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 5, 2015
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 5, 2015, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported third quarter 2015 earnings. For additional information regarding CenterPoint Energy’s third quarter 2015 earnings, please refer to CenterPoint Energy’s press releases attached to this report as Exhibits 99.1 and 99.2, respectively, (the “Press Releases”), which Press Releases are incorporated by reference herein.
| Item 7.01 | Regulation FD Disclosure. |
CenterPoint Energy is holding a conference call to discuss its third quarter 2015 earnings on November 5, 2015. Information about the call can be found in the press release furnished herewith as Exhibit 99.1. Information about CenterPoint Energy’s impairment can be found in the press release furnished herewith as Exhibit 99.2. For additional information regarding CenterPoint Energy’s third quarter 2015 earnings, please refer to the supplemental materials which are being posted on CenterPoint Energy’s website and are attached to this report as Exhibit 99.3 (the “Supplemental Materials”), which Supplemental Materials are incorporated by reference herein.
| Item 9.01 | Financial Statements and Exhibits. |
The information in the Press Releases and the Supplemental Materials is being furnished, not filed, pursuant to Item 2.02 and 7.01, respectively. Accordingly, the information in the Press Releases 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 5, 2015 regarding CenterPoint Energy, Inc.’s third quarter 2015 earnings | |
| 99.2 | Press Release issued November 5, 2015 regarding CenterPoint Energy, Inc.’s non-cash impairment charges related to Midstream Investments | |
| 99.3 | Supplemental Materials regarding CenterPoint Energy, Inc.’s third quarter 2015 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 5, 2015 | 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 5, 2015 regarding CenterPoint Energy, Inc.’s third quarter 2015 earnings | |
| 99.2 | Press Release issued November 5, 2015 regarding CenterPoint Energy, Inc.’s non-cash impairment charges related to Midstream Investments | |
| 99.3 | Supplemental Materials regarding CenterPoint Energy, Inc.’s third quarter 2015 earnings | |
Exhibit 99.1
|
For more information contact Media: Leticia Lowe Phone 713.207.7702 Investors: David Mordy Phone 713.207.6500 |
| For Immediate Release | Page 1 of 6 |
CenterPoint Energy reports third quarter 2015 earnings of $0.34 per diluted share, excluding $1.25 per share from impairment charges, or a net loss of $0.91 per diluted share, including impairment charges
| • | Company updates full year guidance to $1.05 - $1.10 |
| • | Continued strong customer growth and cost discipline |
| • | Enable Midstream announced third quarter distribution of $0.318/unit; fifth consecutive quarterly increase since IPO |
| • | CenterPoint reaffirms target of 4-6% annual EPS growth through 2018 on a guidance basis |
Houston, TX – November 5, 2015 - CenterPoint Energy, Inc. (NYSE: CNP) today reported a net loss of $391 million, or a loss of $0.91 per diluted share, for the third quarter of 2015. The company recognized a loss of $794 million for the three months ended Sept. 30, 2015, from midstream investments, which consists of 55.4 percent interest in Enable Midstream Partners, LP. This loss included pre-tax impairment charges totaling $862 million composed of the company’s impairment of its investment in Enable Midstream of $250 million and the company’s share, $612 million, of impairment charges Enable Midstream recorded for goodwill and long-lived assets.
Excluding the impairment charges, third quarter net income would have been $146 million or $0.34 per diluted share compared with net income of $143 million, or $0.33 per diluted share for the same period of the prior year. On a guidance basis, 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. Additional details on the impairment charges may be found in CenterPoint Energy’s Nov. 5, 2015, impairment news release.
Utility operations produced $265 million of operating income for the third quarter of 2015, compared with $233 million for the same quarter of the prior year. Midstream investments reported an equity loss of $794 million for the third quarter of 2015, which includes the impairment charges noted above. The impairments were offset by earnings of $68 million for the third quarter of 2015. Earnings were $79 million for the third quarter of 2014.
“We adjusted guidance towards the higher end of the range for 2015, largely due to the performance of our utility businesses,” said Scott M. Prochazka, president and chief executive officer of CenterPoint Energy. “We continue to pursue steady earnings growth as we serve the needs of our growing customer base.”
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Business Segments
Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $244 million for the third quarter of 2015, consisting of $219 million from the regulated electric transmission & distribution utility operations (TDU) and $25 million related to securitization bonds. Operating income for the third quarter of 2014 was $232 million, consisting of $202 million from the TDU and $30 million related to securitization bonds.
Operating income for the TDU benefited from higher usage due to favorable weather ($11 million), higher net transmission and distribution related revenues ($10 million), continued strong customer growth ($7 million), and lower operations and maintenance expense ($7 million). These benefits were partially offset by the absence of a one-time energy efficiency remand bonus ($8 million) received in the third quarter of 2014, and reduced equity return related to true-up proceeds ($7 million).
Natural Gas Distribution
The natural gas distribution segment reported operating income of $11 million for the third quarter of 2015, compared with an operating loss of $8 million for the same period of 2014. Operating income was higher, due to the timing of the Minnesota Conservation Improvement Program (CIP) incentive ($12 million), rate relief ($5 million), increased economic activity across our footprint, including customer growth ($3 million) and lower operations and maintenance expense ($2 million). These benefits were partially offset by higher tax expense ($4 million) and higher depreciation expense ($3 million).
Energy Services
The energy services segment reported operating income of $7 million for the third quarter of 2015, which included a mark-to-market accounting gain of $5 million, compared with $6 million for the same period of 2014, which included a mark-to-market accounting gain of $13 million. Excluding mark-to-market accounting gains, the $9 million increase was primarily due to improved margins ($4 million) and a decrease in operation and maintenance expenses ($3 million).
Midstream Investments
The midstream investments segment reported an equity loss of $794 million for the third quarter of 2015, which includes the impairment charges noted above. The impairments were offset by earnings of $68 million for the third quarter of 2015. Earnings were $79 million for the third quarter of 2014.
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Enable Midstream declared a quarterly cash distribution on Oct. 22, 2015, of $0.318 per unit. This represents an increase of approximately 0.6 percent over the prior quarterly distribution of $0.316 per unit.
