CenterPoint rejects OGE offer for Enable stake

OREANDA-NEWS. September 30, 2016. CenterPoint Energy has rejected an offer from OGE Energy, its partner in Enable Midstream, for CenterPoint's share in the company.

CenterPoint's chief financial officer disclosed yesterday that a 30-day period to consider OGE's offer under their partnership agreement expired on 16 September without a deal.

"There is no material agreement to report at this time," Bill Rogers said at a Wolfe Research investor conference. He did not comment further on terms of the offer.

Houston-based CenterPoint notified OGE in July that it would solicit offers for its interest in Enable which was formed by CenterPoint, OGE and ArcLight Capital Partners in 2013.

Under its right of first offer provision, OGE had 30 days to make an offer to buy all of CenterPoint's membership interests in Enable's general partner and all or any portion of Enable's common and subordinated owned by CenterPoint.

In August, OGE made an offer to acquire CenterPoint Energy's stake that included a third party. The third party would become the owner of Enable CenterPoint's stake, leaving OGE's Enable ownership interest unchanged. OGE did not identify the third party or disclose any details of the offer.

Enable manages and operates 7,900 miles (12,700km) of interstate gas pipeline with 8.4 Bcf/d (238mn m?/d) of transportation capacity. It also operates 2,200 miles of intrastate gas pipelines, 14 gas plants with 2.5 Bcf/d processing capacity and 85 Bcf of natural gas storage capacity.

Falling gas production in the Ark-La-Tex and Arkoma basins pared Enable's gathering and processing volume in the second quarter from the second quarter of 2015. The drop was partially offset by increased volume from liquids-rich formations in the Anadarko basin.

Investment bank Tudor Pickering Holt (TPH) analysts expect that CenterPoint to retain its stake in Enable "unless it is able to merge it into another midstream entity" to avoid a \\$1.3bn tax liability.

"The offer for CenterPoint's LP stake would need to exceed \\$19/share to be earnings break-even" and to offset the \\$1.3B tax liability," TPH said in a note.

Because CenterPoint rejected OGE's offer, it faces certain restrictions going forward, Rogers said. CenterPoint has 120 days to find a deal and the price must be 105pc of the OGE offer.

CenterPoint owns a 50pc general partner interest and a 55.4pc limited partner interest in Enable.

CenterPoint president Scott Prochazka said earlier this year that it was the "right time to explore options for unlocking the value of our strategic investment."