UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 22, 2018
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 February 22, 2018, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported fourth quarter and full year 2017 earnings. For additional information regarding CenterPoint Energy’s fourth quarter and full year 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 fourth quarter and full year 2017 earnings on February 22, 2018. Information about the call can be found in the Press Release furnished herewith as Exhibit 99.1. For additional information regarding CenterPoint Energy’s fourth quarter and full year 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: February 22, 2018 | 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: David Mordy Phone 713.207.6500 |
For Immediate Release
CenterPoint Energy reports full-year 2017 earnings
of $4.13 per diluted share; $1.37 per diluted share on a
guidance basis excluding tax reform impacts
| • | Company exceeds 2017 guidance basis EPS range of $1.25 - $1.33 |
| • | CenterPoint announces 2018 guidance basis EPS range of $1.50 - $1.60 |
| • | Company announces target of 5 - 7 percent annual guidance basis EPS growth in 2019 and 2020 |
Houston - Feb. 22, 2018 - CenterPoint Energy, Inc. (NYSE: CNP) today reported full-year 2017 net income of $1,792 million, or $4.13 per diluted share, compared to net income of $432 million, or $1.00 per diluted share in 2016.
On a guidance basis, full-year 2017 earnings were $3.93 per diluted share, which includes a one-time tax benefit of $1,113 million related to the Tax Cuts and Jobs Act (TCJA) federal income tax rate reduction. Excluding the tax benefit, on a guidance basis, full-year 2017 earnings were $1.37 per diluted share, consisting of $0.99 from utility operations and $0.38 from midstream investments. Full-year 2016 earnings on a guidance basis were $1.16 per diluted share, consisting of $0.88 from utility operations and $0.28 from midstream investments.
Fourth quarter 2017 earnings were $2.99 per diluted share, compared to $0.23 per diluted share for the fourth quarter of 2016. Excluding the tax benefit, on a guidance basis, fourth quarter 2017 earnings were $0.33 per diluted share, compared to fourth quarter 2016 earnings of $0.26 per diluted share.
“I am very pleased with our performance in 2017. We had strong results and delivered more than 18 percent year-over-year EPS growth on a guidance basis, excluding the tax benefit,” said Scott M. Prochazka, president and chief executive officer of CenterPoint Energy. “We continue to invest significant capital in our businesses to support safety, customer growth, reliability projects, and infrastructure programs.”
Business Segments
Electric Transmission & Distribution
The electric transmission & distribution segment reported full-year 2017 operating income of $610 million, consisting of $535 million from the regulated electric transmission & distribution utility operations (TDU) and $75 million related to securitization bonds. Operating income for the same period of 2016 was $628 million, consisting of $537 million from the TDU and $91 million related to securitization bonds.
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Full-year 2017 operating income for the TDU benefited from rate relief and customer growth with the addition of nearly 41,000 customers. These increases were more than offset by lower equity return, higher depreciation, higher operation and maintenance expenses, lower usage and lower miscellaneous revenues.
Natural Gas Distribution
The natural gas distribution segment reported full-year 2017 operating income of $328 million compared with $303 million in 2016.
Full-year 2017 operating income for natural gas distribution improved as a result of rate relief, higher transportation revenues, customer growth with the addition of more than 30,000 customers, and favorable labor and benefits expenses resulting primarily from the recording of a regulatory asset to recover prior postretirement expenses in future rates established in the Texas Gulf rate order. These improvements were partially offset by higher operation and maintenance expenses and increased depreciation and amortization.
Energy Services
The energy services segment reported full-year 2017 operating income of $125 million, which included a mark-to-market gain of $79 million, compared with $20 million in 2016, which included a mark-to-market loss of $21 million. Excluding mark-to-market adjustments, operating income was $46 million in 2017 and $41 million in 2016. The increase in operating income was primarily due to increased margin associated with increased throughput in 2017.
Midstream Investments
The midstream investments segment reported full-year 2017 equity income of $265 million, compared to equity income of $208 million in 2016.
Earnings Outlook
CenterPoint Energy expects earnings on a guidance basis for 2018 in the range of $1.50 - $1.60 per diluted share, inclusive of Enable’s net income guidance of $355 - $435 million announced on Enable Midstream’s fourth-quarter earnings call on Feb. 20, 2018. The guidance range 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 and effective tax rates. CenterPoint does not include other potential Enable Midstream impacts on guidance, such as any changes in accounting standards or unusual items.
The guidance range considers utility operations performance to date and certain significant variables that may impact earnings, such as weather, throughput, commodity prices, effective tax rates, financing activities, and regulatory and judicial proceedings to include regulatory action as a result of recent tax reform legislation.
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In providing this guidance, CenterPoint Energy 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.
