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): February 26, 2016
CENTERPOINT ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Texas | 1-31447 | 74-0694415 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| 1111 Louisiana Houston, Texas |
77002 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (713) 207-1111
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Conditions.
On February 26, 2016, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported fourth quarter and full year 2015 earnings. For additional information regarding CenterPoint Energy’s fourth quarter and full year 2015 earnings, please refer to CenterPoint Energy’s press release attached to this report as Exhibit 99.1 (the “Press Release”), which Press Release is incorporated by reference herein.
CenterPoint Energy and its subsidiary, CenterPoint Energy Resources Corp. (“CERC”), recorded non-cash impairment charges of $984 million related to the 55.4 percent equity investment in Enable Midstream Partners, LP (“Enable Midstream”) for the three months ended December 31, 2015, inclusive of its share of impairment charges recorded by Enable Midstream for long-lived assets.
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 December 31, 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 CERC determined in connection with their preparation of financial statements for the three months ended December 31, 2015 that an other than temporary decrease in the value of the investment in Enable Midstream had occurred.
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 common and subordinated units representing limited partner interests, 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.
Item 7.01 Regulation FD Disclosure.
CenterPoint Energy is holding a conference call to discuss its fourth quarter and full year 2015 earnings on February 26, 2016. Information about the call can be found in the press release furnished herewith as Exhibit 99.1. For additional information regarding CenterPoint Energy’s fourth quarter and full year 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 99.2 (the “Supplemental Materials”), which Supplemental Materials are incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
The information in the Press Release and the Supplemental Materials is being furnished, not filed, pursuant to Item 2.02 and 7.01, respectively. Accordingly, the information in the Press Release and the Supplemental Materials will not be incorporated by reference into any registration statement filed by CenterPoint Energy under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
| (d) | Exhibits. |
| EXHIBIT NUMBER |
EXHIBIT DESCRIPTION | |
| 99.1 | Press Release issued February 26, 2016 regarding CenterPoint Energy, Inc.’s fourth quarter and full year 2015 earnings | |
| 99.2 | Supplemental Materials regarding CenterPoint Energy, Inc.’s 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: February 26, 2016 |
By: | /s/ Kristie L. Colvin | ||
| Kristie L. Colvin | ||||
| Senior Vice President and Chief Accounting Officer | ||||
EXHIBIT INDEX
| EXHIBIT NUMBER |
EXHIBIT DESCRIPTION | |
| 99.1 | Press Release issued February 26, 2016 regarding CenterPoint Energy, Inc.’s fourth quarter and full year 2015 earnings | |
| 99.2 | Supplemental Materials regarding CenterPoint Energy, Inc.’s 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 full year 2015 earnings
Net loss of $1.61 per diluted share; Net income of $1.10 per diluted share on a guidance basis
| • | Achieved top end of revised guidance range of $1.05 to $1.10 |
| • | Utility operations delivered $0.79 EPS and midstream investments delivered $0.31 EPS on a guidance basis |
| • | Company reiterates 2016 full year guidance of $1.12—$1.20 with $0.88—$0.92 from utility operations and $0.24—$0.28 from midstream investments |
Houston, TX – Feb. 26, 2016—CenterPoint Energy, Inc. (NYSE: CNP) reports fourth quarter and full year 2015 earnings. Scott M. Prochazka, president and chief executive officer said, “We are pleased to report earnings at the high end of our guidance range. Utility operations contributed increased revenues from timely cost recovery and strong customer growth, while midstream investments finished the year within the initial guidance range provided. We expect continued strong financial performance from utility operations in 2016, which is incorporated in our guidance.”
“We have a great team of employees who are committed to our strategy of operating our systems safely, serving our customers effectively and efficiently, and growing our business to produce long-term shareholder value,” added Prochazka.
CenterPoint Energy, Inc. today reported a net loss of $509 million, or a loss of $1.18 per diluted share, for the fourth quarter of 2015. This loss included pre-tax, non-cash impairment charges in this quarter totaling $984 million from midstream investments.
Excluding the impairment charges, fourth quarter net income would have been $111 million, or $0.26 per diluted share, compared to $176 million or $0.41 per diluted share for the same period in 2014.
For the year ended Dec. 31, 2015, net loss was $692 million, or a loss of $1.61 per diluted share. This loss included pre-tax, non-cash impairment charges taken during 2015 totaling $1,846 million, related to midstream investments. Excluding the impairment charges, net income would have been $465 million, or $1.08 per diluted share compared with net income of $611 million, or $1.42 per diluted share for the previous year.
On a guidance basis, full-year 2015 earnings would have been $1.10 per diluted share, consisting of $0.79 from utility operations and $0.31 from midstream investments.
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Page 2 of 6
Business Segments
Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $109 million for the fourth quarter of 2015, consisting of $84 million from the regulated electric transmission & distribution utility operations (TDU) and $25 million related to securitization bonds. Operating income for the fourth quarter of 2014 was $113 million, consisting of $85 million from the TDU and $28 million related to securitization bonds.
Operating income for the year ended Dec. 31, 2015, was $607 million, consisting of $502 million from the TDU and $105 million related to securitization bonds. Operating income for the same period of 2014 was $595 million, consisting of $477 million from the TDU and $118 million related to securitization bonds.
Full year 2015 operating income for the TDU benefited from higher transmission and distribution related revenues, revenue increases associated with the addition of nearly 50,000 metered customers, as well as higher usage due to a return to more normal weather. These increases were partially offset by lower equity return related to true-up proceeds, lower energy efficiency bonus, including the absence of a one-time energy efficiency remand bonus received in 2014, higher depreciation and lower right of way revenues.
