UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 4, 2016
CENTERPOINT ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Texas | 1-31447 | 74-0694415 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 1111 Louisiana Houston, Texas |
77002 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (713) 207-1111
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Conditions.
On November 4, 2016, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported third quarter 2016 earnings. For additional information regarding CenterPoint Energy’s third quarter 2016 earnings, please refer to CenterPoint Energy’s press release attached to this report as Exhibit 99.1 (the “Press Release”), which Press Release is incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
CenterPoint Energy is holding a conference call to discuss its third quarter 2016 earnings on November 4, 2016. Information about the call can be found in the Press Release furnished herewith as Exhibit 99.1. For additional information regarding CenterPoint Energy’s third quarter 2016 earnings, please refer to the supplemental materials which are being posted on CenterPoint Energy’s website and are attached to this report as Exhibit 99.2 (the “Supplemental Materials”), which Supplemental Materials are incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
The information in the Press Release and the Supplemental Materials is being furnished, not filed, pursuant to Item 2.02 and 7.01, respectively. Accordingly, the information in the Press Release and the Supplemental Materials will not be incorporated by reference into any registration statement filed by CenterPoint Energy under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
(d) Exhibits.
| EXHIBIT NUMBER |
EXHIBIT DESCRIPTION | |
| 99.1 | Press Release issued November 4, 2016 regarding CenterPoint Energy, Inc.’s third quarter 2016 earnings | |
| 99.2 | Supplemental Materials regarding CenterPoint Energy, Inc.’s third quarter 2016 earnings | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CENTERPOINT ENERGY, INC. | ||||||
| Date: November 4, 2016 | By: | /s/ Kristie L. Colvin | ||||
| Kristie L. Colvin | ||||||
| Senior Vice President and Chief Accounting Officer | ||||||
EXHIBIT INDEX
| EXHIBIT NUMBER |
EXHIBIT DESCRIPTION | |
| 99.1 | Press Release issued November 4, 2016 regarding CenterPoint Energy, Inc.’s third quarter 2016 earnings | |
| 99.2 | Supplemental Materials regarding CenterPoint Energy, Inc.’s third quarter 2016 earnings | |
Exhibit 99.1
|
For more information contact Media: Leticia Lowe Phone 713.207.7702 Investors: David Mordy Phone 713.207.6500 |
For Immediate Distribution
CenterPoint Energy reports third quarter 2016 earnings of $0.41 per diluted share and updates full year guidance to $1.16 - $1.20
| • | Strong utility performance driven by customer growth and rate relief |
| • | Midstream Investments expected to contribute earnings at the high end of the $0.24 - $0.28 guidance range for 2016 |
| • | Company continues to target 4-6% annual earnings growth through 2018 |
Houston, TX – November 4, 2016 - CenterPoint Energy, Inc. (NYSE: CNP) today reported net income of $179 million, or $0.41 per diluted share, for the third quarter of 2016, compared with a $391 million loss or a loss of $0.91 per diluted share for the same period of the prior year. The third quarter 2015 loss included pre-tax impairment charges totaling $862 million related to midstream investments. Excluding the impairment charges, third quarter 2015 net income would have been $146 million or $0.34 per diluted share. On a guidance basis, third quarter 2016 earnings were $0.41 per diluted share, consisting of $0.31 from utility operations and $0.10 from midstream investments. On the same guidance basis and excluding the impairment charges, third quarter 2015 earnings would have been $0.34 per diluted share, consisting of $0.24 from utility operations and $0.10 from midstream investments.
Operating income for the third quarter of 2016 was $284 million, compared with $265 million in the third quarter of the prior year. Equity income from midstream investments was $73 million for the third quarter of 2016, compared with a $794 million loss for the same period in the prior year, which includes the impairment charges noted above.
“Utility operations and midstream investments both performed well in the third quarter,” said Scott M. Prochazka, president and chief executive officer of CenterPoint Energy. “As a result, we are adjusting guidance to the higher end of the range for 2016.”
Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $257 million for the third quarter of 2016, consisting of $234 million from the regulated electric transmission & distribution utility operations (TDU) and $23 million related to securitization bonds. Operating income for the third quarter of 2015 was $244 million, consisting of $219 million from the TDU and $25 million related to securitization bonds.
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Operating income for the TDU benefited primarily from rate relief, customer growth and higher equity return, primarily related to true-up proceeds. These benefits were partially offset by higher depreciation and other taxes.
Natural Gas Distribution
The natural gas distribution segment reported operating income of $22 million for the third quarter of 2016, compared with $11 million for the same period of 2015. Operating income benefited from rate relief, revenue from decoupling mechanisms, lower bad debt expense and lower sales and use tax. These benefits were partially offset by higher depreciation and increased labor and benefit expenses.
Energy Services
The energy services segment reported operating income of $5 million for the third quarter of 2016 compared with $7 million for the same period in the prior year. Third quarter operating income for 2016 included a mark-to-market accounting loss of $2 million, compared to a gain of $5 million for the same period of the prior year. Excluding mark-to-market adjustments, operating income would have been $7 million in the third quarter of 2016 and $2 million in the third quarter of 2015.
Midstream Investments
The midstream investments segment reported $73 million of equity income for the third quarter of 2016, compared with a $794 million loss in the third quarter of the prior year, which includes the impairment charges noted above. For the third quarter of 2015, the impairments were partially offset by equity earnings of $68 million.
Enable Midstream declared a quarterly cash distribution of $0.318 per common and subordinated unit on November 1, 2016. Please refer to Enable Midstream’s November 2, 2016 earnings press release for details.
Dividend Declaration
On October 27, 2016, CenterPoint Energy’s board of directors declared a regular quarterly cash dividend of $0.2575 per share of common stock payable on December 9, 2016, to shareholders of record as of the close of business on November 16, 2016.
Outlook for 2016
On a consolidated basis, CenterPoint Energy updates earnings on a guidance basis for 2016 to the range of $1.16 – $1.20 per diluted share.
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The guidance range considers utility operations performance to date and certain significant variables that may impact earnings, such as weather, regulatory and judicial proceedings, throughput, commodity prices, effective tax rates, and financing activities. In providing this guidance, the company uses a non-GAAP measure of adjusted diluted earnings per share that does not consider other potential impacts, such as changes in accounting standards or unusual items, earnings or losses from the change in the value of the ZENS securities and the related stocks, or the timing effects of mark-to-market accounting in the company’s Energy Services business.
