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): August 3, 2017
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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Conditions.
On August 3, 2017, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported second quarter 2017 earnings. For additional information regarding CenterPoint Energy’s second quarter 2017 earnings, please refer to CenterPoint Energy’s press release attached to this report as Exhibit 99.1 (the “Press Release”), which Press Release is incorporated by reference herein.
Item 7.01. Regulation FD Disclosure.
CenterPoint Energy is holding a conference call to discuss its second quarter 2017 earnings on August 3, 2017. Information about the call can be found in the Press Release furnished herewith as Exhibit 99.1. For additional information regarding CenterPoint Energy’s second quarter 2017 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 August 3, 2017 regarding CenterPoint Energy, Inc.’s second quarter 2017 earnings | |
| 99.2 | Supplemental Materials regarding CenterPoint Energy, Inc.’s second quarter 2017 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: August 3, 2017 |
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 August 3, 2017 regarding CenterPoint Energy, Inc.’s second quarter 2017 earnings | |
| 99.2 | Supplemental Materials regarding CenterPoint Energy, Inc.’s second quarter 2017 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
CenterPoint Energy reports second quarter 2017 earnings of $0.31
per diluted share; $0.29 per diluted share on a guidance basis
| • | Strong second quarter performance driven by continued utility growth and rate relief, as well as Midstream Investments performance |
| • | CenterPoint Energy reiterates full-year 2017 guidance of $1.25 - $1.33 |
| • | Company continues to target upper end of 4-6% year-over-year earnings growth range for 2018 |
Houston – Aug. 3, 2017 – CenterPoint Energy, Inc. (NYSE: CNP) today reported net income of $135 million, or $0.31 per diluted share, for the second quarter of 2017, compared with a net loss of $2 million, or a loss of $0.01 per diluted share for the same period of the prior year. On a guidance basis, second quarter 2017 earnings were $0.29 per diluted share, consisting of $0.20 from utility operations and $0.09 from midstream investments. Second quarter 2016 earnings on a guidance basis were $0.17 per diluted share, consisting of $0.14 from utility operations and $0.03 from midstream investments.
Operating income for the second quarter of 2017 was $223 million, compared with $182 million in the second quarter of the prior year. Equity income from midstream investments was $59 million for the second quarter of 2017, compared with $31 million for the second quarter of the prior year.
“We are very pleased with strong second quarter results,” said Scott M. Prochazka, president and chief executive officer of CenterPoint Energy. “All four of our business segments performed well this quarter.”
Business Segments
Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $164 million for the second quarter of 2017, consisting of $144 million from the regulated electric transmission & distribution utility operations (TDU) and $20 million related to securitization bonds. Operating income for the second quarter of 2016 was $158 million, consisting of $135 million from the TDU and $23 million related to securitization bonds.
Operating income for the TDU benefited primarily from rate relief and customer growth. These benefits were partially offset by higher depreciation and amortization expense, other taxes and lower equity return.
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Natural Gas Distribution
The natural gas distribution segment reported operating income of $37 million for the second quarter of 2017, compared with $20 million for the same period of 2016. Operating income benefited primarily from rate relief, customer growth and favorable usage due to timing of a decoupling adjustment. These benefits were partially offset by higher depreciation and amortization expense and other taxes. In addition, operating income benefited from $10 million of adjustments related to the Texas Gulf rate order, including the recording of a $16 million regulatory asset, and the corresponding reduction in expense, to recover prior post-retirement expenses in future rates, which was partially offset by a $6 million operations and maintenance expense adjustment that is primarily timing related.
Energy Services
The energy services segment reported operating income of $16 million for the second quarter of 2017, which included a mark-to-market gain of $6 million. In comparison, operating income for the same period in 2016 was $-0- , which included a mark-to-market loss of $7 million. Excluding mark-to-market adjustments, operating income was $10 million for the second quarter of 2017, compared with $7 million for the same period in 2016. The $3 million increase in operating income was primarily due to an increase in throughput and number of customers related to the acquisition of Atmos Energy Marketing in 2017.
Midstream Investments
The midstream investments segment reported $59 million of equity income for the second quarter of 2017, compared with $31 million in the second quarter of the prior year.
Earnings Outlook
On a consolidated basis, CenterPoint Energy reaffirms its earnings estimate for 2017 in the range of $1.25 - $1.33 per diluted share.
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 uses a non-GAAP measure of adjusted diluted earnings per share that does not consider other potential impacts, such as changes in accounting standards or unusual items, earnings or losses from the change in the value of the ZENS securities and the related stocks, or the timing effects of mark-to-market accounting in the company’s Energy Services business.
In providing guidance for midstream investments, the company assumes ownership of 54.1 percent of the common and subordinated units representing limited partner interests in Enable Midstream and includes the amortization of CenterPoint Energy’s basis differential in Enable
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Midstream. CenterPoint Energy’s guidance takes into account such factors as Enable Midstream’s most recent public outlook for 2017 dated Aug. 1, 2017, and effective tax rates. The company does not include other potential impacts, such as any changes in accounting standards or Enable Midstream’s unusual items.