CenterPoint Energy, Inc. and Subsidiaries Reconciliation of Net Income
and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS used in providing annual earnings guidance
| Twelve Months Ended | ||||||||||||||||
| December 31, 2017 | December 31, 2016 | |||||||||||||||
| Net Income (in millions) |
Diluted EPS | Net Income (in millions) |
Diluted EPS | |||||||||||||
| Consolidated net income and diluted EPS as reported |
$ | 1,792 | $ | 4.13 | $ | 432 | $ | 1.00 | ||||||||
| Midstream Investments |
(675 | ) | (1.56 | ) | (121 | ) | (0.28 | ) | ||||||||
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| Utility Operations (1) |
1,117 | 2.57 | 311 | 0.72 | ||||||||||||
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| Timing effects impacting CES(2) : |
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| Mark-to-market (gains) losses (net of taxes of $29 and $8)(3) |
(50 | ) | (0.12 | ) | 13 | 0.03 | ||||||||||
| ZENS-related mark-to-market (gains) losses: |
||||||||||||||||
| Marketable securities (net of taxes of $3 and $114) (3)(4) |
(4 | ) | (0.01 | ) | (212 | ) | (0.49 | ) | ||||||||
| Indexed debt securities (net of taxes of $17 and $145) (3)(5) |
(32 | ) | (0.07 | ) | 268 | 0.62 | ||||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 1,031 | $ | 2.37 | $ | 380 | $ | 0.88 | ||||||||
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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 |
$ | 1,031 | $ | 2.37 | $ | 380 | $ | 0.88 | ||||||||
| Midstream Investments |
675 | 1.56 | 121 | 0.28 | ||||||||||||
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| Consolidated on a guidance basis |
$ | 1,706 | $ | 3.93 | $ | 501 | $ | 1.16 | ||||||||
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| Benefit from tax reform(6) |
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| Utility |
(599 | ) | (1.38 | ) | — | — | ||||||||||
| Midstream |
(514 | ) | (1.18 | ) | — | — | ||||||||||
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| Total benefit from tax reform |
(1,113 | ) | (2.56 | ) | — | — | ||||||||||
| Utility Operations on a guidance basis, excluding benefit from tax reform |
$ | 432 | $ | 0.99 | $ | 380 | $ | 0.88 | ||||||||
| Midstream Investments excluding benefit from tax reform |
161 | 0.38 | 121 | 0.28 | ||||||||||||
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| Consolidated on a guidance basis, excluding benefit from tax reform |
$ | 593 | $ | 1.37 | $ | 501 | $ | 1.16 | ||||||||
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| (1) | CenterPoint 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 |
| (6) | Tax reform legislation informally called the Tax Cuts and Jobs Act of 2017 |
3
CenterPoint Energy, Inc. and Subsidiaries Reconciliation of Net Income
and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS used in providing annual earnings guidance
| Quarter Ended | ||||||||||||||||
| December 31, 2017 | December 31, 2016 | |||||||||||||||
| Net Income (in millions) |
Diluted EPS | Net Income (in millions) |
Diluted EPS | |||||||||||||
| Consolidated net income and diluted EPS as reported |
$ | 1,296 | $ | 2.99 | $ | 101 | $ | 0.23 | ||||||||
| Midstream Investments |
(551 | ) | (1.27 | ) | (25 | ) | (0.06 | ) | ||||||||
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| Utility Operations (1) |
745 | 1.72 | 76 | 0.17 | ||||||||||||
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| Timing effects impacting CES(2) : |
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| Mark-to-market (gains) losses (net of taxes of $20 and $1)(3) |
(36 | ) | (0.09 | ) | 2 | 0.01 | ||||||||||
| ZENS-related mark-to-market (gains) losses: |
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| Marketable securities (net of taxes of $33 and $49) (3)(4) |
64 | 0.15 | (90 | ) | (0.21 | ) | ||||||||||
| Indexed debt securities (net of taxes of $38 and $55) (3) |
(70 | ) | (0.16 | ) | 100 | 0.23 | ||||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 703 | $ | 1.62 | $ | 88 | $ | 0.20 | ||||||||
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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 |
$ | 703 | $ | 1.62 | $ | 88 | $ | 0.20 | ||||||||
| Midstream Investments |
551 | 1.27 | 25 | 0.06 | ||||||||||||
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| Consolidated on a guidance basis |
$ | 1,254 | $ | 2.89 | $ | 113 | $ | 0.26 | ||||||||
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| Benefit from tax reform(5) |
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| Utility |
$ | (599 | ) | $ | (1.38 | ) | $ | — | $ | — | ||||||
| Midstream |
(514 | ) | (1.18 | ) | — | — | ||||||||||
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| Total benefit from tax reform |
(1,113 | ) | (2.56 | ) | — | — | ||||||||||
| Utility Operations on a guidance basis, excluding benefit from tax reform |
$ | 104 | $ | 0.24 | $ | 88 | $ | 0.20 | ||||||||
| Midstream Investments excluding benefit from tax reform |
37 | 0.09 | 25 | 0.06 | ||||||||||||
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| Consolidated on a guidance basis, excluding benefit from tax reform |
$ | 141 | $ | 0.33 | $ | 113 | $ | 0.26 | ||||||||
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| (1) | CenterPoint 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) | Time Warner Inc., Charter Communications, Inc. and Time Inc. |
| (5) | Tax reform legislation informally called the Tax Cuts and Jobs Act of 2017 |
4
Filing of Form 10-K for CenterPoint Energy, Inc.
