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CenterPoint Energy (CNP) Sells AR & OK Gas Supply Assets

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CenterPoint Energy (CNP - Free Report) recently completed its previously announced sale of natural gas distribution utilities in Arkansas (AR) and Oklahoma (OK) to Summit Utilities, Inc. Last April, CNP entered into an agreement to sell its natural gas distribution assets for $2.15 billion in cash to Summit Utilities.

Courtesy of the latest acquisition, Summit Utilities will now own nearly 17,000 miles of main pipeline in Arkansas, Oklahoma, and Texarkana, serving more than 500,000 residential and business customers. Since all legal formalities have been met, Summit Utilities will start serving natural gas customers of CenterPoint Energy in AR and OK on an immediate basis.

Divestiture Helps Meet Long-Term Goals

The decision to sale the natural gas distribution assets in these two assets will allow CenterPoint to focus on a fewer areas to execute long-term plans. The net proceeds from the sale will assist CNP in funding long-term capital investment plans across regulated utility businesses without issuing external equity, which in turn will drive its industry-leading rate base growth.

The divestment of midstream assets is not going to impact the long-term annual earnings growth target in the range of 6-8%. Reinvestment of the sale proceeds and the long-term capital expenditure plan to invest more than $18 billion in five years and $40 billion in the next decade will continue to drive the performance of CenterPoint Energy.

Recently, Dominion Energy (D - Free Report) completed the sale of Questar Pipelines to Southwest Gas Holdings Inc. for $1.975 billion. The net proceeds from the asset sale allowed Dominion to lower its existing debt and fund capital growth projects. This sale will allow Dominion to focus on the clean-energy portfolio, including the development of the largest offshore wind farm in North America. Dominion Energy plans to invest $32 billion in the 2021-2025 time period to strengthen its existing infrastructure, out of which a major portion will be invested in zero-carbon generation and energy storage.

Investments in Utility Space

Apart from streamlining their portfolios through divestiture of non-core assets, utilities are also making strategic acquisitions and have long-term capital expenditure plans to strengthen and expand their infrastructure to serve the increasing number of customers. NextEra Energy (NEE - Free Report) and American Water Works (AWK - Free Report) , among others, are making investments in upgrading and maintaining infrastructure.

NextEra Energy has well-chalked plans to invest nearly $34.5 billion in different projects during the 2022-2025 time period. NEE has a long-term (three to five years) earnings growth of 8.94% and the Zacks Consensus Estimate for NEE’s 2021 earnings has moved up 0.4% in the past 90 days.

American Water Works has plans to invest $13-$14 billion in the 2022-2026 time period and $28-$32 billion in the 2022-2031 time frame. AWK’s long-term earnings growth is pegged at 8.1% and the Zacks Consensus Estimate for 2021 earnings has moved up 0.2% in the past 90 days.

Price Performance

Shares of CenterPoint Energy have gained 33.8% in the past year, outperforming the industry’s 8.9% rally.

Zacks Investment Research

Image Source: Zacks Investment Research

Zacks Rank 

CenterPoint Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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