| Quarter Ended | ||||||||||||||||
| June 30, 2017 | June 30, 2016 | |||||||||||||||
| Net Income (in millions) |
Diluted EPS | Net Income (in millions) |
Diluted EPS | |||||||||||||
| Consolidated net income and diluted EPS as reported |
$ | 135 | $ | 0.31 | $ | (2 | ) | $ | (0.01 | ) | ||||||
| Midstream Investments |
(37 | ) | (0.09 | ) | (13 | ) | (0.03 | ) | ||||||||
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| Utility Operations (1) |
98 | 0.22 | (15 | ) | (0.04 | ) | ||||||||||
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| Timing effects impacting CES (2): |
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| Mark-to-market (gains) losses (net of taxes of $3 and $3) (3) |
(3 | ) | (0.01 | ) | 4 | 0.01 | ||||||||||
| ZENS-related mark-to-market (gains) losses: |
||||||||||||||||
| Marketable securities (net of taxes of $7 and $6) (3)(4) |
(16 | ) | (0.04 | ) | (14 | ) | (0.03 | ) | ||||||||
| Indexed debt securities (net of taxes of $4 and $45) (3)(5) |
9 | 0.03 | 85 | 0.20 | ||||||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 88 | $ | 0.20 | $ | 60 | $ | 0.14 | ||||||||
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| Adjusted net income and adjusted diluted EPS used in providing earnings guidance: |
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| Utility Operations on a guidance basis |
$ | 88 | $ | 0.20 | $ | 60 | $ | 0.14 | ||||||||
| Midstream Investments |
37 | 0.09 | 13 | 0.03 | ||||||||||||
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| Consolidated on a guidance basis |
$ | 125 | $ | 0.29 | $ | 73 | $ | 0.17 | ||||||||
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| (1) | CenterPoint Energy earnings excluding Midstream Investments |
| (2) | Energy Services segment |
| (3) | Taxes are computed based on the impact removing such item would have on tax expense |
| (4) | As of May 18, 2016, comprised of Time Warner Inc., Charter Communications, Inc. and Time Inc. Prior to May 18, 2016, comprised of Time Warner Inc., Time Warner Cable Inc. and Time Inc. |
| (5) | 2016 includes amount associated with the Charter Communications, Inc. and Time Warner Cable Inc. merger |
3
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 June 30, 2017. 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., Aug. 3, 2017, at 9:00 a.m. Central time/10:00 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 54.1 percent of the common and subordinated units representing limited partner interests 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 7,700 employees, CenterPoint Energy and its predecessor companies have been in business for more than 150 years. For more information, please visit 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 and changes in regulation and legislation pertaining to trade, health care, finance and actions regarding the rates charged by CenterPoint Energy’s regulated businesses; (2) local, state and federal legislative and regulatory actions or developments relating to the environment, including those related to global climate change; (3) recording of non-cash goodwill, long-lived asset or other than temporary impairment charges by or related to Enable Midstream; (4) timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment; (5) the timing and outcome of any audits, disputes or other proceedings related to taxes; (6) problems with regulatory approval, 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 the effects of geographic and seasonal commodity price differentials; (9) weather variations and other natural phenomena, including the impact of severe weather events on operations and capital from; (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 such as fires, earthquakes, explosions, leaks, floods, droughts, hurricanes, pandemic health events or other occurrences ; (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) the extent and effectiveness of CenterPoint Energy’s risk management and hedging
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activities, including, but not limited to, its financial hedges and weather hedges; (17) inability of various counterparties to meet their obligations; (18) non-payment for services due to financial distress of CenterPoint Energy’s and Enable Midstream’s customers; (19) the ability of GenOn Energy, Inc. (formerly known as RRI Energy, Inc.), a wholly-owned subsidiary of NRG Energy, Inc., and its subsidiaries, currently the subject of bankruptcy proceedings, to satisfy their obligations to CenterPoint Energy and its subsidiaries, including indemnity obligations; (20) the ability of retail electric providers, including affiliates of NRG Energy, Inc. and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and its subsidiaries; (21) the outcome of litigation; (22) CenterPoint Energy’s ability to control operation and maintenance costs; (23) the investment performance of pension and postretirement benefit plans; (24) CenterPoint Energy’s or Enable’s potential business strategies and strategic initiatives, including restructurings, joint ventures, and acquisitions or dispositions of assets or businesses (including a reduction of CenterPoint Energy’s interests in Enable, whether through its election to sell the common units it owns in the public equity markets or otherwise, subject to certain limitations) , for which no assurance can be given that they will be completed or will provide the anticipated benefits to CenterPoint Energy or Enable Midstream; (25) acquisition and merger activities involving CenterPoint Energy, Enable Midstream or their 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, Enable Midstream’s ability to redeem its Series A Preferred Units in certain circumstances 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 rates; (30) tax reform and legislation; (31) the effect of changes in and application of accounting standards and pronouncements; and (32) other factors discussed in CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2016, as well as in CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 and June 30, 2017 and other reports CenterPoint Energy or its subsidiaries may file from time to time with the Securities and Exchange Commission.
Use of Non-GAAP Financial Measures by CenterPoint Energy in Providing Guidance
In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), including presentation of net income and diluted earnings per share, CenterPoint Energy also provides guidance based on adjusted net income and adjusted diluted earnings per share, which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share calculation excludes from net income and diluted earnings per share, respectively, the impact of ZENS and related securities and mark-to-market gains or losses resulting from the company’s Energy Services business. CenterPoint Energy is unable to present a quantitative reconciliation of forward looking adjusted net income and adjusted diluted earnings per share because changes in the value of ZENS and related securities and mark-to-market gains or losses resulting from the company’s Energy Services business are not estimable.
Management evaluates the company’s financial performance in part based on adjusted net income and adjusted diluted earnings per share. We believe that presenting these non-GAAP financial measures enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. The adjustments made in these non-GAAP financial measures exclude items that Management believes does not most accurately reflect the company’s fundamental business performance. These excluded items are reflected in the reconciliation tables of this news release, where applicable. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, net income and diluted earnings per share, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies.