Natural Gas Distribution
The natural gas distribution segment reported operating income of $97 million for the fourth quarter of 2015, compared with $103 million for the same period of 2014.
Operating income for the year ended Dec. 31, 2015, was $273 million compared with $287 million in 2014.
Full year 2015 operating income for natural gas distribution decreased as a result of lower usage from a return to more normal weather and higher depreciation and amortization. This decrease was partially offset by revenue from rate increases associated with capital investment and revenue from customer growth of approximately 30,000 new customers.
Energy Services
The energy services segment reported operating income of $13 million for the fourth quarter of 2015, which included a mark-to-market accounting gain of $1 million, compared with $9 million for the same period of 2014, which included a mark-to-market accounting gain of $6 million. Excluding mark-to-market gains, operating income increased $9 million versus 2014.
Operating income for the year ended Dec. 31, 2015, was $42 million, which included a mark-to-market gain of $4 million, compared with $52 million in 2014, which included a mark-to-market gain of $29 million. Excluding mark-to-market gains, the $15 million increase in 2015 was primarily due to operations and maintenance expense reductions, a lower inventory write down and improved margins.
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Midstream Investments
The midstream investments segment reported an equity loss of $934 million for the fourth quarter of 2015, which includes the impairment charges noted above. The impairments noted above were partially offset by earnings of $50 million for the fourth quarter of 2015. Earnings were $67 million for the same period of 2014.
For the year ended Dec. 31, 2015, the segment reported an equity loss of $1,633 million, which includes the impairment charges noted above. The impairments noted above were partially offset by full-year earnings of $213 million. Earnings were $308 million for the full year of 2014.
Earnings Outlook
On a consolidated basis, CenterPoint Energy expects earnings on a guidance basis for 2016 in the range of $1.12—$1.20 per diluted share. This guidance includes anticipated utility operations earnings of $0.88—$0.92 per diluted share and midstream investment earnings of $0.24—$0.28 per diluted share.
CenterPoint Energy is targeting 4-6 percent earnings per share annual growth through 2018 on a guidance basis, inclusive of midstream investments.
The utility operations guidance range considers performance to date and certain significant variables that may impact earnings, such as weather, regulatory and judicial proceedings, throughput, commodity prices, effective tax rates, and financing activities.
In providing this guidance, the company 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 for midstream investments, the company assumes 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 2016 dated Feb. 17, 2016, 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.
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Page 4 of 6
CenterPoint Energy, Inc. and Subsidiaries
Reconciliation of Net Income and diluted EPS to the basis used in providing 2015 annual earnings guidance
| Quarter Ended December 31, 2015 |
Twelve Months Ended December 31, 2015 |
|||||||||||||||
| Net Income (in millions) |
EPS | Net Income (in millions) |
EPS | |||||||||||||
| Consolidated as reported |
$ | (509 | ) | $ | (1.18 | ) | $ | (692 | ) | $ | (1.61 | ) | ||||
| Midstream Investments |
589 | 1.37 | 1,024 | 2.38 | ||||||||||||
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| Utility Operations (1) |
80 | 0.19 | 332 | 0.77 | ||||||||||||
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| Loss on impairment of Midstream Investments: |
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| CenterPoint’s impairment of its investment in Enable |
613 | 1.43 | 769 | 1.79 | ||||||||||||
| CenterPoint’s share of Enable’s impairment of its goodwill and long-lived assets |
7 | 0.01 | 388 | 0.90 | ||||||||||||
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| Total loss on impairment |
620 | 1.44 | 1,157 | 2.69 | ||||||||||||
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| Midstream Investments excluding loss on impairment |
$ | 31 | $ | 0.07 | $ | 133 | $ | 0.31 | ||||||||
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| Consolidated excluding loss on impairment |
$ | 111 | $ | 0.26 | $ | 465 | $ | 1.08 | ||||||||
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| Timing effects impacting CES(2): |
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| Mark-to-market (gain) losses |
— | — | (2 | ) | (0.01 | ) | ||||||||||
| ZENS-related mark-to-market (gains) losses: |
||||||||||||||||
| Marketable securities (3) |
13 | 0.03 | 60 | 0.14 | ||||||||||||
| Indexed debt securities (4) |
(8 | ) | (0.02 | ) | (48 | ) | (0.11 | ) | ||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 85 | $ | 0.20 | $ | 342 | $ | 0.79 | ||||||||
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| Per the basis used in providing 2015 earnings guidance: |
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| Utility Operations on a guidance basis |
$ | 85 | $ | 0.20 | $ | 342 | $ | 0.79 | ||||||||
| Midstream Investments excluding loss on impairment |
31 | 0.07 | 133 | 0.31 | ||||||||||||
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| 2015 Consolidated on guidance basis |
$ | 116 | $ | 0.27 | $ | 475 | $ | 1.10 | ||||||||
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| (1) | CenterPoint earnings excluding Midstream Investments |
| (2) | Energy Services segment |
| (3) | Quarter ended and Twelve months ended results include Time Warner Inc., Time Warner Cable Inc. and Time Inc. Twelve months ended results also include AOL Inc. prior to the merger with Verizon |
| (4) | Twelve months ended results include amount associated with Verizon merger with AOL Inc. |
Page 5 of 6
Filing of Form 10-K for CenterPoint Energy, Inc.