Today, CenterPoint Energy, Inc. filed with the Securities and Exchange Commission (SEC) its Annual Report on Form 10-K for the fiscal year ended Dec. 31, 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 Thursday, Feb. 22, 2018, 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 nearly 8,000 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, 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, including the effects of the comprehensive tax reform legislation informally referred to as the TCJA and uncertainties involving state commissions’ and local municipalities’ regulatory requirements and determinations regarding the treatment of excess deferred taxes and CenterPoint Energy’s rates; (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
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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 and their impact on CenterPoint Energy’s costs of borrowing and the valuation of its pension benefit obligation; (21) changes in rates of inflation; (22) inability of various counterparties to meet their obligations to CenterPoint Energy; (23) non-payment for CenterPoint Energy’s services due to financial distress of its customers; (24) the extent and effectiveness of CenterPoint Energy’s risk management and hedging activities, including, but not limited to, its financial and weather hedges; (25) timely and appropriate regulatory actions allowing securitization for any future hurricanes or natural disasters or other recovery of costs, including costs associated with Hurricane Harvey; (26) 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 decision to sell all or a portion of the Enable 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; (27) acquisition and merger activities involving CenterPoint Energy or its competitors; (28) CenterPoint Energy’s or Enable’s ability to recruit, effectively transition and retain management and key employees and maintain good labor relations; (29) 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; (30) the outcome of litigation; (31) 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; (32) changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation; (33) the timing and outcome of any audits, disputes and other proceedings related to taxes; (34) the effective tax rates; (35) the effect of changes in and application of accounting standards and pronouncements; and (36) other factors discussed in CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 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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6
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
| Quarter Ended December 31, |
Year Ended December 31, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues: |
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| Utility revenues |
$ | 1,602 | $ | 1,437 | $ | 5,603 | $ | 5,440 | ||||||||
| Non-utility revenues |
1,036 | 644 | 4,011 | 2,088 | ||||||||||||
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| Total |
2,638 | 2,081 | 9,614 | 7,528 | ||||||||||||
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| Expenses: |
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| Utility natural gas |
403 | 320 | 1,109 | 983 | ||||||||||||
| Non-utility natural gas |
942 | 615 | 3,785 | 1,983 | ||||||||||||
| Operation and maintenance |
607 | 554 | 2,221 | 2,093 | ||||||||||||
| Depreciation and amortization |
287 | 253 | 1,036 | 1,126 | ||||||||||||
| Taxes other than income taxes |
103 | 96 | 391 | 384 | ||||||||||||
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| Total |
2,342 | 1,838 | 8,542 | 6,569 | ||||||||||||
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| Operating Income |
296 | 243 | 1,072 | 959 | ||||||||||||
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| Other Income (Expense): |
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| Gain (loss) on marketable securities |
(97 | ) | 139 | 7 | 326 | |||||||||||
| Gain (loss) on indexed debt securities |
108 | (155 | ) | 49 | (413 | ) | ||||||||||
| Interest and other finance charges |
(78 | ) | (82 | ) | (313 | ) | (338 | ) | ||||||||
| Interest on securitization bonds |
(19 | ) | (21 | ) | (77 | ) | (91 | ) | ||||||||
| Equity in earnings of unconsolidated affiliates |
66 | 44 | 265 | 208 | ||||||||||||
| Other—net |
10 | (6 | ) | 60 | 35 | |||||||||||
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| Total |
(10 | ) | (81 | ) | (9 | ) | (273 | ) | ||||||||
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| Income Before Income Taxes |
286 | 162 | 1,063 | 686 | ||||||||||||
| Income Tax Expense (Benefit) |
(1,010 | ) | 61 | (729 | ) | 254 | ||||||||||
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| Net Income |
$ | 1,296 | $ | 101 | $ | 1,792 | $ | 432 | ||||||||
