Good morning, and welcome to the CenterPoint and Vectren Merger Conference Call and Webcast. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to David Morty, Director of Investor Relations.
Please go ahead, sir.
Thank you, Laura. Good morning, everyone. We appreciate you joining us today for this call relating to the merger. I'm David Morty, Director of Investor Relations for CenterPoint Energy. To discuss the merger, I have Scott Prochaska, President and CEO of CenterPoint Energy and Carl Chapin, Vectren's Chairman, President and CEO.
Also with us this morning are Bill Rogers, Executive Vice President and CFO of CenterPoint and Susan Hardwick, Executive Vice President and CFO of Vectren. Bill and Susan will be available during the Q and A portion of our call. In conjunction with our call, we will be using slides, which can be found under the Investors section at centerpointenergy.com or Vectren's Investor Relations homepage at investors.vectren.com. This call is being webcast, and shortly following its conclusion, a replay will be available on both companies' Investor Relations websites. Please note that we may announce material information using SEC filings, news releases, public conference calls, webcasts and posts to the respective company investor websites.
In the future, we will continue to use these channels to communicate important information and encourage you to review the information on the website. Today, we will discuss certain topics containing projections and forward looking information that are based on our beliefs, assumptions and information currently available to us. These forward looking statements are subject to risks or uncertainties. Actual results could differ materially based upon factors including risks or uncertainties described on Slides two through four and other risk factors noted in our SEC filings. We will also discuss CenterPoint's guidance for 2018.
The guidance range considers utility operations performance to date and certain significant variables that may impact earnings such as weather, throughput, commodity prices, effective tax rates, financing activities, and regulatory and judicial proceedings to include regulatory action as a result of recent tax reform legislation. In providing this guidance, CenterPoint uses a non GAAP measure of adjusted diluted earnings per share. This does not include other potential impacts such as changes in accounting standards or unusual items, earnings or losses from the change in the value of the zero premium exchangeable subordinated notes or ZEN securities and the related stocks or the timing effects of mark to market accounting in CenterPoint's Energy Services business. The guidance range also considers such factors as Enable's most recent public forecast and effective tax rates. And with that, I'll turn the call over to Scott.
Thank you, David, and thank you everyone for joining us today to discuss the merger of CenterPoint Energy and Vectren announced yesterday morning. We are speaking to you from Evansville, Indiana, and I'm thrilled to be here and to be talking about the merger of these two great companies. This merger is about scale and diversification. It is about leveraging best practices to serve our customers. It is about expanding product offerings in a time when customers' needs are rapidly evolving.
And it is about combining two companies with similar cultures who are committed to our customers, the environment, and the communities we serve. Let me begin with an overview of the transaction, which you will find on slide seven. The board of directors of CenterPoint Energy and Vectren have each unanimously approved the transaction whereby CenterPoint will acquire all of the issued and outstanding shares of Vectren for $72 per share in cash. Combined, we will become a $27,000,000,000 enterprise value company. We are targeting closing the transaction by the first quarter of twenty nineteen, subject to approval from Vectren shareholders, approvals by several federal agencies and after certain regulatory filings are completed in Indiana and Ohio.
Turning to Slide eight, I will provide a high level overview of CenterPoint starting with our regulated utility businesses. CenterPoint's Houston Electric serves over 2,400,000 metered customers in a 5,000 square mile territory in and around Houston, Texas. Houston Electric has historically enjoyed and is projected to continue to have very strong customer growth for all three customer classes, residential, commercial, and industrial. This growth requires continued investment by CenterPoint to help ensure our system has sufficient capacity and is safe, resilient, and reliable. We have introduced numerous technological advancements in this business over the last decade, including smart meters, intelligent grid circuits, predictive analytics, and power alert services.
Our regulated natural gas distribution business delivers natural gas to 3,500,000 customers in six states. This business also requires significant investment to support infrastructure replacement, reliability, safety, and growth. For these combined utilities, we plan to invest $8,000,000,000 from 2018 to 02/2022.
