Why NiSource Deserves a Look: The Privatization Case That Private Markets Are Already Seeing

The Setup: A Public Market Blind Spot

NiSource Inc. (NYSE: NI) is trading at a significant discount to what private markets think it’s worth. While this might sound like typical activist rhetoric, the numbers tell a different story. Natural gas utilities are currently valued by private investors at over 30 times forward earnings—roughly 50% higher than NiSource’s current valuation. That gap? It’s not accidental. It reflects a fundamental misalignment between how public markets view traditional energy infrastructure and where private capital actually sees value.

HITE Hedge Asset Management, managing $700 million in assets with a 17-year track record in energy investing, laid out this argument clearly in a recent statement to NiSource’s board: the company has substantial hidden value that won’t be unlocked while it remains public.

The Asset Quality Question

Let’s be direct about what NiSource actually owns. The company operates two major business lines: a significant natural gas distribution network and electric utilities in northern Indiana through NIPSCO. The natural gas side has invested heavily in pipeline replacement and modernization—reducing methane emissions while maintaining critical infrastructure. The electric utilities are positioned to benefit from renewable generation growth and vehicle electrification trends that remain underpenetrated in the Midwest.

With roughly 7,500 employees, NiSource has consistently improved safety metrics and environmental performance. These aren’t sexy metrics for public market investors, but they’re exactly what private infrastructure funds spend hours analyzing.

The Capital Problem

Here’s where the argument gets interesting. Public markets in the US have largely turned away from natural gas utilities. That’s ideological to some extent, but it’s also a real structural problem for companies like NiSource that need capital to fund pipeline replacement and renewable investment simultaneously.

Private markets, particularly infrastructure-focused funds, approach this differently. They have the patient capital and extended investment horizon to fund the transition while maintaining steady returns. Lower cost of equity capital would let NiSource accelerate its modernization program—which reduces environmental risk while improving service reliability.

The Sum-of-Parts Discount

This is worth understanding. NiSource’s mixed portfolio—leading positions in both natural gas and electric utilities—should theoretically deserve a premium valuation. Instead, it trades at a discount. Part of this reflects sector rotation away from traditional utilities. Part reflects pure market inefficiency.

A privatization transaction would theoretically allow investors to restructure the capital stack and unlock value through more specialized management and focused investment strategies—essentially doing what public markets have failed to do naturally.

The Timing Factor

The recent appointment of Lloyd Yates as CEO, combined with Elliott Management’s involvement as an activist investor, has positioned the conversation around strategic alternatives. Private markets are watching. They see an experienced management team running assets that generate reliable cash flow while undergoing necessary environmental and infrastructure modernization.

Whether NiSource’s board aggressively pursues privatization remains an open question. But the market signal is clear: private capital sees something public markets haven’t priced in yet.