Enable Midstream provided outlook for per unit distributions to grow up to 3 percent annually through 2017. Please refer to their Nov. 4, 2015, earnings press release for details.
Dividend Declaration
On Oct. 21, 2015, CenterPoint Energy’s board of directors declared a regular quarterly cash dividend of $0.2475 per share of common stock payable on Dec. 10, 2015, to shareholders of record as of the close of business on Nov. 13, 2015.
Outlook for 2015
On a consolidated basis, CenterPoint Energy updates earnings on a guidance basis for 2015 in the range of $1.05 - $1.10 per diluted share.
The guidance range considers utility operations performance to date and certain significant variables that may impact utility operations earnings, such as weather, regulatory and judicial proceedings, throughput, commodity prices, effective tax rates, and financing activities. In providing this guidance, the company does not include other potential impacts, such as changes in accounting standards or unusual items, earnings 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 service business.
In providing guidance, the company assumes for equity investments in midstream operations a 55.4 percent limited partner ownership interest in Enable Midstream and includes the amortization of our basis differential in Enable Midstream. The company’s guidance takes into account such factors as Enable Midstream’s most recent public outlook for 2015 dated Nov.4, 2015, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards, impairments or Enable Midstream’s unusual items.
Earnings Growth Outlook
CenterPoint Energy is targeting 4-6 percent earnings per share annual growth through 2018 on a guidance basis, inclusive of midstream investments.
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CenterPoint Energy, Inc. and Subsidiaries
Reconciliation of Net Income and diluted EPS to the basis used in providing 2015 annual earnings guidance
| Quarter Ended September 30, 2015 |
Nine Months Ended September 30, 2015 |
|||||||||||||||
| Net Income (in millions) |
EPS | Net Income (in millions) |
EPS | |||||||||||||
| Consolidated as reported |
$ | (391 | ) | $ | (0.91 | ) | $ | (183 | ) | $ | (0.43 | ) | ||||
| Midstream Investments |
495 | 1.15 | 435 | 1.01 | ||||||||||||
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| Utility Operations (1) |
104 | 0.24 | 252 | 0.58 | ||||||||||||
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| Loss on impairment of Midstream Investments: |
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| CenterPoint’s impairment of its investment in Enable |
156 | 0.36 | 156 | 0.36 | ||||||||||||
| CenterPoint’s share of Enable’s impairment of its goodwill and long-lived assets |
381 | 0.89 | 381 | 0.89 | ||||||||||||
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| Total loss on impairment |
537 | 1.25 | 537 | 1.25 | ||||||||||||
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| Midstream Investments excluding loss on impairment |
$ | 42 | $ | 0.10 | $ | 102 | $ | 0.24 | ||||||||
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| Consolidated excluding loss on impairment |
$ | 146 | $ | 0.34 | $ | 354 | $ | 0.82 | ||||||||
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| Timing effects impacting CES(2): |
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| Mark-to-market (gain) losses |
(3 | ) | (0.01 | ) | (2 | ) | (0.01 | ) | ||||||||
| ZENS-related mark-to-market (gains) losses: |
||||||||||||||||
| Marketable securities (3) |
87 | 0.20 | 47 | 0.11 | ||||||||||||
| Indexed debt securities (4) |
(84 | ) | (0.19 | ) | (40 | ) | (0.09 | ) | ||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 104 | $ | 0.24 | $ | 257 | $ | 0.59 | ||||||||
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| Per the basis used in providing 2015 earnings guidance: |
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| Utility Operations on a guidance basis |
$ | 104 | $ | 0.24 | $ | 257 | $ | 0.59 | ||||||||
| Midstream Investments excluding loss on impairment |
42 | 0.10 | 102 | 0.24 | ||||||||||||
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| 2015 Consolidated on guidance basis |
$ | 146 | $ | 0.34 | $ | 359 | $ | 0.83 | ||||||||
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| (1) | CenterPoint earnings excluding Midstream Investments |
| (2) | Energy Services segment |
| (3) | Time Warner Inc., Time Warner Cable Inc., Time Inc. and AOL Inc. |
| (4) | Nine months ended results include amount associated with Verizon tender offer for AOL, Inc common stock |
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 Sept. 30, 2015. 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 Thurs., Nov. 5, 2015, at 8:30 a.m. Central time or 9:30 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.
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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 7,400 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, (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 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 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 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
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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 noted in CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2014, as well as in CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, June 30, 2015, and Sept. 30, 2015, 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
In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), CenterPoint Energy also provides guidance based on adjusted diluted earnings per share, and adjusted net income to reflect the impact of the impairments, 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. A reconciliation of net income and diluted earnings per share to the basis used in providing 2015 guidance and net income, adjusted for the impairment, is provided in this news release.
Management evaluates financial performance in part based on adjusted diluted earnings per share and believes that presenting this non-GAAP financial measure 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 by excluding items that Management does not believe most accurately reflect its fundamental business performance, which items include the items reflected in the reconciliation table of this news release. This non-GAAP financial measure should be considered as a supplement and complement to, and not as a substitute for, or superior to, the most directly comparable GAAP financial measure and may be different than non-GAAP financial measures used by other companies.