Our unregulated energy services business delivers competitive natural gas supply to approximately 31,000 commercial and industrial customers. This business delivered 1,200,000,000,000 cubic feet of natural gas in 2017, making it one
of the largest customer focused natural gas sales businesses in the country. Additional smaller unregulated businesses that we have include Home Services Plus in Minnesota, which provides appliance and appliance warranty services and Mobile Energy Services, which provides portable liquid and compressed natural gas service primarily during pipeline maintenance and outages. In total, our unregulated businesses span 33 states. Turning to slide nine, CenterPoint has long had a strategy to operate, serve, and grow our business. We strive to add value for our customers.
This is done by making the right investments in our system, in the technology we introduce, in our employees, and in maintaining a strong connection with the communities we serve. Our vision is to lead the nation in delivering energy, service, and value. This merger is well aligned with our vision and strongly supports the elements of our strategy. I'd like to turn the call over to Carl Chapman to discuss Vectren's current businesses and the combined utility group. Thank you, Scott.
And let me echo how pleased I am to be combining these two excellent companies. I will briefly provide an overview of Vectren's businesses as highlighted on Slides ten and eleven, and I will start with the utility businesses. Vectren serves over 1,000,000 natural gas distribution customers throughout Indiana and Ohio. In addition, we deliver electricity to 145,000 homes and businesses in Southwestern Indiana and provide electricity to our customers from over 1,200 megawatts of power generation assets. The combined company will continue Vectren's smart energy future plan, investing $6,500,000,000 in our utilities between 2018 and 2027 that we expect to improve the reliability and safety of our energy distribution systems, modernize our electric grid and diversify our generation mix.
As highlighted on Slide 11, the largest portion of the $6,500,000,000 Smart Energy Future Plan is a $3,800,000,000 investment that we anticipate will further improve our ability to deliver safe and reliable service to our natural gas customers. This investment plan includes the replacement of bare steel and cast iron pipelines throughout our territory. Another significant investment is our electric grid modernization infrastructure investment program related to our electric transmission and distribution grid. We expect this program will improve the reliability of our electric system, reduce the frequency and duration of service outages and enhance the overall customer experience. It includes the installation of smart meters across our territory.
Finally, we believe transition plan will diversify our generation fleet, improve our overall fuel source flexibility, further reduce emissions and enhance the utility's ability to adapt to new technologies and changing customer needs. Diversifying our generation mix includes a plan to add 54 megawatts of solar generation by 2020 and build approximately 800 to 900 megawatts of combined cycle gas generation to replace coal units that we intend to retire by 2024. The generation transition plan also includes additional investment into one remaining coal fired unit to enable compliance with existing environmental regulations. As a result of this diversification, we expect that by 2024, our carbon emissions will decline approximately 60% from 2,005 levels. Next, I will cover our two unregulated business segments, Vectren Infrastructure Services, or Visco for short, and Vectren Energy Services, or VESCO.
Visco focuses on natural gas transmission and distribution pipeline construction and repair. We estimate this business will have revenue of just over $1,000,000,000 in 2018, led by the distribution portion of the business that primarily serves utility LDCs. Visco has a significant backlog of projects, and we anticipate construction activity will remain strong as utilities and pipeline companies continue to repair and replace aging pipeline infrastructure and as more large scale pipeline construction projects get underway across the nation. Our VESCO business provides energy efficiency performance contracting, designs and builds sustainable infrastructure and provides operations and maintenance work on many facilities where VESCO has completed the projects. We're seeing strong interest in improving energy efficiency by both public and federal sectors, providing good growth opportunities at VESCO.
We believe our performance contracting business model continues to provide one of the most effective ways to achieve long term energy savings, while at the same time providing cost effective opportunities to enable infrastructure renewable, such as new HVAC systems, windows and lighting. And we anticipate strong growth in this business as technology enables new solutions for energy efficiency and renewable generation. As you can see on Slide 12, the combined company gained significant scale, serving 4,500,000 natural gas distribution customers in eight states with a combined pro form a gas rate base of $5,100,000,000 On the electric side, the combined company will serve 2,600,000 customers in Texas and Indiana with a combined rate base of $6,700,000,000 We believe that the larger scale of the combined companies will enable opportunities for operational efficiency, while growth in a more diverse business portfolio will enable exciting employment opportunities. On Slide 13, we show the combined utility service territories. The states with our largest investments are all doing well, experiencing low unemployment and solid economic growth.