Today, CenterPoint Energy, Inc. filed with the Securities and Exchange Commission (SEC) its Annual Report on Form 10-K for the year ended Dec. 31, 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 Friday, Feb. 26, 2016, at 10 a.m. Central time or 11 a.m. Eastern time. Interested parties may listen to a live audio broadcast of the conference call on the company’s website under the Investors section. A replay of the call can be accessed approximately two hours after the completion of the call and will be archived on the website for at least one year.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and energy services operations. The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. The company also owns a 55.4 percent limited partner interest in Enable Midstream Partners, a publicly traded master limited partnership it jointly controls with OGE Energy Corp., which owns, operates and develops natural gas and crude oil infrastructure assets. With approximately 7,500 employees, CenterPoint Energy and its predecessor companies have been in business for more than 140 years. For more information, visit the website at 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 earnings per share 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
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Page 6 of 6
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 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 Dec. 31, 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 impairments, 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 December 31, |
Year Ended December 31, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues: |
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| Electric Transmission & Distribution |
$ | 701 | $ | 679 | $ | 2,845 | $ | 2,845 | ||||||||
| Natural Gas Distribution |
653 | 900 | 2,632 | 3,301 | ||||||||||||
| Energy Services |
447 | 815 | 1,957 | 3,179 | ||||||||||||
| Other Operations |
3 | 4 | 14 | 15 | ||||||||||||
| Eliminations |
(13 | ) | (26 | ) | (62 | ) | (114 | ) | ||||||||
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| Total |
1,791 | 2,372 | 7,386 | 9,226 | ||||||||||||
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| Expenses: |
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| Natural gas |
692 | 1,296 | 3,102 | 4,921 | ||||||||||||
| Operation and maintenance |
542 | 528 | 2,007 | 1,969 | ||||||||||||
| Depreciation and amortization |
246 | 229 | 970 | 1,013 | ||||||||||||
| Taxes other than income taxes |
85 | 98 | 374 | 388 | ||||||||||||
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| Total |
1,565 | 2,151 | 6,453 | 8,291 | ||||||||||||
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| Operating Income |
226 | 221 | 933 | 935 | ||||||||||||
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| Other Income (Expense) : |
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| Gain (loss) on marketable securities |
(21 | ) | 90 | (93 | ) | 163 | ||||||||||
| Gain (loss) on indexed debt securities |
12 | (57 | ) | 74 | (86 | ) | ||||||||||
| Interest and other finance charges |
(86 | ) | (92 | ) | (352 | ) | (353 | ) | ||||||||
| Interest on transition and system restoration bonds |
(25 | ) | (28 | ) | (105 | ) | (118 | ) | ||||||||
| Equity in earnings (losses) of unconsolidated affiliates |
(934 | ) | 67 | (1,633 | ) | 308 | ||||||||||
| Other—net |
10 | 8 | 46 | 36 | ||||||||||||
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| Total |
(1,044 | ) | (12 | ) | (2,063 | ) | (50 | ) | ||||||||
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| Income (Loss) Before Income Taxes |
(818 | ) | 209 | (1,130 | ) | 885 | ||||||||||
| Income Tax Expense (Benefit) |
(309 | ) | 33 | (438 | ) | 274 | ||||||||||
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| Net Income (Loss) |
$ | (509 | ) | $ | 176 | $ | (692 | ) | $ | 611 | ||||||
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Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K 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 December 31, |
Year Ended December 31, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Basic Earnings (Loss) Per Common Share |
$ | (1.18 | ) | $ | 0.41 | $ | (1.61 | ) | $ | 1.42 | ||||||
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| Diluted Earnings (Loss) Per Common Share |
$ | (1.18 | ) | $ | 0.41 | $ | (1.61 | ) | $ | 1.42 | ||||||
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| Dividends Declared per Common Share |
$ | 0.2475 | $ | 0.2375 | 0.9900 | $ | 0.9500 | |||||||||
| Weighted Average Common Shares Outstanding (000): |
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| - Basic |
430,262 | 429,796 | 430,180 | 429,634 | ||||||||||||
| - Diluted |
430,262 | 431,830 | 430,180 | 431,668 | ||||||||||||
| Operating Income (Loss) by Segment |
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| Electric Transmission & Distribution: |
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| Electric Transmission and Distribution Operations |
$ | 84 | $ | 85 | $ | 502 | $ | 477 | ||||||||
| Transition and System Restoration Bond Companies |
25 | 28 | 105 | 118 | ||||||||||||
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| Total Electric Transmission & Distribution |
109 | 113 | 607 | 595 | ||||||||||||
| Natural Gas Distribution |
97 | 103 | 273 | 287 | ||||||||||||
| Energy Services |
13 | 9 | 42 | 52 | ||||||||||||
| Other Operations |
7 | (4 | ) | 11 | 1 | |||||||||||
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| Total |
$ | 226 | $ | 221 | $ | 933 | $ | 935 | ||||||||
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Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Electric Transmission & Distribution | ||||||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||||
| December 31, | % Diff Fav/(Unfav) |
December 31, | % Diff Fav/(Unfav) |