###
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
| Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues: |
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| Electric Transmission & Distribution |
$ | 827 | $ | 839 | $ | 2,144 | $ | 2,166 | ||||||||
| Natural Gas Distribution |
359 | 382 | 1,979 | 2,401 | ||||||||||||
| Energy Services |
452 | 604 | 1,510 | 2,364 | ||||||||||||
| Other Operations |
4 | 4 | 11 | 11 | ||||||||||||
| Eliminations |
(12 | ) | (22 | ) | (49 | ) | (88 | ) | ||||||||
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| Total |
1,630 | 1,807 | 5,595 | 6,854 | ||||||||||||
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| Expenses: |
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| Natural gas |
527 | 702 | 2,410 | 3,625 | ||||||||||||
| Operation and maintenance |
479 | 493 | 1,465 | 1,441 | ||||||||||||
| Depreciation and amortization |
268 | 293 | 724 | 784 | ||||||||||||
| Taxes other than income taxes |
91 | 86 | 289 | 290 | ||||||||||||
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| Total |
1,365 | 1,574 | 4,888 | 6,140 | ||||||||||||
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| Operating Income |
265 | 233 | 707 | 714 | ||||||||||||
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| Other Income (Expense) : |
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| Gain (loss) on marketable securities |
(134 | ) | 31 | (72 | ) | 73 | ||||||||||
| Gain (loss) on indexed debt securities |
129 | (22 | ) | 62 | (29 | ) | ||||||||||
| Interest and other finance charges |
(88 | ) | (88 | ) | (266 | ) | (261 | ) | ||||||||
| Interest on transition and system restoration bonds |
(25 | ) | (30 | ) | (80 | ) | (90 | ) | ||||||||
| Equity in earnings (losses) of unconsolidated affiliates |
(794 | ) | 79 | (699 | ) | 241 | ||||||||||
| Other - net |
12 | 10 | 36 | 28 | ||||||||||||
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| Total |
(900 | ) | (20 | ) | (1,019 | ) | (38 | ) | ||||||||
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| Income (Loss) Before Income Taxes |
(635 | ) | 213 | (312 | ) | 676 | ||||||||||
| Income Tax Expense (Benefit) |
(244 | ) | 70 | (129 | ) | 241 | ||||||||||
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| Net Income (Loss) |
$ | (391 | ) | $ | 143 | $ | (183 | ) | $ | 435 | ||||||
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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.
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Millions of Dollars, Except Share and Per Share Amounts)
(Unaudited)
| Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Basic Earnings (Loss) Per Common Share |
$ | (0.91 | ) | $ | 0.33 | $ | (0.43 | ) | $ | 1.01 | ||||||
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| Diluted Earnings (Loss) Per Common Share |
$ | (0.91 | ) | $ | 0.33 | $ | (0.43 | ) | $ | 1.01 | ||||||
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| Dividends Declared per Common Share |
$ | 0.2475 | $ | 0.2375 | 0.7425 | $ | 0.7125 | |||||||||
| Weighted Average Common Shares Outstanding (000): |
||||||||||||||||
| - Basic |
430,262 | 429,796 | 430,152 | 429,580 | ||||||||||||
| - Diluted |
430,262 | 431,573 | 430,152 | 431,357 | ||||||||||||
| Operating Income (Loss) by Segment |
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| Electric Transmission & Distribution: |
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| Electric Transmission and Distribution Operations |
$ | 219 | $ | 202 | $ | 418 | $ | 392 | ||||||||
| Transition and System Restoration Bond Companies |
25 | 30 | 80 | 90 | ||||||||||||
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| Total Electric Transmission & Distribution |
244 | 232 | 498 | 482 | ||||||||||||
| Natural Gas Distribution |
11 | (8 | ) | 176 | 184 | |||||||||||
| Energy Services |
7 | 6 | 29 | 43 | ||||||||||||
| Other Operations |
3 | 3 | 4 | 5 | ||||||||||||
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| Total |
$ | 265 | $ | 233 | $ | 707 | $ | 714 | ||||||||
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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.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Electric Transmission & Distribution | ||||||||||||||||||||||||
| Quarter Ended September 30, |
% Diff | Nine Months Ended September 30, |
% Diff | |||||||||||||||||||||
| 2015 | 2014 | Fav/(Unfav) | 2015 | 2014 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
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| Revenues: |
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| Electric transmission and distribution utility |
$ | 683 | $ | 660 | 3 | % | $ | 1,782 | $ | 1,716 | 4 | % | ||||||||||||
| Transition and system restoration bond companies |
144 | 179 | (20 | %) | 362 | 450 | (20 | %) | ||||||||||||||||
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| Total |
827 | 839 | (1 | %) | 2,144 | 2,166 | (1 | %) | ||||||||||||||||
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| Expenses: |
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| Operation and maintenance |
322 | 319 | (1 | %) | 944 | 907 | (4 | %) | ||||||||||||||||
| Depreciation and amortization |
86 | 83 | (4 | %) | 253 | 247 | (2 | %) | ||||||||||||||||
| Taxes other than income taxes |
56 | 56 | - | 167 | 170 | 2 | % | |||||||||||||||||
| Transition and system restoration bond companies |
119 | 149 | 20 | % | 282 | 360 | 22 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
583 | 607 | 4 | % | 1,646 | 1,684 | 2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 244 | $ | 232 | 5 | % | $ | 498 | $ | 482 | 3 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||
| Electric transmission and distribution operations |
$ | 219 | $ | 202 | 8 | % | $ | 418 | $ | 392 | 7 | % | ||||||||||||
| Transition and system restoration bond companies |
25 | 30 | (17 | %) | 80 | 90 | (11 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Segment Operating Income |
$ | 244 | $ | 232 | 5 | % | $ | 498 | $ | 482 | 3 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Electric Transmission & Distribution Operating Data: |
||||||||||||||||||||||||
| Actual MWH Delivered |
||||||||||||||||||||||||
| Residential |
10,387,735 | 9,736,785 | 7 | % | 23,283,969 | 22,000,244 | 6 | % | ||||||||||||||||
| Total |
25,612,134 | 24,801,549 | 3 | % | 65,378,208 | 63,128,739 | 4 | % | ||||||||||||||||
| Weather (average for service area): |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Cooling degree days |
101 | % | 99 | % | 2 | % | 99 | % | 92 | % | 7 | % | ||||||||||||
| Heating degree days |
0 | % | 0 | % | 0 | % | 130 | % | 138 | % | (8 | %) | ||||||||||||
| Number of metered customers - end of period: |
||||||||||||||||||||||||
| Residential |
2,069,213 | 2,018,858 | 2 | % | 2,069,213 | 2,018,858 | 2 | % | ||||||||||||||||
| Total |
2,337,806 | 2,284,202 | 2 | % | 2,337,806 | 2,284,202 | 2 | % | ||||||||||||||||
| Natural Gas Distribution | ||||||||||||||||||||||||
| Quarter Ended September 30, |
% Diff | Nine Months Ended September 30, |
% Diff | |||||||||||||||||||||
| 2015 | 2014 | Fav/(Unfav) | 2015 | 2014 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 359 | $ | 382 | (6 | %) | $ | 1,979 | $ | 2,401 | (18 | %) | ||||||||||||
| Natural gas |
106 | 142 | 25 | % | 1,014 | 1,432 | 29 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
253 | 240 | 5 | % | 965 | 969 | - | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
155 | 169 | 8 | % | 510 | 524 | 3 | % | ||||||||||||||||
| Depreciation and amortization |
55 | 52 | (6 | %) | 165 | 149 | (11 | %) | ||||||||||||||||
| Taxes other than income taxes |
32 | 27 | (19 | %) | 114 | 112 | (2 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
242 | 248 | 2 | % | 789 | 785 | (1 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income (Loss) |
$ | 11 | $ | (8 | ) | 238 | % | $ | 176 | $ | 184 | (4 | %) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Natural Gas Distribution Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
||||||||||||||||||||||||
| Residential |
12 | 12 | - | 128 | 140 | (9 | %) | |||||||||||||||||
| Commercial and Industrial |
52 | 46 | 13 | % | 196 | 197 | (1 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Throughput |
64 | 58 | 10 | % | 324 | 337 | (4 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weather (average for service area) |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Heating degree days |
64 | % | 106 | % | (42 | %) | 108 | % | 128 | % | (20 | %) | ||||||||||||
| Number of customers - end of period: |
||||||||||||||||||||||||
| Residential |
3,110,645 | 3,077,633 | 1 | % | 3,110,645 | 3,077,633 | 1 | % | ||||||||||||||||
| Commercial and Industrial |
248,911 | 246,789 | 1 | % | 248,911 | 246,789 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
3,359,556 | 3,324,422 | 1 | % | 3,359,556 | 3,324,422 | 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.