We believe that merging with CenterPoint was the right decision for our customers, our employees and our shareholders because CenterPoint shares our vision. This shared vision includes executing and enhancing our smart energy future plan with innovation CenterPoint is employed and will continue to develop across its system. CenterPoint shares our vision to grow Visco and Visco into premier infrastructure and energy services companies. They also share our vision to develop talented employees. And finally, as you will hear from Scott shortly, CenterPoint shares our vision of commitment to the customers and the communities we serve.
We're eager to focus on this successful integration of these two companies, and we are excited about the combined future.
Thank you, Carl. Turning to Slide 14, I will cover the strategic rationale behind combining these two companies. First, the combined company will expand its mix of regulated utilities that are experiencing strong growth fundamentals. To meet the needs of our collective utility service territories, significant capital is needed. Constructive regulation, including capital recovery mechanisms across much of our footprint, allow for timely capital recovery.
We also believe abundant natural gas supply coupled with low prices make natural gas an economic and favored source of energy for direct home use for decades to come. Turning to slide 15, both companies understand and are investing in products or technologies that enhance the customer experience. At its core, business strategy is about meeting customers' needs both today and tomorrow. Without the customer, there simply is no business. Technology and societal change are shifting customers' expectations of an energy delivery company.
Delivering reliable, safe, and affordable electricity and natural gas will continue to be the focal point of what we do. We believe that combining these two companies gives us the size and additional shared expertise to advance the affordability, reliability and safety of our delivered energy. In addition, customers want greater control over their energy usage, optionality in terms of their energy source, better integration and management of electric devices within their homes and businesses and to look at alternative fuels for transportation. This merger of CenterPoint and Vectren will help ensure we have the capability to meet these evolving customer expectations and deliver long term value to our investors. We believe that CenterPoint's technological experience with smart meters, data management, the intelligent grid, power alert service, and advanced leak detection are the right fit to combine with Vectren's smart energy future vision.
Finally, we believe the combined unregulated businesses offer strong opportunities. Continued programmatic infrastructure spending along with growing customer interest in managing their energy supply are key drivers for Visco and Visco. In addition, these businesses along with CenterPoint's unregulated businesses will be able to leverage a larger common customer base to further enhance this growth. Slide 16 shows CenterPoint's earnings trajectory. Following the merger, we continue to anticipate 5% to 7% EPS growth in 2019 and 2020, excluding one time charges associated with the merger.
This merger is anticipated to be modestly accretive by 2020 with increasing accretion in the years after. In addition, an improved business risk profile and longer term projections from Vectren's business unit allow for greater confidence in earnings, especially longer term earnings. Turning to Slide 17, we anticipate funding this transaction with approximately $2,500,000,000 in equity or equity content securities in advance of closing. The remainder we expect to finance with debt. We expect the new capital structure and resulting credit metrics will support solid investment grade quality.
I will close by mentioning a few of the specific elements associated with our merger agreement. I will be the Chief Executive Officer of the combined company and will work to determine additional leadership roles in the weeks and months to come. We will continue to utilize the Vectren name throughout Indiana and Ohio as a center point company. The combined company's natural gas utilities operations serving 4,500,000 customers as well as the electric operations in Indiana will be headquartered in Evansville, continuing a strong presence in the city. Finally, CenterPoint will continue to contribute annually to the Veteran Foundation, supporting the community and the valuable work the foundation does.
Let me reiterate how excited I am to be part of the merger of these two great companies. Before we open the call to questions, let me remind you that both companies have scheduled earnings calls next week. Depending on the nature of your question today, we may defer them to be answered on those earnings calls. We appreciate your interest in this merger and for joining us today. David?
