CenterPoint announces sale of Arkansas and Oklahoma natural gas LDC businesses to Summit Utilities for $2.150 billion in cash

Rhea-AI Summary

CenterPoint Energy (NYSE: CNP) has agreed to sell its Arkansas and Oklahoma natural gas LDC assets to Summit Utilities for $2.15 billion in cash. The sale includes a recovery of $425 million in storm-related costs. The net proceeds of $1.725 billion represent a 2.5x multiple of 2020's rate base and a 38.0x multiple of 2020's earnings. This strategic move enables CenterPoint to focus on its growth commitments, targeting annualized utility earnings per share growth of 6%-8% and a 10% compound annual growth rate. The transaction is expected to close by the end of 2021.

Positive

• Sale of natural gas assets for $2.15 billion enhances liquidity.
• Transaction reflects a strong valuation with 2.5x rate base multiple.
• Allows CenterPoint to focus on expansion and growth commitments in utility earnings.

Negative

• None.

CenterPoint Energy, Inc. (NYSE: CNP) (“CenterPoint”) today announced the sale of its Arkansas and Oklahoma natural gas LDC assets to Summit Utilities for $2.150 billion in cash, including recovery of approximately $425 million in cash of unrecovered storm-related incremental natural gas costs incurred in February 2021, subject to true-up at transaction close. The assets include approximately 17,000 miles of main pipeline in Arkansas, Oklahoma, and Texarkana serving more than half a million customers residing in high-quality regulatory jurisdictions.

The proceeds of $1.725 billion in cash, after recovery of approximately $425 million in cash unrecovered storm costs, represents a 2.5x multiple of 2020 rate base and a 38.0x multiple of 2020 earnings. The transaction is anticipated to close by the end of 2021, subject to customary closing conditions, including Hart-Scott Rodino antitrust clearance and state regulatory approvals.

CenterPoint President and CEO Dave Lesar said, “I could not be more excited to share this announcement today. Summit Utilities is a seasoned operator of utility assets in the region and the ideal company to acquire these assets. We are excited that Summit has existing businesses in Arkansas and Oklahoma, which will facilitate the transition process for our employees and customers. Summit has an industry track record of being a high-quality operator and we are confident they will continue to provide safe, reliable, and low-cost natural gas service to our customers in Arkansas and Oklahoma.”

Lesar added, “This transaction reflects the hard work and determination of everyone on the CenterPoint team. This valuation represents a landmark multiple for the LDC space and is a clear testament of the premium utility assets in these two jurisdictions. These assets are a proven integral part of the energy supplies in the states in which they operate. The solid customer demand for reliable and efficient distribution of natural gas was only solidified by the recent winter storm events. We believe the price paid for these assets demonstrates that the market is significantly undervaluing the remainder of our natural gas businesses.”

“The announcement demonstrates not only our ability to efficiently recycle capital across our utility footprint, but also our ability to execute on our commitments to our shareholders. As outlined in our December 2020 Investor Day, our commitments include delivering annualized utility earnings per share growth of 6% - 8% and growing our rate base at a 10% compound annual growth rate. The ability to efficiently redeploy this capital and the eventual exit of the midstream investments will have no impact on our targeted 6% - 8% annualized earnings per share growth rate. Further, we will also be eliminating the Oklahoma and Arkansas storm-related incremental natural gas cost from our balance sheet,” said Lesar.

“We look forward to announcing our first quarter of 2021 financial results during our earnings call on May 6,” he said.

J.P. Morgan Securities LLC. and RBC Capital Markets, LLC. served as CenterPoint Energy’s financial advisors. Baker Botts L.L.P. served as CenterPoint Energy’s legal advisors.

About CenterPoint Energy, Inc.

As the only investor-owned electric and gas utility based in Texas, CenterPoint Energy, Inc. (NYSE: CNP) is an energy delivery company with electric transmission and distribution, power generation and natural gas distribution operations that serve more than 7 million metered customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas. As of December 31, 2020, the company owned approximately $33 billion in assets and also owned 53.7 percent of the common units representing limited partner interests in Enable Midstream Partners, LP, a publicly traded master limited partnership that owns, operates and develops strategically located natural gas and crude oil infrastructure assets. With approximately 9,500 employees, CenterPoint Energy and its predecessor companies have been in business for more than 150 years. For more information, visit CenterPointEnergy.com.

About Summit Utilities, Inc.

Summit Utilities, Inc. (Summit) owns natural gas distribution and transmission subsidiaries that operate in Arkansas, Colorado, Maine, Missouri, and Oklahoma. The company provides safe, clean and affordable natural gas to businesses and residents in five states through Colorado Natural Gas, Inc., Summit Natural Gas of Missouri, Inc., Summit Natural Gas of Maine, Inc. and Arkansas Oklahoma Gas Corporation. Each of Summit’s subsidiaries constructs and installs natural gas distribution systems with the goal of supporting economic development by providing clean-burning, safe and reliable natural gas to residential and commercial customers through exceptional customer service and commitment to community. Overall, Summit entities serve approximately 100,000 customers and operate more than 5,400 miles of pipeline in Arkansas, Colorado, Maine, Missouri and Oklahoma.

Use of Non-GAAP Measures

As included in this press release, our utility growth target of 6-8% is based on a non-GAAP utility earnings per share (“Utility EPS”), which is not a generally accepted accounting principles (“GAAP”) financial measure. This non-GAAP EPS based utility growth rate has been previously referenced by the CenterPoint Energy as the guidance-based growth rate. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. The Utility EPS reflects dilution and earnings as if the Company’s Series B Preferred Stock converted on their mandatory conversion date. Utility EPS considers assumptions for certain significant variables that may impact earnings, such as customer growth and usage including normal weather, throughput, reco

FAQ

What is the value of the CenterPoint Energy asset sale to Summit Utilities?

CenterPoint Energy announced the sale of its Arkansas and Oklahoma natural gas assets for $2.15 billion.

What does the sale of assets mean for CenterPoint Energy's financials?

The sale provides $1.725 billion in net cash, reflecting a 2.5x multiple of the 2020 rate base, enhancing liquidity for future growth.

When is the transaction between CenterPoint Energy and Summit Utilities expected to close?

The transaction is anticipated to close by the end of 2021, subject to regulatory approvals.

What are CenterPoint Energy's growth targets following the asset sale?

CenterPoint Energy aims for annualized utility earnings per share growth of 6%-8% and a 10% compound annual growth rate after the sale.