Indiana Utility Set to Borrow Billions as it Keeps Up With Data Center Expansion

Utility holding company NiSource is seeking bond financing as it plans billions in spending to supply data centers in northern Indiana. The company would use the proceeds for capital expenditures, working capital and debt repayment.

The company, which lists Amazon, Alphabet and Microsoft among its customers, announced a $40 billion capital expenditure plan for 2027 through 2033 in its Wednesday earnings release. That includes $32 billion for its base business and $8 billion for data center investments. Its preliminary prospectus supplement filed Monday leaves the borrowing amount and interest rate blank.

“We continually evaluate ways to effectively manage the potential power demand, generation sources, and transmission capabilities to meet potential further load growth from additional data center customers,” NiSource said in the filing.

In its forward-looking statements, NiSource also lists the risk of losing its investment-grade credit ratings or failing to recover investments under data center contracts. Customers could default, reduce their committed capacity or terminate contracts.

American Electric Power is also raising money for a larger utility construction program. It issued approximately $8.3 billion in long-term debt in 2025. Last week, AEP announced a $100 billion capital plan for 2027 through 2031, including $37 billion for transmission and $36 billion for generation. AEP says long-term customer contracts back those generation investments.

NiSource, based in Merrillville, Indiana, serves approximately 3.8 million customers across six states. Its Columbia Gas businesses deliver natural gas to about 2.4 million residential, commercial and industrial customers in Ohio, Pennsylvania, Virginia, Kentucky and Maryland. Those operations include approximately 37,300 miles of distribution mains.

Its Northern Indiana Public Service Company subsidiary, known as NIPSCO, serves approximately 900,000 gas customers and 500,000 electric customers in northern Indiana, with electric service covering 20 counties. NiSource owns an indirect 80.1 percent interest in NIPSCO.

Federal emergency orders have kept NiSource’s R.M. Schahfer coal plant operating. The company says it is reviewing the timing of replacement power sources and considering alternatives. It also continues to replace and modernize gas pipelines.

NIPSCO has agreements with three data center customers. According to the preliminary prospectus supplement, service to one began in summer 2026, and maximum committed capacity is expected to reach 3,888 megawatts by the end of 2032. NiSource plans 3,578 megawatts of generation and capacity assets through NiSource Generation Company LLC, known as GenCo, supplemented by other purchases and agreements.

The Indiana Utility Regulatory Commission approved the Amazon special contract and related power purchase agreement June 17. A separate order approved generation resources, including gas turbines and battery storage. NiSource announced its Alphabet agreement in April and Microsoft agreement in October. Microsoft is expected to begin a 20-year service term in 2028, with approximately 1,100 megawatts added to GenCo’s pool portfolio.

NiSource says large customers fund the generation and transmission infrastructure needed to serve them, protecting existing customers from incremental costs. It projects approximately $1.75 billion in savings for existing NIPSCO electric customers.

NiSource reported approximately $15.3 billion in senior unsecured debt and $2.75 billion in junior subordinated debt as of Sept. 30. The proposed senior unsecured notes mature in 2032 and depend on subsidiary cash flows for repayment. Subsidiary creditors, including holders of about $400 million in debt, have priority claims on subsidiary assets. The indenture imposes no financial-ratio requirements or ceiling on unsecured borrowing by NiSource or its subsidiaries and provides no change-of-control repurchase right.

The proposed bonds also permit redemption at 101 percent of principal if issuance to specified foreign entities threatens federal tax credits. The definition includes battery companies CATL and BYD.

BMO Capital Markets, KeyBanc, Mizuho and PNC are managing the offering. Some proceeds may repay revolving loans or commercial paper held by underwriters or their affiliates. The filing says a FINRA conflict-of-interest rule would apply if an underwriter or its affiliates receive at least 5 percent of the net proceeds.

GenCo plans to add 600 megawatts of battery storage under a long-term tolling agreement signed in connection with the Microsoft deal. An AGP Group affiliate will develop and construct the facility. The storage will serve multiple large customers through GenCo’s shared pool of power resources.