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Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
7
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Millions of Dollars, Except Share and Per Share Amounts)
(Unaudited)
| Quarter Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Basic Earnings Per Common Share |
$ | 3.01 | $ | 0.23 | $ | 4.16 | $ | 1.00 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted Earnings Per Common Share |
$ | 2.99 | $ | 0.23 | $ | 4.13 | $ | 1.00 | ||||||||
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|
|
|
|
|
|
|
|||||||||
| Dividends Declared per Common Share |
$ | 0.5450 | $ | 0.2575 | $ | 1.3475 | $ | 1.0300 | ||||||||
| Weighted Average Common Shares Outstanding (000): |
||||||||||||||||
| - Basic |
431,038 | 430,682 | 430,964 | 430,606 | ||||||||||||
| - Diluted |
434,382 | 433,679 | 434,308 | 433,603 | ||||||||||||
| Operating Income by Segment |
||||||||||||||||
| Electric Transmission & Distribution: |
||||||||||||||||
| TDU |
$ | 104 | $ | 109 | $ | 535 | $ | 537 | ||||||||
| Bond Companies |
17 | 21 | 75 | 91 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
| Total Electric Transmission & Distribution |
121 | 130 | 610 | 628 | ||||||||||||
| Natural Gas Distribution |
108 | 101 | 328 | 303 | ||||||||||||
| Energy Services |
67 | 9 | 125 | 20 | ||||||||||||
| Other Operations |
— | 3 | 9 | 8 | ||||||||||||
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|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 296 | $ | 243 | $ | 1,072 | $ | 959 | ||||||||
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|
|
|
|||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
8
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Electric Transmission & Distribution | ||||||||||||||||||||||||
| Quarter Ended December 31, |
% Diff | Year Ended December 31, |
% Diff | |||||||||||||||||||||
| 2017 | 2016 | Fav/(Unfav) | 2017 | 2016 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues: |
||||||||||||||||||||||||
| TDU |
$ | 644 | $ | 626 | 3 | % | $ | 2,588 | $ | 2,507 | 3 | % | ||||||||||||
| Bond Companies |
119 | 103 | 16 | % | 409 | 553 | (26 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
763 | 729 | 5 | % | 2,997 | 3,060 | (2 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance, excluding Bond Companies |
383 | 360 | (6 | %) | 1,423 | 1,355 | (5 | %) | ||||||||||||||||
| Depreciation and amortization, excluding Bond Companies |
99 | 99 | — | 395 | 384 | (3 | %) | |||||||||||||||||
| Taxes other than income taxes |
58 | 58 | — | 235 | 231 | (2 | %) | |||||||||||||||||
| Bond Companies |
102 | 82 | (24 | %) | 334 | 462 | 28 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
642 | 599 | (7 | %) | 2,387 | 2,432 | 2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 121 | $ | 130 | (7 | %) | $ | 610 | $ | 628 | (3 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||
| TDU |
$ | 104 | $ | 109 | (5 | %) | $ | 535 | $ | 537 | — | |||||||||||||
| Bond Companies |
17 | 21 | (19 | %) | 75 | 91 | (18 | %) | ||||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||||||
| Total Segment Operating Income |
$ | 121 | $ | 130 | (7 | %) | $ | 610 | $ | 628 | (3 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Electric Transmission & Distribution Operating Data: |
||||||||||||||||||||||||
| Actual MWH Delivered |
||||||||||||||||||||||||
| Residential |
6,191,591 | 6,159,687 | 1 | % | 29,703,307 | 29,586,399 | — | |||||||||||||||||
| Total |
20,680,236 | 19,990,319 | 3 | % | 88,636,416 | 86,828,902 | 2 | % | ||||||||||||||||
| Weather (average for service area): |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Cooling degree days |
133 | % | 154 | % | (21 | %) | 109 | % | 107 | % | 2 | % | ||||||||||||
| Heating degree days |
100 | % | 59 | % | 41 | % | 63 | % | 75 | % | (12 | %) | ||||||||||||
| Number of metered customers—end of period: |
||||||||||||||||||||||||
| Residential |
2,164,073 | 2,129,773 | 2 | % | 2,164,073 | 2,129,773 | 2 | % | ||||||||||||||||
| Total |
2,444,299 | 2,403,340 | 2 | % | 2,444,299 | 2,403,340 | 2 | % | ||||||||||||||||
| Natural Gas Distribution | ||||||||||||||||||||||||
| Quarter Ended December 31, |
% Diff | Year Ended December 31, |
% Diff | |||||||||||||||||||||
| 2017 | 2016 | Fav/(Unfav) | 2017 | 2016 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 848 | $ | 716 | 18 | % | $ | 2,639 | $ | 2,409 | 10 | % | ||||||||||||
| Natural gas |
422 | 329 | (28 | %) | 1,164 | 1,008 | (15 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
426 | 387 | 10 | % | 1,475 | 1,401 | 5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
211 | 188 | (12 | %) | 742 | 714 | (4 | %) | ||||||||||||||||
| Depreciation and amortization |
66 | 62 | (6 | %) | 260 | 242 | (7 | %) | ||||||||||||||||
| Taxes other than income taxes |
41 | 36 | (14 | %) | 145 | 142 | (2 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
