CenterPoint Energy Announces Sale of Retail Supplier CenterPoint Energy Services, Names Buyer, Purchase Price
February 24, 2020 Email This Story Copyright 2010-20 EnergyChoiceMatters.com
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CenterPoint Energy, Inc. provided further information in an 8-K concerning an interim goodwill impairment valuation of their Energy Services reporting unit
In the 8-K, CenterPoint Energy, Inc. stated, "On February 24, 2020, CenterPoint Energy Resources Corp., a Delaware corporation ('Seller') and a wholly-owned subsidiary of CenterPoint Energy, Inc. (the 'Company'), entered into an Equity Purchase Agreement (the 'Purchase Agreement') by and between Seller and Athena Energy Services Buyer, LLC, a Delaware limited liability company ('Buyer'), pursuant to which Seller has agreed to sell all of the outstanding capital stock of CenterPoint Energy Services, Inc., a Delaware corporation (including as converted into a Delaware limited liability company prior to closing, 'CES') to Buyer."
In the 8-K, CenterPoint Energy, Inc. stated, "Subject to the terms and conditions of the Purchase Agreement, Buyer has agreed to purchase all of the outstanding equity interests of CES (the 'Transaction'). The purchase price for the Transaction is approximately $400 million, subject to customary adjustments set forth in the Purchase Agreement, including adjustments based on CES’s net working capital at closing, indebtedness and transaction expenses (as so adjusted, the 'Purchase Price'). The Company and Seller estimate that their net after-tax proceeds from the sale of approximately $380 million to $390 million, inclusive of the working capital adjustment, which may be materially different from the estimated amount, will be used to repay a portion of outstanding debt in the second quarter of 2020."
In the 8-K, CenterPoint Energy, Inc. stated, "During the preparation of their financial statements for the year ended December 31, 2019, the Company and Seller are performing an interim goodwill impairment valuation of their Energy Services reporting unit. The Company and Seller preliminarily anticipate the Transaction will result in aggregate after-tax goodwill impairment losses of approximately $45 million to be recognized in 2019. During the first quarter of 2020, the assets and liabilities representing substantially all of the businesses within the Company’s and Seller’s Energy Services reporting unit that will be sold in the Transaction (the disposal group) will be reflected as held for sale. As a result, the Company and Seller anticipate recording an after-tax impairment loss on the disposal group, consisting of both goodwill and long-lived asset impairments, of approximately $75 million, plus transaction costs, in 2020. The actual amount of the impairments recorded may be materially different from the preliminary amounts."
In the 8-K, CenterPoint Energy, Inc. stated, "The Company’s 2020 guidance range and target for earnings per share will to be [sic] provided on the Company’s fourth quarter and full-year 2019 earnings call on February 27, 2020. The sale of CES is expected to reduce the Company’s 2020 earnings by approximately $0.06 to $0.07 per diluted share of the Company’s common stock, excluding mark-to-market adjustments, on an annualized basis. However, despite the expected annual earnings impact, the sale is a key achievement in the Company’s ongoing strategic focus to strengthen its balance sheet and to improve its business risk profile and earnings quality through increased relative contribution of its core utility businesses."
CenterPoint Energy, Inc. today announced it has entered into an agreement to sell its natural gas retail supplier business, CenterPoint Energy Services, Inc. (CES) to Energy Capital Partners, LLC, (ECP), a private equity and credit investor specializing in energy infrastructure projects, for total consideration of approximately $400 million, including estimated working capital at close, subject to the satisfaction of customary terms and conditions.
As part of the transaction, CES will enter into a structured long-term Preferred Supply agreement where Shell Energy North America (US), L.P. (SENA) will provide gas supply and collateral support, as well as receive equity warrants. Net proceeds of the sale will be used to repay a portion of outstanding CenterPoint Energy debt.
CES provides competitive natural gas sales, storage and supply, and other energy-related solutions to approximately 30,000 commercial and industrial customers, utilities and municipalities in more than 30 states. CES is headquartered in Houston and has approximately 300 employees.
Energy Capital Partners is among a consortium of investors that owns Calpine Corporation, which owns various retail suppliers including Champion Energy
"The sale of our gas retail business further positions CenterPoint Energy to focus on the long-term performance of our core electric and natural gas utility businesses," said John W. Somerhalder II, interim president and chief executive officer of CenterPoint Energy. "At the same time, this sale will strengthen our balance sheet and improve our business risk profile."
Somerhalder added, "When combined with our recent agreement to sell Miller Pipeline and Minnesota Limited, two businesses that comprised our infrastructure services segment, we expect our utility earnings contribution to approach 90% over the next several years."
The sale is anticipated to be completed in the second quarter 2020, subject to the satisfaction of closing conditions, including the expiration or termination of the Hart-Scott-Rodino waiting period.