By Tom Kleckner
CenterPoint Energy said Friday it is no longer considering transforming itself into a real estate investment trust.
“Given a broad range of assumptions, we have determined that the potential to create long-term shareholder value by forming a REIT is very limited and does not justify exposure to the associated risks,” CEO Scott Prochazka said in a statement. “We continue to focus on increasing shareholder value by investing in our growing utility businesses.”
CenterPoint executives did not elaborate on the decision during their quarterly earnings call. The company had said in February that it was considering the use of a REIT for all or part of its utility business.
The decision may have been influenced by Hunt Consolidated’s unsuccessful plan to use a REIT structure to acquire Oncor. In March, the Public Utility Commission of Texas approved Hunt’s proposal to split Oncor into two companies, one of which would operate as a REIT. But the commission ordered the REIT’s tax savings be shared with Oncor customers, effectively scuttling Hunt’s plan to acquire the utility.
CenterPoint officials spent much of their earnings call discussing plans to divest the company’s stake in Enable Midstream Partners, a gas gathering and processing limited partnership with OGE Energy.
OGE said during its Aug. 4 earnings call that CenterPoint offered to sell OGE its 55.4% stake in Enable. Under the partnership agreement, OGE has the right of first offer and the right of first refusal on any sales of CenterPoint’s share of Enable, which went public in 2014.
“Our options are essentially the same as they’ve been in the past. We’re looking at a sale or a spin,” Prochazka said. “The timing is such [that] we’re continuing to step through the process. Providing notice to OG&E was one part of [the] process.”
Prochazka said Enable’s performance helped weigh down CenterPoint’s second-quarter results. The company reported a loss of $2 million for the quarter ($0.01/share), after registering a $77 million profit ($0.18/share) for the period in 2015. It had operating income of $182 million, compared to $186 million a year ago.
The company said the losses could be attributed to “changes in the fair market value of commodity derivatives.” Investors reacted Friday by sending CenterPoint’s stock down 3.9%, closing at $22.67.
Houston-based CenterPoint serves more than 5 million metered electric and gas customers, mostly in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas.