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 | |||||||||||||||||||||
| 2015 | 2014 | Fav/(Unfav) | 2015 | 2014 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 452 | $ | 604 | (25 | %) | $ | 1,510 | $ | 2,364 | (36 | %) | ||||||||||||
| Natural gas |
433 | 582 | 26 | % | 1,445 | 2,280 | 37 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
19 | 22 | (14 | %) | 65 | 84 | (23 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
11 | 14 | 21 | % | 32 | 36 | 11 | % | ||||||||||||||||
| Depreciation and amortization |
1 | 2 | 50 | % | 3 | 4 | 25 | % | ||||||||||||||||
| Taxes other than income taxes |
- | - | - | 1 | 1 | - | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
12 | 16 | 25 | % | 36 | 41 | 12 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 7 | $ | 6 | 17 | % | $ | 29 | $ | 43 | (33 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Mark-to-market gain |
$ | 5 | $ | 13 | (62 | %) | $ | 3 | $ | 23 | (87 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Energy Services Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
138 | 140 | (1 | %) | 459 | 463 | (1 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Number of customers - end of period |
18,052 | 17,900 | 1 | % | 18,052 | 17,900 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Other Operations | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2015 | 2014 | Fav/(Unfav) | 2015 | 2014 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 4 | $ | 4 | - | $ | 11 | $ | 11 | - | ||||||||||||||
| Expenses |
1 | 1 | - | 7 | 6 | (17 | %) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 3 | $ | 3 | - | $ | 4 | $ | 5 | (20 | %) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Capital Expenditures by Segment | ||||||||||||||||||||||||
| (Millions of Dollars) | ||||||||||||||||||||||||
| (Unaudited)
|
| |||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Capital Expenditures by Segment |
||||||||||||||||||||||||
| Electric Transmission & Distribution |
$ | 237 | $ | 203 | $ | 665 | $ | 573 | ||||||||||||||||
| Natural Gas Distribution |
172 | 148 | 416 | 378 | ||||||||||||||||||||
| Energy Services |
3 | - | 4 | 2 | ||||||||||||||||||||
| Other Operations |
12 | 7 | 29 | 34 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 424 | $ | 358 | $ | 1,114 | $ | 987 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Interest Expense Detail | ||||||||||||||||||||||||
| (Millions of Dollars) | ||||||||||||||||||||||||
| (Unaudited)
|
| |||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Interest Expense Detail |
||||||||||||||||||||||||
| Amortization of Deferred Financing Cost |
$ | 6 | $ | 6 | $ | 19 | $ | 19 | ||||||||||||||||
| Capitalization of Interest Cost |
(2 | ) | (2 | ) | (7 | ) | (8 | ) | ||||||||||||||||
| Transition and System Restoration Bond Interest Expense |
25 | 30 | 80 | 90 | ||||||||||||||||||||
| Other Interest Expense |
84 | 84 | 254 | 250 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Interest Expense |
$ | 113 | $ | 118 | $ | 346 | $ | 351 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
| September 30, 2015 |
December 31, 2014 |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 227 | $ | 298 | ||||
| Other current assets |
2,173 | 2,970 | ||||||
|
|
|
|
|
|||||
| Total current assets |
2,400 | 3,268 | ||||||
|
|
|
|
|
|||||
| Property, Plant and Equipment, net |
11,185 | 10,502 | ||||||
|
|
|
|
|
|||||
| Other Assets: |
||||||||
| Goodwill |
840 | 840 | ||||||
| Regulatory assets |
3,199 | 3,527 | ||||||
| Investment in unconsolidated affiliates |
3,604 | 4,521 | ||||||
| Other non-current assets |
550 | 542 | ||||||
|
|
|
|
|
|||||
| Total other assets |
8,193 | 9,430 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 21,778 | $ | 23,200 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Short-term borrowings |
$ | 49 | $ | 53 | ||||
| Current portion of transition and system restoration bonds long-term debt |
390 | 372 | ||||||
| Indexed debt |
152 | 152 | ||||||
| Current portion of other long-term debt |
396 | 271 | ||||||
| Other current liabilities |
2,204 | 2,627 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
3,191 | 3,475 | ||||||
|
|
|
|
|
|||||
| Other Liabilities: |
||||||||
| Accumulated deferred income taxes, net |
4,445 | 4,757 | ||||||
| Regulatory liabilities |
1,269 | 1,206 | ||||||
| Other non-current liabilities |
1,153 | 1,205 | ||||||
|
|
|
|
|
|||||
| Total other liabilities |
6,867 | 7,168 | ||||||
|
|
|
|
|
|||||
| Long-term Debt: |
||||||||
| Transition and system restoration bonds |
2,346 | 2,674 | ||||||
| Other |
5,316 | 5,335 | ||||||
|
|
|
|
|
|||||
| Total long-term debt |
7,662 | 8,009 | ||||||
|
|
|
|
|
|||||
| Shareholders’ Equity |
4,058 | 4,548 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 21,778 | $ | 23,200 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(Millions of Dollars)
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2015 | 2014 | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income (loss) |
$ | (183 | ) | $ | 435 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
745 | 805 | ||||||
| Deferred income taxes |
(264 | ) | 94 | |||||
| Write-down of natural gas inventory |
4 | 2 | ||||||
| Equity in earnings (losses) of unconsolidated affiliates, net of distributions |
843 | (6 | ) | |||||
| Changes in net regulatory assets |
92 | 53 | ||||||
| Changes in other assets and liabilities |
266 | (271 | ) | |||||
| Other, net |
15 | 12 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
1,518 | 1,124 | ||||||
| Net Cash Used in Investing Activities |
(1,024 | ) | (1,026 | ) | ||||
| Net Cash Used in Financing Activities |
(565 | ) | (76 | ) | ||||
|
|
|
|
|
|||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
