UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 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 November 3, 2017, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported third quarter 2017 earnings. For additional information regarding CenterPoint Energy’s third 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 third quarter 2017 earnings on November 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 third 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.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CENTERPOINT ENERGY, INC. | ||||||
| Date: November 3, 2017 | By: | /s/ Kristie L. Colvin | ||||
| Kristie L. Colvin | ||||||
| Senior Vice President and Chief Accounting Officer | ||||||
Exhibit 99.1
|
For more information contact Media: Leticia Lowe Phone 713.207.7702 Investors: Dave Mordy Phone 713.207.6500 |
For Immediate Release
CenterPoint Energy reports third quarter 2017 earnings of $0.39 per
diluted share; $0.38 per diluted share on a guidance basis
| • | CenterPoint Energy anticipates achieving at or near the high end of the $1.25 - $1.33 guidance range for 2017 |
| • | Company continues to target upper end of 4-6% year-over-year earnings growth range for 2018 |
Houston - Nov. 3, 2017 - CenterPoint Energy, Inc. (NYSE: CNP) today reported net income of $169 million, or $0.39 per diluted share, for the third quarter of 2017, compared with net income of $179 million, or $0.41 per diluted share for the same period of the prior year. On a guidance basis, third quarter 2017 earnings were $0.38 per diluted share, consisting of $0.28 from utility operations and $0.10 from midstream investments. Third quarter 2016 earnings on a guidance basis were $0.41 per diluted share, consisting of $0.31 from utility operations and $0.10 from midstream investments.
Operating income for the third quarter of 2017 was $279 million, compared with $284 million in the third quarter of the prior year. Equity income from midstream investments was $68 million for the third quarter of 2017, compared with $73 million for the third quarter of the prior year.
“We had a solid third quarter, putting us on track to deliver at or near the high end of our full year guidance range,” said Scott M. Prochazka, president and chief executive officer of CenterPoint Energy. “Our ongoing focus on reliability and resilience enabled our system to perform well in the face of Hurricane Harvey.”
Business Segments
Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $247 million for the third quarter of 2017, consisting of $229 million from the regulated electric transmission & distribution utility operations (TDU) and $18 million related to securitization bonds. Operating income for the third quarter of 2016 was $257 million, consisting of $234 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 more than offset by lower usage largely due to a return to more normal weather, lower equity return and lower miscellaneous revenues, including right of way.
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Natural Gas Distribution
The natural gas distribution segment reported operating income of $19 million for the third quarter of 2017, compared with $22 million for the same period of 2016. Operating income benefited primarily from rate relief and customer growth. These benefits were more than offset by higher depreciation and amortization expense, lower usage primarily due to the timing of a decoupling normalization adjustment and higher operations and maintenance expenses.
Energy Services
The energy services segment reported operating income of $7 million for the third quarter of 2017, which included a mark-to-market gain of $2 million. In comparison, operating income for the same period in 2016 was $5 million, which included a mark-to-market loss of $2 million. Excluding mark-to-market adjustments, operating income was $5 million for the third quarter of 2017 compared with $7 million for the same period in 2016. The $2 million decrease in operating income was primarily due to expenses related to the acquisition and integration of Atmos Energy Marketing.
Midstream Investments
The midstream investments segment reported $68 million of equity income for the third quarter of 2017, compared with $73 million in the third quarter of the prior year.
Earnings Outlook
On a consolidated basis, CenterPoint Energy anticipates earnings at or near the high end of its 2017 guidance 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 units representing limited partner interests in Enable Midstream and includes the amortization of CenterPoint Energy’s basis differential in Enable Midstream. CenterPoint Energy’s guidance takes into account such factors as Enable Midstream’s most recent public outlook for 2017 dated Nov. 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.
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| Quarter Ended | ||||||||||||||||
| September 30, 2017 | September 30, 2016 | |||||||||||||||
| Net Income (in millions) |
Diluted EPS | Net Income (in millions) |
Diluted EPS | |||||||||||||
| Consolidated net income and diluted EPS as reported |
$ | 169 | $ | 0.39 | $ | 179 | $ | 0.41 | ||||||||
| Midstream Investments |
(42 | ) | (0.10 | ) | (46 | ) | (0.10 | ) | ||||||||
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| Utility Operations (1) |
127 | 0.29 | 133 | 0.31 | ||||||||||||
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| Timing effects impacting CES(2): |
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| Mark-to-market (gains) losses (net of taxes of $1 and $1)(3) |
(1 | ) | — | 1 | — | |||||||||||
| ZENS-related mark-to-market (gains) losses: |
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| Marketable securities (net of taxes of $13 and $27) (3)(4) |
(24 | ) | (0.06 | ) | (50 | ) | (0.11 | ) | ||||||||
| Indexed debt securities (net of taxes of $13 and $25) (3) |
23 | 0.05 | 47 | 0.11 | ||||||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 125 | $ | 0.28 | $ | 131 | $ | 0.31 | ||||||||
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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 |
$ | 125 | $ | 0.28 | $ | 131 | $ | 0.31 | ||||||||
| Midstream Investments |
42 | 0.10 | 46 | 0.10 | ||||||||||||
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| Consolidated on a guidance basis |
$ | 167 | $ | 0.38 | $ | 177 | $ | 0.41 | ||||||||
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(1) CenterPoint earnings excluding Midstream Investments |
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(2) Energy Services segment |
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(3) Taxes are computed based on the impact removing such item would have on tax expense |
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(4) Time Warner Inc., Charter Communications, Inc. and Time Inc. |
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Filing of Form 10-Q for CenterPoint Energy, Inc.
