CenterPoint Energy (CNP) sells AR & OK gas supply assets

This story originally appeared on Zacks

CenterPoint Energy CNP recently completed the previously announced sale of natural gas distribution utilities in Arkansas (AR) and Oklahoma (OK) to Summit Utilities, Inc. Last April, CNP reached an agreement to sell its assets of distribution of natural gas for $ 2.15 billion in cash to Summit Utilities.
With 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 commercial customers. Since all legal formalities have been completed, Summit Utilities will begin serving CenterPoint Energy’s natural gas customers in AR and OK on an immediate basis.

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Divestiture helps achieve long-term goals

The decision to sell the natural gas distribution assets in these two assets will allow CenterPoint to focus on fewer areas to execute long-term plans. The net proceeds from the sale will help CNP fund long-term investment plans in regulated utility companies without issuing external equity, which in turn will boost its industry-leading rate base growth.
The divestiture of the intermediate assets will not affect the long-term annual profit growth target of around 6-8%. The reinvestment of the proceeds from the sale and the long-term capital expenditure plan to invest more than $ 18 billion over five years and $ 40 billion over the next decade will continue to drive the performance of CenterPoint Energy.
Recently, Energy of Domination D completed the sale of Questar Pipelines to Southwest Gas Holdings Inc. for $ 1.975 billion. The net proceeds from the sale of assets allowed Dominion to reduce 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 over the 2021-2025 period to strengthen its existing infrastructure, a significant portion of which will be invested in zero-carbon energy production and storage.

Investments in utility space

In addition to streamlining their portfolios through the divestiture of non-core assets, utilities are also making strategic acquisitions and have long-term investment plans to strengthen and expand their infrastructure to serve the growing number of customers. NextEra Energy NEE and American Water Works AWK, among others, invests in the modernization and maintenance of infrastructure.
NextEra Energy has well-defined plans to invest nearly $ 34.5 billion in different projects during the period 2022-2025. NEE has long-term (three to five year) earnings growth of 8.94% and Zacks’ consensus estimate for NEE’s 2021 earnings has risen 0.4% in the past 90 days.
American Water Works plans to invest $ 13 billion to $ 14 billion in the 2022-2026 period and $ 28-32 billion in the 2022-2031 period. AWK’s long-term earnings growth is pegged at 8.1% and Zacks’ consensus estimate for 2021 earnings has risen 0.2% in the past 90 days.

Price return

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

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Zack Rank

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

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