(71 | ) | 22 | |||||
| Cash and Cash Equivalents at Beginning of Period |
298 | 208 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 227 | $ | 230 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
Exhibit 99.2
|
For more information contact Media: Leticia Lowe Phone 713.207.7702 Investors: David Mordy Phone 713.207.6500 |
| For Immediate Release | Page 1 of 4 |
CenterPoint Energy and subsidiary announce non-cash impairment charges related to Midstream Investments
HOUSTON, Nov. 5, 2015 – CenterPoint Energy, Inc. (NYSE: CNP) and its subsidiary, CenterPoint Energy Resources Corp. (CERC), announced today that the 2015 third quarter earnings reflect impairments totaling $862 million related to the 55.4 percent equity investment in Enable Midstream Partners, LP. The non-cash charges include an impairment of CenterPoint Energy’s and CERC’s equity investment in Enable Midstream of $250 million ($156 million after-tax) and its share, $612 million ($381 million after-tax), of the goodwill and long-lived asset impairment charges of approximately $1.1 billion that Enable Midstream reported for the third quarter 2015. The non-cash impairment charges will not affect CenterPoint Energy’s or CERC’s liquidity, cash flows or compliance with debt covenants.
CenterPoint Energy reported a net loss of $391 million dollars, or a loss of $0.91 per diluted share, for the third quarter of 2015. Excluding the impairment charges, third quarter 2015 net income would have been $146 million or $0.34 per diluted share compared with $143 million or $0.33 per diluted share in the same quarter last year. On a guidance basis, 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. Additional details on third quarter 2015 earnings may be found in CenterPoint Energy’s Nov. 5, 2015, earnings news release.
“While the impairments reduce our reported third quarter results, we are revising earnings guidance from our original range of $1.00 to $1.10 to $1.05 to $1.10 per diluted share. We also continue to target 4 to 6 percent earnings growth through 2018,” said William D. Rogers, executive vice president and chief financial officer of CenterPoint Energy. “Additionally, we continue to believe in the long-term prospects of our midstream investment and we remain focused on providing governance that enhances their performance.”
CenterPoint Energy and CERC evaluate equity method investments for impairment when factors indicate that a decrease in the value of its investment has occurred and the carrying amount of its investment may not be recoverable. An impairment loss, based on the excess of the carrying value over estimated fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Based on the sustained low Enable Midstream common unit price and further declines in such price during the three months ended Sept. 30, 2015, as well as the market outlook for continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy and
-more-
Page 2 of 4
CERC determined in connection with preparation of financial statements for the three months ended Sept. 30, 2015, that an other than temporary decrease in the value of the investment in Enable Midstream had occurred. CenterPoint Energy and CERC wrote down the value of the investment in Enable Midstream to its estimated fair value of $3.6 billion.
Both the income approach and market approach were utilized to estimate the fair value of CenterPoint Energy’s and CERC’s total investment in Enable Midstream, which includes the limited partner common and subordinated units, general partner interest and incentive distribution rights held by CenterPoint Energy and CERC. The determination of fair value considered a number of relevant factors including Enable Midstream’s common unit price and forecasted results, recent comparable transactions and the limited float of Enable Midstream’s publicly traded common units.
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 7,400 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, (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
-more-
Page 3 of 4
management activities; (17) inability of various counterparties to meet their obligations; (18) non-payment for services due to financial distress of CenterPoint Energy’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 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 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, 2014, as well as in CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, June 30, 2015, and September 30, 2015, 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
In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), CenterPoint Energy also provides guidance based on adjusted diluted earnings per share, and adjusted net income to reflect the impact of the impairments, 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. A reconciliation of net income and diluted earnings per share to the basis used in providing 2015 guidance and net income, adjusted for the impairment, is provided in this news release.
Management evaluates financial performance in part based on adjusted diluted earnings per share and believes that presenting this non-GAAP financial measure 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 by excluding items that management does not believe most accurately reflect its fundamental business performance, which items include the items reflected in the reconciliation table of this news release. This non-GAAP financial measure should be considered as a supplement and complement to, and not as a substitute for, or superior to, the most directly comparable GAAP financial measure and may be different than non-GAAP financial measures used by other companies.