###
5
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues: |
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| Utility revenues |
$ | 1,222 | $ | 1,177 | $ | 2,768 | $ | 2,725 | ||||||||
| Non-utility revenues |
921 | 397 | 2,110 | 833 | ||||||||||||
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| Total |
2,143 | 1,574 | 4,878 | 3,558 | ||||||||||||
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| Expenses: |
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| Utility natural gas |
150 | 126 | 600 | 564 | ||||||||||||
| Non-utility natural gas |
882 | 370 | 2,011 | 784 | ||||||||||||
| Operation and maintenance |
535 | 513 | 1,095 | 1,034 | ||||||||||||
| Depreciation and amortization |
254 | 289 | 480 | 549 | ||||||||||||
| Taxes other than income taxes |
99 | 94 | 195 | 195 | ||||||||||||
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| Total |
1,920 | 1,392 | 4,381 | 3,126 | ||||||||||||
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| Operating Income |
223 | 182 | 497 | 432 | ||||||||||||
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| Other Income (Expense): |
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| Gain on marketable securities |
23 | 20 | 67 | 110 | ||||||||||||
| Loss on indexed debt securities |
(13 | ) | (130 | ) | (23 | ) | (186 | ) | ||||||||
| Interest and other finance charges |
(77 | ) | (86 | ) | (155 | ) | (173 | ) | ||||||||
| Interest on securitization bonds |
(20 | ) | (23 | ) | (40 | ) | (47 | ) | ||||||||
| Equity in earnings of unconsolidated affiliate |
59 | 31 | 131 | 91 | ||||||||||||
| Other—net |
16 | 14 | 33 | 21 | ||||||||||||
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| Total |
(12 | ) | (174 | ) | 13 | (184 | ) | |||||||||
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| Income Before Income Taxes |
211 | 8 | 510 | 248 | ||||||||||||
| Income Tax Expense |
76 | 10 | 183 | 96 | ||||||||||||
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| Net Income (Loss) |
$ | 135 | $ | (2 | ) | $ | 327 | $ | 152 | |||||||
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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 June 30, |
Six Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Basic Earnings (Loss) Per Common Share |
$ | 0.31 | $ | (0.01 | ) | $ | 0.76 | $ | 0.35 | |||||||
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| Diluted Earnings (Loss) Per Common Share |
$ | 0.31 | $ | (0.01 | ) | $ | 0.75 | $ | 0.35 | |||||||
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| Dividends Declared per Common Share |
$ | 0.2675 | $ | 0.2575 | 0.5350 | $ | 0.5150 | |||||||||
| Weighted Average Common Shares Outstanding (000): |
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| - Basic |
430,996 | 430,653 | 430,896 | 430,530 | ||||||||||||
| - Diluted |
433,797 | 430,653 | 433,697 | 432,973 | ||||||||||||
| Operating Income by Segment |
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| Electric Transmission & Distribution: |
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| TDU |
$ | 144 | $ | 135 | $ | 202 | $ | 194 | ||||||||
| Bond Companies |
20 | 23 | 40 | 47 | ||||||||||||
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| Total Electric Transmission & Distribution |
164 | 158 | 242 | 241 | ||||||||||||
| Natural Gas Distribution |
37 | 20 | 201 | 180 | ||||||||||||
| Energy Services |
16 | — | 51 | 6 | ||||||||||||
| Other Operations |
6 | 4 | 3 | 5 | ||||||||||||
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| Total |
$ | 223 | $ | 182 | $ | 497 | $ | 432 | ||||||||
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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 | ||||||||||||||||||||||||
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| Quarter Ended June 30, |
% Diff Fav/(Unfav) |
Six Months Ended June 30, |
% Diff Fav/(Unfav) |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
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| Results of Operations: |
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| Revenues: |
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| TDU |
$ | 653 | $ | 616 | 6 | % | $ | 1,215 | $ | 1,156 | 5 | % | ||||||||||||
| Bond Companies |
99 | 147 | (33 | %) | 176 | 267 | (34 | %) | ||||||||||||||||
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| Total |
752 | 763 | (1 | %) | 1,391 | 1,423 | (2 | %) | ||||||||||||||||
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| Expenses: |
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| Operation and maintenance, excluding Bond Companies |
348 | 330 | (5 | %) | 696 | 659 | (6 | %) | ||||||||||||||||
| Depreciation and amortization, excluding Bond Companies |
103 | 94 | (10 | %) | 199 | 189 | (5 | %) | ||||||||||||||||
| Taxes other than income taxes |
58 | 57 | (2 | %) | 118 | 114 | (4 | %) | ||||||||||||||||
| Bond Companies |
79 | 124 | 36 | % | 136 | 220 | 38 | % | ||||||||||||||||
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| Total |
588 | 605 | 3 | % | 1,149 | 1,182 | 3 | % | ||||||||||||||||
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| Operating Income |
$ | 164 | $ | 158 | 4 | % | $ | 242 | $ | 241 | — | |||||||||||||
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| Operating Income: |
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| TDU |
$ | 144 | $ | 135 | 7 | % | $ | 202 | $ | 194 | 4 | % | ||||||||||||
| Bond Companies |
20 | 23 | (13 | %) | 40 | 47 | (15 | %) | ||||||||||||||||
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| Total Segment Operating Income |
$ | 164 | $ | 158 | 4 | % | $ | 242 | $ | 241 | — | |||||||||||||
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|
|
|
|
|
|
|
|||||||||||||||||
| Electric Transmission & Distribution Operating Data: |
||||||||||||||||||||||||
| Actual MWH Delivered |
||||||||||||||||||||||||
| Residential |
7,939,932 | 7,631,518 | 4 | % | 13,092,407 | 12,650,973 | 3 | % | ||||||||||||||||
| Total |
22,750,413 | 22,190,347 | 3 | % | 41,503,530 | 40,320,948 | 3 | % | ||||||||||||||||
| Weather (average for service area): |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Cooling degree days |
95 | % | 92 | % | 3 | % | 112 | % | 94 | % | 18 | % | ||||||||||||
| Heating degree days |
4 | % | 54 | % | (50 | %) | 42 | % | 85 | % | (43 | %) | ||||||||||||
| Number of metered customers—end of period: |
||||||||||||||||||||||||
| Residential |
2,152,655 | 2,106,396 | 2 | % | 2,152,655 | 2,106,396 | 2 | % | ||||||||||||||||
| Total |
2,429,403 | 2,377,352 | 2 | % | 2,429,403 | 2,377,352 | 2 | % | ||||||||||||||||
