CenterPoint Energy Divests Ohio Natural Gas Business to National Fuel Gas for $2.62 Billion

CenterPoint Energy Sells Ohio Gas Business to National Fuel Gas

CenterPoint Energy, Inc. (NYSE: CNP) announced the definitive agreement to sell its Ohio natural gas distribution business, Vectren Energy Delivery of Ohio, LLC, to National Fuel Gas Company (NYSE: NFG) for a total consideration of $2.62 billion. This significant transaction involves natural gas distribution assets spanning approximately 5,900 miles of pipeline and serving about 335,000 metered customers across Ohio. The deal is structured on a cash-free, debt-free basis, with customary closing adjustments.

Transaction Details and Financial Mechanics

The sale price for CNP Ohio represents approximately 1.9 times its projected 2024 rate base. CenterPoint Energy anticipates receiving the $2.62 billion in proceeds across two tranches: $1.42 billion in cash expected in 2026, and the remaining $1.20 billion in 2027 through a seller note. This promissory note will carry a 6.5% interest rate and mature approximately one year post-closing. The transaction is slated to close in the fourth quarter of 2026, contingent upon standard closing conditions, including reviews by federal regulators such as the Hart-Scott-Rodino Act and the Public Utilities Commission of Ohio.

For National Fuel Gas, the acquisition price implies an approximate 1.6 times multiple of the estimated 2026 rate base of $1.6 billion for CNP Ohio. National Fuel has secured a fully committed bridge loan for financing. Its permanent financing strategy includes a $1.2 billion promissory note at 6.5% interest maturing 364 days post-closing, along with plans to issue approximately $300 million to $400 million in common equity, supported by long-term debt and expected future free cash flow from its integrated upstream and gathering businesses.

Strategic Rationale and Market Reaction

This divestiture is a pivotal move for CenterPoint Energy, aligning with its updated 10-year capital plan. The company intends to reallocate the proceeds to support its ambitious $65 billion capital investment plan from 2026 through 2035, marking a 40% increase over its previous 10-year target. This strategy is focused on enhancing its core utility operations in higher-growth markets like Texas, Indiana, and Minnesota, with a particular emphasis on modernizing the electric grid and improving gas system safety. CenterPoint has reiterated its non-GAAP EPS growth rate of 9% in 2025 and long-term EPS targets of 7%-9% annually through 2035.

Despite a recent miss on Q2 2025 non-GAAP EPS ($0.29 vs. $0.44 analyst estimates) and revenue ($1.94 billion vs. $2.20 billion estimates), the company's stock has shown bullish indicators, trading above its 50-day and 200-day moving averages. CNP currently trades with a P/E ratio of 28.13, near its five-year high, suggesting a potentially elevated valuation. Its debt-to-equity ratio of 1.96 indicates substantial leverage, and liquidity ratios (current ratio 0.79, quick ratio 0.61) suggest potential liquidity strains that the sale proceeds could alleviate.

For National Fuel Gas, the acquisition represents a significant expansion of its regulated utility footprint, effectively doubling its gas utility rate base to approximately $3.2 billion and increasing its pro forma customer base to 1.1 million across New York, Pennsylvania, and Ohio. This strategic move is expected to be immediately accretive to regulated earnings per share (EPS) and is aimed at diversifying cash flows towards more stable, regulated earnings. While S&P Global Ratings affirmed National Fuel Gas Co.'s 'BBB-' issuer credit rating with a stable outlook, credit metrics are projected to weaken temporarily at closing, with Funds From Operations (FFO) to debt declining to 30%-35% in fiscal 2027 before improving. Following the announcement, NFG shares traded lower, potentially reflecting investor concerns regarding the financing structure and its temporary impact on credit metrics.

Broader Market Implications and Outlook

This transaction underscores a continuing trend of consolidation within the natural gas utility sector, as companies strategically optimize their portfolios to enhance scale, secure stable cash flows, and reallocate capital to high-growth areas. The use of a seller note in the financing structure highlights innovative approaches being deployed in large asset sales to manage liquidity and achieve specific financial objectives.

The long closing timeline of the deal, anticipated in late 2026, suggests a measured impact on immediate stock prices for both CNP and NFG, allowing time for regulatory scrutiny and financial adjustments. The successful integration of Vectren Energy Delivery of Ohio into National Fuel Gas's operations and the efficient deployment of CenterPoint Energy's divested capital into its growth initiatives will be key factors for the companies' long-term performance. Investors will closely monitor the regulatory approval process and the subsequent financial strategies of both utilities as they execute their revised capital plans and integrate new assets.