Morgan Stanley Reiterates CenterPoint Energy at Equal-Weight on OGE and Arclight Capital Partnership

In a report published by Morgan Stanley, analyst Stephen J. Maresca reiterated an Equal-Weight rating and $27 price target on Centerpoint Energy CNP. Morgan Stanley reported that, “While CNP's decision to move forward with formation of an MLP is not a huge surprise (management has said in the past in the right situation it would), the determination to bring in partners (OGE + Arclight) is a significant positive wrinkle (better size and scope for the new MLP, synergies, possibly more organic growth opportunities). We view the overall announcement positively as it is a step toward further value enhancement at CNP, but note that certain structuring decisions could prevent realization of full potential uplift (initial size of the MLP could limit impact of organic growth simply because MLP will be large; possibly $10b equity market cap by our estimation). We remain Equal-weight on CNP (Attractive industry view) given today's move (+7% intra day) and year-to-date move (+22%). However, we would note our bull case is now $30 and we believe as further details of the new MLP are uncovered (growth capex plans, distribution growth rate) that more upside exists in CNP as this is a large step forward for the company. We believe the risk-reward is favorable.” Shares of CenterPoint Energy closed at $21.84 on Thursday.