Thank you, Scott. We will
now open the call to questions. In the interest of time, I will ask you to limit yourself to one question and a follow-up.
And our first question will come from Shar Pourreza of Guggenheim Partners.
Good morning, guys. Congrats on the transaction.
Thank you. Good morning, Shar.
So let's just on the equity, it's somewhat of a big slug. Can we talk a little bit about some potential mitigation measures you could be looking at, I. E, maybe eventually monetizing Veterans Construction business or even sort of revisiting a strategic review of Enable? And then maybe just on Enable, can you just talk about how that prior review timed with the veteran process?
Shar, I think you had several questions in there. Let me comment on
that
as best I can. Sorry about that. The interest in these in the businesses, the unregulated businesses, Visco and Visco, remains is is very high, and our intention is absolutely to keep these businesses and grow them. As for the question about Enable, the assumption around a 2 and a half billion dollars of equity that that I mentioned is under the assumption that there are no sales of Enable. So clearly, if the opportunity presents itself and the market is constructive enough to be able to sell some units, that could be an offset to some of the equity.
Okay. That's that actually does answer it. And then just on sort of your forward metrics, on the balance sheet. You know, what what's what are your expectations as far as the pro form a FFO to debt metrics? I mean, stand alone, you guys were both in very good footing, but the metrics do tick down in time even without this deal and you are taking on some debt here.
So I guess the question is, is where do you think the metrics will shake out? Or another way to ask it, is it fair to assume that post this deal, you may be able to see another 200 to 300 basis points of deterioration from your 20%, 21% range you guided for?
So the way I would answer that is solidly investment grade, and we will give some more detail on that at our earnings call next week.
Okay, great. Congrats guys on the transaction very well.
Thank you. Thank you.
And our next question comes from Ali Agda of SunTrust.
Thank you. Good morning. Good morning, Ali.
Good morning. Scott, as you think about the combination and the financial outlook for the CenterPoint entity going forward, how have you thought about merger synergies that you could extract from combining the company? And given that a large chunk of the business is regulated, how much you can retain versus having to give back to customers over time? How have you thought through that?
Ali, I would answer that by saying I think we're very mindful of the regulatory process. We're also, clearly mindful of the fact that when you merge two corporate entities, at the corporate level, you clearly have some redundancy and some duplication. So we have thought through the implications of some of the efficiencies that are achievable in the near term. I will tell you though that the driver behind this was not synergies from an expense standpoint. The driver behind this is the opportunities for synergistic growth and for the continued growth and investment in the utility space.
Okay. And my second question, CerePoint standalone, you've laid out a very attractive story in the past for us. The regulated business and the rate base growth potential, load growth, etcetera, are all very exciting. You put Vectren into the mix. Your growth profile hasn't really changed.
You're still looking at the same growth rate and yet there is an element of uncertainty with the approvals, with the extra equity coming in. So again, a big picture perspective, what does Vectren bring to the table that CenterPoint standalone did not have or could not have achieved given the targets that you laid out for us?
Well, we've only talked about growth for the next couple of years because that's the timeframe that we've given it. But Vectren has a very attractive growth profile. And we believe when added to ours, it will create additional growth opportunities out past the years that we've been specifically discussing. We also see opportunities in the overlay or the overlap between the unregulated businesses. Opportunities for growth there that we wanna take advantage of.
So while there's always risk and there's always issues when you go through a transaction, we see the upside far outweighing the challenges. We see from a regulated business standpoint coming into areas that have constructive regulation. And so we we feel very good about this merger and the ability to close and the ability to offer a stronger value proposition to the CenterPoint shareholders down the road.
And the next question will come from Julien JULIEN Dumoulin DUMOULIN Smith SMITH:] of Bank of America Merrill Lynch.
Good morning, everyone. This is Josephine on the line for Julien. Hope you're all well.
[SPEAKER Thank you, Justine. Good morning.
So just on the CapEx, is there an opportunity to expand the CapEx at Vectren now that it's part of the CenterPoint platform?