| Natural Gas Distribution | ||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Quarter Ended June 30, |
% Diff Fav/(Unfav) |
Six Months Ended June 30, |
% Diff Fav/(Unfav) |
|||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 477 | $ | 421 | 13 | % | $ | 1,393 | $ | 1,316 | 6 | % | ||||||||||||
| Natural gas |
164 | 130 | (26 | %) | 625 | 575 | (9 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
313 | 291 | 8 | % | 768 | 741 | 4 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
175 | 178 | 2 | % | 368 | 367 | — | |||||||||||||||||
| Depreciation and amortization |
65 | 60 | (8 | %) | 128 | 119 | (8 | %) | ||||||||||||||||
| Taxes other than income taxes |
36 | 33 | (9 | %) | 71 | 75 | 5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
276 | 271 | (2 | %) | 567 | 561 | (1 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 37 | $ | 20 | 85 | % | $ | 201 | $ | 180 | 12 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Natural Gas Distribution Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
||||||||||||||||||||||||
| Residential |
19 | 20 | (5 | %) | 81 | 93 | (13 | %) | ||||||||||||||||
| Commercial and Industrial |
57 | 56 | 2 | % | 139 | 142 | (2 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Throughput |
76 | 76 | — | 220 | 235 | (6 | %) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weather (average for service area) |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Heating degree days |
80 | % | 87 | % | (7 | %) | 74 | % | 87 | % | (13 | %) | ||||||||||||
| Number of customers—end of period: |
||||||||||||||||||||||||
| Residential |
3,176,953 | 3,145,655 | 1 | % | 3,176,953 | 3,145,655 | 1 | % | ||||||||||||||||
| Commercial and Industrial |
253,559 | 252,172 | 1 | % | 253,559 | 252,172 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
3,430,512 | 3,397,827 | 1 | % | 3,430,512 | 3,397,827 | 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 | Six Months Ended | |||||||||||||||||||||||
| June 30, | % Diff | June 30, | % Diff | |||||||||||||||||||||
| 2017 | 2016 | Fav/(Unfav) | 2017 | 2016 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 931 | $ | 397 | 135 | % | $ | 2,127 | $ | 836 | 154 | % | ||||||||||||
| Natural gas |
889 | 377 | (136 | %) | 2,026 | 798 | (154 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
42 | 20 | 110 | % | 101 | 38 | 166 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
22 | 17 | (29 | %) | 43 | 27 | (59 | %) | ||||||||||||||||
| Depreciation and amortization |
3 | 3 | — | 6 | 4 | (50 | %) | |||||||||||||||||
| Taxes other than income taxes |
1 | — | — | 1 | 1 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
26 | 20 | (30 | %) | 50 | 32 | (56 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 16 | $ | — | — | $ | 51 | $ | 6 | 750 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Mark-to-market gain (loss) |
$ | 6 | $ | (7 | ) | 186 | % | $ | 21 | $ | (16 | ) | 231 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Energy Services Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
273 | 199 | 37 | % | 592 | 370 | 60 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Number of customers—end of period |
31,275 | 30,675 | 2 | % | 31,275 | 30,675 | 2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Other Operations | ||||||||||||||||||||||||
| Quarter Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | % Diff | June 30, | % Diff | |||||||||||||||||||||
| 2017 | 2016 | Fav/(Unfav) | 2017 | 2016 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 3 | $ | 4 | (25 | %) | $ | 7 | $ | 8 | (13 | %) | ||||||||||||
| Expenses |
(3 | ) | — | — | 4 | 3 | (33 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 6 | $ | 4 | 50 | % | $ | 3 | $ | 5 | (40 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Capital Expenditures by Segment
(Millions of Dollars)
(Unaudited)
| Quarter Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Capital Expenditures by Segment |
||||||||||||||||
| Electric Transmission & Distribution |
$ | 222 | $ | 215 | $ | 424 | $ | 427 | ||||||||
| Natural Gas Distribution |
139 | 139 | 228 | 228 | ||||||||||||
| Energy Services |
2 | 2 | 4 | 2 | ||||||||||||
| Other Operations |
7 | 2 | 12 | 10 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 370 | $ | 358 | $ | 668 | $ | 667 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Interest Expense Detail
(Millions of Dollars)
(Unaudited)
| Quarter Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Interest Expense Detail |
||||||||||||||||
| Amortization of Deferred Financing Cost |
$ | 5 | $ | 6 | $ | 11 | $ | 12 | ||||||||
| Capitalization of Interest Cost |
(2 | ) | (1 | ) | (4 | ) | (3 | ) | ||||||||
| Transition and System Restoration Bond Interest Expense |
20 | 23 | 40 | 47 | ||||||||||||
| Other Interest Expense |
74 | 81 | 148 | 164 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Interest Expense |
$ | 97 | $ | 109 | $ | 195 | $ | 220 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
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)
| June 30, 2017 | December 31, 2016 |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 248 | $ | 341 | ||||
| Other current assets |
2,617 | 2,582 | ||||||
|
|
|
|
|
|||||
| Total current assets |
2,865 | 2,923 | ||||||
|
|
|
|
|
|||||
| Property, Plant and Equipment, net |
12,644 | 12,307 | ||||||
|
|
|
|
|
|||||
| Other Assets: |
||||||||
| Goodwill |
867 | 862 | ||||||
| Regulatory assets |
2,566 | 2,677 | ||||||
| Investment in unconsolidated affiliate |
2,487 | 2,505 | ||||||
| Preferred units—unconsolidated affiliate |
363 | 363 | ||||||
| Other non-current assets |
253 | 192 | ||||||
|
|
|
|
|
|||||
| Total other assets |
6,536 | 6,599 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 22,045 | $ | 21,829 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Short-term borrowings |
$ | 24 | $ | 35 | ||||
| Current portion of securitization bonds long-term debt |
422 | 411 | ||||||
| Indexed debt |
118 | 114 | ||||||
| Current portion of other long-term debt |
550 | 500 | ||||||
| Other current liabilities |
1,924 | 2,020 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
3,038 | 3,080 | ||||||
|
|
|
|
|
|||||
| Other Liabilities: |
||||||||
| Accumulated deferred income taxes, net |
5,364 | 5,263 | ||||||
| Regulatory liabilities |
1,289 | 1,298 | ||||||
| Other non-current liabilities |
1,204 | 1,196 | ||||||
|
|
|
|
|
|||||
| Total other liabilities |
7,857 | 7,757 | ||||||
|
|
|
|
|
|||||
| Long-term Debt: |
||||||||
| Securitization bonds |
1,638 | 1,867 | ||||||
| Other |
5,949 | 5,665 | ||||||
|
|
|
|
