EVANSVILLE — Vectren and Houston-based energy CenterPoint Energy announced a merger agreement has been approved by boards of both companies.
The combined company will be named CenterPoint Energy. Its corporate offices will be in Houston. The company's natural gas utilities operation and Indiana electric operation will have Evansville headquarters.
The transaction is expected to close in the first quarter of 2019, with all required regulatory approvals.
CenterPoint has natural gas operations for 3.4 million customers in Texas, Oklahoma, Arkansas and Louisiana, and it delivers electricity to more than 2.4 million customers in the Houston area.
According to Vectren and CenterPoint, here is what the news likely means:
* For Vectren’s customers — more than 1 million for natural gas in Indiana and Ohio and 145,000 for electricity in Indiana — the transaction likely will not have a significant short-term impact.
Utility rates are established by the Indiana Utility Regulatory Commission, and they are already in place.
“All the needs of our customers continue on, and we will be looking to meet those needs well,” Vectren Chairman, President and CEO Carl Chapman said.
Over the longer term, “we think that by combining the two companies ...it could have some customer rate benefits,” Chapman said. “They are really focused on service.”
CenterPoint President and CEO Scott Prochazka, who will also hold those titles with the combined company, said CenterPoint and Vectren “are very much aligned in how we think about customers.”
* For Vectren’s local employment force — as many as 2,000 — the transaction will mean some downsizing.
Chapman and Prochazka said it is too soon to say where that will occur or how deep it will go.
“Integration teams,” co-led by Vectren and CenterPoint officials, will work on employment issues.
“In our negotiations, absolutely at the top of the list after customers, was employee protections,” Chapman said. “We think we have a process set up to really allow us to work with employees. But on the other hand, there likely will be some reductions over time, as occurs in mergers.”
Natural gas utilities operations of the combined company, as well as that lead executive, will be headquartered in Evansville.
CenterPoint Energy will establish a chief business officer for Vectren’s electric business, who will directly report to CenterPoint Energy’s CEO and lead Vectren’s ongoing electric grid modernization and generation transition initiatives recently underway.
In addition to utility field employees, CenterPoint Energy will retain key operational activities in support of utilities in Evansville.
The headquarters of Energy Systems Group, a Vectren subsidiary, will remain in Newburgh.
Prochazka said some downsizing in Southwest Indiana is likely, but he added, “We’ve got businesses to run here, and these businesses are growing. Whenever there’s growth, it often times creates new opportunity. And over time, there’s natural turnover in companies, and that provides opportunities to deal with redundancy in a little bit easier fashion.”
Reductions could occur “anywhere within the combined company” and not just in Southwest Indiana, Prochazka said.
* For Vectren shareholders, the transaction will mean $72 in cash for each share of common stock. CenterPoint Energy expects to maintain an earnings per share growth target of 5 to 7 percent in 2019 and 2020, excluding one-time charges related to the merger.
CenterPoint will assume all outstanding Vectren net debt.
* For the community, the CEOs of both companies said CenterPoint intends to be an active philanthropic player in Southwest Indiana, as Vectren has been.
The merger agreement calls for CenterPoint to contribute an additional $3 million per year for a minimum of five years after the merger’s closing to the Vectren Foundation, which will continue to operate out of Evansville and retain its name.
“We share the same thoughts and philosophies on those things,” Chapman said.
The announced merger comes at a time when Vectren has announced several forward-looking steps. Those include the ongoing modernization of its electric grid, and the company’s intent to construct a 900-megawatt natural gas plant in Posey County, as well as two solar farms in Vanderburgh County.
Vectren also is eyeing Spencer County for a solar farm.
“The reality is, those investments are a big part of what’s driving their interest in us,” Chapman said of CenterPoint.
Prochazka concurred.
“As we were having discussions about coming together, it really was based on a view into their planned investments and what was driving it,” he said. “We find that to be very exciting. As we thought about the future, it was in the context of including all of those planned investments. That’s the basis upon which we talked about and got excited about this merger.
“They’ve got a couple of business segments that are unique to them, which they’ve got growth plans for which are very exciting, and we’ve got a couple of business segments they don’t have which we’ve got our own growth plans for. So we see an exciting and compelling combination.”