Today, CenterPoint Energy, Inc. filed with the Securities and Exchange Commission (SEC) its Quarterly Report on Form 10-Q for the period ended Sept. 30, 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 Friday, Nov. 3, 2017, at 10:00 a.m. Central time/11:00 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 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. You are cautioned not to place undue reliance on any forward-looking statements. 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) the performance of Enable Midstream Partners, LP (Enable), the amount of cash distributions CenterPoint Energy receives from Enable, Enable’s ability to redeem the Series A Preferred Units in certain circumstances and the value of CenterPoint Energy’s interest in Enable, and factors that may have a material impact on such performance, cash distributions and value, including factors such as: (A) competitive conditions in the midstream industry, and actions taken by Enable’s customers and competitors, including the extent and timing of the entry of additional competition in the markets served by Enable; (B) the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly prices of natural gas and natural gas liquids (NGLs), the competitive effects of the available pipeline capacity in the regions served by Enable, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable’s interstate pipelines; (C) the demand for crude oil, natural gas, NGLs and transportation and storage services; (D) environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing; (E) recording of non-cash goodwill, long-lived asset or other than temporary impairment charges by or related to Enable; (F) changes in tax status; (G) access to debt and equity capital; and (H) the availability and prices of raw materials and services for current and future construction projects; (2) 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; (3) timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment; (4) future economic conditions in regional and national markets and their effect on sales, prices and costs; (5) weather variations and other natural phenomena, including the impact of severe weather events on operations and capital; (6) state and federal legislative and regulatory actions or developments affecting various aspects of CenterPoint Energy’s and Enable’s businesses, including, among others, energy deregulation or re-regulation,
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pipeline integrity and safety and changes in regulation and legislation pertaining to trade, health care, finance and actions regarding the rates charged by our regulated businesses; (7) tax reform and legislation; (8) CenterPoint Energy’s ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms; (9) the timing and extent of changes in commodity prices, particularly natural gas, and the effects of geographic and seasonal commodity price differentials; (10) 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; (11) local, state and federal legislative and regulatory actions or developments relating to the environment, including those related to global climate change; (12) the impact of unplanned facility outages; (13) 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 CenterPoint Energy’s 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; (14) CenterPoint Energy’s ability to invest planned capital and the timely recovery of CenterPoint Energy’s investment in capital; (15) CenterPoint Energy’s ability to control operation and maintenance costs; (16) actions by credit rating agencies; (17) the sufficiency of CenterPoint Energy’s insurance coverage, including availability, cost, coverage and terms; (18) the investment performance of CenterPoint Energy’s pension and postretirement benefit plans; (19) commercial bank and financial market conditions, CenterPoint Energy’s access to capital, the cost of such capital, and the results of CenterPoint Energy’s financing and refinancing efforts, including availability of funds in the debt capital markets; (20) changes in interest rates or rates of inflation; (21) inability of various counterparties to meet their obligations to CenterPoint Energy; (22) non-payment for CenterPoint Energy’s services due to financial distress of its customers; (23) the extent and effectiveness of CenterPoint Energy’s risk management and hedging activities, including, but not limited to, its financial hedges and weather hedges; (24) timely and appropriate regulatory actions allowing securitization or other recovery of costs associated with Hurricane Harvey and any future hurricanes or natural disasters; (25) 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), which CenterPoint Energy cannot assure will be completed or will have the anticipated benefits to it or Enable; (26) acquisition and merger activities involving CenterPoint Energy or its competitors; (27) CenterPoint Energy’s or Enable’s ability to recruit, effectively transition and retain management and key employees and maintain good labor relations; (28) the ability of GenOn Energy, Inc. (formerly known as RRI Energy, Inc., Reliant Energy and RRI), a wholly-owned subsidiary of NRG Energy, Inc. (NRG), and its subsidiaries, currently the subject of bankruptcy proceedings, to satisfy their obligations to CenterPoint Energy, including indemnity obligations; (29) the outcome of litigation; (30) the ability of retail electric providers (REPs), including REP affiliates of NRG and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and its subsidiaries; (31) changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation; (32) the timing and outcome of any audits, disputes and other proceedings related to taxes; (33) the effective tax rates; (34) the effect of changes in and application of accounting standards and pronouncements; and (35) 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, June 30, 2017 and September 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.
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CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues: |
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| Utility revenues |
$ | 1,233 | $ | 1,278 | $ | 4,001 | $ | 4,003 | ||||||||
| Non-utility revenues |
865 | 611 | 2,975 | 1,444 | ||||||||||||
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| Total |
2,098 | 1,889 | 6,976 | 5,447 | ||||||||||||
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| Expenses: |
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| Utility natural gas |
106 | 99 | 706 | 663 | ||||||||||||
| Non-utility natural gas |
832 | 584 | 2,843 | 1,368 | ||||||||||||
| Operation and maintenance |
519 | 505 | 1,614 | 1,539 | ||||||||||||
| Depreciation and amortization |
269 | 324 | 749 | 873 | ||||||||||||
| Taxes other than income taxes |
93 | 93 | 288 | 288 | ||||||||||||
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| Total |
1,819 | 1,605 | 6,200 | 4,731 | ||||||||||||
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| Operating Income |
279 | 284 | 776 | 716 | ||||||||||||
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| Other Income (Expense): |
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| Gain on marketable securities |