In providing guidance, the company assumes for midstream investments a 55.4 percent limited partner ownership interest in Enable Midstream and includes the amortization of CenterPoint Energy’s basis difference in Enable Midstream. CenterPoint Energy’s guidance takes into account such factors as Enable Midstream’s most recent public outlook for 2016, dated November 2, 2016, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards or Enable Midstream’s unusual items.
3
CenterPoint Energy, Inc. and Subsidiaries Reconciliation of Net Income
and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS used in providing annual earnings guidance
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, 2016 | September 30, 2016 | |||||||||||||||
| Net Income (in millions) |
Diluted EPS |
Net Income (in millions) |
Diluted EPS |
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| Consolidated net income and diluted EPS as reported |
$ | 179 | $ | 0.41 | $ | 331 | $ | 0.76 | ||||||||
| Midstream Investments |
(46 | ) | (0.10 | ) | (96 | ) | (0.22 | ) | ||||||||
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| Utility Operations (1) |
133 | 0.31 | 235 | 0.54 | ||||||||||||
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| Timing effects impacting CES(2): |
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| Mark-to-market losses (net of taxes of $1 and $7)(3) |
1 | — | 11 | 0.02 | ||||||||||||
| ZENS-related mark-to-market (gains) losses: |
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| Marketable securities (net of taxes of $27 and $65) (3)(4) |
(50 | ) | (0.11 | ) | (122 | ) | (0.27 | ) | ||||||||
| Indexed debt securities (net of taxes of $25 and $90) (3)(5) |
47 | 0.11 | 168 | 0.39 | ||||||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 131 | $ | 0.31 | $ | 292 | $ | 0.68 | ||||||||
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| Adjusted net income and adjusted diluted EPS used in providing earnings guidance: |
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| Utility Operations on a guidance basis |
$ | 131 | $ | 0.31 | $ | 292 | $ | 0.68 | ||||||||
| Midstream Investments |
46 | 0.10 | 96 | 0.22 | ||||||||||||
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| Consolidated on a guidance basis |
$ | 177 | $ | 0.41 | $ | 388 | $ | 0.90 | ||||||||
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| (1) | CenterPoint earnings excluding Midstream Investments |
| (2) | Energy Services segment |
| (3) | Taxes are computed based on the impact removing such item would have on tax expense |
| (4) | As of May 18, 2016, comprised of Time Warner Inc., Charter Communications, Inc. and Time Inc. Prior to May 18, 2016, comprised of Time Warner Inc., Time Warner Cable Inc. and Time Inc. |
| (5) | Nine months ended results include amount associated with the Charter Communications, Inc. and Time Warner Cable Inc. merger |
4
CenterPoint Energy, Inc. and Subsidiaries Reconciliation of Net Income (Loss)
and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS used in providing annual earnings guidance
| Quarter Ended | ||||||||||||||||
| September 30, 2016 | September 30, 2015 | |||||||||||||||
| Net Income (in millions) |
Diluted EPS | Net Income (in millions) |
Diluted EPS | |||||||||||||
| Consolidated as reported |
$ | 179 | $ | 0.41 | $ | (391 | ) | $ | (0.91 | ) | ||||||
| Midstream Investments |
(46 | ) | (0.10 | ) | 495 | 1.15 | ||||||||||
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| Utility Operations (1) |
133 | 0.31 | 104 | 0.24 | ||||||||||||
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| Loss on impairment of Midstream Investments: |
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| CenterPoint’s impairment of its investment in Enable (net of taxes of $94)(3) |
— | — | 156 | 0.36 | ||||||||||||
| CenterPoint’s share of Enable’s impairment of its goodwill and long-lived assets (net of taxes of $231)(3) |
— | — | 381 | 0.89 | ||||||||||||
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| Total loss on impairment |
— | — | 537 | 1.25 | ||||||||||||
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| Midstream Investments excluding loss on impairment |
46 | 0.10 | 42 | 0.10 | ||||||||||||
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| Consolidated excluding loss on impairment |
179 | 0.41 | 146 | 0.34 | ||||||||||||
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| Timing effects impacting CES(2): |
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| Mark-to-market (gains) losses (net of taxes of $1 and $2)(3) |
1 | — | (3 | ) | (0.01 | ) | ||||||||||
| ZENS-related mark-to-market (gains) losses: |
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| Marketable securities (net of taxes of $27 and $47) (3)(4) |
(50 | ) | (0.11 | ) | 87 | 0.20 | ||||||||||
| Indexed debt securities (net of taxes of $25 and $45) (3) |
47 | 0.11 | (84 | ) | (0.19 | ) | ||||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 131 | $ | 0.31 | $ | 104 | $ | 0.24 | ||||||||
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| Adjusted net income and adjusted diluted EPS used in providing earnings guidance: |
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| Utility Operations on a guidance basis |
$ | 131 | $ | 0.31 | $ | 104 | $ | 0.24 | ||||||||
| Midstream Investments excluding loss on impairment |
46 | 0.10 | 42 | 0.10 | ||||||||||||
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| Consolidated on a guidance basis |
$ | 177 | $ | 0.41 | $ | 146 | $ | 0.34 | ||||||||
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| (1) | CenterPoint earnings excluding Midstream Investments |
| (2) | Energy Services segment |
| (3) | Taxes are computed based on the impact removing such item would have on tax expense |
| (4) | As of May 18, 2016, comprised of Time Warner Inc., Charter Communications, Inc. and Time Inc. Prior to May 18, 2016, comprised of Time Warner Inc., Time Warner Cable Inc. and Time Inc. |
5
Filing of Form 10-Q for CenterPoint Energy, Inc.
Today, CenterPoint Energy, Inc. filed with the Securities and Exchange Commission (SEC) its Quarterly Report on Form 10-Q for the period ended September 30, 2016. A copy of that report is available on the company’s website, under the Investors section. Other filings the company makes with the SEC and certain documents relating to its corporate governance can also be found under the Investors section.
Webcast of Earnings Conference Call
CenterPoint Energy’s management will host an earnings conference call on Friday, November 4, 2016 at 10 a.m. Central time or 11 a.m. Eastern time. Interested parties may listen to a live audio broadcast of the conference call on the company’s website under the Investors section. A replay of the call can be accessed approximately two hours after the completion of the call and will be archived on the website for at least one year.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and energy services operations. The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. The company also owns a 55.4 percent limited partner interest in Enable Midstream Partners, a publicly traded master limited partnership it jointly controls with OGE Energy Corp., which owns, operates and develops natural gas and crude oil infrastructure assets. With more than 7,800 employees, CenterPoint Energy and its predecessor companies have been in business for more than 140 years. For more information, visit the website at www.CenterPointEnergy.com.
