CenterPoint Energy, Inc. CNP recently announced the receipt of the final nod for its pending merger with Vectren Corp. VVC from the Indiana Utility Regulatory Commission (IURC). Now, the transaction awaits the remaining order with the Public Utilities Commission of Ohio (PUCO), post which its completion can be expected in the first quarter of 2019.
Prior to receiving the final IURC approval, the pending merger had received necessary approvals from Vectren shareholders, Federal Energy Regulatory Commission (FERC) and the Federal Communications
Benefits of the Merger
The acquisition of Vectren, a deal worth roughly $6 billion, will help create a new company that would serve more than 7 million utility customers across nearly 40 states in the United States. On completion of the deal, the combined company can be expected to avail low-risk opportunities in natural gas distribution and electricity generation & transmission segments.
Moreover, the combined company is projected to have electric and natural gas delivery operations in eight states with assets totaling $29 billion with an enterprise value of $27 billion. The merger deal is expected to generate pre-tax earnings of $50-$100 million for the combined company by 2020. Management at CenterPoint Energy believes that the merger will help reduce the equity financing needed for the company’s capital budget.
The new entity is also expected to gain opportunities to leverage and expand competitive energy-related services across a larger U.S. footprint and create long-term efficiencies in the delivery of services. This, in turn, will help the company gain better access to capital, driving its revenue components and customer base.
CenterPoint Energy stock has rallied nearly 10.6% over the past 12 months, outperforming the industry’s growth of 7.1%. The outperformance must have been led by significant customer growth and investments to upgrade infrastructure.
Zacks Rank & Other Stocks to Consider
CenterPoint Energy currently sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the same space are Ameren Corp. AEE and Idacorp Inc. IDA, both sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ameren Corp has estimated long-term earnings growth rate of 6.8%. It surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters by an average of 15.40%.
Idacorp has estimated long-term earnings growth rate of 2.60%. It exceeded the Zacks Consensus Estimate for earnings in the trailing four quarters by an average of 11.69%.
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