37 | 77 | 104 | 187 | ||||||||||||
| Loss on indexed debt securities |
(36 | ) | (72 | ) | (59 | ) | (258 | ) | ||||||||
| Interest and other finance charges |
(80 | ) | (83 | ) | (235 | ) | (256 | ) | ||||||||
| Interest on securitization bonds |
(18 | ) | (23 | ) | (58 | ) | (70 | ) | ||||||||
| Equity in earnings of unconsolidated affiliate |
68 | 73 | 199 | 164 | ||||||||||||
| Other - net |
17 | 20 | 50 | 41 | ||||||||||||
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| Total |
(12 | ) | (8 | ) | 1 | (192 | ) | |||||||||
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| Income Before Income Taxes |
267 | 276 | 777 | 524 | ||||||||||||
| Income Tax Expense |
98 | 97 | 281 | 193 | ||||||||||||
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| Net Income |
$ | 169 | $ | 179 | $ | 496 | $ | 331 | ||||||||
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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 | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Basic Earnings Per Common Share |
$ | 0.39 | $ | 0.42 | $ | 1.15 | $ | 0.77 | ||||||||
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| Diluted Earnings Per Common Share |
$ | 0.39 | $ | 0.41 | $ | 1.14 | $ | 0.76 | ||||||||
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| Dividends Declared per Common Share |
$ | 0.2675 | $ | 0.2575 | 0.8025 | $ | 0.7725 | |||||||||
| Weighted Average Common Shares Outstanding (000): |
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| - Basic |
431,026 | 430,682 | 430,939 | 430,581 | ||||||||||||
| - Diluted |
434,086 | 433,396 | 433,999 | 433,295 | ||||||||||||
| Operating Income by Segment |
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| Electric Transmission & Distribution: |
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| TDU |
$ | 229 | $ | 234 | $ | 431 | $ | 428 | ||||||||
| Bond Companies |
18 | 23 | 58 | 70 | ||||||||||||
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| Total Electric Transmission & Distribution |
247 | 257 | 489 | 498 | ||||||||||||
| Natural Gas Distribution |
19 | 22 | 220 | 202 | ||||||||||||
| Energy Services |
7 | 5 | 58 | 11 | ||||||||||||
| Other Operations |
6 | — | 9 | 5 | ||||||||||||
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| Total |
$ | 279 | $ | 284 | $ | 776 | $ | 716 | ||||||||
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Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Electric Transmission & Distribution | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2017 | 2016 | Fav/(Unfav) | 2017 | 2016 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
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| Revenues: |
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| TDU |
$ | 729 | $ | 725 | 1% | $ | 1,944 | $ | 1,881 | 3% | ||||||||||||||
| Bond Companies |
114 | 183 | (38% | ) | 290 | 450 | (36% | ) | ||||||||||||||||
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| Total |
843 | 908 | (7% | ) | 2,234 | 2,331 | (4% | ) | ||||||||||||||||
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| Expenses: |
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| Operation and maintenance, excluding Bond Companies |
344 | 336 | (2% | ) | 1,040 | 995 | (5% | ) | ||||||||||||||||
| Depreciation and amortization, excluding Bond Companies |
97 | 96 | (1% | ) | 296 | 285 | (4% | ) | ||||||||||||||||
| Taxes other than income taxes |
59 | 59 | — | 177 | 173 | (2% | ) | |||||||||||||||||
| Bond Companies |
96 | 160 | 40% | 232 | 380 | 39% | ||||||||||||||||||
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| Total |
596 | 651 | 8% | 1,745 | 1,833 | 5% | ||||||||||||||||||
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| Operating Income |
$ | 247 | $ | 257 | (4% | ) | $ | 489 | $ | 498 | (2% | ) | ||||||||||||
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| Operating Income: |
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| TDU |
$ | 229 | $ | 234 | (2% | ) | $ | 431 | $ | 428 | 1% | |||||||||||||
| Bond Companies |
18 | 23 | (22% | ) | 58 | 70 | (17% | ) | ||||||||||||||||
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| Total Segment Operating Income |
$ | 247 | $ | 257 | (4% | ) | $ | 489 | $ | 498 | (2% | ) | ||||||||||||
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| Electric Transmission & Distribution Operating Data: |
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| Actual MWH Delivered |
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| Residential |
10,419,309 | 10,775,739 | (3% | ) | 23,511,716 | 23,426,712 | — | |||||||||||||||||
| Total |
26,452,650 | 26,517,635 | — | 67,956,180 | 66,838,583 | 2% | ||||||||||||||||||
| Weather (average for service area): |
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| Percentage of 10-year average: |
||||||||||||||||||||||||
| Cooling degree days |
101% | 107% | (6% | ) | 106% | 101% | 5% | |||||||||||||||||
| Heating degree days |
0% | 0% | 0% | 42% | 85% | (43% | ) | |||||||||||||||||
| Number of metered customers - end of period: |
||||||||||||||||||||||||
| Residential |
2,156,624 | 2,116,312 | 2% | 2,156,624 | 2,116,312 | 2% | ||||||||||||||||||
| Total |
2,435,558 | 2,389,014 | 2% | 2,435,558 | 2,389,014 | 2% | ||||||||||||||||||
| Natural Gas Distribution | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2017 | 2016 | Fav/(Unfav) | 2017 | 2016 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 398 | $ | 377 | 6% | $ | 1,791 | $ | 1,693 | 6% | ||||||||||||||
| Natural gas |
117 | 104 | (13% | ) | 742 | 679 | (9% | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
281 | 273 | 3% | 1,049 | 1,014 | 3% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
163 | 159 | (3% | ) | 531 | 526 | (1% | ) | ||||||||||||||||
| Depreciation and amortization |
66 | 61 | (8% | ) | 194 | 180 | (8% | ) | ||||||||||||||||
| Taxes other than income taxes |
33 | 31 | (6% | ) | 104 | 106 | 2% | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
262 | 251 | (4% | ) | 829 | 812 | (2% | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 19 | $ | 22 | (14% | ) | $ | 220 | $ | 202 | 9% | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Natural Gas Distribution Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
||||||||||||||||||||||||
| Residential |
13 | 12 | 8% | 94 | 105 | (10% | ) | |||||||||||||||||
| Commercial and Industrial |
50 | 51 | (2% | ) | 189 | 193 | (2% | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Throughput |
63 | 63 | — | 283 | 298 | (5% | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weather (average for service area) |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Heating degree days |
60% | 21% | 39% | 73% | 86% | (13% | ) | |||||||||||||||||
| Number of customers - end of period: |
||||||||||||||||||||||||
| Residential |
3,179,284 | 3,143,357 | 1% | 3,179,284 | 3,143,357 | 1% | ||||||||||||||||||
| Commercial and Industrial |
253,041 | 251,043 | 1% | 253,041 | 251,043 | 1% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
3,432,325 | 3,394,400 | 1% | 3,432,325 | 3,394,400 | 1% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Energy Services | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2017 | 2016 | Fav/(Unfav) | 2017 | 2016 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 871 | $ | 614 | 42% | $ | 2,998 | $ | 1,450 | 107% | ||||||||||||||
