Monday, October 15, 2018

CenterPoint Energy Fine-Tunes its Gas Businesses

By Tom Kleckner

CenterPoint Energy continues to focus on its gas business even as its regulated electric business contributed to a strong third-quarter earnings report.

The Houston-based company, which owns electric transmission and distribution and natural gas distribution, sales and services subsidiaries, on Friday reported a third-quarter profit of $179 million ($0.41/share), beating a Zacks Investment Research consensus of $0.37/share.

| CenterPoint Energy

| CenterPoint Energy

It was a marked reversal from the same period last year, when CenterPoint reported a $391 million loss after a taking an $862 million impairment charge due to its investment in struggling Enable Midstream Partners.

CenterPoint’s revenues for the quarter rose 16% to $1.9 billion, including $908 million from its electric transmission and distribution segment, an almost 10% increase over a year earlier. The company attributed the rise to customer growth and higher rates.

Earlier last week, CenterPoint announced its CenterPoint Energy Services had reached an agreement to acquire Atmos Energy Marketing for $40 million. Atmos, which manages assets for utilities, power plants and local distribution companies, will add six states to the 26 in which CenterPoint Energy Services already markets its energy packages.

“This deal will allow us to grow our customer base and revenues while maintaining a low operating model and a cost-effective organization,” Joe McGoldrick, president of CenterPoint’s gas division, said during a conference call with analysts Friday. “This deal will increase our scale, geographic reach and expand our capabilities.”

CenterPoint is also continuing to evaluate “strategic alternatives” for its Midstream partnership with Oklahoma-based OGE Energy, including a sale or spinoff, to “reduce exposure to commodity price influences,” CEO Scott Prochazka said.

CFO Bill Rogers told analysts the company is continuing its discussions with interested parties. If no deal is reached by mid-January, CenterPoint will be required to submit a right-of-first-offer to OGE — allowing OGE to buy out CenterPoint’s interest — before continuing discussions with other prospects, Rogers said. (See CenterPoint Abandons REIT Plan; Offers Stake in Gas Partnership to OGE.)

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