|
|||||
| Total long-term debt |
7,587 | 7,532 | ||||||
|
|
|
|
|
|||||
| Shareholders’ Equity |
3,563 | 3,460 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 22,045 | $ | 21,829 | ||||
|
|
|
|
|
|||||
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)
| Six Months Ended June 30, |
||||||||
| 2017 | 2016 | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 327 | $ | 152 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
492 | 562 | ||||||
| Deferred income taxes |
95 | 69 | ||||||
| Write-down of natural gas inventory |
— | 1 | ||||||
| Equity in earnings of unconsolidated affiliate, net of distributions |
(131 | ) | (91 | ) | ||||
| Changes in net regulatory assets |
(34 | ) | (21 | ) | ||||
| Changes in other assets and liabilities |
(87 | ) | 376 | |||||
| Other, net |
18 | 13 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
680 | 1,061 | ||||||
| Net Cash Used in Investing Activities |
(635 | ) | (467 | ) | ||||
| Net Cash Used in Financing Activities |
(138 | ) | (587 | ) | ||||
|
|
|
|
|
|||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
(93 | ) | 7 | |||||
| Cash and Cash Equivalents at Beginning of Period |
341 | 264 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 248 | $ | 271 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
2nd Quarter 2017 Earnings Call August 3, 2017 Exhibit 99.2
Cautionary Statement This presentation and the oral statements made in connection herewith contain statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future operations, events, financial position, earnings, growth, costs, prospects, capital investments or performance or underlying assumptions (including future regulatory filings and recovery, liquidity, capital resources, balance sheet, cash flow, capital investments and management, financing costs, and rate base or customer growth) and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “target,” “will,” or other similar words. The absence of these words, however, does not mean that the statements are not forward-looking. Examples of forward-looking statements in this presentation include statements about our review of our ownership interest in Enable Midstream Partners, LP (“Enable Midstream”), our acquisition of Atmos Energy Marketing, including statements about future financial performance and operating income, and growth, guidance, including earnings and dividend growth, future financing plans and expectation for liquidity and capital resources and expenditures, effective tax rate, among other statements. We have based our forward-looking statements on our management’s beliefs and assumptions based on information currently available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions, and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Some of the factors that could cause actual results to differ from those expressed or implied by our forward-looking statements include but are not limited to the timing and impact of future regulatory, legislative and IRS decisions, financial market conditions, future market conditions, economic and employment conditions, customer growth, Enable Midstream’s performance and ability to pay distributions, and other factors described in CenterPoint Energy, Inc.’s Form 10-K for the period ended December 31, 2016 and Forms 10-Q for the periods ended March 31, 2017 and June 30, 2017 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 Securities and Exchange Commission (“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. Slide 8 is extracted from Enable Midstream’s investor presentation as presented during its second quarter 2017 earnings call dated August 1, 2017. This slide is included for informational purposes only. The content has not been verified by CenterPoint Energy, and CenterPoint Energy assumes no liability for the same. You should consider Enable Midstream’s investor materials in the context of its SEC filings and its entire investor presentation, which is available on their website at http://investors.enablemidstream.com/. This presentation contains time sensitive information that is accurate as of the date hereof. Some of the information in this presentation is unaudited and may be subject to change. We undertake no obligation to update the information presented herein except as required by law. Investors and others should note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and the Investor Relations page of our website. In the future, we will continue to use these channels to distribute material information about the Company and to communicate important information about the Company, key personnel, corporate initiatives, regulatory updates and other matters. Information that we post on our website could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website. Use of Non-GAAP Financial Measures In addition to presenting its financial results in accordance with generally accepted accounting principles (“GAAP”), including presentation of net income and diluted earnings per share, CenterPoint Energy also provides guidance based on adjusted net income and adjusted diluted earnings per share, which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share calculation excludes from net income and diluted earnings per share, respectively, the impact of ZENS and related securities and mark-to-market gains or losses resulting from the Company’s Energy Services business. A reconciliation of net income and diluted earnings per share to the basis used in providing 2017 guidance is provided in this presentation on slide 23. CenterPoint Energy is unable to present a quantitative reconciliation of forward-looking adjusted net income and adjusted diluted earnings per share because changes in the value of ZENS and related securities and mark-to-market gains or losses resulting from the Company’s Energy Services business are not estimable. Management evaluates the Company’s financial performance in part based on adjusted net income and adjusted diluted earnings per share. We believe that presenting these non-GAAP financial measures enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. The adjustments made in these non-GAAP financial measures exclude items that Management believes do not most accurately reflect the Company’s fundamental business performance. These excluded items are reflected in the reconciliation tables on slides 22, 23, 24 and 25 of this presentation. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, net income and diluted earnings per share, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies.