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CenterPoint Energy, Inc. and Subsidiaries
Reconciliation of Net Income and diluted EPS to the basis used in providing 2015 annual earnings guidance
| Quarter Ended September 30, 2015 |
Nine Months Ended September 30, 2015 |
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| Net Income (in millions) |
EPS | Net Income (in millions) |
EPS | |||||||||||||
| Consolidated as reported |
$ | (391 | ) | $ | (0.91 | ) | $ | (183 | ) | $ | (0.43 | ) | ||||
| Midstream Investments |
495 | 1.15 | 435 | 1.01 | ||||||||||||
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| Utility Operations (1) |
104 | 0.24 | 252 | 0.58 | ||||||||||||
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| Loss on impairment of Midstream Investments: |
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| CenterPoint’s impairment of its investment in Enable |
156 | 0.36 | 156 | 0.36 | ||||||||||||
| CenterPoint’s share of Enable’s impairment of its goodwill and long-lived assets |
381 | 0.89 | 381 | 0.89 | ||||||||||||
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| Total loss on impairment |
537 | 1.25 | 537 | 1.25 | ||||||||||||
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| Midstream Investments excluding loss on impairment |
$ | 42 | $ | 0.10 | $ | 102 | $ | 0.24 | ||||||||
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| Consolidated excluding loss on impairment |
$ | 146 | $ | 0.34 | $ | 354 | $ | 0.82 | ||||||||
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| Timing effects impacting CES(2): |
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| Mark-to-market (gain) losses |
(3 | ) | (0.01 | ) | (2 | ) | (0.01 | ) | ||||||||
| ZENS-related mark-to-market (gains) losses: |
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| Marketable securities (3) |
87 | 0.20 | 47 | 0.11 | ||||||||||||
| Indexed debt securities (4) |
(84 | ) | (0.19 | ) | (40 | ) | (0.09 | ) | ||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 104 | $ | 0.24 | $ | 257 | $ | 0.59 | ||||||||
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| Per the basis used in providing 2015 earnings guidance: |
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| Utility Operations on a guidance basis |
$ | 104 | $ | 0.24 | $ | 257 | $ | 0.59 | ||||||||
| Midstream Investments excluding loss on impairment |
42 | 0.10 | 102 | 0.24 | ||||||||||||
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| 2015 Consolidated on guidance basis |
$ | 146 | $ | 0.34 | $ | 359 | $ | 0.83 | ||||||||
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| (1) | CenterPoint earnings excluding Midstream Investments |
| (2) | Energy Services segment |
| (3) | Time Warner Inc., Time Warner Cable Inc., Time Inc. and AOL Inc. |
| (4) | Nine months ended results include amount associated with Verizon tender offer for AOL, Inc common stock |
November 5, 2015 Third Quarter 2015 Earnings Call Continued strong customer growth and cost discipline Company updates full year guidance to $1.05 - $1.10 Reaffirms 4-6% annual EPS growth through 2018 Exhibit 99.3
Cautionary Statement This presentation contains statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance or underlying assumptions (including future dividends) 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,” “will,” or other similar words. The absence of these words, however, does not mean that the statements are not forward-looking. 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 and other factors described in CenterPoint Energy, Inc.’s Form 10-K for the period ended December 31, 2014 under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Certain Factors Affecting Future Earnings,” in CenterPoint Energy, Inc.’s Form 10-Q for the quarter ended September 30, 2015 under “Cautionary Statement Regarding Forward-Looking Information,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of CenterPoint Energy, Inc. and Subsidiaries” 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 Investors 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”), CenterPoint Energy also provides guidance based on adjusted diluted earnings per share, which is a non-GAAP financial measure. 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. A full reconciliation of net income and diluted earnings per share to the basis used in providing guidance is provided in this presentation on slide 22. Additionally, on slides 18, 19 and 23, management presents a further adjustment and reconciliation of adjusted diluted earnings per share to a 2014 baseline metric, which provides management’s starting point for forecasting earnings growth, by adjusting for other than normal weather impacts, true-up variations, and an energy efficiency remand bonus received in the third quarter of 2014. These additional adjustments are provided to further explain the basis for management’s guidance estimate. These non-GAAP financial measures should be considered as a supplement and complement to, and not as a substitute for, or superior to, the most directly comparable GAAP financial measure and may be different than non-GAAP financial measures used by other companies. Management evaluates financial performance in part based on adjusted diluted earnings per share and believes that presenting this non-GAAP financial measure 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 by excluding items that Management does not believe most accurately reflect its fundamental business performance, which items include the impairments and items reflected in the reconciliation table on page 22 of this presentation. This non-GAAP financial measure should be considered as a supplement and complement to, and not as a substitute for, or superior to, the most directly comparable GAAP financial measure and may be different than non-GAAP financial measures used by other companies.
Scott Prochazka – President and CEO Earnings Call Highlights Utility Operations Update Customer Growth Regulatory Update Expense Management Debt Management Midstream Investment Update
Third Quarter 2015 Performance Highlights Q3 GAAP EPS Q3 2015 vs Q3 2014 Drivers (EPS on a Guidance Basis) $0.30 $0.34 Q3 EPS on a Guidance Basis 3Q15 Utility Operations EPS on a Guidance Basis vs 3Q14 Baseline h Favorable Variance i Unfavorable Variance Note: Refer to slide 22 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures Third quarter 2015 GAAP EPS loss of $0.91, including impairment charges totaling $1.25 per share related to the equity investment in Enable Midstream Rate Relief Customer Growth Expense Management Timing of Conservation Improvement Program (CIP) Incentive Midstream Investments Equity Return related to True-up Energy Efficiency Remand Bonus
Midstream Investments Enable Q3 Highlights Announced a third quarter 2015 distribution of $0.318/unit Fifth consecutive quarterly increase since IPO With this increase, 2015 distribution growth has reached the low end of Enable’s 3% to 7% guidance Per day natural gas processed volumes increased quarter over quarter for the sixth consecutive quarter Recently awarded new long-term, fee-based gathering and processing business in the Anadarko basin with dedications totaling 380,000 gross acres Recently awarded almost 300,000 Dth/d of additional firm, fee-based natural gas transportation business to serve a natural gas power plant and a large local distribution company Rod Sailor named President and CEO effective January 1, 2016 Source: Enable Midstream Partners November 4, 2015, Press Release and Q3 Earnings Call. Please refer to these materials for an overview of Enable’s Q3 performance.
Tracy Bridge – EVP & President, Electric Division Earnings Call Highlights Electric Results Regulatory Update Houston – A Diverse and Growing Economy Construction of a new permanent 345kV double circuit tower in between temporary bypasses constructed to safely reenergize circuits damaged by tornadoes in April 2015.