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual events and results may differ materially from those expressed or implied by these forward-looking statements. Any statements in this news release regarding future earnings, and future financial performance and results of operations, including, but not limited to earnings guidance, targeted dividend growth rate and any other statements that are not historical facts are forward-looking statements. Each forward-looking statement contained in this news release speaks only as of the date of this release. Factors that could affect actual results include (1) state and federal legislative and regulatory actions or developments affecting various aspects of CenterPoint Energy’s businesses (including the businesses of Enable Midstream Partners (Enable Midstream)), including, among others, energy deregulation or re-regulation, pipeline integrity and safety, health care reform, financial reform, tax legislation, and actions regarding the rates charged by CenterPoint Energy’s regulated businesses; (2) state and federal legislative and regulatory actions or developments relating to the environment, including those related to global climate change; (3) recording of non-cash goodwill, long-lived asset or other than temporary impairment charges by or related to Enable Midstream; (4) timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment; (5) the timing and outcome of any audits, disputes or other proceedings related to taxes; (6) problems with construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or in cost overruns that cannot be recouped in rates; (7) industrial, commercial and residential growth in CenterPoint Energy’s service territories and changes in market demand, including the effects of energy efficiency measures and demographic patterns; (8) the timing and extent of changes in commodity prices, particularly natural gas and natural gas liquids, and the effects of geographic and seasonal commodity price differentials, and the impact of commodity changes on producer related activities; (9) weather variations and other natural phenomena, including the impact on operations and capital from severe weather events; (10) any direct or indirect effects on CenterPoint Energy’s facilities, operations and financial condition resulting from terrorism, cyber-attacks, data security breaches or other attempts to disrupt its businesses or the businesses of third parties, or other catastrophic events; (11) the impact of unplanned facility outages; (12) timely and appropriate regulatory actions allowing securitization or other recovery of costs associated with any future hurricanes or natural disasters; (13) changes in interest rates or rates of inflation; (14) commercial bank and financial market conditions, CenterPoint Energy’s access to capital, the cost of such capital, and the results of its financing and refinancing efforts, including availability of funds in the debt capital markets; (15) actions by credit rating agencies; (16) effectiveness of CenterPoint Energy’s risk management activities; (17) inability of various counterparties to meet their obligations; (18) non-payment for services due to financial distress of CenterPoint Energy’s and Enable Midstream’s customers; (19) the ability of GenOn Energy, Inc. (formerly known as RRI Energy, Inc.), a wholly owned subsidiary of NRG Energy, Inc., and its subsidiaries to satisfy their obligations to CenterPoint Energy and its subsidiaries; (20) the ability of retail electric providers, and particularly the largest customers of the TDU, to satisfy their obligations
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6
to CenterPoint Energy and its subsidiaries; (21) the outcome of litigation; (22) CenterPoint Energy’s ability to control costs, invest planned capital, or execute growth projects; (23) the investment performance of pension and postretirement benefit plans; (24) potential business strategies, including restructurings, joint ventures, and acquisitions or dispositions of assets or businesses, for which no assurance can be given that they will be completed or will provide the anticipated benefits to CenterPoint Energy; (25) acquisition and merger activities and successful integration of such activities, involving CenterPoint Energy or its competitors; (26) the ability to recruit, effectively transition and retain management and key employees and maintain good labor relations; (27) future economic conditions in regional and national markets and their effects on sales, prices and costs; (28) the performance of Enable Midstream, the amount of cash distributions CenterPoint Energy receives from Enable Midstream, and the value of its interest in Enable Midstream, and factors that may have a material impact on such performance, cash distributions and value, including certain of the factors specified above and: (A) the integration of the operations of the businesses contributed to Enable Midstream; (B) the achievement of anticipated operational and commercial synergies and expected growth opportunities, and the successful implementation of Enable Midstream’s business plan; (C) competitive conditions in the midstream industry, and actions taken by Enable Midstream’s customers and competitors, including the extent and timing of the entry of additional competition in the markets served by Enable Midstream; (D) the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly natural gas and natural gas liquids, the competitive effects of the available pipeline capacity in the regions served by Enable Midstream, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable Midstream’s interstate pipelines; (E) the demand for crude oil, natural gas, NGLs and transportation and storage services; (F) changes in tax status; (G) access to growth capital; and (H) the availability and prices of raw materials for current and future construction projects; (29) effective tax rate; (30) the effect of changes in and application of accounting standards and pronouncements; (31) other factors discussed in CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as well as in CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, June 30, 2016 and September 30, 2016 and other reports CenterPoint Energy or its subsidiaries may file from time to time with the Securities and Exchange Commission.
Use of Non-GAAP Financial Measures by CenterPoint Energy in Providing Guidance
In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), including presentation of net income and diluted earnings per share, CenterPoint Energy also provides guidance based on adjusted net income and adjusted diluted earnings per share, which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share calculation excludes from net income and diluted earnings per share, respectively, the impact of ZENS and related securities, mark-to-market gains or losses resulting from the company’s Energy Services business and adjustments for impairment charges. A reconciliation of net income and diluted earnings per share to the basis used in providing 2016 guidance is provided in this news release. CenterPoint Energy is unable to present a quantitative reconciliation of forward looking adjusted net income and adjusted diluted earnings per share because changes in the value of ZENS and related securities, mark-to-market gains or losses resulting from the company’s Energy Services business and impairment charges are not estimable.
Management evaluates the company’s financial performance in part based on adjusted net income and adjusted diluted earnings per share. We believe that presenting these non-GAAP financial measures enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. The adjustments made in these non-GAAP financial measures exclude items that Management believes does not most accurately reflect the company’s fundamental business performance. These excluded items are reflected in the reconciliation tables of this news release, where applicable. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, net income and diluted earnings per share, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies.