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| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues: |
||||||||||||||||||||||||
| Electric transmission and distribution utility |
$ | 582 | $ | 563 | 3 | % | $ | 2,364 | $ | 2,279 | 4 | % | ||||||||||||
| Transition and system restoration bond companies |
119 | 116 | 3 | % | 481 | 566 | (15 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
701 | 679 | 3 | % | 2,845 | 2,845 | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
356 | 344 | (3 | %) | 1,300 | 1,251 | (4 | %) | ||||||||||||||||
| Depreciation and amortization |
87 | 80 | (9 | %) | 340 | 327 | (4 | %) | ||||||||||||||||
| Taxes other than income taxes |
55 | 54 | (2 | %) | 222 | 224 | 1 | % | ||||||||||||||||
| Transition and system restoration bond companies |
94 | 88 | (7 | %) | 376 | 448 | 16 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
592 | 566 | (5 | %) | 2,238 | 2,250 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 109 | $ | 113 | (4 | %) | $ | 607 | $ | 595 | 2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||
| Electric transmission and distribution operations |
$ | 84 | $ | 85 | (1 | %) | $ | 502 | $ | 477 | 5 | % | ||||||||||||
| Transition and system restoration bond companies |
25 | 28 | (11 | %) | 105 | 118 | (11 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Segment Operating Income |
$ | 109 | $ | 113 | (4 | %) | $ | 607 | $ | 595 | 2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Electric Transmission & Distribution Operating Data: |
||||||||||||||||||||||||
| Actual MWH Delivered |
||||||||||||||||||||||||
| Residential |
5,711,032 | 5,497,638 | 4 | % | 28,995,001 | 27,497,882 | 5 | % | ||||||||||||||||
| Total |
18,812,439 | 18,710,321 | 1 | % | 84,190,647 | 81,839,060 | 3 | % | ||||||||||||||||
| Weather (average for service area): |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Cooling degree days |
118 | % | 86 | % | 32 | % | 101 | % | 91 | % | 10 | % | ||||||||||||
| Heating degree days |
61 | % | 99 | % | (38 | %) | 102 | % | 123 | % | (21 | %) | ||||||||||||
| Number of metered customers—end of period: |
||||||||||||||||||||||||
| Residential |
2,079,899 | 2,033,027 | 2 | % | 2,079,899 | 2,033,027 | 2 | % | ||||||||||||||||
| Total |
2,348,517 | 2,299,247 | 2 | % | 2,348,517 | 2,299,247 | 2 | % | ||||||||||||||||
| Natural Gas Distribution | ||||||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||||
| December 31, | % Diff Fav/(Unfav) |
December 31, | % Diff Fav/(Unfav) |
|||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 653 | $ | 900 | (27 | %) | $ | 2,632 | $ | 3,301 | (20 | %) | ||||||||||||
| Natural gas |
283 | 529 | 47 | % | 1,297 | 1,961 | 34 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
370 | 371 | — | 1,335 | 1,340 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
187 | 176 | (6 | %) | 697 | 700 | — | |||||||||||||||||
| Depreciation and amortization |
57 | 52 | (10 | %) | 222 | 201 | (10 | %) | ||||||||||||||||
| Taxes other than income taxes |
29 | 40 | 28 | % | 143 | 152 | 6 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
273 | 268 | (2 | %) | 1,062 | 1,053 | (1 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income (Loss) |
$ | 97 | $ | 103 | (6 | %) | $ | 273 | $ | 287 | (5 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Natural Gas Distribution Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
||||||||||||||||||||||||
| Residential |
43 | 57 | (25 | %) | 171 | 197 | (13 | %) | ||||||||||||||||
| Commercial and Industrial |
66 | 71 | (7 | %) | 262 | 270 | (3 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Throughput |
109 | 128 | (15 | %) | 433 | 467 | (7 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weather (average for service area) |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Heating degree days |
73 | % | 107 | % | (34 | %) | 95 | % | 120 | % | (25 | %) | ||||||||||||
| Number of customers—end of period: |
||||||||||||||||||||||||
| Residential |
3,149,845 | 3,124,542 | 1 | % | 3,149,845 | 3,124,542 | 1 | % | ||||||||||||||||
| Commercial and Industrial |
253,921 | 249,272 | 2 | % | 253,921 | 249,272 | 2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
3,403,766 | 3,373,814 | 1 | % | 3,403,766 | 3,373,814 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Energy Services | ||||||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||||
| December 31, | % Diff Fav/(Unfav) |
December 31, | % Diff Fav/(Unfav) |
|||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 447 | $ | 815 | (45 | %) | $ | 1,957 | $ | 3,179 | (38 | %) | ||||||||||||
| Natural gas |
422 | 793 | 47 | % | 1,867 | 3,073 | 39 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
25 | 22 | 14 | % | 90 | 106 | (15 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
10 | 11 | 9 | % | 42 | 47 | 11 | % | ||||||||||||||||
| Depreciation and amortization |
2 | 1 | (100 | %) | 5 | 5 | — | |||||||||||||||||
| Taxes other than income taxes |
— | 1 | 100 | % | 1 | 2 | 50 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
12 | 13 | 8 | % | 48 | 54 | 11 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 13 | $ | 9 | 44 | % | $ | 42 | $ | 52 | (19 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Mark-to-market gain |
$ | 1 | $ | 6 | (83 | %) | $ | 4 | $ | 29 | (86 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Energy Services Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
159 | 168 | (5 | %) | 618 | 631 | (2 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Number of customers—end of period |
18,099 | 17,964 | 1 | % | 18,099 | 17,964 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Other Operations | ||||||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||||||
| December 31, | % Diff Fav/(Unfav) |
December 31, | % Diff Fav/(Unfav) |
|||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 3 | $ | 4 | (25 | %) | $ | 14 | $ | 15 | (7 | %) | ||||||||||||
| Expenses |
