Houston natural gas provider CenterPoint Energy Inc. announced Tuesday the sale of its local distribution company (LDC) businesses to Delta Utilities, a portfolio company of Baton Rouge, La.-based private equity firm Bernhard Capital Partners, for $1.2 billion.
The assets include 12,000 miles of main pipeline in Louisiana and Mississippi serving around 380,000 metered customers. CenterPoint’s LDC’s are the second largest in each state by customer accounts with a combined workforce of about 550 employees.
The sales price represents a 32 multiple of 2023 Louisiana and Mississippi LDC earnings.
The transaction is expected to close toward the end of the first quarter of 2025 if it clears Hart-Scott-Rodino and state regulators.
Several U.S. utilities have been selling their unregulated assets where the returns are dictated by market forces and keeping their regulated operations whose steady returns are preferred by investors, according to Reuters. Last year Duke Energy and American Electric Power announced sales of their unregulated assets, the news agency noted.
Morgan Stanley & Co. and Wells Fargo Securities were CenterPoint’s financial advisors. Latham & Watkins, Phelps Dunbar and Brunini, Grantham, Grower & Hewes were the company’s legal advisors.
Jefferies and Scotiabank were financial advisors to Bernhard Capital, with Kirkland & Ellis the legal advisor. Jefferies and Scotiabank provided a debt financing commitment to Bernhard Capital in connection with the transaction.
CenterPoint’s in-house legal team was led by Monica Karuturi, executive VP and general counsel, and Charles Wang, VP of corporate and finance and AGC. Lucie Kantrow is general counsel at Bernhard Capital (she previously practiced at Phelps Dunbar).
The Latham corporate deal team was led by Houston partners Ryan Maierson and Nick Dhesi with associates Ashley Nguyen, Monika Kluziak, Catherine Sims and Nikky Wei.
Advice was also provided on intellectual property matters by Washington, D.C., counsel Kieran Dickinson with associate Lyle Stewart; on executive compensation, employment and benefits matters by Los Angeles partner Michelle Carpenter with associate Courtney Thomson; on finance matters by Houston partner Matthew Jones with associate Max Fin; on government contracts matters by Washington, D.C., partner Kyle Jefcoat, with associate Genevieve Hoffman; on real estate matters by San Diego counsel Aaron Friberg; and on tax matters by Houston partners Tim Fenn and Jared Grimley with associate Dominick Constantino.
Latham counsel on antitrust matters was handled by Washington, D.C., partner Jason Cruise and Washington, D.C., counsel Peter Todaro with associates Brian Goodell and Mary Tursi; on energy regulatory matters by Washington, D.C., partner Patrick Nevins; on data and technology transactions matters by New York partner Jeffrey Tochner with associate Sebastian Moss and Ece Gonulal; on environmental matters by Los Angeles/Houston partner Joshua Marnitz with associate Nolan Fargo; on insurance matters by Los Angeles partner Harrison White; on data privacy matters by Houston counsel Robert Brown; and on other regulatory matters by Washington, D.C., partner James Barker.
The Kirkland team was led by corporate partners Bill Benitez, Rob Goodin and Daniel Cadis and corporate associates Shelby Morgan and Max Chaffetz.
The group also included debt finance partners Lucas Spivey, Jordan Roberts and Purun Cheong, tax partner Mark Dundon and energy regulatory partner Brooksany Barrowes.
Jason Wells, president and CEO of CenterPoint, said in a press release that the deals will allow the company to optimize its portfolio of utility operations and recycle around $1 billion in after-tax cash proceeds into its service territory, in which CenterPoint has electric and natural gas operations or a larger presence at a valuation more efficient than issuing common equity.
“The sale will also enable us to redeploy approximately $1 billion of future capital expenditures intended for Louisiana and Mississippi into jurisdictions with less regulatory lag, thereby enhancing the ongoing earnings power of the company,” he added.
Wells added this will mark the fourth time over the past few years in which CenterPoint has reinvested sales proceeds in its regulated businesses for the benefit of stakeholders.
The transaction, along with the reinvested capital, won’t change CenterPoint’s targeted non-GAAP earnings per share growth rate of 8 percent in 2024 and the mid-to-high end of 6 percent to 8 percent per year from 2025 through 2030, he said.
“The efficiency of this transaction and portfolio optimization will further enhance our ability to continue executing our industry-leading long-term growth strategy for years to come,” he said.
CenterPoint’s Louisiana and Mississippi LDC’s represent less than 4 percent of the company’s overall rate base.