318 | 286 | (11 | %) | 1,147 | 1,098 | (4 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 108 | $ | 101 | 7 | % | $ | 328 | $ | 303 | 8 | % | ||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||||||||
| Natural Gas Distribution Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
||||||||||||||||||||||||
| Residential |
57 | 47 | 21 | % | 151 | 152 | (1 | %) | ||||||||||||||||
| Commercial and Industrial |
72 | 66 | 9 | % | 261 | 259 | 1 | % | ||||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||||||||
| Total Throughput |
129 | 113 | 14 | % | 412 | 411 | — | |||||||||||||||||
|
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|
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|
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|
|||||||||||||||||
| Weather (average for service area) |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Heating degree days |
101 | % | 80 | % | 21 | % | 83 | % | 84 | % | (1 | %) | ||||||||||||
| Number of customers—end of period: |
||||||||||||||||||||||||
| Residential |
3,213,140 | 3,183,538 | 1 | % | 3,213,140 | 3,183,538 | 1 | % | ||||||||||||||||
| Commercial and Industrial |
256,651 | 255,806 | — | 256,651 | 255,806 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
3,469,791 | 3,439,344 | 1 | % | 3,469,791 | 3,439,344 | 1 | % | ||||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
9
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Energy Services | ||||||||||||||||||||||||
| Quarter Ended December 31, |
% Diff Fav/(Unfav) |
Year Ended December 31, |
% Diff Fav/(Unfav) |
|||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 1,051 | $ | 649 | 62 | % | $ | 4,049 | $ | 2,099 | 93 | % | ||||||||||||
| Natural gas |
951 | 622 | (53 | %) | 3,816 | 2,011 | (90 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
100 | 27 | 270 | % | 233 | 88 | 165 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
22 | 16 | (38 | %) | 87 | 59 | (47 | %) | ||||||||||||||||
| Depreciation and amortization |
10 | 2 | (400 | %) | 19 | 7 | (171 | %) | ||||||||||||||||
| Taxes other than income taxes |
1 | — | — | 2 | 2 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
33 | 18 | (83 | %) | 108 | 68 | (59 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 67 | $ | 9 | 644 | % | $ | 125 | $ | 20 | 525 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Timing impacts of mark-to-market gain (loss) |
$ | 56 | $ | (3 | ) | 1,967 | % | $ | 79 | $ | (21 | ) | 476 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Energy Services Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
336 | 207 | 62 | % | 1,200 | 777 | 54 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Number of customers—end of period |
31,000 | 30,000 | 3 | % | 31,000 | 30,000 | 3 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Other Operations | ||||||||||||||||||||||||
| Quarter Ended December 31, |
% Diff Fav/(Unfav) |
Year Ended December 31, |
% Diff Fav/(Unfav) |
|||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 3 | $ | 4 | (25 | %) | $ | 14 | $ | 15 | (7 | %) | ||||||||||||
| Expenses |
3 | 1 | (200 | %) | 5 | 7 | 29 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | — | $ | 3 | — | $ | 9 | $ | 8 | 13 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Capital Expenditures by Segment
(Millions of Dollars)
(Unaudited)
| Quarter Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Capital Expenditures by Segment |
||||||||||||||||
| Electric Transmission & Distribution |
$ | 308 | $ | 220 | $ | 924 | $ | 858 | ||||||||
| Natural Gas Distribution |
137 | 139 | 523 | 510 | ||||||||||||
| Energy Services |
6 | 2 | 11 | 5 | ||||||||||||
| Other Operations |
17 | 17 | 36 | 33 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
$ | 468 | $ | 378 | $ | 1,494 | $ | 1,406 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Interest Expense Detail
(Millions of Dollars)
(Unaudited)
| Quarter Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Interest Expense Detail |
||||||||||||||||
| Amortization of Deferred Financing Cost |
$ | 5 | $ | 6 | $ | 22 | $ | 24 | ||||||||
| Capitalization of Interest Cost |
(3 | ) | (3 | ) | (9 | ) | (8 | ) | ||||||||
| Transition and System Restoration Bond Interest Expense |
19 | 21 | 77 | 91 | ||||||||||||
| Other Interest Expense |
76 | 79 | 300 | 322 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Interest Expense |
$ | 97 | $ | 103 | $ | 390 | $ | 429 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
10
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
| December 31, 2017 |
December 31, 2016 |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 260 | $ | 341 | ||||
| Other current assets |
3,135 | 2,582 | ||||||
|
|
|
|
|
|||||
| Total current assets |
3,395 | 2,923 | ||||||
|
|
|
|
|
|||||
| Property, Plant and Equipment, net |