Well, never say that the actual CapEx plan will stay as it is. I mean, our CapEx plan evolves based on customer needs. The investment plan at Vectren could evolve over time. But right now, they've got a very thoughtful plan in place with specific goals to accomplish, and their capital plan is geared around that. Yeah.
The only other
thing I might comment on is just obviously, and we've talked about this many times, it's a balance between, the growth and also the customer rates. There are many growth opportunities available, and it's just a matter of looking at that against what it does to customer rates.
Great. Thank you. And then just a quick follow-up. On the Enable portion, I know it doesn't necessarily change the $2,500,000,000 of equity considered, but is there a change in the consideration of long term Enable monetization in order to fund the greater CapEx as part of the merger?
No. I think strategically, our our position still stays intact and that is we would like to reduce our exposure to that space through the sale of units as the market allows us.
Got it. Great. Thank you very much.
Thank you, Justin. Thank you.
And next we have a question from Insoo Kim of RBC Capital Markets.
Hey, good morning everyone. Good morning. Good morning.
Up on, I think, Ali's question, do you see this did you see this combination bolstering longer term growth versus the growth that you CenterPoint would have seen, you know, longer term as a stand alone company? Is it was that the primary motivation for this?
Yes. There is we do see that. And while we don't specifically talk about the growth rates beyond the near term period of two years, we do see that potential there. We see it in in two ways. One is the utility investment opportunity added on to our utility investment profile as well as the commercial opportunities that come from the unregulated businesses.
Understood. And then again, with the introduction of the unregulated business with this merger, it does kind of, in some ways, maintain that regulatedunregulated mix while it is still regulated for the most part. Is that mix something that you intend to maintain longer term? Or is it going to be trying to add or bolster the regulated business going forward?
We haven't set a specific target for percentage of unregulated, but we're comfortable with the overall unregulated mix that we have against the, as you pointed out, predominantly regulated base. I will say the one of the impacts of this is the amount of earnings exposure from the midstream investment space will go down on a percentage basis. Right. Okay.
Thank you very much.
Yep.
And our next question will come from Christopher Turnure of JPMorgan.
Good morning, Scott and Karl. And Good congratulations on the deal. My first question is just on financing with respect to the idea you're going to give us more quantitative detail next week. If we assume that there's no Enable sell down and kind of given your current equity band or guidance there, how much flexibility do you have to maybe use equity units versus preferred equity or use a a forward equity structure versus a common equity structure?
I think we have a a fair amount of flexibility. I think as you saw in our message, we said we could we would look at a mix of common or common like or products as we think about what's the right mix for that.
Okay. And even if you're assuming no sale of Enable shares, you still think there's some level of flexibility there?
Yes, that is correct.
Okay. And then you mentioned this doesn't change your Enable sell down plan, but are there any tax benefits in relationship to that sell down or elsewhere within the consolidated structure that we might be missing at first glance here?
Not as a result of this transaction, if that's what you're asking.
Yes, it is.
Okay. Thank you. The
next question comes from Greg Gordon of Evercore ISI.
Hey, good morning.
Good morning, Greg.
So to the extent that the deal does become accretive to the earnings growth rate, when you get out three or four years because it's, by your own admission, not accretive to the earnings power of the company in the first two, What is the secret sauce that gets you there? Is it if it's not enhanced ability to deploy capital or increased ROEs at the utility businesses, is it an expectation that, the combination of your unregulated business platforms will drive better growth there? I'm I'm having a hard time sort of extrapolating how the growth rate expands.
So, just to clarify, we believe, this thing will be modestly accretive by '20, so the first full year after close. And then, I think
your question is how does it come out
more accretive beyond that? And, we get there through, additional opportunities of the overlap of the unregulated businesses as well as the deployment of capital that's planned, in both the regulated or in both our regulated and the vector regulated business.
And and and deploying this amount of leverage to consummate the transaction, my calculations are, it has a significant impact on the FFO to debt of the consolidated company. And I think CenterPoint's FFO to debt before this transaction was probably 20% plus and I think pro form a it's in the mid teens. Now that is consistent with an investment grade rating given your risk profile, but it seems like you're spending an awful lot of balance sheet capacity to not get a lot of earnings growth upside. So is there a plan to deleverage? Or can you articulate why that trade off is a reasonable trade off given your strategic vision for the company?
