CenterPoint Energy makes another divestment deal for hundreds of millions of dollars

Houston-based CenterPoint Energy Inc. (NYSE: CNP) will sell its natural gas retail business to a private equity firm for about $400 million, according to a Feb. 24 press release.

Energy Capital Partners LLC is buying CenterPoint Energy Services Inc. in the deal, which is expected to close in the second quarter of 2020. CenterPoint plans to use the net proceeds to pay down debt. The deal comes just days after the departure of the company’s CEO and shortly after another multimillion-dollar divestment was announced.

New Jersey-based ECP has an office in Houston and specializes in energy infrastructure projects. Houston-based CES has about 300 employees. It provides natural gas sales, storage and supply plus other energy-related services to about 30,000 commercial and industrial customers, utilities and municipalities across more than 30 states, per the release.

As part of the deal, CES and Shell Energy North America (US) LP will enter into a long-term preferred supply agreement in which the latter company will provide gas supply and collateral support and receive equity warrants.

“The sale of our gas retail business further positions CenterPoint Energy to focus on the long-term performance of our core electric and natural gas utility businesses,” John W. Somerhalder II, interim president and CEO of CenterPoint Energy, said in the release. “At the same time, this sale will strengthen our balance sheet and improve our business risk profile.”

This is the first announcement CenterPoint has made with Somerhalder at the helm. Just days earlier, previous President and CEO Scott Prochazka abruptly departed after leading the company for six years. His departure came just days after the Texas Public Utility Commission approved a $13 million rate hike for CenterPoint. The company initially sought a $161 million increase.

“When (the CES deal is) combined with our recent agreement to sell Miller Pipeline and Minnesota Limited, two businesses that comprised our infrastructure services segment, we expect our utility earnings contribution to approach 90 percent over the next several years,” Somerhalder added.

Earlier this month, CenterPoint announced the deal to sell Miller Pipeline and Minnesota Limited to Atlanta-based PowerTeam Services LLC for $850 million. The subsidiaries — which CenterPoint acquired in its multibillion-dollar acquisition of Indiana-based Vectren Corp. — are natural gas distribution and transmission pipeline contractors that employ about 7,500 people combined.

When the Vectren deal was announced in April 2018, it was valued at roughly $5.98 billion plus the assumption of Vectren’s debt, which was expected to be about $2.5 billion. Upon closing the deal in February 2019, CenterPoint had assets totaling $29 billion, an enterprise value of $27 billion and approximately 14,000 employees. The company now has nearly $35 billion in assets, and it serves customers in nearly 40 states.

CenterPoint Energy is represented in the CES sale by Goldman Sachs & Co. LLC as exclusive financial adviser and Akin Gump Strauss Hauer & Feld LLP as legal counsel. Latham & Watkins LLP is serving as legal counsel to Energy Capital Partners, and BNP Paribas is providing a committed borrowing base facility.

By Olivia Pulsinelli – Assistant Managing Editor

Courtesy of Houston Business Journal

https://www.bizjournals.com/houston/news/2020/02/24/centerpoint-energy-makes-another-divestment-deal.html