| Natural gas |
839 | 591 | (42% | ) | 2,865 | 1,389 | (106% | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
32 | 23 | 39% | 133 | 61 | 118% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
22 | 16 | (38% | ) | 65 | 43 | (51% | ) | ||||||||||||||||
| Depreciation and amortization |
3 | 1 | (200% | ) | 9 | 5 | (80% | ) | ||||||||||||||||
| Taxes other than income taxes |
— | 1 | — | 1 | 2 | 50% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
25 | 18 | (39% | ) | 75 | 50 | (50% | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 7 | $ | 5 | 40% | $ | 58 | $ | 11 | 427% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Mark-to-market gain (loss) |
$ | 2 | $ | (2 | ) | 200% | $ | 23 | $ | (18 | ) | 228% | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Energy Services Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
272 | 200 | 36% | 864 | 570 | 52% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Number of customers - end of period |
30,817 | 31,669 | (3% | ) | 30,817 | 31,669 | (3% | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Other Operations | ||||||||||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % Diff | September 30, | % Diff | |||||||||||||||||||||
| 2017 | 2016 | Fav/(Unfav) | 2017 | 2016 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 4 | $ | 3 | 33% | $ | 11 | $ | 11 | — | ||||||||||||||
| Expenses |
(2 | ) | 3 | (167% | ) | 2 | 6 | 67% | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 6 | $ | — | — | $ | 9 | $ | 5 | 80% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Capital Expenditures by Segment
(Millions of Dollars)
(Unaudited)
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Capital Expenditures by Segment |
||||||||||||||||
| Electric Transmission & Distribution |
$ | 192 | $ | 211 | $ | 616 | $ | 638 | ||||||||
| Natural Gas Distribution |
158 | 143 | 386 | 371 | ||||||||||||
| Energy Services |
1 | 1 | 5 | 3 | ||||||||||||
| Other Operations |
7 | 6 | 19 | 16 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 358 | $ | 361 | $ | 1,026 | $ | 1,028 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Interest Expense Detail | ||||||||||||||||
| (Millions of Dollars) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Interest Expense Detail |
||||||||||||||||
| Amortization of Deferred Financing Cost |
$ | 6 | $ | 6 | $ | 17 | $ | 18 | ||||||||
| Capitalization of Interest Cost |
(2 | ) | (2 | ) | (6 | ) | (5 | ) | ||||||||
| Transition and System Restoration Bond Interest Expense |
18 | 23 | 58 | 70 | ||||||||||||
| Other Interest Expense |
76 | 79 | 224 | 243 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Interest Expense |
$ | 98 | $ | 106 | $ | 293 | $ | 326 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 201 | $ | 341 | ||||
| Other current assets |
2,734 | 2,582 | ||||||
|
|
|
|
|
|||||
| Total current assets |
2,935 | 2,923 | ||||||
|
|
|
|
|
|||||
| Property, Plant and Equipment, net |
12,700 | 12,307 | ||||||
|
|
|
|
|
|||||
| Other Assets: |
||||||||
| Goodwill |
867 | 862 | ||||||
| Regulatory assets |
2,539 | 2,677 | ||||||
| Investment in unconsolidated affiliate |
2,481 | 2,505 | ||||||
| Preferred units – unconsolidated affiliate |
363 | 363 | ||||||
| Other non-current assets |
250 | 192 | ||||||
|
|
|
|
|
|||||
| Total other assets |
6,500 | 6,599 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 22,135 | $ | 21,829 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Short-term borrowings |
$ | 48 | $ | 35 | ||||
| Current portion of securitization bonds long-term debt |
432 | 411 | ||||||
| Indexed debt |
120 | 114 | ||||||
| Current portion of other long-term debt |
550 | 500 | ||||||
| Other current liabilities |
2,071 | 2,020 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
3,221 | 3,080 | ||||||
|
|
|
|
|
|||||
| Other Liabilities: |
||||||||
| Accumulated deferred income taxes, net |
5,458 | 5,263 | ||||||
| Regulatory liabilities |
1,127 | 1,298 | ||||||
| Other non-current liabilities |
1,180 | 1,196 | ||||||
|
|
|
|
|
|||||
| Total other liabilities |
7,765 | 7,757 | ||||||
|
|
|
|
|
|||||
| Long-term Debt: |
||||||||
| Securitization bonds |
1,500 | 1,867 | ||||||
| Other |
6,031 | 5,665 | ||||||
|
|
|
|
|
|||||
| Total long-term debt |
7,531 | 7,532 | ||||||
|
|
|
|
|
|||||
| Shareholders’ Equity |
3,618 | 3,460 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 22,135 | $ | 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)
| Nine Months Ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 496 | $ | 331 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
767 | 892 | ||||||
| Deferred income taxes |
185 | 150 | ||||||
| Write-down of natural gas inventory |
— | 1 | ||||||
| Equity in earnings of unconsolidated affiliate, net of distributions |
(199 | ) | (164 | ) | ||||
| Changes in net regulatory assets |
(135 | ) | (26 | ) | ||||
| Changes in other assets and liabilities |
(99 | ) | 252 | |||||
| Other, net |
16 | 19 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
1,031 | 1,455 | ||||||
| Net Cash Used in Investing Activities |
(892 | ) | (739 | ) | ||||
| Net Cash Used in Financing Activities |
(279 | ) | (710 | ) | ||||
|
|
|
|
|
|||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
(140 | ) | 6 | |||||
| Cash and Cash Equivalents at Beginning of Period |
341 | 264 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 201 | $ | 270 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
3rd Quarter 2017 Earnings Call November 3, 2017 Exhibit 99.2
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”), our anticipated Brazos Valley Connection completion date and estimated costs, our acquisition of Atmos Energy Marketing (including statements about future financial performance and growth through customers, throughput and supply), growth and guidance (including earnings and dividend growth), future financing plans and expectation for liquidity and capital resources and expenditures, potential tax reform implications (including the impact on deferred taxes) and effective tax rates, among other statements. We have based our forward-looking statements on our management’s beliefs and assumptions based on information currently available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions, and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Some of the factors that could cause actual results to differ from those expressed or implied by our forward-looking statements include but are not limited to the timing and impact of future regulatory, legislative and IRS decisions, financial market conditions, future market conditions, economic and employment conditions, customer growth, Enable’s performance and ability to pay distributions, and other factors described in CenterPoint Energy, Inc.’s (the “Company”) Form 10-K for the period ended December 31, 2016 and Forms 10-Q for the periods ended March 31, 2017, June 30, 2017 and September 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 the Company, which can be found at www.centerpointenergy.com on the Investor Relations page or on the SEC’s website at www.sec.gov. Slide 10 is extracted from Enable’s investor presentation