Agenda Scott Prochazka – President and CEO Second Quarter Results Business Segment Highlights Houston Electric Natural Gas Distribution Energy Services Midstream Investments Full-Year Outlook Midstream Investments Ownership Review Update Bill Rogers – Executive Vice President and CFO Business Segment Performance Utility Operations EPS Drivers Consolidated EPS Drivers Investment and Financing Appendix Regulatory Update Core Operating Income Reconciliation Net Income Reconciliation
Second Quarter 2017 Performance (1) Refer to slide 23 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) Excluding ZENS and CES mark-to-market adjustments (3) Items related to the Texas Gulf rate order include recording of a regulatory asset (and a corresponding reduction in expense) to recover $16 million of prior postretirement expenses in future rates and a $6 million unfavorable adjustment to operation and maintenance expense, which is timing related (4) Primarily due to the annual true-up of transition charges correcting for over-collections that occurred during 2016 Q2 2017 vs Q2 2016 Drivers (2) h Favorable Variance i Unfavorable Variance Rate Relief Customer Growth Midstream Investments Interest Expense Enable Preferred Units Other (3) Depreciation Equity Return (4) Q2 GAAP EPS Q2 EPS on a Guidance (Non-GAAP) Basis (1) Second quarter 2017 EPS of $0.31, compared with EPS loss of $0.01 in second quarter 2016, which included a $0.17 per share charge associated with ZENS, primarily due to the merger of Time Warner Cable and Charter Communications
Electric Transmission and Distribution Highlights TDU core operating income was $144 million in Q2 2017 compared to $135 million in Q2 2016 Added more than 52,000 metered customers year-over-year, representing 2% customer growth Total throughput increased 2.5% from Q2 2016 to Q2 2017 DCRF Unanimous Stipulation and Settlement Agreement for a $41.8 million annual increase approved by the PUCT in July 2017; effective date of September 1, 2017 (1) Texas Legislature approved annual DCRF filings, eliminating the need to file full rate case after 4th DCRF filing (2) DCRF – Distribution Cost Recovery Factor; ERCOT – Electric Reliability Council of Texas; PUCT – Texas Public Utility Commission (1) The settlement agreement also included an estimated $28.7 million due to a refund of AMS revenue in excess of expenses (2) The legislation also requires the PUCT to create a rate case schedule; rate case schedule is subject to change if earned ROE is lower than a defined ROE Proposed $250 million transmission project submitted to ERCOT in April 2017 to address continued load growth from the petrochemical industry in the Freeport, Texas area Expected capital for the proposed project incremental to the previously disclosed five-year capital plan Anticipate decision from ERCOT later in 2017; if approved, Houston Electric will make the necessary filings with the PUCT CenterPoint crews restoring power after a May 2017 “microburst” weather event in Sealy, TX
Natural Gas Distribution Highlights Natural Gas Distribution operating income was $37 million in Q2 2017 compared to $20 million in Q2 2016 Added more than 32,000 customers year-over-year, representing 1% customer growth Texas Gulf rate order approved by the RRC in May 2017 establishes parameters for future GRIP filings; includes annual increase of $16.5 million Minnesota rate case filed in August 2017 proposes an annual increase of $56.5 million for growth and infrastructure investment; interim rates expected to be effective October 1, 2017 Arkansas FRP Unanimous Settlement Agreement filed in July 2017 for $7.6 million; subject to approval by the APSC RRC – Texas Railroad Commission; GRIP – Gas Reliability Infrastructure Program; FRP – Formula Rate Plan; APSC – Arkansas Public Service Commission
Energy Services Highlights and Outlook Q2 2017 Operating Income Operating income was $10 million in Q2 2017 compared to $7 million in Q2 2016, excluding a mark-to-market gain of $6 million and loss of $7 million, respectively Business Outlook Energy Services projected to contribute $45 - $55 million in operating income in 2017 Atmos Energy Marketing (AEM) acquisition has been accretive to earnings year-to-date Energy Services is the 12th largest natural gas marketer in North America as of Q1 2017 according to Platts (1) (1) Platts ranking for natural gas marketed volumes (Bcf/d) for Q1 2017
Midstream Investments Highlights $0.09 EPS Contribution in Q2 2017 vs $0.03 in Q2 2016 Source: Enable Midstream Partners, August 1, 2017, Q2 Earnings Call. Please refer to these materials for an overview of Enable’s Q2 2017 performance 44 Active Rigs on Enable’s Footprint (4) 50,000 New acres dedicated (1) Continued Commercial Momentum Underpinned by Significant Rig Activity Previously announced Wildcat and CaSE projects provide critical Anadarko Basin takeaway solutions totaling over 600 MMcf/d Year-to-date approximate additions to Enable’s total acreage dedications as of June 30, 2017 Active rigs on Enable’s footprint per Drillinginfo as of July 31, 2017, compared to April 17, 2017 Per quarter processed volumes since Enable’s formation Per Drillinginfo as of July 31, 2017 38 Increase in active rigs (2) 1.91 All-time high processed volumes TBtu/d % (3)
2017 Full-Year Outlook Utility rate relief and continued customer growth Increased contribution from Energy Services, partly due to recent acquisitions Increased earnings per Enable Midstream Partners’ forecast (2) Anticipate 2017 EPS growth will be driven by: (1) Refer to slide 25 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) As provided on Enable Midstream Partners’ second quarter 2017 earnings call on August 1, 2017 Targeting upper end of 4-6% year-over-year earnings growth range for 2018 * 2017 Guidance of $1.25 - $1.33 assumes that earnings from Utility Operations and Midstream Investments will not both be at the top or bottom end of their respective ranges $1.16 $1.25 – $1.33 * EPS on a Guidance (Non-GAAP) Basis (1)
