National Fuel's Strategic Acquisition of CenterPoint's Ohio Natural Gas Utility Business: Assessing Long-Term Value Creation and Regulatory Tailwinds

In a bold move to expand its footprint in the U.S. energy landscape, National Fuel Gas Company has agreed to acquire CenterPoint Energy's Ohio natural gas utility business for $2.62 billion, a transaction poised to double its gas utility rate base to $3.2 billion and serve 1.1 million customers across New York, Pennsylvania, and Ohio, according to a FinancialContent article. This acquisition, expected to close in Q4 2026 pending regulatory approvals, underscores National Fuel's strategic pivot toward regulated, stable cash flows while navigating the complexities of a transitioning energy sector. With Ohio's recent passage of House Bill 15 (HB 15) creating a favorable regulatory environment for natural gas infrastructure and energy development, the deal positions National Fuel to capitalize on both immediate financial synergies and long-term policy tailwinds.

Regulatory Tailwinds: Ohio's HB 15 and Tax Incentives

Ohio's HB 15, signed into law in May 2025, represents a transformative shift in the state's energy policy, reducing tangible personal property taxes on new generation and transmission infrastructure. For natural gas utilities like National Fuel, the law lowers assessment rates for energy conversion equipment from 24% to 7% and for pipeline infrastructure from 88% to 25%, effective in tax year 2027, according to a Kroll tax alert. Additionally, the bill introduces a five-year property tax exemption for projects developed in Priority Investment Areas (PIAs), including brownfields and former coal mines, incentivizing infrastructure development in underutilized regions, as detailed in a JDSupra analysis. These tax reductions are projected to lower National Fuel's operational costs, enhancing the economic viability of its Ohio operations while aligning with the company's goal of maintaining an investment-grade credit profile, as noted in a QuiverQuant announcement.

HB 15 also eliminates subsidies for unprofitable coal plants, a move that reduces regulatory uncertainty for natural gas providers and positions the fuel as a transitional bridge to cleaner energy sources, according to a Dickinson Wright alert. The law's emphasis on behind-the-meter generation and self-sufficiency further supports National Fuel's ability to integrate distributed energy resources, such as energy storage systems, into its service offerings, as reported in a cleveland.com report.

Financial Implications and Strategic Alignment

The acquisition is structured to preserve National Fuel's financial flexibility, with financing sourced from a combination of debt, free cash flow, and a modest equity component. The company will also receive a $1.2 billion promissory note from CenterPoint, bearing a 6.5% interest rate and maturing in 364 days post-closing, providing additional liquidity (as reported by FinancialContent). This capital structure ensures National Fuel can maintain its investment-grade rating while reinvesting in regulated growth opportunities.

From a valuation perspective, the $2.62 billion purchase price reflects a 1.6x multiple of CenterPoint's estimated 2026 rate base of $1.6 billion, a premium that signals confidence in the long-term earnings potential of Ohio's natural gas market (per the FinancialContent article). Analysts note that the acquisition is immediately accretive to regulated earnings per share, with the expanded rate base expected to drive consistent dividend growth and enhance shareholder returns, as highlighted by QuiverQuant.

Energy Transition and Sustainability Considerations

While National Fuel's 2024 Corporate Responsibility Report highlights progress in reducing methane emissions-28% lower since 2020-the company's post-acquisition strategy in Ohio appears to prioritize regulated utility growth over direct renewable integration, according to National Fuel's 2024 Corporate Responsibility Report. However, Ohio's HB 15 includes provisions that indirectly support clean energy development, such as tax incentives for energy storage systems and a $40 million solar loan program for schools, as noted in an Ohio House release. These policies create a regulatory framework where National Fuel could eventually incorporate renewables into its service model, aligning with broader federal initiatives like the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL), which have allocated $16.5 billion in clean energy investments for Ohio, according to Policy Matters Ohio research.

Critics argue that the acquisition's focus on natural gas may conflict with long-term decarbonization goals, particularly as renewable energy costs decline and electrification gains momentum. Yet, National Fuel's leadership has emphasized the role of natural gas as a transitional fuel, citing its ability to stabilize variable renewable energy sources and support grid reliability during the energy transition, citing a KPMG outlook.

Conclusion: A Calculated Bet on Stability and Growth

National Fuel's acquisition of CenterPoint's Ohio utility business is a calculated bet on regulatory stability, tax incentives, and the enduring role of natural gas in a transitional energy landscape. While the deal's immediate value lies in its ability to boost earnings and credit metrics, the alignment with Ohio's HB 15 and federal clean energy programs suggests a path for future diversification into renewables. For investors, the transaction represents a strategic move to secure long-term cash flows in a state where policy tailwinds are reshaping the energy sector.