) inked a deal with
OGE Energy Corp.
) and ArcLight Capital Partners LLC to form a new midstream
partnership business arm. The partnership will be run by a
general partner and controlled equally by CenterPoint and OGE
The partnership is expected to come into existence by the
second or third quarter of 2013 and is subject to regulatory
sanctions and certain third-party approvals. The business will
include CenterPoint's interstate pipeline transmission and field
service units and the joint midstream unit of OGE and ArcLight,
Per the agreement, the newly formed partnership will have to
make provision for a $1.4 billion credit facility and a $1.05
billion term loan. CenterPoint, OGE and ArcLight will hold 59%,
28% and 13% interests, respectively, in the business unit which
is subject to certain customary closing conditions.
The agreement has received approval from the board of
directors of all the three companies. CenterPoint and OGE,
however, will hold 40% and 60% stakes in the incentive
distribution rights of the general partner.
The partnership's portfolio of assets will include 8,400 miles
of interstate pipelines with maximum transport capacity of 9
billion cubic feet (Bcf) and an additional 2,300 miles of
intrastate pipelines. In addition to this it will have 11,000
miles of gathering lines which transmitted about 4 Bcf per day of
natural gas in 2012. Add to this, the partnership will have 90
Bcf of gas storage facility and eleven processing plants having
inlet capacity of around 2 Bcf.
The pipeline and storage facilities of this new partnership
are strategically located near some of the resource-rich
properties in the U.S. The partnership will have access to the
properties of Granite Wash, Tonkawa, Mississippi Lime, Cana
Woodford, Haynesville, Fayetteville, Barnett and Woodford.
Moreover, the partnership's large-scale and diversified business
spread across the premier gas and natural liquids regions of
Oklahoma, Texas, Arkansas and Louisiana will complement its broad
Given the encouraging prospects of the midstream business in
the U.S., we believe this partnership strategy will help
strengthen the companies position in the market. Further, the
growing usage of natural gas as a utility energy source in the
U.S. will act as an added catalyst.
CenterPoint might gain some ground in its pipeline business
which did not do too well in the fourth quarter of 2012 due to
contract expirations, decline in commodity prices and lower
system transportation revenue. CenterPoint currently has a Zacks
Rank #2 (Buy).
We also prefer the Zacks Ranked #1 (Strong Buy) utility stocks
Pike Electric Corp.
Otter Tail Corp
Based in Houston, TX, CenterPoint operates as a public utility
holding company in the United States.
CENTERPOINT EGY (CNP): Free Stock Analysis
OGE ENERGY CORP (OGE): Free Stock Analysis
OTTER TAIL CORP (OTTR): Free Stock Analysis
PIKE ELECTRIC (PIKE): Free Stock Analysis
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