13,057 | 12,307 | ||||||
|
|
|
|
|
|||||
| Other Assets: |
||||||||
| Goodwill |
867 | 862 | ||||||
| Regulatory assets |
2,347 | 2,677 | ||||||
| Investment in unconsolidated affiliate |
2,472 | 2,505 | ||||||
| Preferred units – unconsolidated affiliate |
363 | 363 | ||||||
| Other non-current assets |
235 | 192 | ||||||
|
|
|
|
|
|||||
| Total other assets |
6,284 | 6,599 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 22,736 | $ | 21,829 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Short-term borrowings |
$ | 39 | $ | 35 | ||||
| Current portion of securitization bonds long-term debt |
434 | 411 | ||||||
| Indexed debt |
122 | 114 | ||||||
| Current portion of other long-term debt |
50 | 500 | ||||||
| Other current liabilities |
2,424 | 2,020 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
3,069 | 3,080 | ||||||
|
|
|
|
|
|||||
| Other Liabilities: |
||||||||
| Accumulated deferred income taxes, net |
3,174 | 5,263 | ||||||
| Regulatory liabilities |
2,464 | 1,298 | ||||||
| Other non-current liabilities |
1,146 | 1,196 | ||||||
|
|
|
|
|
|||||
| Total other liabilities |
6,784 | 7,757 | ||||||
|
|
|
|
|
|||||
| Long-term Debt: |
||||||||
| Securitization bonds |
1,434 | 1,867 | ||||||
| Other |
6,761 | 5,665 | ||||||
|
|
|
|
|
|||||
| Total long-term debt |
8,195 | 7,532 | ||||||
|
|
|
|
|
|||||
| Shareholders’ Equity |
4,688 | 3,460 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 22,736 | $ | 21,829 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
11
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(Millions of Dollars)
(Unaudited)
| Year Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 1,792 | $ | 432 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
1,060 | 1,152 | ||||||
| Deferred income taxes |
(770 | ) | 213 | |||||
| Write-down of natural gas inventory |
— | 1 | ||||||
| Equity in earnings of unconsolidated affiliate |
(265 | ) | (208 | ) | ||||
| Changes in net regulatory assets |
(107 | ) | (60 | ) | ||||
| Changes in other assets and liabilities |
(313 | ) | 353 | |||||
| Other, net |
24 | 48 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
1,421 | 1,931 | ||||||
| Net Cash Used in Investing Activities |
(1,257 | ) | (1,046 | ) | ||||
| Net Cash Used in Financing Activities |
(245 | ) | (808 | ) | ||||
|
|
|
|
|
|||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
(81 | ) | 77 | |||||
| Cash and Cash Equivalents at Beginning of Period |
341 | 264 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 260 | $ | 341 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
12
4th Quarter 2017 Earnings Call February 22, 2018 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 intentions with respect to our ownership interest in Enable Midstream Partners, LP (“Enable”), our anticipated Brazos Valley Connection completion date, growth and guidance (including earnings, dividend and core operating income growth), future financing plans and expectation for liquidity and capital resources and expenditures, average rate base and growth, implications resulting from enacted tax legislation (including the impact on deferred taxes, customer rates, cash flows and regulatory treatment) and effective tax rates, our anticipated regulatory filings and Energy Services’ operating income target for 2018, 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, 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 13 is extracted from Enable’s investor presentation as presented during its Q4 and full year 2017 earnings call dated February 20, 2018. 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 17. 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 34, 35, 36 and 37 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 2017 Performance and Highlights Segment Review Houston Electric Natural Gas Distribution Energy Services Midstream Investments Puerto Rico Mutual Assistance 2018-2020 Earnings Outlook Bill Rogers – Executive Vice President and CFO 2017 GAAP and Guidance Earnings 2017 Earnings Drivers Tax Cuts and Jobs Act Impact 2018 Investment and Financing Appendix Regulatory Review Equity to Capital and Holding Company Debt Review FFO/Debt, Core Operating Income and Net Income Reconciliation Equity Amortization Schedule
2017 Performance (1) Refer to slides 35 – 37 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) Excluding ZENS, CES mark-to-market adjustments and tax reform (3) Primarily due to the annual true-up of transition charges correcting for over-collections that occurred during 2016 Note: In the following slides, we will refer to public law number 115-97, initially introduced as the Tax Cuts and Jobs Act, as TCJA or simply “tax reform”. 2017 vs 2016 Drivers(2) h Favorable Variance i Unfavorable Variance Rate Relief Midstream Investments Customer Growth Interest Expense Operations and Maintenance Depreciation and Amortization Equity Return(3) Usage Right of Way Revenue 2017 GAAP Diluted EPS 2017 Guidance Basis (Non-GAAP) Diluted EPS, excluding tax reform(1) $1.16 $1.37 Full year 2017 diluted EPS of $4.13, inclusive of $2.56 deferred tax re-measurement benefit, compared with diluted EPS of $1.00 in 2016, which included a $0.17 per share charge associated with ZENS, primarily due to the merger of Time Warner Cable and Charter Communications
