National Fuel Gas Company (NYSE:NFG) M&A Announcement Transcript

Summary of National Fuel Gas Company Conference Call Company and Industry - Company: National Fuel Gas Company (NYSE: NFG) - Industry: Natural Gas Utility Key Points and Arguments Acquisition Details - National Fuel Gas Company announced the acquisition of CenterPoint Energy's Ohio Natural Gas Utility business for $2.62 billion on a cash-free, debt-free basis, valuing the transaction at approximately 1.6 times the estimated rate base at year-end 2026 [4][10] - The acquisition will add 335,000 customers and over 5,900 miles of natural gas transmission and distribution pipelines, along with a $1.6 billion rate base [4][10] - Expected closing of the acquisition is in the fourth quarter of calendar 2026, pending regulatory reviews [4][10] Strategic Importance - The acquisition is part of National Fuel's strategic priority to grow through M&A, particularly in regulated sectors [4][10] - It is expected to enhance the company's investment-grade credit profile and support continued growth on both regulated and non-regulated sides [5][10] - The Ohio Natural Gas Utility business is seen as a great fit due to its scale, geographical proximity to existing operations, favorable regulatory environment, and stable customer base [5][6][10] Financial Implications - The acquisition is anticipated to be immediately accretive to the company's regulated earnings per share, excluding transaction-related expenses [6][10] - On a consolidated basis, adjusted operating results are expected to be neutral in fiscal 2028, with potential for accretion thereafter [7][10] - National Fuel plans to finance the acquisition through a combination of $300 million to $400 million in common equity, long-term debt, and free cash flow from integrated upstream and gathering operations [14][16] Regulatory Environment - Ohio's regulatory framework is described as constructive, with mechanisms in place for timely recovery of investments and system modernization [11][12] - The Ohio Commission has approved cost recovery for nearly 100% of capital investments through various riders, providing certainty for future cash flows [12][10] Growth Opportunities - National Fuel plans to invest $150 million to $200 million in capital for modernization and safety improvements in the Ohio operations [27][10] - The service territory is positioned between Columbus and Cincinnati, presenting growth opportunities due to regional sprawl and investment [27][10] Integration and Future Outlook - National Fuel is committed to a smooth integration process with CenterPoint's Ohio workforce, emphasizing shared values in safety and customer service [9][17] - The acquisition is expected to deliver long-term value for stakeholders, with a strong outlook for the natural gas industry [10][18] Earnings and Capital Allocation - Historical net income from CenterPoint's Ohio business is approximately $65 million, with built-in rate increases expected to support growth over the next five years [30][10] - National Fuel aims to maintain a balance between strengthening its balance sheet and deploying capital for growth opportunities [40][10] Additional Important Information - The acquisition aligns with National Fuel's long-term strategy to enhance its portfolio and improve earnings and credit metrics [10][18] - The company has a nearly 125-year history in the energy sector, reinforcing its commitment to providing reliable energy supplies [9][10]