OGE Energy selling gas business for $7B, focusing solely on OG&E electric utility

OKC skyline courtesy Wikivoyage

By Rod Walton, Power Engineering and POWERGEN+ content director

The parent of Oklahoma Gas & Electric (OG&E), which has followed a dual path as a utility and natural gas company, is now intent on focusing on its electric business and letting go of its nationwide gas gathering, pipeline and processing business.

OGE Energy Corp. owns a 25.5-percent limited partner and 50 percent general partner interest in Enable Midstream Partners, a gas pipeline and storage company. The parent firm is supporting a proposed deal in which Texas-based Energy Transfer LP would merge with Enable.

The deal was somewhat obscured last week as Oklahoma, Texas and nearby states dealt with historic cold weather. The lingering storm impacted electric and gas service throughout the region.

OGE Energy CEO Sean Trauschke said the company will discuss the merger in deeper detail on its Thursday earnings call.

“This transaction adds value for our shareholders and the communities we serve, and places OGE on a clear path to becoming a pure-play electric utility,” Trauschke said. “The transaction significantly enhances the liquidity of our midstream position and affords us flexibility to exit this investment in a manner that maximizes value for OGE Energy shareholders.”

OG&E provides gas and electric service to about one million customers in Oklahoma and western Arkansas, including most of the Oklahoma City metropolitan area (downtown pictured).

Under the terms of the merger agreement, Energy Transfer will acquire all outstanding limited partnership (“LP”) units of Enable through a unit-for-unit exchange ratio of 0.8595x.  OGE Energy Corp. will own approximately 3% of the outstanding LP units of Energy Transfer immediately after the consummation of the merger.

As part of the transaction, Energy Transfer will also acquire the general partner interests from OGE Energy Corp. and CenterPoint Energy for $10 million in aggregate cash consideration.  In addition, upon closing of the transaction, CenterPoint Energy will pay OGE Energy Corp. $30 million.

“Over the years, we have grown a modestly sized gas pipeline business into a publicly traded MLP that has returned over $1 billion in cash distributions to OGE,” said  Trauschke.  “This proposed merger transaction will result in a stronger, much larger midstream company, transforming our investment into a passive one, albeit with increased flexibility and liquidity necessary to accomplish an exit in a manner that was previously unavailable with Enable units.

“However, with today’s announcement, we are taking the first step of our plan to exit our midstream investment, becoming a pure-play electric utility focused on investing in our electric infrastructure and bringing outstanding service, jobs and economic development to the communities of Oklahoma and Arkansa,” the OGE CEO added.

OG&E was founded in 1902. It reorganized under the OGE Energy holding company umbrella in 1997. The Enable Midstream master limited partnership was formed in 2013.

Oklahoma City-based Enable owns close to 14,000 miles of natural gas, crude oil, condensate and produced water gathering pipelines, as well as 15 gas processing plants and nearly 10,000 miles of interstate and intrastate gas pipeline.

The Entergy Transfer acquisition was valued at close to $7 billion, according to reports.

(Rod Walton, a 13-year veteran in covering the energy industry, is content director for Power Engineering, POWERGEN International and the POWERGEN+ online series. He can be reached at 918-831-9177 and rod.walton@clarionevents.com).

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