Well, because we think that, we have some capacity within our credit to, take on the additional debt and still maintain the credit ratings that we need to to operate all of our businesses. And we see the value of the larger platform and the particularly, some of the opportunities around the unregulated space, knowing how customers' needs are evolving and how the energy delivery space is evolving to take advantage of having that combined skill set and those combined capabilities.
The next question will come from Steve Fleishman of Wolfe Research.
Hey, good morning. Just in terms of the financing for the transaction, both the equity and the debt, how are you thinking about hedging during this period? Or just obviously, markets can move around between now and closing?
Hey, Steve. If if it's okay with you, we'd like to defer that subject till the call next week.
Okay. Okay. Great. And then just you might have talked about this, but the approval filings for the for for the state, so I guess Indiana, Ohio. So you don't don't need approval of the merger, but you do have to make some kind of filing.
So what what kind of filing do you need to make? And what's the nature of that?
Yeah. This is Carl. As you said, approval file formal approval is not required in either Indiana or Ohio. And the filings that we'll make, really, what we'll do is sit down with the commission and talk about the information that they would like to see. And so then we'll make those filings once we've really determined what it is that we think the commissions would be looking for.
But as you mentioned, I think the key issue here is while there are filings, a formal approval is not required to either state.
Okay. Thank you.
Thanks, Steve.
The next question will come from Charles Fishman of Morningstar.
Thank you. I look at the non regulated businesses of Vectren and I covering CenterPoint, you've had tremendous growth in the your energy services. That's gonna be a material part of the combined company. But there doesn't appear to be an overlap. In other words, I I guess I would consider that an opportunity that the Vectren non regulated businesses can operate in the footprint of CenterPoint and vice versa.
Is that assumed in your earnings projections for the combined company that there'd be considerable growth in that area?
Well, it's certainly, Charles, part of the the growth consideration is we see value in this deal. But you pointed out, something that, you know, is very true, and that is the ability to do cross selling between these areas does represent opportunity for growth that neither company may be able to do on its own.
So you're a lot of CenterPoint's energy services is customers within the footprint of CenterPoint. And I I don't see that type of service on the bullet points in Vectren. I'm not familiar with Vectren.
That to me would be
a real opportunity to do it again. And you had some significant growth in your energy services as far as customer count throughput, etcetera. Is that but that is in the game plan, I assume?
Yeah. Yeah. Absolutely. That's how we think about the opportunity between these unregulated businesses. As you pointed out, we do have a number of customers that are within our utility footprint, but we also operate our energy services business in 30 about 33 states.
And Vectren operates their business in 30 plus states, I believe. And the overlap there is some overlap geographically, but there's also a fair amount of unique customer sets that we'll be able to take advantage of in terms of cross selling with the with the products that they have as well as the products that we have.
And like your Minneapolis, natural gas project, is that the kind of project that Veterans Infrastructure Services could do?
Yeah. In fact, what you would if you looked at our prior investor, you would see investor presentations, you would see that we list CenterPoint as a customer. And just an interesting fact, just to give you some sense, Minnesota Limited, one of our businesses, has been in business for a very long time. Its first customer was actually the Minnesota operations of CenterPoint, and that's a customer today. So I think it gives us a very good sense of the relationship that already exists, and then it can be built upon from there.
Okay.
The next question comes from Paul Ridzon of KeyBanc.
You actually touched on a lot of this, but there's there's no net benefit standards in in either Indiana, right, or Ohio?
Again, there are no formal approvals required. So in in essence, I think the answer is no.
But I'd rather answer if there's no
formal approvals required there. Obviously, we will have discussions and decide what type of filings we need to make in both states, but it will not rise to those kinds of approvals.
Thanks again for the clarification.
The next question comes from Kamal Patel of Wells Fargo.
Morning, gentlemen. Had a few quick questions on structure and debt strategy. From a corporate structure perspective, does Vectren become a sub of CenterPoint Inc?