(4 | ) | 8 | 150 | % | 3 | 14 | 79 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income (Loss) |
$ | 7 | $ | (4 | ) | 275 | % | $ | 11 | $ | 1 | 1,000 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Capital Expenditures by Segment
(Millions of Dollars)
(Unaudited)
| Quarter Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Capital Expenditures by Segment |
||||||||||||||||
| Electric Transmission & Distribution |
$ | 269 | $ | 245 | $ | 934 | $ | 818 | ||||||||
| Natural Gas Distribution |
185 | 147 | 601 | 525 | ||||||||||||
| Energy Services |
1 | 1 | 5 | 3 | ||||||||||||
| Other Operations |
6 | 22 | 35 | 56 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 461 | $ | 415 | $ | 1,575 | $ | 1,402 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Interest Expense Detail
(Millions of Dollars)
(Unaudited)
| Quarter Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Interest Expense Detail |
||||||||||||||||
| Amortization of Deferred Financing Cost |
$ | 6 | $ | 6 | $ | 25 | $ | 25 | ||||||||
| Capitalization of Interest Cost |
(3 | ) | (3 | ) | (10 | ) | (11 | ) | ||||||||
| Transition and System Restoration Bond Interest Expense |
25 | 28 | 105 | 118 | ||||||||||||
| Other Interest Expense |
83 | 89 | 337 | 339 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Interest Expense |
$ | 111 | $ | 120 | $ | 457 | $ | 471 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 264 | $ | 298 | ||||
| Other current assets |
2,425 | 2,970 | ||||||
|
|
|
|
|
|||||
| Total current assets |
2,689 | 3,268 | ||||||
|
|
|
|
|
|||||
| Property, Plant and Equipment, net |
11,537 | 10,502 | ||||||
|
|
|
|
|
|||||
| Other Assets: |
||||||||
| Goodwill |
840 | 840 | ||||||
| Regulatory assets |
3,129 | 3,527 | ||||||
| Investment in unconsolidated affiliates |
2,594 | 4,521 | ||||||
| Other non-current assets |
545 | 542 | ||||||
|
|
|
|
|
|||||
| Total other assets |
7,108 | 9,430 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 21,334 | $ | 23,200 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Short-term borrowings |
$ | 40 | $ | 53 | ||||
| Current portion of transition and system restoration bonds long-term debt |
391 | 372 | ||||||
| Indexed debt |
154 | 152 | ||||||
| Current portion of other long-term debt |
328 | 271 | ||||||
| Other current liabilities |
1,554 | 1,944 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
2,467 | 2,792 | ||||||
|
|
|
|
|
|||||
| Other Liabilities: |
||||||||
| Accumulated deferred income taxes, net |
5,047 | 5,440 | ||||||
| Regulatory liabilities |
1,276 | 1,206 | ||||||
| Other non-current liabilities |
1,182 | 1,205 | ||||||
|
|
|
|
|
|||||
| Total other liabilities |
7,505 | 7,851 | ||||||
|
|
|
|
|
|||||
| Long-term Debt: |
||||||||
| Transition and system restoration bonds |
2,283 | 2,674 | ||||||
| Other |
5,618 | 5,335 | ||||||
|
|
|
|
|
|||||
| Total long-term debt |
7,901 | 8,009 | ||||||
|
|
|
|
|
|||||
| Shareholders’ Equity |
3,461 | 4,548 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 21,334 | $ | 23,200 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(Millions of Dollars)
(Unaudited)
| Year Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income (loss) |
$ | (692 | ) | $ | 611 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
997 | 1,041 | ||||||
| Deferred income taxes |
(413 | ) | 280 | |||||
| Write-down of natural gas inventory |
4 | 8 | ||||||
| Equity in earnings (losses) of unconsolidated affiliates, net of distributions |
1,779 | (2 | ) | |||||
| Changes in net regulatory assets |
63 | 22 | ||||||
| Changes in other assets and liabilities |
105 | (576 | ) | |||||
| Other, net |
22 | 13 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
1,865 | 1,397 | ||||||
| Net Cash Used in Investing Activities |
(1,387 | ) | (1,384 | ) | ||||
| Net Cash Provided by (Used in) Financing Activities |
(512 | ) | 77 | |||||
|
|
|
|
|
|||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
(34 | ) | 90 | |||||
| Cash and Cash Equivalents at Beginning of Period |
298 | 208 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 264 | $ | 298 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
Achieved top end of revised guidance range of $1.05 - $1.10 Utility operations delivered $0.79 EPS and midstream investments delivered $0.31 EPS on a guidance basis Company reiterates 2016 full year guidance of $1.12 - $1.20 4th Quarter 2015 Earnings Call February 26, 2016 Exhibit 99.2
This presentation contains statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance or underlying assumptions (including future regulatory filings, earnings, capital investments, and rate base or customer growth) and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “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, 2015 under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Certain Factors Affecting Future Earnings” and in other filings with the SEC by CenterPoint Energy, which can be found at www.centerpointenergy.com on the Investor Relations page or on the SEC’s website at www.sec.gov . This presentation contains time sensitive information that is accurate as of the date hereof. Some of the information in this presentation is unaudited and may be subject to change. We undertake no obligation to update the information presented herein except as required by law. Investors and others should note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and the 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 35. Additionally, on slide 36, 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 slide 35 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. Cautionary Statement
Earnings Call Highlights 2015 Highlights Earnings Guidance & Growth Drivers Midstream Investments Update Strategic Update 2015 Industry Recognition Scott Prochazka – President and CEO