2017 Highlights Added more than 70,000 new utility customers Capital expenditures of ~$1.5 billion invested on behalf of our customers Rate relief of ~$90 million Earned near our allowed ROEs Expect to energize the Brazos Valley Connection early in the second quarter of 2018, ahead of the original energization date Finished natural gas cast-iron main replacement in Texas and Minnesota Demonstrated the value of technology and T&D investments during Hurricane Harvey restoration CenterPoint Energy received Edison Electric Institute’s “Emergency Assistance Award”
Electric Transmission and Distribution Operating Income Drivers 2016 v. 2017 (1) Excludes transition and system restoration bonds; please refer to slide 34 for more detail on core operating income (2) Includes lower equity return of $22 million, primarily related to the annual true-up of transition charges correcting for over-collections that occurred during the preceding 12 months, higher operation and maintenance expenses of $19 million primarily due to higher labor and benefits costs of $10 million and corporate support services expenses of $8 million and lower miscellaneous revenues, including right-of-way, of $10 million (1) (2) (1) $537 $535 Core Operating Income Growth of 4.2% (Excluding equity return)
Electric Transmission and Distribution Capital Investment Outlook 2017A 2018E 2019E 2020E 2021E 2022E Transmission 49% 43% 44% 49% 43% 36% Distribution 46% 49% 52% 48% 52% 57% (1) (1) Includes AFUDC $4.8 Billion 2018 – 2022 Capital Plan $924 $949 $958 $1,004 $959 $900
Natural Gas Distribution Operating Income Drivers 2016 v. 2017 (1) Rate increases of $38 million, primarily from Texas rate filings of $14 million, Arkansas rate case and formula rate plan filings of $9 million, Minnesota interim rates of $7 million and Mississippi RRA of $4 million (2) Includes higher other revenues of $8 million, primarily driven by transportation revenues, labor and benefits were favorable by $5 million, resulting primarily from the recording of a regulatory asset (and a corresponding reduction in expense) to recover $16 million of prior postretirement expenses in future rates established in the Texas Gulf rate order and higher operation and maintenance expenses of $20 million, primarily due to increased bad debt expenses of $7 million, increased contract services of $7 million, increased insurance costs of $3 million and increased corporate support services expenses of $2 million (1) (2) Operating Income Growth of 8.2%
Capital Recovery Method 2017A 2018E 2019E 2020E 2021E 2022E Annual Mechanisms 58% 65% 58% 66% 67% 67% Rate Cases 42% 35% 42% 34% 33% 33% (1) Includes AFUDC $3.2 Billion 2018 – 2022 Capital Plan $523 $635 $612 $637 $664 $687 Natural Gas Distribution Capital Investment Outlook (1)
Capital rate base projected to grow primarily as a result of capital investment outlook (1) The average annual rate base is subject to change due to actual capital investment and deferred taxes, the time frame over which excess deferred taxes are returned to customers, and the actual rate base authorized (2) Projected average rate base is the total average rate base for the year and not just the amount that has been reflected in rates Rate Base Growth: 8.3% CAGR 2017 - 2022 (1) (2) $7,945 $8,638 $9,470 $10,266 $11,096 $11,837 9.2% CAGR 7.8% CAGR Rate Base Growth
Houston Electric Regulatory Update Houston Electric intends to file a base rate application no later than April 30, 2019 Previous rate case was filed in June of 2010 Houston Electric reported for 2016 an earned overall ROE of 9.6%, with an allowed ROE of 10.0% Houston Electric will utilize TCOS and DCRF mechanisms to accelerate the returning of certain tax reform benefits to customers; does not impact expected earnings PUCT – Public Utilities Commission of Texas, DCRF – Distribution Cost Recovery Factor, TCOS – Transmission Cost of Service
Energy Services Highlights and Outlook Energy Services contributed operating income of $46 million in 2017 compared to $41 million in 2016, excluding a mark-to-market gain of $79 million and loss of $21 million, respectively Increased margin associated with throughput was primary driver of operating income increase Targeting Energy Services operating income of $55 - $65 million for 2018