The the short answer, it is yes. But we would like to answer that in more detail next week on the call if we can on our install.
And then looking at your debt funding strategy, you're including CP. Is that because you intend to reduce debt immediately upon close or through through the next year or so? And do you need to get to an EPS accretive? Does the transaction need to be EPS accretive to pursue debt reduction going forward?
Well, when you say need to be e accretive, not sure that there's a requirement. A structural requirement. Is that a hurdle?
Is what I'm trying to say. Sorry.
No. I wouldn't describe it as a as a hurdle. The consideration for financing includes a number of factors around both debt and equity, and we're thinking through all of those and being willing to and able to share more of those on future call.
Okay. Thank you.
Okay. The next question will come from Michael Weinstein of Credit Suisse.
Hi, guys. I apologize if
I, if these were already asked. I just came on the call late. But, the long term growth CAGRs for the rate base of Vectren are 5% to 7%, and, that's a little bit lower than CenterPoint standalone at 8% to 9%. What does that mean for the you know, you maintaining your 5% to 7%, EPS growth rate?
Of course, Vectren's overall growth rate, which we've confirmed really for a ten year period is six to 8%. Obviously, some of that is from the non regulated portion. Also, some of it is from our expectations on how costs are controlled, even without the merger. So, we were very comfortable in in the past with that 6% to 8%. We, of course, will talk more about that next week.
Wouldn't wait want to say we're confirming that number on the call today. But, we've been talking about a six to 8% growth rate for quite some time.
Gotcha. And also, maybe you could comment a little bit on the impact to FFO to debt as a result of the merger, you know, considering tax reform impacts on both companies, before and after, and whether you know, what this might mean for credit ratings.
Yeah. It it will decline, but the the result will still be solid credit quality. Investment grade credit quality.
Does that mean that you'd be you might have to take a one notch downgrade?
Potentially.
Okay. All right.
The next question will come from Paul Patterson of Glenrock Associates.
Congratulations, guys.
Thank you, Paul. Thanks.
On the synergies, growth synergies, I was wondering if you could if there was any quantification as to how much you see the non regulated operations growing as a result of the merger? And you mentioned cross selling, but I'm just wondering if there are any other sort of examples you could use you could you could elaborate on that would that'd be driving the the synergistic growth that you talked about?
Yeah. So we have not given specific numbers for growth based on the cross selling potential of all of the businesses. But let me provide an example. So we have a mobile energy solutions business on the CenterPoint side that provides service to pipelines that have to be taken out for maintenance or repair. And this service allows the customers to continue to be fed the the gas that they need during those repair those repair work.
Well, the Visco side of the business does on the Vectren side, does a lot of the replacement and repair work. So being able to marry those two up for joint opportunity is one example of how a product line on our side and product line on the Vectren side can come together to create some additional value.
Okay. And so quantifiable, can you give us a sense as to how much more these businesses will grow or as a result of the merger? I mean, how how should we think about that?
Yeah. We haven't we we're not giving growth numbers yet on those. But suffice it to say, that is clearly one of the strategic elements that makes us confident that this will be a win for the shareholder in terms of providing additional upside and growth opportunity.
Okay, great. Thanks a lot.
Thank you.
Our next question comes from Andy Levi of Avon Capital.
Hi, good morning.
Good morning, Andy.
Hi. Most of my questions obviously were asked already. But I don't just the timing of of the financing, particularly the equity, can you give us any sense of that?
Yeah. Andy, that's the way
we would describe that is we're gonna get it completed in advance of closing. And we've said closing is anticipated to be the first quarter of two thousand nineteen.
Okay. That's fair. And have you do you have all the appropriate filings made, you know, s threes and things like that, as far as, you know, having the equity on the shelf for no better way to to say it? Or or or do those filings registration statements need to be made still?
We do have those. We have a universal shelf.
Okay. So you're ready to go once quiet period goes and anywhere between now and closing. Okay. Right. Thank you very much.
Yep.
Yep.
Our next question comes from Michael Lapides of Goldman Sachs.
