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CENTERPOINT ENERGY INC 8-K Report, Material Agreement (Mar 18, 2013)

Filed March 18, 2013For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) announced on March 14, 2013, the formation of a significant joint venture (Midstream JV) with OGE Energy Corp. (OGE) and affiliates of ArcLight Capital Partners, LLC (Bronco Group). This JV will own and operate the midstream natural gas businesses of both CenterPoint and OGE. CenterPoint will contribute its midstream subsidiaries, including natural gas gathering, processing, and interstate pipeline assets, while OGE and the Bronco Group will contribute Enogex LLC, a substantial midstream operator in Oklahoma. The initial ownership structure will see CenterPoint holding a 59% limited partner interest, OGE 28%, and the Bronco Group 13%. The JV will be equally controlled by CenterPoint and OGE, each holding 50% of the management rights in the general partner. A key element of the agreement is the planned initial public offering (IPO) of the Midstream JV, which CenterPoint and OGE intend to initiate after formation, although consummation is subject to market conditions and further negotiation. The transaction is expected to close in the second or third quarter of 2013, subject to regulatory approvals and other customary closing conditions.

Key Highlights

  • 1Formation of a new Midstream Joint Venture (Midstream JV) combining CenterPoint Energy's and OGE Energy Corp.'s midstream assets.
  • 2CenterPoint Energy will initially hold a 59% limited partner interest in the Midstream JV.
  • 3OGE Energy Corp. will hold a 28% limited partner interest, and the Bronco Group will hold 13%.
  • 4Both CenterPoint and OGE will equally control the Midstream JV's general partner with 50% management rights each.
  • 5The formation agreement includes a commitment to pursue an initial public offering (IPO) of the Midstream JV after its formation.
  • 6The transaction is subject to regulatory approvals and other customary closing conditions, with an expected closing in Q2 or Q3 2013.
  • 7Significant debt financing commitments ($1.05 billion term loan and $1.4 billion revolving credit facility) are in place for the Midstream JV.

Frequently Asked Questions

This Form 8-K filing announces CenterPoint Energy's entry into a material definitive agreement to form a joint venture with OGE Energy Corp. and the Bronco Group for their midstream natural gas businesses. It details the structure, ownership, and planned future steps, including an IPO.

CenterPoint Energy is contributing its midstream subsidiaries, including natural gas gathering, processing, and interstate pipelines (such as CEGT, MRT, and interests in SESH). OGE Energy Corp. and the Bronco Group are contributing Enogex LLC, which comprises a significant natural gas pipeline and processing business in Oklahoma.

The transaction is expected to close in the second or third quarter of 2013, pending satisfaction of closing conditions including regulatory approvals. The Midstream JV plans to initiate an IPO within 12 months of closing and consummate it within 180 days of filing the registration statement, subject to market conditions and further negotiations.

The Midstream JV has secured commitment letters for a $1.05 billion 3-year senior unsecured term loan facility and is working to establish a $1.4 billion senior unsecured revolving credit facility. CenterPoint Energy Resources Corp. (CERC) will provide a subordinated guarantee for the term loan.