Strong customer growth - nearly 80,000 new utility customers 2% electric metered customer growth 1% natural gas utilities customer growth Received nearly $90 million in annualized rate relief from 2015 filings, excluding interim rates ROEs near authorized levels at both electric and gas utilities O&M expense growth was flat year-over-year versus 2014, excluding certain expenses that have revenue offsets Achieved first quartile safety performance compared to our industry peers (AGA and EEI members) 2015 Highlights
One-time $0.07 tax benefit and $0.06 of other baseline adjustments 2016 Guidance ($1.12 - $1.20) 2015 EPS (Guidance Basis) 2014 EPS (Guidance Basis) Earnings from Utility Operations were 65% of overall earnings in 2014 and are expected to represent 75% - 80% in 2016 We anticipate 2016 Utility Operations earnings growth will be driven by: Efficient recovery of invested capital CenterPoint’s vibrant, growing service territories Effective capital management Optimization of CenterPoint’s financing costs Steady Utility Growth Anticipated to Compensate for Midstream Challenges in 2016 baseline Note: Refer to slide 35 and 36 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures
Activity Increased both full-year 2015 processed volumes and intrastate transported volumes by 14% compared to 2014 Bear Den crude gathering system volumes increased by 6,500 barrels per day (Bbl/d) in fourth quarter of 2015 compared to third quarter 2015 Total of 28 rigs are currently drilling wells scheduled to be connected to Enable in the Anadarko Basin Finances Achieved distribution coverage of greater than 1.0x in 2015 Substantial liquidity with $1.2 billion of available revolving credit facility capacity as of December 31, 2015 No debt maturities due in 2016 or 2017 2016 expansion capital reduced to $375 million Midstream Investments Source: Enable Midstream Partners February 17, 2016, Press Release and 4Q Earnings Call. Please refer to these materials for an overview of Enable’s 4Q Performance.
Core strategy is to invest organically to grow and strengthen our current utility service territories In January, announced two investments that are expected to be EPS accretive: $363 million investment in Enable Midstream Partners’ 10% perpetual preferred securities; closed on February 18, 2016 Acquisition of Continuum Energy’s retail energy services creates access to more markets, increases Energy Services’ commercial and industrial customer base by over 30%, and generates economies of scale; expected to close in March or April 2016 Continue to evaluate strategic opportunities: Options for Enable Midstream Partners ownership (sale or spin-off) Real Estate Investment Trust (REIT) for utility assets Expect to provide an update on the strategic reviews in the second half of 2016, if not sooner Strategic Update
1st in Midwest in Operational Satisfaction in Utility Trusted Brand & Engagement Residential Study Environmental Champion Award Customer Champion in Electric Utility Trusted Brand & Engagement Residential Study 2nd in J.D. Power 2015 Gas Utility Residential Customer Satisfaction Study (South Region) 2015 Industry Recognition
Earnings Call Highlights Electric Results Customer Growth Capital Investment Outlook Rate Base Outlook Construction of a new permanent 345kV double circuit tower in between temporary bypasses to safely reenergize circuits damaged by tornadoes in April 2015. Tracy Bridge – EVP & President, Electric Division
(1) Houston Electric’s customer count increased from 2,299,247 as of December 31, 2014, to 2,348,517 as of December 31, 2015 (2) Weather in 2015 was close to the 10-year average; 2015 cooling degree days and heating degree days were 101% and 102% of the 10-year averages, respectively, compared to 91% and 123%, respectively, in 2014 (3) 2014 TDU core operating income represents total segment operating income of $595 million, excluding operating income from transition and system restoration bonds of $118 million (4) Net transmission and distribution related revenue (5) Includes lower revenues from energy efficiency bonuses of $15 million, including 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 $20 million, lower right of way revenue of $7 million, and higher miscellaneous revenue of $1 million (6) 2015 TDU core operating income represents total segment operating income of $607 million, excluding operating income from transition and system restoration bonds of $105 million $ Millions 2% YoY Customer Growth (1) (3) (4) (5) (6) Return to More Normal Weather (2) Electric Transmission and Distribution Operating Income Drivers 2014 vs 2015
2.4% 2.1% 2.0% Electric Transmission and Distribution Steady Customer Growth Continues
$3.7 Billion 2016 – 2020 Capital Plan (1) $ Millions Brazos Valley Connection ($270-$310 million from 2016 into 2018) Reliability and resiliency Customer growth Infrastructure improvements Technology improvements Capital plan addresses: (1) Includes AFUDC Electric Transmission and Distribution Capital Investment Growth
$ Millions Projected Average Rate Base Electric Transmission and Distribution $5.8 Billion Projected 2020 Rate Base Rate Base Capital Structure: 55% debt / 45% equity Rate Base Growth: 5.2% CAGR 2015-2020
2015 Minnesota Beltline Replacement Project in downtown Minneapolis Earnings Call Highlights Gas Operations Results Capital Investment Outlook Rate Base Outlook Energy Services Update Joe McGoldrick – EVP & President, Gas Division
1% YoY Customer Growth (1) $ Millions (1) Natural Gas Utilities’ customer count increased from 3,373,814 on December 31, 2014, to 3,403,766 on December 31, 2015 (2) Weather in 2015 was close to the 10-year average; heating degree days were 95% of the 10-year average compared to 120% in 2014 (3) Includes higher depreciation expense of $22 million and higher tax expense of $2 million (3) Return to More Normal Weather (2) Natural Gas Utilities Operating Income Drivers 2014 vs 2015