Just a veteran in Indiana CapEx related question. When looking at the electric CapEx, and this is kind of very long term focus, I know that a lot of the back end uptick in CapEx is tied to new combined cycle. But just curious, how are you thinking the combination would potentially impact the development of either a, new renewables into that part of the country or b, new transmission that could bring in new renewables from other states?
Well, I I think, first of all, as you know, we've got a ten year growth plan, on the table, which is unusual to start with. So, you know, we'd be talking about growth in essence beyond that. There obviously could be more growth before that. But I really think the two companies will get together to look at those opportunities. There certainly will be opportunities down the road on renewables.
But of course, we will be building the combined cycle plant, which will deal with our reserve margin in this period of time. But exactly what will unfold beyond that, we'll still have the one coal plant as an example. So we'll have to see what opportunities occur related to renewables, beyond that time period. And if it's a step up, that would really be driven more by, perhaps any requirements that might occur, from various agencies. But we feel like the generation is gonna be positioned very nicely.
We'll have renewables. We'll have gas. We'll have coal.
Got it. Thank you, guys. Much appreciated.
Thanks, Mike.
The next question comes from Cesare Nideki of Schroders.
Thank you for taking the call. Just had a quick question on the termination date for the deal close, if the closing conditions are not met.
Can you re can you restate the question? Do you know what yeah.
Yeah. What is what is the termination date for the deal if the closing conditions are not met?
Yeah. It starts at twelve months, and then related to any regulatory input would be eighteen months. That'd be six months beyond that, a total of eighteen months.
Okay. And and since you said that acquisition of the regulator operations in in Indiana and Ohio don't require formal approvals, Is the closing of the transaction subject to finalization of any pending reviews or questions from the commission?
What we really said in the press release is subject to additional regulatory filings. So in an answer, the the in essence, the answer is yes. But, again, they aren't formal approvals as you often think about in other states. But we will make regulatory filings to provide information to the commission so that they're fully informed.
So so just to clarify, in case those proceedings are not closed in eighteen months or not not to CenterPoint satisfaction, I guess, the termination fee would not take place.
That that is correct. And, of course, what we would basically suggest, though, is, you know, not closing in eighteen months in either Indiana or Ohio, if you look back through history, would be unheard of. But but the answer is there isn't a termination fee in that situation.
Okay. Just just wanna clarify. Congratulations again. Thank you.
Thank you.
The next question will come from Lassandra Hong of Auvilla Research Consulting.
Thank you. I know this question has been asked, but I'm going to ask it slightly differently. If and when CenterPoint sells Enable units, how high a priority would it be to buy back shares of CenterPoint?
Well, Hassan, the way I would answer that is if we were able to sell some Enable shares, it would reduce the amount of equity we would otherwise need.
Correct. But it okay. I'll leave it at that. Second, how much of the debt that is being issued has a maturity of, let's say, three years or less?
I think we'll have to we'll have to get back to you on that one.
Okay. Final question. How sensitive is CenterPoint to natural gas prices once the merger with Vectren occurs?
In what way? I'm sorry.
Say, volatility or net income.
To natural gas prices?
Yes.
Our exposure our exposure to natural gas prices would be through two considerations. One would be the, amount of, say, bad debt or receivables may go up slightly if gas prices were to go up. And if gas prices were to go, I guess, extraordinarily high, you may see a a reduction in usage. Although many of the jurisdictions have rate designs that are largely fixed bill. So that would be mitigated there.
And next, have a follow-up question from Julien Dumoulin Smith of Bank of America Merrill Lynch.
Hi. It's Justine again. Just curious if you could comment on any initial conversations with credit rating agencies.
Yeah. We've already had those. We had them last week.
And feedback's been positive so far?
Yeah. I think they're, we'll look for them to comment on that.
Got it. Great. Thank you very much.
Thank you.
And this concludes our question and answer session. I would like to turn the conference back over to David Morty for any closing remarks.
Thank you. We appreciate everyone joining, and we look forward to talking to you next week on our respective earnings call.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.