Unitil Corp. will grow its customer base by 40% with the acquisition of Northern Utilities Inc. and Granite State Gas Transmission Inc. from NiSource Inc. for $160 million plus an estimated $25 million for natural gas storage inventory and other working capital items, the company said last week.

The purchase is expected to be financed by newly issued common stock and debt. The transaction, which is expected to close by the fourth quarter of 2008, is subject to approval by the Maine Public Utilities Commission and the New Hampshire Public Utilities Commission, and review by certain federal agencies.

"Northern Utilities is a natural fit for Unitil," said Unitil CEO Robert G. Schoenberger. "Our New Hampshire electric distribution operations already share many customers and communities with Northern, and the acquisition underscores Unitil's commitment to the region."

Northern Utilities is a natural gas distribution utility serving 52,000 customers in 44 communities in Maine and New Hampshire. Northern has 78 full-time employees. Granite's operations consist of 86 miles of federally regulated gas transmission pipeline, primarily in Maine and New Hampshire. Granite's principal business is delivering gas transportation services to Northern and providing access to interstate gas pipeline supplies. Upon consummation of the transaction, both Northern and Granite would become wholly owned subsidiaries of Unitil Corp.

"This acquisition significantly strengthens our gas utility operations and increases our customer base by 40%," said Schoenberger.

NiSource acquired Northern and Granite in 1999 as part of the company's larger acquisition of Bay State Gas Co., which serves nearly 300,000 residential, commercial and industrial gas customers in Massachusetts. NiSource is retaining ownership of Bay State.

Looking to capitalize on the Millennium Pipeline entering service later this year, NiSource Gas Transmission & Storage is holding an open season for the potential construction of the New Penn Pipeline system and associated firm transportation, which would offer customers increased access to Northeast and Mid-Atlantic markets (see NGI, Feb. 18).

"Unitil is acquiring a quality set of assets uniquely suited to its growth strategy, while NiSource is able to focus even more closely on its own long-term growth plan, which centers on commercial development and expansion of our natural gas pipeline and storage business, as well as investment-driven growth at our core regulated utility businesses, including Bay State," said NiSource CEO Robert C. Skaggs Jr.

Unitil is being advised by RBC Capital Markets Corp. and by the law firm of Dewey & LeBoeuf. NiSource is being advised by The Blackstone Group and by the law firm of Schiff Hardin.

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