Natural Gas Utilities Capital Investment Growth $ Millions Capital plan addresses: Aging infrastructure Minnesota Belt Line Project Customer growth Public improvement requirements $2.3 Billion 2016 – 2020 Capital Plan
Natural Gas Utilities $3.3 Billion Projected 2020 Rate Base $ Millions Projected Average Rate Base Rate Base Growth: 6.2% CAGR 2015-2020 Rate Base Capital Structure: 48.5% debt / 51.5% equity
(1) (3) (1) Operating income as reported in 2014 was $52 million. Chart excludes mark-to-market gain of $29 million. (2) Includes a $4 million benefit related to a lower inventory write-down in 2015. (3) Operating income as reported in 2015 was $42 million. Chart excludes mark-to-market gain of $4 million. $ Millions Energy Services Operating Income Drivers 2014 vs 2015 Improved Margin Cost Discipline Customer Growth and Retention (2)
CNP Signs Agreement to Acquire Continuum’s Retail Energy Services Business Acquisition includes Continuum’s retail business, Choice customers, and origination & logistics assets Aggregate purchase price for the acquisition is $77.5 million plus working capital Acquisition complements overall natural gas strategy and increases Energy Services’ commercial and industrial customer base by over 30% Expanded operational footprint positions Energy Services to access more markets, grow efficiently, and achieve economies of scale Combined energy services business will continue to operate with a low Value-at-Risk business model Expected to increase annual gross margin by approximately 40% Anticipate closing in March or April 2016 Combined energy services business projected to contribute $40 - $50 million in annual operating income
Bill Rogers – EVP & CFO Earnings Call Highlights Guidance Parameters Impairment Discussion Financing Activities
Guidance Parameters Reiterate 2016 full year guidance of $1.12 - $1.20 per diluted share $0.88 - $0.92 expected from utility operations $0.24 - $0.28 expected from midstream investments CenterPoint’s targeted 4 - 6% annual EPS growth through 2018 is based off of 2015 EPS on a guidance basis of $1.10 per share 2016’s guidance presumes a continuation of the current commodity environment and its impact on our Midstream Investments Certain factors may drive variation within the guidance range, such as: Enable Midstream performance including impact of commodity prices Interest expense Combined Energy Services/Continuum retail energy services business performance Weather-driven usage Regulatory filing outcomes Right-of-way revenues Energy efficiency bonuses Other factors disclosed in our public filings with the SEC
Non-Cash Impairment Charges Related to Midstream Investments Recorded pre-tax, non-cash impairments on equity investment in Enable Midstream totaling $984 million ($620 million after-tax) in the fourth quarter of 2015, inclusive of CenterPoint’s share ($9 million) of impairment charges recorded by Enable Midstream for long-lived assets Reduces the equity investment from $3.6 billion to $2.6 billion Post impairments, the carrying value of CenterPoint Energy’s investment in Enable Midstream is $11.09 per unit, including the value of GP shares and potential incentive distribution rights Does not affect liquidity, cash flow or compliance with debt agreement obligations Equity/Capital (as of December 31, 2015) CenterPoint Energy Inc. Consolidated 36.0% CenterPoint Energy Houston Electric, LLC 42.1% CenterPoint Energy Resources Corp (1) 55.2% (1)Pro-forma CERC equity/capital; net of CERC dividend to CNP associated with receipt of notes receivable
2015 Record year with $1.6 billion total capital investment Cash flow covered all capital expenditures in 2015 Borrowing(1) increased ~$330 million 2016 Anticipate strong balance sheet and cash flow No external sources or cash from operations were needed to finance $363 million investment in Enable’s perpetual preferred securities Project total capital investment of approximately $1.4 billion Net incremental borrowings not anticipated to exceed $150 million, inclusive of funding of the acquisition of Continuum’s marketing business Expect to refinance $600 million debt at Houston Electric Equity issuance not anticipated 2017 No anticipated incremental financing needs; dependent on such factors as bonus depreciation, capital investment plans, and working capital Liquidity and Capital Resources (1)Excludes transition and system restoration bonds
Interest Expense and Annual Tax Rates Interest Expense 2015 full-year interest expense was lower than 2014 (1) Partial year impact of financing activities in 2015, including retirement of $270 million of CNP Inc. debt 2016 full-year interest expense is projected to be lower than 2015 Full year impact of financing activities in 2015, including retirement of $270 million of CNP Inc. debt Partial year impact of $325 million maturity at CERC in May 2016 Partially offset by expected Houston Electric fixed rate debt offering Annual Tax Rates 2015 effective tax rate with impairment: 39% 2015 effective tax rate without impairment: 35% 2016 anticipated effective tax rate: 36% (1)Excludes transition and system restoration bonds
Appendix
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 TCOS November 2015 $16.8 Filed on October 1, 2015; approved during 4Q 2015 45214 Annualized rate relief from approved 2015 filings: $67 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 2015 (1): $6.6 million Electric Transmission and Distribution 2015 Regulatory Update
2015A 2016E 2017E 2018E 2019E 2020E Transmission 38% 48% 43% 30% 32% 25% Distribution 61% 49% 52% 64% 64% 69% $ Millions Electric Transmission and Distribution Capital Expenditures
$4 million $29 million $2 million $27 million $21 million $14 million Revenues attributable to allowing third-party use of transmission ROWs Third-party needs result in uncertain project/revenue timing 2016 ROW revenue range of $10 to $20 million estimated Houston Electric Right of Way Revenues Right of Way Revenues