as presented during its Q3 2017 earnings call dated November 1, 2017. This slide is included for informational purposes only. The content has not been verified by us, and we assume no liability for the same. You should consider Enable’s investor materials in the context of its SEC filings and its entire investor presentation, which is available on is 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, diluted earnings per share and net cash provided by operating activities, the Company also provides guidance based on adjusted net income and adjusted diluted earnings per share and provides adjusted funds from operations (“FFO”), 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. The Company’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 29. The Company 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. The Company’s FFO calculation excludes from net cash provided by operating activities the impact of changes in other assets and liabilities (accounts receivable and unbilled revenues, net; inventory; taxes receivable; accounts payable; fuel cost recovery; non-trading derivatives, net; margin deposits, net; interest and taxes accrued; net regulatory assets and liabilities; other current assets; other current liabilities; other assets; and other liabilities) and other, net, and includes distributions from unconsolidated affiliates in excess of cumulative earnings but excludes amounts associated with transition and system restoration bond companies. Management evaluates the Company’s financial performance in part based on adjusted net income, adjusted diluted earnings per share and FFO. We believe that presenting these non-GAAP financial measures enhances an investor’s understanding of the Company’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. Management believes the adjustments made in these non-GAAP financial measures exclude or include items, as applicable, to most accurately reflect the Company’s business performance. These excluded or included items, as applicable, are reflected in the reconciliation tables on slides 28, 29, 30 and 31 and the FFO calculations on slides 32 and 33 of this presentation. The Company’s adjusted net income, adjusted diluted earnings per share and FFO non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, net income, diluted earnings per share and net cash provided by operating activities, 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. Cautionary Statement
Agenda Scott Prochazka – President and CEO Third Quarter Performance Hurricane Harvey Restoration Business Segment Highlights Full Year Outlook Midstream Investments Ownership Review Update Bill Rogers – Executive Vice President and CFO Hurricane Harvey Financial Impact Business Segment Performance Utility Operations EPS Drivers Consolidated EPS Drivers Investment and Financing Appendix Regulatory Update Tax Position Review Core Operating Income, Net Income and FFO/Debt Reconciliation
Third Quarter 2017 Performance (1) Refer to slide 29 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) Excluding ZENS and CES mark-to-market adjustments (3) Primarily due to the annual true-up of transition charges correcting for over-collections that occurred during 2016 Q3 2017 vs Q3 2016 Drivers(2) h Favorable Variance i Unfavorable Variance Rate Relief Customer Growth Usage, primarily weather Equity Return(3) Depreciation and Amortization Right of Way Revenue Q3 GAAP EPS Q3 Guidance (Non-GAAP) EPS(1) $0.41 $0.38 $0.41 $0.39
Hurricane Harvey Restoration Employees, Technology and T&D Investments Provided Resiliency Grid hardening initiatives since 2009 reduced storm impact Smart meters identified outages across the system CenterPoint’s intelligent grid expedited service restorations Outage notification service informed customers and reduced calls Employee preparedness and response efforts helped Houston’s recovery Over 1,500 electric mutual assistance personnel and contractors from 7 states supported recovery efforts CenterPoint dispatched electric crews to Florida for Hurricane Irma recovery
Electric Transmission and Distribution Highlights TDU core operating income of $229 million in Q3 2017 compared to $234 million in Q3 2016 Added more than 46,000 metered customers year-over-year, representing 2% customer growth Brazos Valley Connection on target to be completed in Q1 2018 at a final cost within estimated range of $270 - $310 million
Electric Transmission and Distribution Capital Investment Outlook Update 2017 – 2021 Capital Plan expected to increase Continued growth in both industrial and residential customer segments in the Houston metro area Proposed $250 million Freeport transmission project submitted to ERCOT in April 2017 Anticipate ERCOT decision by year end 2017; if approved, will make necessary filings with PUCT Increase reliability and resiliency of electric grid 2018 – 2022 Capital Plan will be provided in the 2017 Form 10-K ERCOT – Electric Reliability Council of Texas; PUCT – Texas Public Utility Commission
Natural Gas Distribution Highlights Natural Gas Distribution operating income of $19 million in Q3 2017 compared to $22 million in Q3 2016 Added 38,000 customers year-over-year, representing 1% customer growth FRP – Formula Rate Plan; APSC – Arkansas Public Service Commission Minnesota rate case filed in August 2017 proposes an annual increase of $56.5 million; interim rates set at $47.8 million effective October 1, 2017 APSC finalized Arkansas FRP settlement of $7.6 million; rates effective October 2, 2017 2017 – 2021 Capital Plan expected to increase Increased pipe replacement improves safety and system integrity Significant system modernization work anticipated to continue well beyond our five-year plan
Energy Services Highlights and Outlook Energy Services operating income of $5 million in Q3 2017 compared to $7 million in Q3 2016, excluding a mark-to-market gain of $2 million and loss of $2 million, respectively Business Outlook Atmos Energy Marketing acquisition has been accretive to earnings year-to-date Targeting growth through customer acquisition, volume increases and supply optimization
Midstream Investments Highlights Strong Operational Performance Continues Intrastate Average Deliveries Natural Gas Gathered Volumes Natural Gas Processed Volumes TBtu/d TBtu/d TBtu/d 7.3% Increase 40 rigs are currently drilling wells to be connected to Enable’s gathering and processing systems1 Natural gas gathered and processed volumes increased in the third quarter of 2017 compared to the third quarter 2016 as a result of higher gathered volumes in the Anadarko and Ark-La-Tex Basins Crude oil gathered volumes increased in the third quarter of 2017 compared to the third quarter of 2016 as a result of the commissioning of multi-well pads on the Bear Den and Nesson gathering systems Intrastate average deliveries increased in the third quarter of 2017 compared to the third quarter of 2016 as a result of increased supply in the Anadarko Basin 11.4% Increase 6.7% Increase 21.4% Increase Crude Oil Gathered Volumes MBbls/d Per Drillinginfo as of October 26, 2017 Source: Enable Midstream Partners November 1, 2017, Q3 earnings call. Please refer to the materials for an overview of Enable’s Q3 2017 performance.
