Dive Brief:

• Federal regulators last week approved CenterPoint Energy's $6 billion bid to purchase Vectren Corp., finding no market power issues and citing the companies' promise that the deal will not lead to higher customer bills.
• The combined gas and electric utility company would serve more than 7 million customers in eight states, though the Federal Energy Regulatory Commission (FERC) concluded "there are no common markets with respect to generation ownership."
• With FERC approval, the deal is on track to get wrapped up by the first quarter of 2019.

Dive Insight:

CenterPoint and Vectren say the deal will allow the combined entity to leverage efficiencies, and they estimate earnings per share growth of up to 7% next year and in 2020.

CenterPoint serves more than 3.4 million gas customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas, and delivers electricity to more than 2.4 million customers in Houston. Vectren delivers gas to more than 1 million customers in Indiana and Ohio, and electricity to 145,000 customers in Indiana.

Despite the wide geographic swath to their markets, FERC determined the merger would not cause any market power issues in the Midcontinent ISO (MISO) or Electric Reliability Council of Texas (ERCOT).

"Neither Vectren nor its affiliates make any wholesale electricity sales in ERCOT and neither CenterPoint nor its affiliates make any wholesale electricity sales in MISO," FERC wrote of possible horizontal market issues."[T]here is no geographic overlap between [the] applicants in any relevant market."

Considering vertical market power concerns, FERC said it accepted the companies' assertion that the MISO market is "not highly concentrated, and that Vectren's and CenterPoint's affiliates do not serve a significant amount of gas-fired generation in MISO, and that their storage facilities represent a small share of storage fields in MISO."

The deal values Vectren shares at $72 with CenterPoint assuming all outstanding Vectren net debt. Following the announcement in April, Vectren shares rose from about $65 to $70, and in the ensuing six months they edged up to about $71.50.

But investors immediately believed CenterPoint's valuation of Vectren was too high. "There's a perception out there ... that CenterPoint overpaid for Vectren," a utilities analyst told Reuters at the time of the deal. Centerpoint shares initially fell about 5%, to below $26. Since then, shares are up about 8.5% and on Monday, closed at $27.95.

Vectren shareholders approved the deal in August and there are regulatory filings due in Indiana and Ohio, though the companies say neither of those states has approval authority and the proceedings are "informational."

The Indiana Utility Regulatory Commission has set an Oct. 17 hearing, but the companies say they do not anticipate a hearing in Ohio.