinsic value, far from the required margin of safety. The estimated total return at market price (appreciation plus dividend, via IRR) is +5% annually.
What to watch
The central disconfirmer is execution of the Amazon and Alphabet contract: if GenCo's construction pace slips, if the regulator limits cost recovery for the data center business, or if Amazon exercises its option to cut capacity starting in 2032, the guided growth path (9%-10% adjusted EPS) loses its main incremental driver and NiSource reverts to the more modest growth profile of a traditional utility.
Educational / informational. Does not constitute investment advice.