Electric Transmission and Distribution Operating Income Drivers: 3rd Quarter 2014 vs 3rd Quarter 2015 1 Houston Electric’s customer count increased from 2,284,202 as of September 30, 2014, to 2,337,806 as of September 30, 2015 2 Q3 2014 TDU core operating income represents total segment operating income of $232 million, excluding operating income from transition and system restoration bonds of $30 million 3 Net transmission and distribution related revenue 4 O&M expense excludes certain costs with revenue offsets 5 Includes the absence of a one-time energy efficiency remand bonus of $8 million received in the third quarter of 2014, reduced equity return related to true-up proceeds of $7 million, lower right of way revenue of $4 million, and higher other miscellaneous of $4 million 6 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 $ Millions 2% YoY Customer Growth1 2 6 5 3 4
Electric Transmission and Distribution: 2015 Regulatory Update DCRF – Distribution Cost Recovery Factor; TCOS – Transmission Cost of Service; EECRF – Energy Efficiency Cost Recovery Factor 1 Performance incentive approved and recognized in Q4 2014 was $16.2 million Mechanism Effective Date Annual Revenue Increase - $MM Comments Docket # TCOS February 2015 $23.5 Filed on November 21, 2014; approved during 1Q 2015 43836 TCOS August 2015 $13.7 Filed on June 26, 2015; approved during 3Q 2015 44881 DCRF September 2015 $13.0 Filed on April 6, 2015; settlement approved on July 30, 2015 44572 Mechanism Expected Effective Date Annual Revenue Increase - $MM Comments Docket # TCOS 4Q 2015 $16.8 Filed on October 1, 2015; approval expected during 4Q 2015 45214 Annualized rate relief from approved 2015 filings: $50.2 million Expected annualized rate relief from pending 2015 filings: $16.8 million Mechanism Date Recognized Incentive - $MM Comments Docket # EECRF October 2015 $6.6 Filed on June 1, 2015; performance incentive approved in October 2015; recognized when approved; rates effective March 2016 44783 Energy efficiency incentive recognized in 20151: $6.6 million
Houston – A Diverse and Growing Economy GDP Forecast Houston – The Woodlands – Sugarland MSA GDP forecast ($ billions ‘09 constant dollars) Source: Perryman Group Source: Greater Houston Partnership Q4 2015 Pictures: jakewyman.com, theaspenskinny.com, snipview.com, ncaa.com, housuperbowl.com
Joe McGoldrick – EVP & President, Gas Division Earnings Call Highlights Gas Operations Results Regulatory Update Energy Services Update 2015 Minnesota Beltline Replacement Project in downtown Minneapolis
Natural Gas Utilities Operating Income Drivers: 3rd Quarter 2014 vs 3rd Quarter 2015 1% YoY Customer Growth1 $ Millions 1 Natural Gas Utilities’ customer count increased from 3,324,422 on September 30, 2014, to 3,359,556 on September 30, 2015 2 O&M expense excludes certain costs with revenue offsets 3 Includes higher tax expense of $4 million and higher depreciation expense of $3 million $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 ($2) ($4) ($6) ($8) 3 2
Natural Gas Utilities: 2015 Regulatory Update Jurisdiction Effective Date Annual Revenue Increase - $MM Comments Docket # Arkansas June 2015 $1.5 (Interim Rates) Act 310 filing pending approval 2; interim rates effective in June 2015 10-108-U South Texas July 2015 $4.0 Fourth annual GRIP filing; approved by the TX RRC GUD 10435 Beaumont/East Texas July 2015 $5.9 Second annual GRIP filing; approved by the TX RRC GUD 10433 Texas Coast September 2015 $4.9 Rate case approved by the TX RRC on August 25, 2015; settlement established parameters for future GRIP filings GUD 10432 Arkansas September 2015 $1.5 MRP filed monthly; annual revenue increase includes 2015 rate relief through September 2015 06-161-U Minnesota October 2015 $47.8 (Interim Rates) Rate case requesting an increase of $54.1MM filed in August 2015; interim rates of $47.8MM effective in October 2015; final decision from the MPUC expected mid-2016 15-424 GRIP – Gas Reliability Infrastructure Program; TX RRC – Texas Railroad Commission; MRP – Main Replacement Program; MPUC – Minnesota Public Utilities Commission 1 Interim rates begin the recognition of revenue, subject to refund (pending issuance of a final order) 2 Act 310 provides rate relief between rate cases for capital and expenses associated with changes in laws and regulations relating to public health, safety and environment Annualized rate relief from 2015 filings (includes interim rates1): $65.6 million
Natural Gas Utilities: 2015 Regulatory Update RSP – Rate Stabilization Plan; RRA – Rate Regulation Adjustment; MPSC – Mississippi Public Service Commission; SGR – Supplemental Growth Rider; PBRC – Performance Based Rate Change; BDA – Billing Determinant Rate Adjustment 1 Interim rates begin the recognition of revenue for mechanisms except Arkansas BDA, which recognizes rate relief in the prior year; subject to refund (pending issuance of a final order) Jurisdiction Expected Effective Date Annual Revenue Increase - $MM Comments Docket # North Louisiana December 2015 $1.0 (Interim Rates) Filed 2015 RSP requesting $1.0MM on October 1, 2015; pending approval; interim rates effective December 1, 2015 U-33818 South Louisiana December 2015 $1.5 (Interim Rates) Filed 2015 RSP requesting $1.5MM on October 1, 2015; pending approval; interim rates effective December 1, 2015 U-33817 Mississippi 4Q 2015 $2.5 RRA filed with MPSC on May 1, 2015 12-UN-139 Mississippi 4Q 2015 $0.1 SGR filed with MPSC on May 1, 2015 13-UN-0214 Oklahoma 4Q 2015 $0.9 PBRC filed in March 2015 201500118 Expected annualized rate relief from pending 2015 filings (includes interim rates1): $6 million Jurisdiction Date Recognized Rate Relief - $MM Comments Docket # Arkansas December 2014 $3.9 (Interim Rates) BDA filed in March 2015; revenue recognized in fourth quarter 2014; interim rates effective in June 2015; pending approval 06-161-U Rate relief from 2015 filing recognized in 2014 (includes interim rates1): $3.9 million