2017 Full Year Outlook 2017 Utility EPS growth anticipated to exceed 6% despite an extremely mild winter Enable Midstream Partners stated that it anticipates exceeding the midpoint of its earnings range for 2017(2) Anticipate achieving at or near the high end of 2017 EPS range (1) Refer to slide 31 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) As provided on Enable Midstream Partners’ Q3 2017 earnings call on November 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 We are currently in late stage discussions regarding our investment in Enable; we will not comment on the status of those activities, nor can we represent that an agreement will be reached Should these discussions not result in an agreement, we will evaluate the sale of units in the public market, subject to market conditions We will continue to support Enable’s efforts to reduce commodity and volume exposure via contract design
Scott Prochazka – President and CEO Third Quarter Performance Hurricane Harvey Restoration Business Segment Highlights Full Year Outlook Midstream Investments Ownership Review Update Bill Rogers – Executive Vice President and CFO Hurricane Harvey Financial Impact Business Segment Performance Utility Operations EPS Drivers Consolidated EPS Drivers Investment and Financing Appendix Regulatory Update Tax Position Review Core Operating Income, Net Income and FFO/Debt Reconciliation Agenda
Hurricane Harvey - A Balance Sheet Event Balance Sheet Impacts at September 30, 2017 (1) in millions Electric Gas Total Insurance Receivables for expected expense and property claims $22.6 $1.6 $24.2 Property, Plant and Equipment (2) $4.4 $0.1 $4.5 Regulatory Assets for EOP O&M (2) $73.3 $7.4 $80.7 Total Assets $100.3 $9.1 $109.4 Accounts Payable/ Debt $100.3 $9.1 $109.4 Total Liabilities $100.3 $9.1 $109.4 (1) Additional costs will be incurred in Q4 2017 (2) During Q4 2017, the labor currently included in the Regulatory Asset will be reviewed and identified as either O&M to remain in the Regulatory Asset or capital to be included in Property, Plant and Equipment EOP – Emergency Operations Plan
Electric Transmission and Distribution Operating Income Drivers Q3 2016 v. Q3 2017 (1) Houston Electric’s customer count increased by 46,544 from 2,389,014 as of September 30, 2016 to 2,435,558 as of September 30, 2017 (2) Q3 2016 TDU core operating income represents total segment operating income of $257 million, excluding operating income from transition and system restoration bonds of $23 million (3) Includes rate increases of $12 million related to distribution capital investments (4) Includes lower usage of $12 million, largely due to a return to more normal weather in 2017 (5) Includes lower equity return of $9 million, primarily related to the annual true-up of transition charges correcting for over-collections that occurred during 2016 and lower miscellaneous revenues, primarily right-of-way, of $7 million (6) Q3 2017 TDU core operating income represents total segment operating income of $247 million, excluding operating income from transition and system restoration bonds of $18 million (2) (3) (4) (6) (5) $234 $229
Natural Gas Distribution Operating Income Drivers Q3 2016 v. Q3 2017 (1) Natural Gas Distribution’s customer count increased by 37,925 from 3,394,400 as of September 30, 2016 to 3,432,325 as of September 30, 2017 (2) Includes rate relief increases of $5 million, primarily from Texas jurisdictions of $2 million, Arkansas rate case filing of $1 million and Mississippi RRA of $1 million (3) Lower revenue of $4 million, primarily due to the timing of a decoupling normalization adjustment (4) Increased depreciation and amortization expense, primarily due to ongoing additions to plant-in-service, and other taxes of $6 million RRA – Rate Regulation Adjustment (2) (3) (4) 1% YoY Customer Growth (1)
Utility Operations Adjusted Diluted EPS Drivers Q3 2016 v. Q3 2017 (Guidance Basis) (1) Excludes equity return; please refer to slide 28 for more detail on core operating income (2) Lower equity return of $9 million, primarily related to the annual true-up of transition charges correcting for over-collections that occurred during 2016 (3) Income taxes, equity AFUDC, other income and Other Operations segment Note: Refer to slide 29 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (1) (2) (3)
Consolidated Adjusted Diluted EPS Drivers Q3 2016 v. Q3 2017 (Guidance Basis) Midstream Investments $0.41 $0.38 Midstream Investments (1) See previous slide (2) Uses an ownership percentage of 55.4% for Q3 2016 and 54.1% for Q3 2017 (3) Midstream Investments components adjusted for the effective tax rate Note: Refer to slide 29 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (1) (2) Midstream Investments Impact (3) Utility Operations Utility Operations
Update on 2017 Investment and Financing 2017 Investment and Financing Planned capital investment of approximately $1.5 billion Equity issuance not anticipated Current ratings and outlook 2017 Income Tax Q3 2017 effective tax rate: 37% Expected full year 2017 effective tax rate: 36% Moody’s S&P Fitch Company/Instrument Rating Outlook (1) Rating Outlook (2) Rating Outlook (3) CenterPoint Energy Senior Unsecured Debt Baa1 Stable BBB+ Positive BBB Positive Houston Electric Senior Secured Debt A1 Stable A Positive A+ Stable CERC Corp. Senior Unsecured Debt Baa2 Stable A- Positive BBB Positive (1) A Moody’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term. (2) An S&P rating outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term. (3) A Fitch rating outlook indicates the direction a rating is likely to move over a one- to two-year period.