Midstream Investments Ownership Review Update Criteria for Consideration of a Sale or Spin – Sustainable value for our long-term shareholders Comparable earnings per share and dividends Improve visibility of future earnings Maintain current credit ratings of CenterPoint Activity Update Sale – Multiple parties are conducting their due diligence; we will not comment on the status of those activities, nor can we represent that any parties will make a binding offer Spin – Concluded that with a reasonable level of debt at SpinCo, we would not maintain the desired credit metrics for CenterPoint; therefore, we are no longer pursuing this option If Outright Sale is not Viable Support Enable’s efforts for growth and contract design that reduces commodity and volume exposure Pursue opportunities to incrementally reduce investment in Enable via sale in public markets, subject to market conditions We recognize current capital market limitations due to Enable’s public float Separate from capital market considerations, sales of more than 5% of the common units CenterPoint Energy owns to any one party are subject to rights of first offer and first refusal, except for transactions through a securities exchange
Scott Prochazka – President and CEO Second Quarter Results Business Segment Highlights Houston Electric Natural Gas Distribution Energy Services Midstream Investments Full-Year Outlook Midstream Investments Ownership Review Update Bill Rogers – Executive Vice President and CFO Business Segment Performance Utility Operations EPS Drivers Consolidated EPS Drivers Investment and Financing Appendix Regulatory Update Core Operating Income Reconciliation Net Income Reconciliation Agenda
Electric Transmission and Distribution Operating Income Drivers Q2 2016 vs Q2 2017 (1) Houston Electric’s customer count increased by 52,051 from 2,377,352 as of June 30, 2016 to 2,429,403 as of June 30, 2017 (2) Q2 2016 TDU core operating income represents total segment operating income of $158 million, excluding operating income from transition and system restoration bonds of $23 million (3) Includes rate increases of $11 million related to distribution capital investments (4) Includes lower equity return of $7 million, primarily due to the annual true-up of transition charges correcting for over-collections that occurred during 2016 and higher operation and maintenance expenses of $4 million, partially offset by higher usage of $2 million, primarily due to a return to more normal weather (5) Q2 2017 TDU core operating income represents total segment operating income of $164 million, excluding operating income from transition and system restoration bonds of $20 million 2% YoY Customer Growth (1) $135 $144 (2) (3) (4) (5) +$16 million year-over-year
Natural Gas Distribution Operating Income Drivers Q2 2016 vs Q2 2017 (1) Natural Gas Distribution’s customer count increased by 32,685 from 3,397,827 as of June 30, 2016 to 3,430,512 as of June 30, 2017 (2) Includes rate relief increases of $6 million, primarily from the Arkansas rate case filing of $3 million and Texas jurisdictions of $3 million (3) Items related to the Texas Gulf rate order include recording of a regulatory asset (and a corresponding reduction in expense) to recover $16 million of prior postretirement expenses in future rates and a $6 million unfavorable adjustment to operation and maintenance expense, which is timing related; remaining $7 million favorable variance includes $8 million favorable usage primarily due to the timing of a decoupling normalization adjustment, partially offset by $1 million other (4) Increased depreciation and amortization expense, primarily due to ongoing additions to plant-in-service, and other taxes of $7 million (2) (3) 1% YoY Customer Growth (1) (4) $37 $17 +$7 million year-over-year
Utility Operations Adjusted Diluted EPS Drivers Q2 2016 vs Q2 2017 (Guidance Basis) (1) Excludes equity return; please refer to slide 22 for more detail on core operating income (2) Includes a $9 million decrease in interest expense due to lower weighted average interest rates on outstanding debt and a $5 million increase in cash distributions on Series A Preferred Units included in Other Income; excludes transition and system restoration bonds (3) Lower equity return of $7 million, primarily related to the annual true-up of transition charges correcting for over-collections that occurred during 2016 (4) Taxes, equity AFUDC, other income and Other Operations segment Note: Refer to slide 23 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (1) (2) (3) (4)
Consolidated Adjusted Diluted EPS Drivers Q2 2016 vs Q2 2017 (Guidance Basis) Utility Operations Midstream Investments $0.17 $0.29 Midstream Investments Utility Operations (1) See previous slide (2) Uses an ownership percentage of 55.4% for Q2 2016 and 54.1% for Q2 2017 (3) Midstream Investments components adjusted for the effective tax rate Note: Refer to slide 23 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (1) (2) Midstream Investments Impact (3)
Update on 2017 Investment and Financing 2017 Investment and Financing Planned capital investment of approximately $1.5 billion (1) Net incremental borrowing anticipated of $200 – $400 million (2) Equity issuance not anticipated Increased size of Credit Facilities by $400 million to an aggregate of $2.9 billion; maturity extended through March 3, 2022 Guidance EPS growth of 8% to 15% projected to reduce the 2017 payout ratio to be in the range of 80% to 86% (from $1.07/$1.33 to $1.07/$1.25) (3) 2017 Income Tax Q2 2017 effective tax rate: 36% Expected full-year 2017 effective tax rate: 36% (1) 2017 – 2021 consolidated capital plan includes planned capital investment of approximately $7.0 billion; expected $250 million capital investment related to the proposed transmission project in the Freeport, Texas area would be incremental to the previously disclosed five-year capital plan (2) Inclusive of funding for Atmos Energy Marketing (AEM) acquisition (3) Refer to slide 2 for information on non-GAAP measures