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7
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues: |
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| Electric Transmission & Distribution |
$ | 908 | $ | 827 | $ | 2,331 | $ | 2,144 | ||||||||
| Natural Gas Distribution |
377 | 359 | 1,693 | 1,979 | ||||||||||||
| Energy Services |
614 | 452 | 1,450 | 1,510 | ||||||||||||
| Other Operations |
3 | 4 | 11 | 11 | ||||||||||||
| Eliminations |
(13 | ) | (12 | ) | (38 | ) | (49 | ) | ||||||||
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| Total |
1,889 | 1,630 | 5,447 | 5,595 | ||||||||||||
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| Expenses: |
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| Natural gas |
683 | 527 | 2,031 | 2,410 | ||||||||||||
| Operation and maintenance |
505 | 479 | 1,539 | 1,465 | ||||||||||||
| Depreciation and amortization |
324 | 268 | 873 | 724 | ||||||||||||
| Taxes other than income taxes |
93 | 91 | 288 | 289 | ||||||||||||
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| Total |
1,605 | 1,365 | 4,731 | 4,888 | ||||||||||||
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| Operating Income |
284 | 265 | 716 | 707 | ||||||||||||
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| Other Income (Expense) : |
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| Gain (loss) on marketable securities |
77 | (134 | ) | 187 | (72 | ) | ||||||||||
| Gain (loss) on indexed debt securities |
(72 | ) | 129 | (258 | ) | 62 | ||||||||||
| Interest and other finance charges |
(83 | ) | (88 | ) | (256 | ) | (266 | ) | ||||||||
| Interest on securitization bonds |
(23 | ) | (25 | ) | (70 | ) | (80 | ) | ||||||||
| Equity in earnings (losses) of unconsolidated affiliate |
73 | (794 | ) | 164 | (699 | ) | ||||||||||
| Other - net |
20 | 12 | 41 | 36 | ||||||||||||
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| Total |
(8 | ) | (900 | ) | (192 | ) | (1,019 | ) | ||||||||
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| Income (Loss) Before Income Taxes |
276 | (635 | ) | 524 | (312 | ) | ||||||||||
| Income Tax Expense (Benefit) |
97 | (244 | ) | 193 | (129 | ) | ||||||||||
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| Net Income (Loss) |
$ | 179 | $ | (391 | ) | $ | 331 | $ | (183 | ) | ||||||
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Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
8
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Millions of Dollars, Except Share and Per Share Amounts)
(Unaudited)
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Basic Earnings (Loss) Per Common Share |
$ | 0.42 | $ | (0.91 | ) | $ | 0.77 | $ | (0.43 | ) | ||||||
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| Diluted Earnings (Loss) Per Common Share |
$ | 0.41 | $ | (0.91 | ) | $ | 0.76 | $ | (0.43 | ) | ||||||
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| Dividends Declared per Common Share |
$ | 0.2575 | $ | 0.2475 | 0.7725 | $ | 0.7425 | |||||||||
| Weighted Average Common Shares Outstanding (000): |
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| - Basic |
430,682 | 430,262 | 430,581 | 430,152 | ||||||||||||
| - Diluted |
433,396 | 430,262 | 433,295 | 430,152 | ||||||||||||
| Operating Income by Segment |
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| Electric Transmission & Distribution: |
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| TDU |
$ | 234 | $ | 219 | $ | 428 | $ | 418 | ||||||||
| Bond Companies |
23 | 25 | 70 | 80 | ||||||||||||
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|
|
|
|
|||||||||
| Total Electric Transmission & Distribution |
257 | 244 | 498 | 498 | ||||||||||||
| Natural Gas Distribution |
22 | 11 | 202 | 176 | ||||||||||||
| Energy Services |
5 | 7 | 11 | 29 | ||||||||||||
| Other Operations |
— | 3 | 5 | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 284 | $ | 265 | $ | 716 | $ | 707 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
9
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Electric Transmission & Distribution | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2016 | 2015 | Fav/(Unfav) | 2016 | 2015 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues: |
||||||||||||||||||||||||
| TDU |
$ | 725 | $ | 683 | 6 | % | $ | 1,881 | $ | 1,782 | 6 | % | ||||||||||||
| Bond Companies |
183 | 144 | 27 | % | 450 | 362 | 24 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
908 | 827 | 10 | % | 2,331 | 2,144 | 9 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance. excluding Bond Companies |
336 | 322 | (4 | %) | 995 | 944 | (5 | %) | ||||||||||||||||
| Depreciation and amortization, excluding Bond Companies |
96 | 86 | (12 | %) | 285 | 253 | (13 | %) | ||||||||||||||||
| Taxes other than income taxes |
59 | 56 | (5 | %) | 173 | 167 | (4 | %) | ||||||||||||||||
| Bond Companies |
160 | 119 | (34 | %) | 380 | 282 | (35 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
651 | 583 | (12 | %) | 1,833 | 1,646 | (11 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 257 | $ | 244 | 5 | % | $ | 498 | $ | 498 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||
| TDU |
$ | 234 | $ | 219 | 7 | % | $ | 428 | $ | 418 | 2 | % | ||||||||||||
| Bond Companies |
23 | 25 | (8 | %) | 70 | 80 | (13 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Segment Operating Income |
$ | 257 | $ | 244 | 5 | % | $ | 498 | $ | 498 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Electric Transmission & Distribution Operating Data: |
||||||||||||||||||||||||
| Actual MWH Delivered |
||||||||||||||||||||||||
| Residential |
10,775,739 | 10,387,735 | 4 | % | 23,426,712 | 23,283,969 | 1 | % | ||||||||||||||||
| Total |
26,517,635 | 25,612,134 | 4 | % | 66,838,583 | 65,378,208 | 2 | % | ||||||||||||||||
| Weather (average for service area): |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Cooling degree days |
107 | % | 101 | % | 6 | % | 101 | % | 99 | % | 2 | % | ||||||||||||
| Heating degree days |
0 | % | 0 | % | 0 | % | 85 | % | 130 | % | (45 | %) | ||||||||||||
| Number of metered customers - end of period: |
||||||||||||||||||||||||
| Residential |
2,116,312 | 2,069,213 | 2 | % | 2,116,312 | 2,069,213 | 2 | % | ||||||||||||||||
| Total |
2,389,014 | 2,337,806 | 2 | % | 2,389,014 | 2,337,806 | 2 | % | ||||||||||||||||
| Natural Gas Distribution | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2016 | 2015 | Fav/(Unfav) | 2016 | 2015 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 377 | $ | 359 | 5 | % | $ | 1,693 | $ | 1,979 | (14 | %) | ||||||||||||
| Natural gas |
104 | 106 | 2 | % | 679 | 1,014 | 33 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
273 | 253 | 8 | % | 1,014 | 965 | 5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
159 | 155 | (3 | %) | 526 | 510 | (3 | %) | ||||||||||||||||
| Depreciation and amortization |