Consolidated Adjusted Diluted EPS Drivers Nine Months Ended Sept 30, 2016 v. 2017 (Guidance Basis) $1.04 (1) Includes Utility Operations improvement of $0.04 in Q1 2017 v. Q1 2016, $0.06 in Q2 2017 v. Q2 2016 and ($0.03) in Q3 2017 v. Q3 2016 (2) Uses an ownership percentage of 55.4% for nine months ended September 30, 2016 and 54.1% for nine months ended September 30, 2017 (3) Midstream Investments components adjusted for the effective tax rate Note: Refer to slide 30 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures Midstream Investments Impact (3) Midstream Investments $0.90 Utility Operations Utility Operations (1) (2) Midstream Investments
Scott Prochazka – President and CEO Third Quarter Performance Hurricane Harvey Restoration Business Segment Highlights Full Year Outlook Midstream Investments Ownership Review Update Bill Rogers – Executive Vice President and CFO Hurricane Harvey Financial Impact Business Segment Performance Utility Operations EPS Drivers Consolidated EPS Drivers Investment and Financing Appendix Regulatory Update Tax Position Review Core Operating Income, Net Income and FFO/Debt Reconciliation Agenda
Electric Transmission and Distribution Q3 2017 Regulatory Update Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information AMS 47364 N/A Jun-17 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. Refunds began in September 2017. EECRF (2) 47232 11.0 Jun-17 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 Apr-17 Sep-17 Jul-17 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 Dec-16 Feb-17 Feb-17 Based on an incremental increase in total rate base of $109.6 million. TCOS 47610 39.3 Sep-17 TBD TBD Based on an incremental increase in total rate base of $263.4 million. AMS – Advanced Metering System; EECRF – Energy Efficiency Cost Recovery Factor; DCRF – Distribution Cost Recovery Factor; TCOS – Transmission Cost of Service; TBD – to be determined (1) Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates (2) Amounts are recorded when approved
Natural Gas Distribution Q3 2017 Regulatory Update Jurisdiction Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information South Texas and Beaumont/East Texas (RRC) GRIP 10618, 10619 7.6 Mar-17 Jul-17 Jun-17 Based on net change in invested capital of $46.5 million. Houston and Texas Coast (RRC) Rate Case 10567 16.5 Nov-16 May-17 May-17 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 Jul-17 Sep-17 Aug-17 Approved rates are consistent with Arkansas rates approved in 2016. Arkansas (APSC) EECR (2) 07-081-TF 0.5 May-17 Jan-18 Sep-17 Recovers $11.0 million, including an incentive of $0.5 million based on 2016 program performance. Arkansas (APSC) FRP 17-010-FR 7.6 Apr-17 Oct-17 Sep-17 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 was subsequently approved. Arkansas (APSC) BDA 06-161-U 3.9 Mar-17 Jun-17 Jun-17 For the evaluation period between January 2016 and August 2016. Amounts are recorded during the evaluation period. Minnesota (MPUC) Rate Case G008/GR-17-285 56.5 Aug-17 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 reflecting an annual increase of $47.8 million were effective October 1, 2017. GRIP – Gas Reliability Infrastructure Program; EECR – Energy Efficiency Cost Recovery; FRP – Formula Rate Plan; BDA – Billing Determinant Rate Adjustment; TBD – to be determined (1) Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates (2) Amounts are recorded when approved
Natural Gas Distribution Q3 2017 Regulatory Update Jurisdiction Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information Minnesota (MPUC) CIP (2) G008/M-17-339 13.8 May-17 Aug-17 Aug-17 Annual reconciliation filing for program year 2016 and includes performance bonus of $13.8 million. Minnesota (MPUC) Decoupling G008/GR-13-316 20.4 Sep-17 Sep-17 TBD Reflects revenue under recovery for the period July 1, 2016 through June 30, 2017 and $3.0 million related to the under recovery of prior period adjustment factor. $9.2 million was recognized in 2016 and $11.2 million has been recognized in 2017. Mississippi (MPSC) RRA 12-UN-139 2.3 May-17 Jul-17 Jul-17 Authorized ROE of 9.59% and a capital structure of 50% debt and 50% equity. Louisiana (LPSC) RSP U-34251, U-34249 1.0 Sep-16 Dec-16 Apr-17 Authorized ROE of 9.95% and a capital structure of 48% debt and 52% equity. Louisiana (LPSC) RSP U-34667 U-34669 3.4 Sep-17 Dec-17 TBD Authorized ROE of 9.95% and a capital structure of 48% debt and 52% equity. Oklahoma (OCC) EECR (2) PUD201700078 0.4 Mar-17 Nov-17 Oct-17 Recovers $2.6 million, including an incentive of $0.4 million based on 2016 program performance. Oklahoma (OCC) PBRC PUD201700078 2.2 Mar-17 Nov-17 Oct-17 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
CenterPoint’s Current Tax Position Effective Tax Rates CenterPoint’s 2016 Effective Tax Rate was 37% (projected rate of 36% plus the income tax expense recognized due to the Louisiana state tax law change) Cash Tax Rates CenterPoint’s 2016 federal cash tax rate was 5% All remaining federal NOL carry forwards were utilized as of Dec. 31, 2016 Lower than the statutory rate primarily due to 50% bonus depreciation and taxable loss allocated from Enable Midstream Investment Impact Taxable income or loss at the Enable level is based on its operations and tax elections at the partnership level CenterPoint reports taxable income or loss on the consolidated tax return based on the Schedule K-1 that is received from Enable