Jurisdiction Effective Date Annual Revenue Increase - $MM Comments Docket # Arkansas June 2015 $1.5 Act 310 – final order issued Jan 12, 2016(2) 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 in August 2015; settlement established parameters for future GRIP filings GUD 10432 Arkansas December 2015 $1.9 MRP filed monthly; annual revenue increase includes 2015 rate relief through December 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 in 3Q 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 rates (1)): $71.4 million (Continued on slide 30) Natural Gas Utilities 2015 Regulatory Update
PBRC – Performance Based Rate Change; RSP – Rate Stabilization Plan; RRA – Rate Regulation Adjustment; SGR – Supplemental Growth Rider (1) Interim rates begin the recognition of revenue, subject to refund (pending issuance of a final order) Jurisdiction Expected Effective Date Annual Revenue Increase - $MM Comments Docket # Arkansas 3Q 2016 $35.6 Rate case filed on November 10, 2015; pending approval 15-098-U Requested annualized rate relief from pending 2015 filings: $ 35.6 million Jurisdiction Effective Date Annual Revenue Increase - $MM Comments Docket # Oklahoma November 2015 $0.9 PBRC filing approved in 4Q 2015 201500118 North Louisiana December 2015 $1.0 (Interim Rates) Filed 2015 RSP requesting $1.0MM in October 2015; pending approval; interim rates effective December 2015 U-33818 South Louisiana December 2015 $1.5 (Interim Rates) Filed 2015 RSP requesting $1.5MM in October 2015; pending approval; interim rates effective in December 2015 U-33817 Mississippi December 2015 $1.9 RRA filing approved in 4Q 2015 12-UN-139 Mississippi December 2015 $0.1 SGR filing approved in 4Q 2015 13-UN-0214 Annualized rate relief from 2015 filings (includes interim rates (1)): $71.4 million Natural Gas Utilities 2015 Regulatory Update
BDA – Billing Determinant Rate Adjustment; RSP – Rate Stabilization Plan; GSR – Gas Supply Rate; APSC – Arkansas Public Service Commission; MPUC – Minnesota Public Utilities Commission; CIP – Conservation Improvement Program (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) (2) Arkansas performance incentive approved and recognized in 2014 was $0.5 million. Minnesota CIP incentive approved and recognized in 2014 was $10.9 million. 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 $11.6 MPUC approved CIP incentive in August 2015; recognized when approved; rates effective January 2016 15-421 Energy efficiency incentives recognized in 2015 (2): $12.1 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) 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 rates (1)): $3.9 million Natural Gas Utilities 2015 Regulatory Update
Capital Recovery Method 2015A 2016E 2017E 2018E 2019E 2020E Annual Mechanisms 47% 39% 59% 63% 59% 63% Rate Cases 53% 61% 41% 37% 41% 37% $ Millions Natural Gas Utilities Capital Expenditures
Estimated Rate Filing Timelines as of December 31, 2015 Houston Electric (1) Natural Gas Utilities (1) (1) Rate filings and timelines are subject to change and may be impacted by factors such as regulatory, legislative and economic factors (2) Rate case required to continue filing DCRF. No requirement to file. (2)
Excludes transition and system restoration bonds Near Term Debt Maturities Issuer Amount Outstanding ($MM) Coupon Maturity CERC 325 6.150% 05/01/2016 CNP 250 5.950% 02/01/2017 CERC 250 6.125% 11/01/2017 CNP 300 6.500% 05/01/2018 CERC 300 6.000% 05/15/2018 CNP 50 5.050% 11/01/2018 $ Millions
Note: Refer to slide 2 for information on non-GAAP measures Reconciliation: Net Income and diluted EPS to the Basis Used in Providing 2015 Earnings Guidance
2014 EPS Reconciliation to Baseline 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 37 details the decrease between the 2014 and 2015 equity returns Information about the 2008 Energy Efficiency Cost Recovery Factor Appeals is provided in the 2014 10-K Note: Refer to slide 2 for information on non-GAAP measures (1) (2)
Estimated Amortization for Pre-Tax Equity Earnings Associated with the Recovery of Certain Qualified Cost and Storm Restoration Costs The table provides the pre-tax equity return recognized by CenterPoint Energy, Inc. (CenterPoint Energy) during each of the years 2005 through 2015 related to CenterPoint Energy Houston Electric, LLC’s (CEHE) recovery of certain qualified costs or storm restoration costs, as applicable, pursuant to the past issuance of transition bonds by CenterPoint Energy Transition Bond Company II, LLC (Transition BondCo II) and CenterPoint Energy Transition Bond Company III, LLC (Transition BondCo III) or CenterPoint Energy Transition Bond Company IV, LLC (Transition BondCo IV) or system restoration bonds by CenterPoint Energy Restoration Bond Company, LLC (System Restoration BondCo), as applicable and the estimated pre-tax equity return currently expected to be recognized in each of the years 2016 through 2024 related to CEHE’s recovery of certain qualified costs or storm restoration costs, as applicable, pursuant to the past issuance of transition bonds by Transition BondCo II, Transition BondCo III or Transition BondCo IV or system restoration bonds by System Restoration BondCo, as applicable. The amounts reflected for 2016 through 2024 are based on CenterPoint Energy’s estimates as of December 31, 2015. However, the equity returns to be recognized in future periods with respect to each series of transition or system restoration bonds, as applicable, will be periodically subject to adjustment based on tariff adjustments for any overcollections or undercollections of transition charges or system restoration charges, as applicable. The equity return amounts reflected in the table are reported in the financial statements of CenterPoint Energy and CenterPoint Energy Houston Electric as revenues from electric transmission and distribution utility. As of December 31, 2015