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NiSource to Invest $1.75B, Widen Market for Appalachian Gas

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Columbia Pipeline Group (CPG), a unit of diversified utility NiSource Inc. (NI), announced fresh investments of $1.75 billion to strengthen its existing pipeline infrastructure. The objective is to construct new pipeline projects and transport additional volumes of gas produced by natural gas producers in western Pennsylvania, northern West Virginia and eastern Ohio.

The investment will involve construction of the Leach XPress project, a new 160 mile natural gas pipeline in Ohio and West Virginia by Columbia Gas Transmission (Columbia Transmission). The Leach XPress project will boost the natural gas transportation capacity of the company by 1.5 billion cubic feet per day (Bcf/d).

This new pipeline has already booked long-term firm service contracts with Range Resources - Appalachia, LLC, a unit of Range Resource Corporation (RRC), Noble Energy, Inc. (NBL), Kaiser Marketing Appalachian, LLC and American Energy Utica – LLC.

Another project from Columbia Gulf Transmission (Columbia Gulf) – the Rayne XPress project – will provide additional capability for more than four shippers to transport Appalachian production to the markets via Columbia Gulf. This new project is also supported by long-term shipping agreements.

Long-term service agreements make these pipeline projects viable as construction of these pipelines involves huge initial capital investments for the company. The construction work on the projects is expected to start in the second half of 2016 and commercial operation is slated for the second half of 2017.

We believe the increasing regulation on coal usage, clean burning nature of natural gas and new drilling techniques have resulted in booming natural gas production and usage. This also requires efficient midstream services for the transportation of natural gas to refiners and storage units and ultimately to their end markets.

Columbia Gas Transmission and Columbia Gulf Transmission are part of the Columbia Pipeline Group. NiSource currently holds a Zacks Rank #3 (Hold). A better ranked stock in the same space is ALLETE, Inc. (ALE) carrying a Zacks Rank #2 (Buy).

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