Natural Gas Utilities: 2015 Regulatory Update RSP – Rate Stabilization Plan; GSR – Gas Supply Rate; APSC – Arkansas Public Service Commission; MPUC – Minnesota Public Utilities Commission; CIP – Conservation Improvement Program 1 Arkansas performance incentive approved and recognized in 2014 was $0.5 million. Minnesota CIP incentive approved and recognized in 2014 was $10.9 million. Expected regulatory activity in 4Q 2015 Jurisdiction Expected Filing Date Comments Docket # Arkansas November 2015 Filed Notice of Intent on August 17, 2015; rate case will be filed no later than November 15, 2015 15-098-U Mechanism Date Recognized Incentive - $MM Comments Docket # Arkansas June 2015 $0.5 APSC approved energy efficiency incentive in June 2015; recognized when approved; rates effective July 2015 07-081-TF Minnesota August 2015 $11.7 MPUC approved CIP incentive in August 2015; recognized when approved; rates effective January 2016 15-421 Energy efficiency incentives recognized in 20151: $12.2 million Jurisdiction Effective Date Refund - $MM Comments Docket # North Louisiana September 2015 ($0.9) 2013 RSP refunded through the GSR; refund period expected to run through July 2016; recognized upon approval U-32996 South Louisiana September 2015 ($0.6) 2013 RSP refunded through the GSR; refund period expected to run through June 2016; recognized upon approval U-32998 Interim rate refunds: ($1.5 million)
Energy Services Operating Income Drivers: 3rd Quarter 2014 vs 3rd Quarter 2015 1 2 1 Operating income as reported in Q3 2014 was $6 million. Chart excludes mark-to-market gain of $13 million. 2 Operating income as reported in Q3 2015 was $7 million. Chart excludes mark-to-market gain of $5 million. $ Millions $3 $2 $1 $0 ($1) ($2) ($3) ($4) ($5) ($6) ($7) Low Risk Business Model Continued Customer Growth
Bill Rogers – EVP & CFO Earnings Call Highlights Impairment Discussion Quarterly Drivers Guidance Update Financing Activities
Non-Cash Impairment Charges Related to Midstream Investments Recorded impairments on equity investment in Enable Midstream totaling $862 million in the third quarter of 2015, inclusive of CenterPoint’s share, $612 million, of impairment charges recorded by Enable Midstream for goodwill and long-lived assets Reduces the equity investment from $4.5 billion to $3.6 billion Post impairments, the carrying value of CenterPoint Energy’s investment in Enable Midstream is $15.41 per unit, including the value of GP shares and potential incentive distribution rights Non-cash charge Does not affect liquidity, cash flow or compliance with debt agreement obligations CenterPoint Energy, Inc. equity/capital (as of September 30, 2015)1: 41% CenterPoint Energy Resources Corp. equity/capital (as of September 30, 2015): 63% 1 Excludes transition and system restoration bonds
Q3 EPS Normalization GAAP to Guidance Basis to Baseline Note: Please refer to slide 22 for the full reconciliation table and slide 2 for information on non-GAAP measures
2014 Q3 Baseline EPS to 2015 Q3 EPS on a Guidance Basis Note: Please refer to slide 22 for the full reconciliation table and slide 2 for information on non-GAAP measures
Financing Plan 2015 $200 million matured in June 2015 $69 million matured in October 2015 Net borrowing expected to increase ~$300 million 2016 $325 million maturity in May 2016 Anticipate incremental financing needs of ~$600 million; dependent on such factors as bonus depreciation, capital investment plans, and working capital Equity issuance not anticipated Anticipated Annual Tax Rates 2015 effective tax rate with impairment: 45% 2015 effective tax rate without impairment: 35% 2016 effective tax rate: 36% 1Excludes transition and system restoration bonds Financing Plan & Tax Rates Equity/Capital (as of September 30, 2015) CenterPoint Energy, Inc. 41% CenterPoint Energy Houston Electric, LLC 48% CenterPoint Energy Resources Corp. 63%
Appendix
Reconciliation: Net Income and diluted EPS to the Basis Used in Providing Annual Earnings Guidance Note: For information on non-GAAP measures, please refer to slide 2
2014 EPS Reconciliation to 2015 Utility Operations Guidance Range of $0.71 to $0.75 per diluted share 2014 Fully Diluted EPS $ 1.42 On an adjusted guidance basis: ZENS-related mark to market gains (0.12) CES MTM gain (0.04) Pension Curtailment loss 0.01 2014 Consolidated EPS on a guidance basis $ 1.27 Deferred Tax Benefit (0.07) 2014 Fully Adjusted EPS $ 1.20 Midstream Investments (0.44) 2014 Fully Adjusted Utility Operations EPS $ 0.76 The Equity Amortization schedule on page 19 of the supplemental materials posted on February 26, 2015 details the decrease between the 2014 actual and 2015 projected equity returns Information about the 2008 Energy Efficiency Cost Recovery Factor Appeals is provided in the 2014 10-K Note: Please refer to slide 2 for information on non-GAAP measures 1 2 $0.71 to $0.75 Q1 ($0.01) Q2 ($0.01) Q3 ($0.01) Q4 - Q1 ($0.05) Q2 $0.01 Q3 $0.01 Q4 $0.01 Q1 Q2 Q3 ($0.01) Q4 For 2014, normalized $0.76 of fully adjusted earnings to a baseline of $0.70. For Q3 of 2014, “baseline” was one cent below guidance. Adjustments for each quarter can be seen in the tan boxes below.
Right of Way Revenues $4 million $29 million $2 million $27 million $21 million $14 million (YTD) Revenues attributable to allowing third-party use of transmission ROWs Third-party needs result in uncertain project/revenue timing 2015 ROW revenue range of $10 to $20 million expected Houston Electric Right of Way Revenues
Reconciliation: Operating Income to Core Operating Income on a Guidance Basis