CenterPoint Energy's Strategic Divestiture of Ohio Gas Business: Implications for Energy Sector Investors

In a bold move to reshape its utility portfolio, CenterPoint Energy has announced the sale of its Ohio natural gas business to National Fuel Gas Company for $2.62 billion, a transaction representing approximately 1.9 times the 2024 rate base for the business, according to a BusinessWire release. This divestiture, expected to close in the fourth quarter of 2026, underscores the company's commitment to capital reallocation and long-term value creation. For energy sector investors, the decision reflects a strategic pivot toward high-growth markets and infrastructure modernization, while reinforcing CenterPoint's financial discipline.

Strategic Rationale: Portfolio Optimization and Capital Recycling

The sale of CenterPoint's Ohio Gas business aligns with its broader strategy to focus on core markets with stronger growth potential. By exiting the Ohio segment, the company aims to reprioritize capital toward its regulated electric and natural gas operations in Texas, Indiana, and Minnesota. Texas, in particular, is a focal point due to surging power demand driven by data centers, industrial expansion, and population growth. According to KHOU's coverage, electric peak load demand in Texas is projected to nearly double by the mid-2030s, making infrastructure investment in the region a critical lever for future earnings.

The $2.62 billion proceeds will be received in two tranches: $1.42 billion in 2026 and $1.20 billion in 2027 via a seller note. This structured payout allows CenterPoint to maintain liquidity while funding its ambitious 65 billion capital plan from 2026 through 2035. The plan, a 40% increase over its previous 10-year target, is designed to modernize the electric grid, enhance gas system safety, and support economic development across its service territories.

Capital Reallocation and Long-Term Value Creation

The divestiture enables CenterPoint to accelerate investments in its core operations while maintaining a robust balance sheet. The company has reiterated its non-GAAP EPS growth target of 9% for 2025 and long-term targets of 7%-9% annually through 2035. These projections are underpinned by the capital recycling strategy, which channels proceeds from the Ohio sale into infrastructure projects that align with regulatory incentives and customer demand.

A key component of this strategy is the $65 billion capital plan, which includes $53 billion in base investments through 2030 and an additional $10 billion in incremental opportunities. For instance, Texas's coastal electric grid modernization-a cornerstone of the plan-is expected to enhance reliability and resilience, critical factors for attracting industrial and commercial customers. According to the Houston Business Journal, CenterPoint's Texas operations already serve over 10 million customers, and the company anticipates a 50% increase in power demand by 2035.

Implications for Investors

For investors, the Ohio divestiture signals a disciplined approach to capital allocation. By exiting a lower-growth segment and reinvesting in high-potential markets, CenterPoint is positioning itself to outperform peers in a sector increasingly driven by infrastructure spending and decarbonization. The company's focus on Texas, a state with favorable regulatory environments and robust economic growth, further strengthens its competitive edge.

Moreover, the transaction supports CenterPoint's commitment to shareholder returns. While the company has not explicitly broken down the $2.62 billion proceeds into debt reduction, reinvestment, or dividends, its recent debt repurchase plan in September 2025 demonstrates a proactive stance on deleveraging. This, combined with a 2.27% dividend yield and 55 consecutive years of dividend payments, underscores its dedication to balancing growth and returns.

National Fuel's acquisition of the Ohio business also adds a layer of strategic validation. The deal is expected to double National Fuel's gas utility rate base and enhance its regulated cash flows, suggesting that the valuation reflects strong long-term earnings potential. For CenterPoint, this means the proceeds are being exchanged for a premium, further bolstering its capital base.

Conclusion

CenterPoint Energy's divestiture of its Ohio Gas business is a textbook example of strategic capital reallocation. By exiting a mature market and redirecting resources toward high-growth opportunities, the company is not only addressing immediate financial goals but also laying the groundwork for sustained earnings growth. For energy investors, the move highlights the importance of agility in a sector undergoing rapid transformation. As CenterPoint invests in Texas's electric grid and other core operations, the $65 billion capital plan-fueled by the Ohio proceeds-positions the company to deliver on its long-term EPS targets while maintaining a strong balance sheet.