61 | 55 | (11 | %) | 180 | 165 | (9 | %) | ||||||||||||||||
| Taxes other than income taxes |
31 | 32 | 3 | % | 106 | 114 | 7 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
251 | 242 | (4 | %) | 812 | 789 | (3 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 22 | $ | 11 | 100 | % | $ | 202 | $ | 176 | 15 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Natural Gas Distribution Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
||||||||||||||||||||||||
| Residential |
12 | 12 | — | 105 | 128 | (18 | %) | |||||||||||||||||
| Commercial and Industrial |
51 | 52 | (2 | %) | 193 | 196 | (2 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Throughput |
63 | 64 | (2 | %) | 298 | 324 | (8 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weather (average for service area) |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Heating degree days |
21 | % | 64 | % | (43 | %) | 86 | % | 108 | % | (22 | %) | ||||||||||||
| Number of customers - end of period: |
||||||||||||||||||||||||
| Residential |
3,143,357 | 3,110,645 | 1 | % | 3,143,357 | 3,110,645 | 1 | % | ||||||||||||||||
| Commercial and Industrial |
251,043 | 248,911 | 1 | % | 251,043 | 248,911 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
3,394,400 | 3,359,556 | 1 | % | 3,394,400 | 3,359,556 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
10
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Energy Services | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2016 | 2015 | Fav/(Unfav) | 2016 | 2015 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 614 | $ | 452 | 36 | % | $ | 1,450 | $ | 1,510 | (4 | %) | ||||||||||||
| Natural gas |
591 | 433 | (36 | %) | 1,389 | 1,445 | 4 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
23 | 19 | 21 | % | 61 | 65 | (6 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
16 | 11 | (45 | %) | 43 | 32 | (34 | %) | ||||||||||||||||
| Depreciation and amortization |
1 | 1 | — | 5 | 3 | (67 | %) | |||||||||||||||||
| Taxes other than income taxes |
1 | — | — | 2 | 1 | (100 | %) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
18 | 12 | (50 | %) | 50 | 36 | (39 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 5 | $ | 7 | (29 | %) | $ | 11 | $ | 29 | (62 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Mark-to-market gain (loss) |
$ | (2 | ) | $ | 5 | (140 | %) | $ | (18 | ) | $ | 3 | (700 | %) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Energy Services Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
200 | 138 | 45 | % | 570 | 459 | 24 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Number of customers - end of period |
31,669 | 18,052 | 75 | % | 31,669 | 18,052 | 75 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Other Operations | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2016 | 2015 | Fav/(Unfav) | 2016 | 2015 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 3 | $ | 4 | (25 | %) | $ | 11 | $ | 11 | — | |||||||||||||
| Expenses |
3 | 1 | (200 | %) | 6 | 7 | 14 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | — | $ | 3 | — | $ | 5 | $ | 4 | 25 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Capital Expenditures by Segment
(Millions of Dollars)
(Unaudited)
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Capital Expenditures by Segment |
||||||||||||||||
| Electric Transmission & Distribution |
$ | 211 | $ | 237 | $ | 638 | $ | 665 | ||||||||
| Natural Gas Distribution |
143 | 172 | 371 | 416 | ||||||||||||
| Energy Services |
1 | 3 | 3 | 4 | ||||||||||||
| Other Operations |
6 | 12 | 16 | 29 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 361 | $ | 424 | $ | 1,028 | $ | 1,114 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Interest Expense Detail | ||||||||||||||||
| (Millions of Dollars) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Interest Expense Detail |
||||||||||||||||
| Amortization of Deferred Financing Cost |
$ | 6 | $ | 6 | $ | 18 | $ | 19 | ||||||||
| Capitalization of Interest Cost |
(2 | ) | (2 | ) | (5 | ) | (7 | ) | ||||||||
| Transition and System Restoration Bond Interest Expense |
23 | 25 | 70 | 80 | ||||||||||||
| Other Interest Expense |
79 | 84 | 243 | 254 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Interest Expense |
$ | 106 | $ | 113 | $ | 326 | $ | 346 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
11
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 270 | $ | 264 | ||||
| Other current assets |
2,259 | 2,425 | ||||||
|
|
|
|
|
|||||
| Total current assets |
2,529 | 2,689 | ||||||
|
|
|
|
|
|||||
| Property, Plant and Equipment, net |
12,083 | 11,537 | ||||||
|
|
|
|
|
|||||
| Other Assets: |
||||||||
| Goodwill |
862 | 840 | ||||||
| Regulatory assets |
2,756 | 3,129 | ||||||
| Investment in unconsolidated affiliate |
2,535 | 2,594 | ||||||
| Preferred units – unconsolidated affiliate |
363 | — | ||||||
| Other non-current assets |
158 | 501 | ||||||
|
|
|
|
|
|||||
| Total other assets |
6,674 | 7,064 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 21,286 | $ | 21,290 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Short-term borrowings |
$ | 43 | $ | 40 | ||||
| Current portion of securitization bonds long-term debt |
410 | 391 | ||||||
| Indexed debt |
112 | 145 | ||||||
| Current portion of other long-term debt |
250 | 328 | ||||||
| Other current liabilities |
1,583 | 1,554 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
2,398 | 2,458 | ||||||
|
|
|
|
|
|||||
| Other Liabilities: |
||||||||
| Accumulated deferred income taxes, net |
5,206 | 5,047 | ||||||
| Regulatory liabilities |
1,279 | 1,276 | ||||||
| Other non-current liabilities |
1,195 | 1,182 | ||||||
|
|
|
|
|
|||||
| Total other liabilities |
7,680 | 7,505 | ||||||
|
|
|
|
|
|||||
| Long-term Debt: |
||||||||
| Securitization bonds |
1,931 | 2,276 | ||||||
| Other |
5,805 | 5,590 | ||||||
|
|
|
|
|
|||||
| Total long-term debt |
7,736 | 7,866 | ||||||
|
|
|
|
|
|||||
| Shareholders’ Equity |
3,472 | 3,461 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 21,286 | $ | 21,290 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
12
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(Millions of Dollars)
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income (loss) |
$ | 331 | $ | (183 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
892 | 745 | ||||||
| Deferred income taxes |
150 | (264 | ) | |||||
| Write-down of natural gas inventory |
1 | 4 | ||||||
| Equity in (earnings) losses of unconsolidated affiliate, net of distributions |
(164 | ) | 843 | |||||
| Changes in net regulatory assets |
(26 | ) | 92 | |||||
| Changes in other assets and liabilities |
252 | 266 | ||||||
| Other, net |
16 | 15 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
1,452 | 1,518 | ||||||
| Net Cash Used in Investing Activities |
(739 | ) | (1,024 | ) | ||||
| Net Cash Used in Financing Activities |