CenterPoint’s Deferred Tax Liability CenterPoint has a net deferred tax liability of $5.3 billion as of Dec. 31, 2016, which would be reduced if a lower federal income tax rate is enacted December 31, 2016 ($ in millions) Utility Related (1) Non-Utility Related Total Deferred Tax Assets Benefits and compensation $82 $234 $316 Loss and credit carryforwards $79 $79 Assets retirement obligations $76 $1 $77 Other $5 $16 $21 Valuation allowance ($5) ($5) Total deferred tax assets $163 $325 $488 Deferred Tax Liabilities Property, plant, and equipment $2,545 $58 $2,603 Investment in unconsolidated affiliates $1,383 $1,383 Securitization $683 $683 Regulatory assets/liabilities, net ($65) $265 $200 Investment in marketable securities and indexed debt $772 $772 Indexed debt securities derivative $4 $4 Other $1 $105 $106 Total deferred tax liabilities $2,481 $3,270 $5,751 Net Deferred Tax Liabilities $2,318 $2,945 $5,263 Any reduction in regulated balances would be subject to regulatory review and likely re-characterized as a regulatory liability and amortized to customers over time Any reduction in unregulated balances would likely be recognized as an income tax benefit on the income statement or through other comprehensive income increasing owner’s equity in the period of enactment (1) The “Utility Related” net deferred tax liabilities is largely comprised of regulated balances, but also includes amounts that are not incorporated in the setting of rates
Potential Tax Reform Implications Using a 2018 effective tax date and either of the following assumptions (and assuming the current business segments) (1) Lower corporate tax rate of 20%; 100% expensing of capital investments or Provisions for utilities outlined in H.R.1 Tax Cuts and Jobs Act Tax reform should have the following impacts on CenterPoint Accretive to EPS Reduced future cash tax rates and effective tax rates A stronger balance sheet as a result of unregulated deferred tax reductions (1) These assumptions are not comprehensive and do not address other potential tax reforms being contemplated, including but not limited to, taxation of partnership interests, transition rules for regulated utilities and cross-border adjustability. The impacts described above do not consider the effects of these other potential tax reform proposals or the specific implications to regulated utilities such as the re-characterization of deferred tax liability to a regulatory liability, amortized to customers over time.
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
CenterPoint Energy Consolidated Adjusted Funds From Operations (FFO) Year Ended December 31, 2016 Year Ended December 31, 2015 Year Ended December 31, 2014 ($ in millions) Net cash provided by operating activities $ 1,928 $ 1,865 $ 1,397 Less: Changes in other assets and liabilities Accounts receivable and unbilled revenues, net 117 (345) (39) Inventory (34) (28) 102 Taxes receivable (142) (18) 190 Accounts payable (133) 224 3 Fuel cost recovery 72 (43) 41 Non-trading derivatives, net (30) 7 34 Margin deposits, net (101) 4 79 Interest and taxes accrued (5) 10 23 Net regulatory assets and liabilities 60 (63) (22) Other current assets 17 (10) (1) Other current liabilities (22) 50 20 Other assets 16 5 (9) Other liabilities (30) (8) (41) Less: Other, net (45) (22) (13) Funds from Operations $ 1,668 $ 1,628 $ 1,764 Amounts included in Cash Flows from Investing Activities: Distributions from unconsolidated affiliates in excess of cumulative earnings 297 148 0 Less: Amounts associated with Transition and System Restoration Bond Companies (456) (368) (444) Adjusted Funds From Operations (FFO) $ 1,509 $ 1,408 $ 1,320 This slide includes adjusted funds from operations (“FFO”) which is net cash provided by operating activities: Excluding (I) changes in other assets and liabilities, (II) other, net and (III) amounts related to transition and system restoration bonds, as applicable; and Including distributions from unconsolidated affiliates in excess of cumulative earnings included in cash flow from investing activities, as applicable Note: Refer to slide 2 for information on non-GAAP measures
CenterPoint Energy Consolidated Ratio of Adjusted FFO/Total Debt Excluding Transition and System Restoration Bonds ($ in millions) December 31, 2016 December 31, 2015 December 31, 2014 Short-term Debt: Short-term borrowings $ 35 $ 40 $ 53 Current portion of transition and system restoration bonds* 411 391 372 Indexed debt (ZENS)** 114 145 142 Current portion of other long-term debt 500 328 271 Long-term Debt: Transition and system restoration bonds, net* 1,867 2,276 2,665 Other, net 5,665 5,590 5,304 Total Debt, net $ 8,592 $ 8,770 $ 8,807 Less: Transition and system restoration bonds (including current portion)* (2,278) (2,667) (3,037) Total Debt, excluding transition and system restoration bonds $ 6,314 $ 6,103 $ 5,770 Adjusted FFO/Total Debt, excluding transition and system restoration bonds 23.9% 23.1% 22.9% * The transition and system restoration bonds are serviced with dedicated revenue streams, and the bonds are non-recourse to CenterPoint Energy and CenterPoint Energy Houston Electric. ** The debt component reflected on the financial statements was $114 million, $145 million, and $142 million as of December 31, 2016, December 31, 2015, and December 31, 2014, respectively. The principal amount on which 2% interest is paid was $828 million on each of December 31, 2016, December 31, 2015 and December 31, 2014. The contingent principal amount was $514 million, $705 million and $751 million as of December 31, 2016, December 31, 2015, and December 31, 2014, respectively. At maturity or upon redemption, holders of ZENS will receive cash at the higher of the contingent principal amount or the value of the reference shares of Time Warner Inc., Time Inc. and Charter Communications, Inc. This slide includes adjusted funds from operations (“FFO”) which is net cash provided by operating activities: Excluding (I) changes in other assets and liabilities, (II) other, net and (III) amounts related to transition and system restoration bonds, as applicable; and Including distributions from unconsolidated affiliates in excess of cumulative earnings included in cash flow from investing activities, as applicable Note: Refer to slide 2 for information on non-GAAP measures and slide 32 for CenterPoint Energy’s adjusted FFO calculation