Thursday, January 24, 2019

CenterPoint Touts Vectren Deal in Earnings Call

Vectren CenterPoint OGE earnings Q1 2018

CenterPoint Energy executives said Friday they were “excited” about the company’s proposed acquisition of Indiana utility Vectren, saying it presents them with future growth opportunities.

“This transaction will continue to advance us towards our vision of being the nation’s leader in delivering energy, service and value,” CenterPoint CEO Scott Prochazka said during the company’s first-quarter earnings call with analysts and investors. “We’re excited about CenterPoint’s post-merger future.”

CenterPoint announced the $6 billion deal last month. The combined company would serve more than 7 million customers, operate electric and natural gas delivery systems in eight states and hold about $29 billion in assets. (See CenterPoint Energy to Acquire Vectren in $6B Deal.)

The Houston-based company hopes to close the acquisition in the first quarter of 2019. The deal still requires approvals from Vectren shareholders, FERC, the Federal Communications Commission, and regulators in Indiana and Ohio.

“We are combining two companies with strong capital investment opportunities and rate base growth,” said CFO Bill Rogers. “We believe we also have the right mix of unregulated products and services to meet the customer needs of today and tomorrow. This merger provides us the opportunity to deliver even stronger earnings results than we would as separate entities.”

CenterPoint reported first-quarter earnings of $241 million ($0.55/share), compared with $160 million ($0.37/share) for the same period in 2017, beating the Zacks Consensus Estimate of 44 cents.

Investors reacted to the news by driving CenterPoint’s share price up 6.1% to $26.88 at the market’s open. The stock closed at $26.41.

Vectren CenterPoint OGE earnings Q1 2018

The combined CenterPoint-Vectren service area | CenterPoint Energy

Prochazka said the Vectren acquisition will lessen the company’s exposure to the midstream space through Enable Midstream Partners, a gas-gathering and processing joint venture with Oklahoma’s OGE Energy. CenterPoint owns a 54.1% share of Enable, while OGE holds a 25.7% limited-partnership interest and a 50% management interest.

“We continue to believe Enable is well-positioned for success,” Prochazka said, pointing to Enable’s earnings announcement earlier in the week in which it reported all-time highs for quarterly natural gas gathered volumes and processed volumes.

That’s not to say CenterPoint isn’t continuing to look for opportunities to reduce its ownership in Enable.

“We need to be very thoughtful and do so in a coordinated fashion with Enable, so we don’t have a negative impact on Enable,” Prochaska said.

Rogers made it clear that CenterPoint will not sell off portions of Enable to fund the Vectren acquisition, saying three times, “We do not intend to sell Enable common units to finance the acquisition of Vectren shares.”

OGE Gets Huge Boost from Favorable Weather

REV FERC earnings Vectren

OGE on Thursday credited favorable weather for first-quarter earnings that almost doubled analysts’ projections.

The Oklahoma City-based company reported earnings of $55 million ($0.27/share), compared with 2017’s first-quarter profits of $36 million ($0.18/share). A Thomson Reuters survey of analysts had expected earnings of 15 cents/share.

CEO Sean Trauschke told analysts and investors during a conference call that it was the first time in five years OGE has begun a calendar year with weather that has driven up electricity sales.

“It feels good to have the first quarter behind us with positive weather,” Trauschke said. “Weather changes. It’s not something you can control. What does not change is our execution and focus on getting better.”

Ironically, Trauschke’s comments came in the aftermath of severe weather that hit OGE utility Oklahoma Gas & Electric’s service territory on May 2.

Vectren CenterPoint OGE Earnings Q1 2018

OG&E’s service territory | OG&E

“Tornadoes, high winds, rain, hail, the full complement,” Trauschke said, promising that service would be restored by noon May 3.

OG&E contributed earnings of 16 cents/share, double its performance in 2017’s first quarter. Trauschke said its Mustang Energy Center’s seven new units have already seen “close to 500 starts” and produced more power this year than its legacy units did all last year.

OGE’s revenue for the quarter was $492.7 million, up 8% from last year. Noting the company realizes most of its earnings in the second and third quarters, Trauschke reaffirmed year-end earnings guidance of $1.90 to 2.05/share.

The company’s stock price gained $1.41/share with Thursday’s earnings release, finishing the day up 4.3% at $34.23/share.

— Tom Kleckner