(707 | ) | (565 | ) | ||||
|
|
|
|
|
|||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
6 | (71 | ) | |||||
| Cash and Cash Equivalents at Beginning of Period |
264 | 298 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 270 | $ | 227 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
13
Third quarter 2016 earnings of $0.41 per diluted share Full year guidance updated to $1.16 - $1.20 Strong utility performance driven by customer growth and rate relief Midstream Investments expected to contribute earnings at the high end of the $0.24 - $0.28 guidance range for 2016 Company continues to target 4 - 6% annual earnings growth through 2018 3rd Quarter 2016 Earnings Call November 4, 2016 Exhibit 99.2
Cautionary Statement This presentation and the oral statements made in connection herewith contain statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future operations, events, financial position, earnings, growth, costs, prospects, capital investments or performance or underlying assumptions (including future regulatory filings and recovery, liquidity, capital resources, balance sheet, cash flow, capital investments and management, financing costs, and rate base or customer growth) and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “target,” “will,” or other similar words. The absence of these words, however, does not mean that the statements are not forward-looking. Examples of forward-looking statements in this presentation include statements about our acquisition of Atmos Energy Marketing, including statements about future financial performance, margin and operating income and growth, guidance, including earnings and dividend growth, future financing plans and expectation for liquidity and capital resources, tax rates and interest rates, among other statements. We have based our forward-looking statements on our management's beliefs and assumptions based on information currently available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions, and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Some of the factors that could cause actual results to differ from those expressed or implied by our forward-looking statements include but are not limited to the timing and impact of future regulatory, legislative and IRS decisions, financial market conditions, future market conditions, economic and employment conditions, customer growth, Enable Midstream’s performance and ability to pay distributions, and other factors described in CenterPoint Energy, Inc.’s Form 10-K for the period ended December 31, 2015 and Form 10-Q for the period ended September 30, 2016 under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Certain Factors Affecting Future Earnings” and in other filings with the SEC by CenterPoint Energy, which can be found at www.centerpointenergy.com on the Investor Relations page or on the SEC’s website at www.sec.gov. This presentation contains time sensitive information that is accurate as of the date hereof. Some of the information in this presentation is unaudited and may be subject to change. We undertake no obligation to update the information presented herein except as required by law. Investors and others should note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and the Investor Relations page of our website. In the future, we will continue to use these channels to distribute material information about the Company and to communicate important information about the Company, key personnel, corporate initiatives, regulatory updates and other matters. Information that we post on our website could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website. Use of Non-GAAP Financial Measures In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), including presentation of net income and diluted earnings per share, CenterPoint Energy also provides guidance based on adjusted net income and adjusted diluted earnings per share, which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share calculation excludes from net income and diluted earnings per share, respectively, the impact of ZENS and related securities, mark-to-market gains or losses resulting from the company’s Energy Services business and adjustments for impairment charges. A reconciliation of net income and diluted earnings per share to the basis used in providing 2016 guidance is provided in this presentation on slide 16. CenterPoint Energy is unable to present a quantitative reconciliation of forward-looking adjusted net income and adjusted diluted earnings per share because changes in the value of ZENS and related securities, mark-to-market gains or losses resulting from the company’s Energy Services business and impairment charges are not estimable. Management evaluates the company’s financial performance in part based on adjusted net income and adjusted diluted earnings per share. We believe that presenting these non-GAAP financial measures enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. The adjustments made in these non-GAAP financial measures exclude items that Management believes do not most accurately reflect the company’s fundamental business performance. These excluded items are reflected in the reconciliation table on slides 16, 20 and 21 of this presentation. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, net income and diluted earnings per share, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies.
Earnings Call Highlights Third Quarter Performance Enable Midstream Highlights Full-Year Outlook Scott Prochazka – President and CEO
Third Quarter 2016 Performance Highlights (1) Refer to slide 16 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) Excluding ZENS and CES mark-to-market adjustments (3) Primarily related to true-up proceeds Q3 2016 vs Q3 2015 Drivers (2) h Favorable Variance i Unfavorable Variance Customer Growth Rate Relief Interest Expense Equity Return (3) Depreciation O&M Expense Q3 EPS Q3 EPS on a Guidance (Non-GAAP) Basis (1) Third quarter 2016 EPS of $0.41, compared with third quarter 2015 EPS loss of $0.91, that included impairment charges totaling $1.25 per share related to the equity investment in Enable Midstream Midstream Investments in line with expectations
Highlights from Enable Midstream’s Earnings Call on Nov. 2, 2016 Source: Enable Midstream Partners, November 2, 2016, Press Release and Q3 Earnings Call. Please refer to these materials for an overview of Enable’s Q3 performance (1) Per Drillinginfo: Q3-16 rig count of 33 rigs as of October 26, 2016, and Q2-16 rig count of 29 rigs as of July 26, 2016 Dedicated rig count increased over 13% during the 3rd quarter (1) Enable continues to achieve commercial success and is well-positioned to meet customers needs through integrated midstream solutions Quarterly natural gas gathered volumes increased for the third quarter in a row Signed new 10-year, fee-based natural gas gathering and processing agreement with one of the most active producers in the STACK, replacing an existing percent-of-proceeds processing arrangement Increases fee-based margins, reduces commodity exposure and increases the volume-weighted average term on gathering contracts Declared a third quarter 2016 cash distribution of $0.318 per common and subordinated unit and a cash distribution of $0.625 per Series A Preferred Unit