Consolidated Adjusted Diluted EPS Drivers Six Months Ended June 30, 2016 vs YTD 2017 (Guidance Basis) Utility Operations Midstream Investments $0.49 $0.66 Midstream Investments Utility Operations (1) Includes Utility Operations improvement of $0.04 in Q1 2017 vs Q1 2016 and $0.06 in Q2 2017 vs Q2 2016 (2) Uses an ownership percentage of 55.4% for six months ended June 30, 2016 and 54.1% for six months ended June 30, 2017 (3) Midstream Investments components adjusted for the effective tax rate Note: Refer to slide 24 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (1) (2) Midstream Investments Impact (3)
Scott Prochazka – President and CEO Second Quarter Results Business Segment Highlights Houston Electric Natural Gas Distribution Energy Services Midstream Investments Full-Year Outlook Midstream Investments Ownership Review Update Bill Rogers – Executive Vice President and CFO Business Segment Performance Utility Operations EPS Drivers Consolidated EPS Drivers Investment and Financing Appendix Regulatory Update Core Operating Income Reconciliation Net Income Reconciliation Agenda
Electric Transmission and Distribution Q2 2017 Regulatory Update Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information AMS 47364 N/A June 2017 TBD TBD Final reconciliation of AMS surcharge proposing a $28.7 million refund for AMS revenue in excess of expenses, for which a reserve has been recorded. EECRF (2) 47232 $11.0 June 2017 TBD TBD Annual reconciliation filing for program year 2016 and includes proposed performance bonus of $11 million. Anticipated effective date of March 2018. DCRF 47032 $41.8 April 2017 September 2017 July 2017 Based on an increase in eligible distribution-invested capital for 2016 of $479 million. Unanimous Stipulation and Settlement Agreement was filed in June 2017 for $86.8 million (a $41.8 million annual increase). The settlement agreement also included the AMS refund referenced above. TCOS 46703 $7.8 December 2016 February 2017 February 2017 Based on an incremental increase in total rate base of $109.6 million. AMS – Advanced Metering System; EECRF – Energy Efficiency Cost Recovery Factor; DCRF – Distribution Cost Recovery Factor; TCOS – Transmission Cost of Service; TBD – to be determined (1) Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates (2) Amounts are recorded when approved
Natural Gas Distribution Q2 2017 Regulatory Update Jurisdiction Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information South Texas and Beaumont/East Texas (RRC) GRIP 10618, 10619 $7.6 March 2017 July 2017 June 2017 Based on net change in invested capital of $46.5 million. Houston and Texas Coast (RRC) Rate Case 10567 $16.5 November 2016 May 2017 May 2017 The Railroad Commission approved a unanimous settlement agreement establishing parameters for future GRIP filings, including a 9.6% ROE on a 55.15% equity ratio. Texarkana, Texas Service Area (Multiple City Jurisdictions) Rate Case $1.1 July 2017 September 2017 TBD Proposed rates are consistent with Arkansas rates approved in 2016. Arkansas (APSC) EECR (2) 07-081-TF $0.5 May 2017 January 2018 TBD Recovers $11.5 million, including an incentive of $0.5 million based on 2016 program performance. Arkansas (APSC) FRP 17-010-FR $9.3 April 2017 October 2017 TBD Based on ROE of 9.5% as approved in the last rate case. Unanimous Settlement Agreement was filed in July 2017 for $7.6 million and is subject to approval. Arkansas (APSC) BDA 06-161-U $3.9 March 2017 June 2017 June 2017 For the evaluation period between January 2016 and August 2016. Amounts are recorded during the evaluation period. GRIP – Gas Reliability Infrastructure Program; EECR – Energy Efficiency Cost Recovery; FRP – Formula Rate Plan; BDA – Billing Determinant Rate Adjustment; TBD – to be determined (1) Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates (2) Amounts are recorded when approved
Natural Gas Distribution Q2 2017 Regulatory Update Jurisdiction Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information Minnesota (MPUC) Rate Case G008/GR-17-285 $56.5 August 2017 TBD TBD Reflects a proposed 10.0% ROE on a 52.18% equity ratio. Includes a proposal to extend decoupling beyond current expiration date of June 2018. Interim rates expected to be effective October 1, 2017. Minnesota (MPUC) CIP (2) G008/M-17-339 $13.8 May 2017 TBD TBD Annual reconciliation filing for program year 2016 and includes proposed performance bonus of $13.8 million. Minnesota (MPUC) Decoupling G008/GR-13-316 $26.2 September 2016 February 2017 March 2017 Reflects revenue under recovery for the period July 1, 2015 through June 30, 2016, adjusting for final rates from the 2015 rate case. $24.6 million was recognized in 2016. Mississippi (MPSC) RRA 12-UN-139 $2.3 May 2017 July 2017 July 2017 Authorized ROE of 9.59% and a capital structure of 50% debt and 50% equity. Louisiana (LPSC) RSP U-34251, U-34249 $1.0 September 2016 December 2016 April 2017 Authorized ROE of 9.95% and a capital structure of 48% debt and 52% equity. Oklahoma (OCC) EECR (2) PUD201700078 $0.4 March 2017 TBD TBD Recovers $2.6 million, including an incentive of $0.4 million based on 2016 program performance. Oklahoma (OCC) PBRC PUD201700078 $2.2 March 2017 TBD TBD Based on ROE of 10%. CIP – Conservation Improvement Program; RRA – Rate Regulation Adjustment; RSP – Rate Stabilization Plan; EECR – Energy Efficiency Cost Recovery; PBRC – Performance Based Rate Change Plan; TBD – to be determined (1) Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates (2) Amounts are recorded when approved
Reconciliation: Operating Income to Core Operating Income on a Guidance (Non-GAAP) Basis
Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance
Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance
Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance