Feb 12, 2004
CenterPoint Energy reports strong full year and fourth quarter 2003 earnings
CenterPoint Energy reports strong full year and fourth quarter 2003 earnings
Houston, TX - February 12, 2004 - CenterPoint Energy, Inc. (NYSE: CNP) today reported income from continuing operations of $149 million, or $0.48 per diluted share, for the fourth quarter of 2003 compared to a loss of $24 million, or $0.08 per diluted share, for the fourth quarter of 2002. The company reported $496 million, or $1.62 per diluted share, of income from continuing operations before cumulative effect of accounting change for 2003, compared to $369 million, or $1.23 per diluted share, for the prior year.
The company's net income for the fourth quarter 2003 was $147 million, or $0.48 per diluted share, compared to a net loss of $63 million, or $0.21 per diluted share for the fourth quarter of 2002. Net income for 2003 was $560 million, or $1.83 per diluted share compared to a net loss of $3.9 billion, or $13.08 per diluted share, for 2002. In 2003, net income included a gain of $80 million relating to the implementation of SFAS No. 143, "Accounting for Asset Retirement Obligations", and a $16 million loss from discontinued operations primarily related to the sale of the company's energy management services business. The loss in 2002 included $4.3 billion related primarily to the write-down of the company's investment in Reliant Resources, Inc. (RRI) in conjunction with the company's distribution of that investment to CenterPoint Energy shareholders in September 2002.
"I'm pleased to report improved operating results, which reflect the continued solid performance of our core operating units and the significant contributions from Texas Genco and the ECOM true-up formula," said David McClanahan, president and chief executive officer of CenterPoint Energy. "Our enhanced financial flexibility and liquidity, together with the improvements made in our core businesses this past year, have created a solid foundation for the future. This upcoming year will be key to us as we seek a buyer for our 81 percent interest in Texas Genco and complete the final steps in the regulatory process which determines the amount of stranded investment associated with our generating units to be recovered."
FULL YEAR AND FOURTH QUARTER 2003 HIGHLIGHTS
The company's operating performance for 2003 compared to 2002 benefited from:
Electric Transmission & Distribution
The electric transmission & distribution segment generated operating income of $284 million in the fourth quarter of 2003, consisting of $78 million for the regulated electric transmission & distribution utility (TDU) and non-cash operating income of $206 million associated with ECOM, as described below. For the fourth quarter of 2002 operating income was $169 million, consisting of $23 million from the TDU and non-cash operating income of $146 million associated with ECOM.
Revenues for the TDU continued to benefit from solid customer growth in the fourth quarter of 2003. The quarter also benefited from lower operation and maintenance expenses, including a favorable settlement of the company's transmission cost lawsuit and lower spending for materials and supplies, as well as severance costs incurred in the fourth quarter of 2002, which did not recur in the fourth quarter of 2003. In addition, the fourth quarter of 2002 reflected a $22 million charge associated with the settlement of issues in a fuel reconciliation proceeding.
Under the Texas electric restructuring law, a regulated utility may recover, in its 2004 stranded cost true-up proceeding, the difference between the market prices received in 2002 and 2003 by its affiliated power generation company in the Public Utility Commission of Texas (PUC) mandated auctions and the projections for the same time periods used in the ECOM model established by the PUC. Beginning in 2004, there will no longer be an ECOM contribution to earnings.
Operating income was $1.1 billion for the year, consisting of $446 million for the TDU and non-cash operating income of $661 million from ECOM. The transmission & distribution segment's operating income in 2002 was $1.1 billion, consisting of $399 million from the TDU and non-cash operating income of $697 million from ECOM. The $47 million increase in operating income for the TDU was driven by continued strong customer growth. At the end of 2003, the TDU served 1.84 million metered customers, an increase of 47,000, or 2.6 percent. Although pension costs were higher, operation and maintenance expenses declined as a result of the benefit of the transmission lawsuit settlement and severance costs noted above, and costs related to the transition to the deregulated market in 2002 which did not recur in 2003. In addition, 2002 reflected the fuel reconciliation settlement noted above.
Electric Generation
Texas Genco reported operating income of $64 million for the fourth quarter of 2003, compared to an operating loss of $59 million for the same period of 2002. Capacity and other revenues were bolstered by increased prices for its baseload products due primarily to strong wholesale electricity prices and revenues from the sales of surplus air emission allowances ($10 million). Energy revenues also increased and more than offset increased fuel and purchased power costs. Operation and maintenance expenses for the fourth quarter of 2003 were lower than the prior year primarily related to expenses incurred in the fourth quarter of 2002 which did not recur in the fourth quarter of 2003, the most significant of which was an early retirement program. Taxes other than income taxes increased in the fourth quarter of 2003 compared to the same period of 2002 due primarily to higher property taxes in 2003 and to reduced state franchise taxes in the fourth quarter of 2002.
Operating income for Texas Genco was $222 million for 2003, compared to an operating loss of $133 million for 2002. Consistent with the fourth quarter, revenues increased due to higher capacity revenue for baseload products, the sales of surplus air emission allowances ($16 million) and higher energy revenue which more than offset higher fuel and purchased power costs. Operation and maintenance expenses increased due to higher pension expenses, as well as higher costs associated with planned and several unplanned unit outages. These increases were partially offset by expenses incurred in the fourth quarter of 2002 which did not recur in 2003, as noted above.
Natural Gas Distribution
The natural gas distribution segment reported operating income of $56 million for the fourth quarter of 2003, compared to $84 million for the same period of 2002. The reduction in operating income in the quarter resulted from a change in the estimate of margins earned on unbilled revenues, as well as from milder weather and reduced consumption. Lower operation and maintenance expenses partially mitigated these impacts on operating income.
The natural gas distribution segment reported operating income of $202 million for 2003 compared to $198 million for 2002. Rate increases and customer growth of 38,000 contributed to revenue increases, which more than offset higher operation and maintenance expenses attributable primarily to higher pension and bad debt expense, as well as the change in estimate noted above.
In addition, the costs associated with a receivables facility, modified in November 2002, reduced operating income by $7 million for 2003. Prior to the amendment, these costs were included in interest expense.
Pipelines and Gathering
The pipelines and gathering segment reported operating income of $34 million for the fourth quarter of 2003 compared to $35 million for the same period of 2002. The slight decline results primarily from increased operation and maintenance expenses.
The pipelines and gathering segment reported operating income of $158 million for 2003 compared to $153 million for 2002. The improvement in operating income resulted primarily from an increase in throughput and enhanced services related to gas gathering operations.
Other Operations
The company's other operations reported an operating loss of $3 million for the fourth quarter of 2003 compared to operating income of $32 million for the same period of 2002. Operating income was $2 million for 2003 compared to $19 million for 2002. The changes for both the quarter and the year relate primarily to timing differences in the assignment of corporate costs to the business segments.
WEBCAST OF EARNINGS CONFERENCE CALL
CenterPoint Energy's management will host an earnings conference call on Thursday, Feb. 12, 2004, at 10:30 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.CenterPointEnergy.com/investors/events. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
The management of Texas Genco, the company's 81 percent-owned subsidiary, will host an earnings conference call on Thursday, Feb. 12, 2004, at 9 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.txgenco.com/investor.html. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site 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 sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas, of which nearly 3,000 megawatts are currently in mothball status. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. Assets total approximately $20 billion. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. For more information, visit the Web site at www.CenterPointEnergy.com.
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This news release includes forward-looking statements. Actual events and results may differ materially from those projected. The statements in this news release regarding future financial performance and results of operations and other statements that are not historical facts are forward-looking statements. Factors that could affect actual results include the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or its subsidiaries' business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas, the impact of unplanned facility outages and other factors discussed in CenterPoint Energy's and its subsidiaries' Form 10-Qs for the quarterly period ended September 30, 2003 and other filings with the Securities and Exchange Commission.
The company's net income for the fourth quarter 2003 was $147 million, or $0.48 per diluted share, compared to a net loss of $63 million, or $0.21 per diluted share for the fourth quarter of 2002. Net income for 2003 was $560 million, or $1.83 per diluted share compared to a net loss of $3.9 billion, or $13.08 per diluted share, for 2002. In 2003, net income included a gain of $80 million relating to the implementation of SFAS No. 143, "Accounting for Asset Retirement Obligations", and a $16 million loss from discontinued operations primarily related to the sale of the company's energy management services business. The loss in 2002 included $4.3 billion related primarily to the write-down of the company's investment in Reliant Resources, Inc. (RRI) in conjunction with the company's distribution of that investment to CenterPoint Energy shareholders in September 2002.
"I'm pleased to report improved operating results, which reflect the continued solid performance of our core operating units and the significant contributions from Texas Genco and the ECOM true-up formula," said David McClanahan, president and chief executive officer of CenterPoint Energy. "Our enhanced financial flexibility and liquidity, together with the improvements made in our core businesses this past year, have created a solid foundation for the future. This upcoming year will be key to us as we seek a buyer for our 81 percent interest in Texas Genco and complete the final steps in the regulatory process which determines the amount of stranded investment associated with our generating units to be recovered."
FULL YEAR AND FOURTH QUARTER 2003 HIGHLIGHTS
The company's operating performance for 2003 compared to 2002 benefited from:
- improved operating income from Texas Genco of $355 million, including $123 million for the fourth quarter
- continued customer growth, with the addition of over 85,000 metered electric and gas customers
- increased revenues from rate increases in the natural gas distribution businesses of $33 million, including $3 million for the fourth quarter
- an increase in interest expense of $170 million; however, interest expense decreased by $59 million in the fourth quarter due primarily to lower amortization of financing expenses
- higher pension and insurance expenses of $59 million, including $4 million in the fourth quarter
- a reduction in Excess Cost Over Market (ECOM) of $36 million; however, ECOM increased $60 million in the fourth quarter
- accessing the capital markets for transactions totaling approximately $4 billion
- reducing the company's bank credit facility by $1.5 billion
- restructuring the remaining $2.35 billion credit facility, thereby extending the maturity to October 2006, lowering the interest rate by 100-150 basis points and otherwise obtaining more favorable terms
- the distribution of approximately 19 percent of the Texas Genco common stock to its shareholders in January 2003 in preparation for its stranded investment determination in 2004
- the completion of the sales of certain non-strategic businesses, including all of its remaining international interests and its energy management services business
Electric Transmission & Distribution
The electric transmission & distribution segment generated operating income of $284 million in the fourth quarter of 2003, consisting of $78 million for the regulated electric transmission & distribution utility (TDU) and non-cash operating income of $206 million associated with ECOM, as described below. For the fourth quarter of 2002 operating income was $169 million, consisting of $23 million from the TDU and non-cash operating income of $146 million associated with ECOM.
Revenues for the TDU continued to benefit from solid customer growth in the fourth quarter of 2003. The quarter also benefited from lower operation and maintenance expenses, including a favorable settlement of the company's transmission cost lawsuit and lower spending for materials and supplies, as well as severance costs incurred in the fourth quarter of 2002, which did not recur in the fourth quarter of 2003. In addition, the fourth quarter of 2002 reflected a $22 million charge associated with the settlement of issues in a fuel reconciliation proceeding.
Under the Texas electric restructuring law, a regulated utility may recover, in its 2004 stranded cost true-up proceeding, the difference between the market prices received in 2002 and 2003 by its affiliated power generation company in the Public Utility Commission of Texas (PUC) mandated auctions and the projections for the same time periods used in the ECOM model established by the PUC. Beginning in 2004, there will no longer be an ECOM contribution to earnings.
Operating income was $1.1 billion for the year, consisting of $446 million for the TDU and non-cash operating income of $661 million from ECOM. The transmission & distribution segment's operating income in 2002 was $1.1 billion, consisting of $399 million from the TDU and non-cash operating income of $697 million from ECOM. The $47 million increase in operating income for the TDU was driven by continued strong customer growth. At the end of 2003, the TDU served 1.84 million metered customers, an increase of 47,000, or 2.6 percent. Although pension costs were higher, operation and maintenance expenses declined as a result of the benefit of the transmission lawsuit settlement and severance costs noted above, and costs related to the transition to the deregulated market in 2002 which did not recur in 2003. In addition, 2002 reflected the fuel reconciliation settlement noted above.
Electric Generation
Texas Genco reported operating income of $64 million for the fourth quarter of 2003, compared to an operating loss of $59 million for the same period of 2002. Capacity and other revenues were bolstered by increased prices for its baseload products due primarily to strong wholesale electricity prices and revenues from the sales of surplus air emission allowances ($10 million). Energy revenues also increased and more than offset increased fuel and purchased power costs. Operation and maintenance expenses for the fourth quarter of 2003 were lower than the prior year primarily related to expenses incurred in the fourth quarter of 2002 which did not recur in the fourth quarter of 2003, the most significant of which was an early retirement program. Taxes other than income taxes increased in the fourth quarter of 2003 compared to the same period of 2002 due primarily to higher property taxes in 2003 and to reduced state franchise taxes in the fourth quarter of 2002.
Operating income for Texas Genco was $222 million for 2003, compared to an operating loss of $133 million for 2002. Consistent with the fourth quarter, revenues increased due to higher capacity revenue for baseload products, the sales of surplus air emission allowances ($16 million) and higher energy revenue which more than offset higher fuel and purchased power costs. Operation and maintenance expenses increased due to higher pension expenses, as well as higher costs associated with planned and several unplanned unit outages. These increases were partially offset by expenses incurred in the fourth quarter of 2002 which did not recur in 2003, as noted above.
Natural Gas Distribution
The natural gas distribution segment reported operating income of $56 million for the fourth quarter of 2003, compared to $84 million for the same period of 2002. The reduction in operating income in the quarter resulted from a change in the estimate of margins earned on unbilled revenues, as well as from milder weather and reduced consumption. Lower operation and maintenance expenses partially mitigated these impacts on operating income.
The natural gas distribution segment reported operating income of $202 million for 2003 compared to $198 million for 2002. Rate increases and customer growth of 38,000 contributed to revenue increases, which more than offset higher operation and maintenance expenses attributable primarily to higher pension and bad debt expense, as well as the change in estimate noted above.
In addition, the costs associated with a receivables facility, modified in November 2002, reduced operating income by $7 million for 2003. Prior to the amendment, these costs were included in interest expense.
Pipelines and Gathering
The pipelines and gathering segment reported operating income of $34 million for the fourth quarter of 2003 compared to $35 million for the same period of 2002. The slight decline results primarily from increased operation and maintenance expenses.
The pipelines and gathering segment reported operating income of $158 million for 2003 compared to $153 million for 2002. The improvement in operating income resulted primarily from an increase in throughput and enhanced services related to gas gathering operations.
Other Operations
The company's other operations reported an operating loss of $3 million for the fourth quarter of 2003 compared to operating income of $32 million for the same period of 2002. Operating income was $2 million for 2003 compared to $19 million for 2002. The changes for both the quarter and the year relate primarily to timing differences in the assignment of corporate costs to the business segments.
WEBCAST OF EARNINGS CONFERENCE CALL
CenterPoint Energy's management will host an earnings conference call on Thursday, Feb. 12, 2004, at 10:30 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.CenterPointEnergy.com/investors/events. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
The management of Texas Genco, the company's 81 percent-owned subsidiary, will host an earnings conference call on Thursday, Feb. 12, 2004, at 9 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.txgenco.com/investor.html. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site 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 sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas, of which nearly 3,000 megawatts are currently in mothball status. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. Assets total approximately $20 billion. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. For more information, visit the Web site at www.CenterPointEnergy.com.
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This news release includes forward-looking statements. Actual events and results may differ materially from those projected. The statements in this news release regarding future financial performance and results of operations and other statements that are not historical facts are forward-looking statements. Factors that could affect actual results include the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or its subsidiaries' business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas, the impact of unplanned facility outages and other factors discussed in CenterPoint Energy's and its subsidiaries' Form 10-Qs for the quarterly period ended September 30, 2003 and other filings with the Securities and Exchange Commission.