CenterPoint Energy Full-Year Outlook Focus continues to be on investing in our utility service territories to address ongoing growth, maintenance, reliability, safety and customer service 2016 earnings from Utility Operations are expected to represent 75% - 80% of overall earnings Anticipate 2016 Utility Operations earnings growth will be driven by: (1) Refer to slide 21 for reconciliation to 2015 GAAP measures and slide 2 for information on non-GAAP measures 2016 Guidance Range vs. 2015 EPS on a Guidance (Non-GAAP) Basis (1) $1.16 - $1.20 $1.10 Investment discipline Optimization of operating costs Customer growth Efficient rate recovery $1.12 - $1.20
Earnings Call Highlights Houston Electric Results Houston Electric Regulatory Update Tracy Bridge – EVP & President, Electric Division Construction of a new 345kV double circuit tower
(1) Houston Electric’s customer count increased by 51,208 from 2,337,806 as of September 30, 2015 to 2,389,014 as of September 30, 2016 (2) Q3 2015 TDU core operating income represents total segment operating income of $244 million, excluding operating income from transition and system restoration bonds of $25 million (3) Includes higher DCRF revenues of $6 million, primarily due to the implementation of new rates in September from the 2016 filing, and higher net transmission-related revenues of $5 million (4) Includes higher equity return of $7 million, primarily related to true-up proceeds (5) Q3 2016 TDU core operating income represents total segment operating income of $257 million, excluding operating income from transition and system restoration bonds of $23 million $ Millions 2% YoY Customer Growth (1) (2) (3) (5) Electric Transmission and Distribution Operating Income Drivers: Q3 2015 vs Q3 2016 (4)
DCRF – Distribution Cost Recovery Factor; PUCT – Texas Public Utility Commission; TCOS – Transmission Cost of Service; EECRF – Energy Efficiency Cost Recovery Factor (1) Performance incentive approved and recognized in October 2015 was $6.6 million Mechanism Effective Date Annual DCRF Revenue Requirement ($MM) Comments Docket # DCRF September 2016 $45.0 Filed in April 2016; settlement approved by the PUCT in June 2016 provides for an annualized DCRF revenue requirement of $45.0 million effective September 2016 through August 2017; unless otherwise changed in subsequent DCRF filing, settlement provides for an annualized DCRF revenue requirement of $49.0 million effective September 2017 45747 Annualized DCRF revenue requirement: $45.0 million Electric Transmission and Distribution Q3 2016 Regulatory Update Mechanism Expected Effective Date Annual Performance Incentive ($MM) Comments Docket # EECRF March 2017 $10.6 (1) Filed in June 2016; requested incentive amount based on 2015 program performance; incentive approved in October 2016; recognized when approved 46014 Energy efficiency incentives recognized in 2016: $10.6 million Mechanism Effective Date Annual Revenue Increase ($MM) Comments Docket # TCOS September 2016 $3.5 Filed in July 2016; approved in September 2016 46230 Annualized rate relief from 2016 filings: $3.5 million
2015 Minnesota Beltline Replacement Project in downtown Minneapolis Earnings Call Highlights Natural Gas Distribution Results Natural Gas Distribution Regulatory Update Energy Services Results Atmos Energy Marketing (AEM) Acquisition Joe McGoldrick – EVP & President, Gas Division
1% YoY Customer Growth (1) $ Millions Natural Gas Distribution Operating Income Drivers: Q3 2015 vs Q3 2016 (2) (1) Natural Gas Distribution’s customer count increased by 34,844 from 3,359,556 as of September 30, 2015 to 3,394,400 as of September 30, 2016 (2) Includes rate increases of $8 million and rate stabilization of $7 million, reflecting adjustments from decoupling in Minnesota and Arkansas (3) Includes increased depreciation of $6 million, primarily due to ongoing additions to plant in service, and lower sales and use tax of $3 million (4) Includes increased labor and benefits expense of $5 million and lower bad debt expense of $3 million (3)
GRIP – Gas Reliability Infrastructure Program; APSC – Arkansas Public Service Commission; RRA – Rate Regulation Adjustment; MPSC – Mississippi Public Service Commission; MPUC – Minnesota Public Utilities Commission Jurisdictions Effective Date Annual Increase ($MM) Comments Docket # Houston South Texas Beaumont/East Texas Texas Coast July 2016 $18.2 Annual GRIP filings submitted in March 2016; approved and implemented by July 2016 10508 10509 10510 10511 Arkansas September 2016 $14.2 Rate case; APSC order issued in September 2016 authorized a $14.2 million rate adjustment, ROE of 9.5% and adoption of Formula Rate Plan Tariff 15-098-U Mississippi October 2016 $2.7 RRA amended request filed in July 2016; settlement approved by the MPSC and rates implemented in October 2016 12-UN-139 Minnesota December 2016 $27.5 Rate case; interim increase of $47.8 million effective in October 2015; MPUC order issued in June 2016 includes $27.5 million rate increase based on an ROE of 9.49%; final rates and interim rate refund will be implemented in December 2016 15-424 Annualized rate relief from filings completed in 2016: $62.6 million Natural Gas Distribution Q3 2016 Regulatory Update
MPUC – Minnesota Public Utilities Commission; CIP – Conservation Improvement Program; RSP – Rate Stabilization Plan; BDA – Billing Determinant Rate Adjustment (1) Performance incentive approved in 2015 was $11.6 million; recognized in August 2015 (2) Interim rates begin the recognition of revenue, subject to a refund (pending issuance of final order) Natural Gas Distribution Q3 2016 Regulatory Update Jurisdictions Date Recognized Rate Relief ($MM) Comments Docket # Arkansas December 2015 $5.5 BDA filed in March 2016; revenue recognized in Q4 2015; rates were implemented in June 2016 06-161-U Rate relief from 2016 filings recognized in 2015: $5.5 million Jurisdictions Expected Effective Date Annual Increase ($MM) Comments Docket # North Louisiana South Louisiana December 2016 $1.3 (2) (net interim rates) RSP filings made in September 2016; North Louisiana rider shows revenue deficiency of $1.7 million; South Louisiana rider shows revenue surplus of $0.4 million; pending approval; interim rates effective in December 2016 U-34251 U-34249 Expected annualized rate relief from pending 2016 filings: $1.3 million Jurisdiction Effective Date Annual Performance Incentive ($MM) Comments Docket # Minnesota September 2016 $12.7 (1) MPUC approved CIP incentive in September 2016; recognized when approved G008/M-16-366 Energy efficiency incentives recognized in 2016: $12.7 million
Third Quarter Operating Income Operating income was $7 million for the third quarter 2016 compared to $2 million for the same period last year, excluding a mark-to-market loss of $2 million and a gain of $5 million, respectively Energy Services Agreement to acquire Atmos Energy Marketing (AEM) Aggregate purchase price for the acquisition is $40 million plus working capital Complementary operational and geographic footprints provide scale and expanded capabilities that will enable growth Similar low value-at-risk models Pro forma, Energy Services is expected to deliver in excess of one trillion cubic feet of natural gas to approximately 100,000 customers Projected to be accretive to earnings Expected to close in early 2017 Source: Atmos Energy Marketing www.atmosenergymarketing.com/about/
Bill Rogers – EVP & CFO Earnings Call Highlights Third Quarter Earnings Financing, Interest Expense & Tax Strategic Review Update
Note: Refer to slide 2 for information on non-GAAP measures Reconciliation: Net Income (Loss) and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance Net Income (in millions) Diluted EPS Net Income (in millions) Diluted EPS Consolidated as reported 179 $ 0.41 $ (391) $ (0.91) $ Midstream Investments (46) (0.10) 495 1.15 Utility Operations (1) 133 0.31 104 0.24 Loss on impairment of Midstream Investments: CenterPoint's impairment of its investment in Enable (net of taxes of $94) (3) - - 156 0.36 CenterPoint's share of Enable's impairment of its goodwill and long-lived assets (net of taxes of $231) (3) - - 381 0.89 Total loss on impairment - - 537 1.25 Midstream Investments excluding loss on impairment 46 0.10 42 0.10 Consolidated excluding loss on impairment 179 0.41 146 0.34 Timing effects impacting CES (2) : Mark-to-market (gains) losses (net of taxes of $1 and $2) (3) 1 - (3) (0.01) ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $27 and $47) (3)(4) (50) (0.11) 87 0.20 Indexed debt securities (net of taxes of $25 and $45) (3) 47 0.11 (84) (0.19) Utility operations earnings on an adjusted guidance basis 131 $ 0.31 $ 104 $ 0.24 $ Adjusted net income and adjusted diluted EPS used in providing earnings guidance: Utility Operations on a guidance basis 131 $ 0.31 $ 104 $ 0.24 $ Midstream Investments excluding loss on impairment 46 0.10 42 0.10 Consolidated on a guidance basis 177 $ 0.41 $ 146 $ 0.34 $ (1) CenterPoint earnings excluding Midstream Investments (2) Energy Services segment (3) Taxes are computed based on the impact removing such item would have on tax expense (4) As of May 18, 2016, comprised of Time Warner Inc., Charter Communications, Inc. and Time Inc. Prior to May 18, 2016, comprised of Time Warner Inc., Time Warner Cable Inc. and Time Inc. September 30, 2016 September 30, 2015 Quarter Ended
Liquidity and Capital Resources Anticipate strong balance sheet and cash flow Net incremental borrowings of ~$100 million expected for 2016, inclusive of funding for the acquisition of the retail energy services business and natural gas wholesale assets of Continuum Equity issuance not anticipated in 2017 and 2018 Modest incremental financing needs expected for 2017 and 2018, inclusive of funding for the acquisition of the retail energy services business of Atmos Energy Marketing (AEM); dependent on factors including bonus depreciation, capital investment plans and working capital Tax Rates Anticipate 37% effective tax rate for 2016 Anticipate 36% effective tax rate on a going forward basis Interest Expense Full year 2016 interest expense projected to be lower than 2015 Near-term maturities and refinancing suggest interest expense savings Financing, Interest Expense and Tax (1) Excludes transition and system restoration bonds Equity/Total Capital (1) (as of September 30, 2016) CenterPoint Energy, Inc. Consolidated 35.9% CenterPoint Energy Houston Electric, LLC 39.5% CenterPoint Energy Resources Corp. 55.9%
Enable Strategic Review Update Criteria for Consideration of a Sale or Spin – sustainable value for our long-term shareholders Comparable earnings per share and dividends Improve visibility and certainty of future earnings Seek to maintain current credit ratings Ongoing Activities Continuing discussions with third parties for sale option Working to gain certainty regarding the tax characteristics of a spin and confirmation of minimal tax leakage that may occur as a result of a spin
Appendix
Reconciliation: Operating Income to Core Operating Income on a Guidance (Non-GAAP) Basis Operating Income ($ in millions) Quarter Ended September 30, 2016 Quarter Ended September 30, 2015 Difference Fav/(Unfav) Electric Transmission and Distribution 257 $ 244 $ 13 $ Transition and System Restoration Bond Companies (23) (25) 2 TDU Core Operating Income 234 219 15 Energy Services 5 7 (2) Mark-to-market (gain) loss 2 (5) 7 Energy Services Operating Income, excluding mark-to-market 7 2 5 Natural Gas Distribution Operating Income 22 11 11 Core Operating Income on a guidance basis 263 $ 232 $ 31 $
Note: Refer to slide 2 for information on non-GAAP measures Reconciliation: Net Income (Loss) and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance Net Income (in millions) Diluted EPS Consolidated as reported (692) $ (1.61) $ Midstream Investments 1,024 2.38 Utility Operations (1) 332 0.77 Loss on impairment of Midstream Investments: CenterPoint's impairment of its investment in Enable (net of taxes of $456) (2) 769 1.79 CenterPoint's share of Enable's impairment of its goodwill and long-lived assets (net of taxes of $233) (2) 388 0.90 Total loss on impairment 1,157 2.69 Midstream Investments excluding loss on impairment 133 $ 0.31 $ Consolidated excluding loss on impairment 465 $ 1.08 $ Timing effects impacting CES (3) : Mark-to-market gain (net of taxes of $2) (2) (2) (0.01) ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $33) (2)(4) 60 0.14 Indexed debt securities (net of taxes of $26) (2)(5) (48) (0.11) Utility operations earnings on an adjusted guidance basis 342 $ 0.79 $ Adjusted net income and adjusted diluted EPS used in providing 2015 earnings guidance: Utility Operations on a guidance basis 342 $ 0.79 $ Midstream Investments excluding loss on impairment 133 0.31 2015 Consolidated on guidance basis 475 $ 1.10 $ (1) CenterPoint earnings excluding Midstream Investments (2) Taxes are computed based on the impact removing such item would have on tax expense (3) Energy Services segment (4) Time Warner Inc., Time Warner Cable Inc., Time Inc. and AOL Inc. (5) Includes amount associated with Verizon merger with AOL Inc. Twelve Months Ended December 31, 2015