Midstream Investments 2017 Highlights (1) Full-year operational performance since Enable’s formation in 2013. Source: Per Enable’s 4th Quarter and Full Year 2017 presentation dated Feb 20, 2018 (2) Source: Per Enable’s 4th quarter and full-year 2017 presentation dated Feb 20, 2018 and per Drillinginfo as of February 5, 2018 (3) Source: Per Enable’s 4th quarter and full-year 2017 presentation dated Feb 20, 2018 (4) Excluding tax reform Highest natural gas gathered and processed volumes Highest NGLs produced Highest natural gas transported volumes Acquisition of Align Midstream extending Ark-La-Tex footprint and further optimizing midstream services in the basin Announced Project Wildcat, a 400 million cubic feet per day (MMcf/d) rich natural gas takeaway solution from the Anadarko Basin to North Texas Announced the CaSE project, a 205,000 dekatherms per day (Dth/d) firm natural gas transportation solution for growing Anadarko Basin production Contracted firm, fee-based agreements on EGT and EOIT SIGNIFICANT COMMERCIAL SUCCESSES(3) RECORD-SETTING YEAR(1) MIDSTREAM INVESTMENTS REPORTED EQUITY EARNINGS OF $265 MILLION OR $0.38 PER DILUTED SHARE(4) IN 2017, COMPARED TO $208 MILLION OR $0.28 PER DILUTED SHARE IN 2016
Puerto Rico Mutual Assistance Joined peer utilities, FEMA, PREPA and EEI to help restore power to Puerto Rico Trucks and supplies shipped on two-week, 1,700 mile journey Approximately 150 CenterPoint line workers and support personnel assisting in Puerto Rico since January 19th Joined more than 1,500 mutual-assistance crew members from other utilities to support the PREPA in the next phase of their restoration process FEMA – Federal Emergency Management Agency, PREPA – Puerto Rico Electric Power Authority, EEI – Edison Electric Institute
2018 – 2020 Earnings Outlook The $1.55 guidance midpoint for 2018 represents 6% growth from $1.37 plus approximately $0.10 from the TCJA 2019 and 2020 year-over-year growth rate target of 5 – 7% Capital investment anticipated to be a primary driver of growth trajectory (1) Refer to slides 35 – 37 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) Excluding tax reform benefit Note: The guidance range considers utility operations performance to date and certain significant variables that may impact earnings, such as weather, throughput, commodity prices, effective tax rates, financing activities, and regulatory and judicial proceedings to include regulatory action as a result of recent tax reform legislation. The guidance range also assumes ownership of 54.1% of the common units representing limited partner interests in Enable and includes the amortization of CenterPoint Energy’s basis differential in Enable and effective tax rates. In providing this guidance, CenterPoint Energy 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 its Energy Services business. CenterPoint does not include other potential Enable impacts on guidance, such as any changes in accounting standards or unusual items. Diluted EPS on a Guidance (Non-GAAP) Basis (1) 5-7% Diluted EPS Growth Over 2018 5-7% Diluted EPS Growth Over 2019 $1.50 – 1.60 $1.37 $1.16 $1.10 (2)
Scott Prochazka – President and CEO 2017 Performance and Highlights Segment Review Houston Electric Natural Gas Distribution Energy Services Midstream Investments Puerto Rico Mutual Assistance 2018-2020 Earnings Outlook Bill Rogers – Executive Vice President and CFO 2017 GAAP and Guidance Earnings 2017 Earnings Drivers Tax Cuts and Jobs Act Impact 2018 Investment and Financing Appendix Regulatory Review Equity to Capital and Holding Company Debt Review FFO/Debt, Core Operating Income and Net Income Reconciliation Equity Amortization Schedule Agenda
Reconciliation: Diluted EPS to Adjusted Diluted EPS Used in Providing Annual Earnings Guidance(1) 2017 2016 2017 2016 Diluted EPS as reported $2.99 $0.23 $4.13 $1.00 Timing effects impacting CES (related to mark-to-market accounting) ($0.09) $0.01 ($0.12) $0.03 ZENS-related mark-to-market adjustments ($0.01) $0.02 ($0.08) $0.13 Consolidated diluted EPS on a guidance basis $2.89 $0.26 $3.93 $1.16 Benefit from tax reform ($2.56) - ($2.56) - Consolidated diluted EPS on a guidance basis, excluding tax reform $0.33 $0.26 $1.37 $1.16 4th Quarter Full Year (1) Refer to slides 35 – 37 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures
Utility Operations Adjusted Diluted EPS Drivers 2016 v. 2017 (Guidance Basis, Excluding Tax Reform) (1) Excludes equity return; please refer to slide 34 for more detail on core operating income (2) Includes interest expense reductions of $25 million, primarily due to refinancing and balance sheet management; excludes transition and system restoration bonds (3) The Equity Amortization schedule on page 38 details the decrease between the 2016 and 2017 equity returns (4) 4th quarter 2016 charge of $22 million for early redemption of bonds otherwise due in 2018, 4th quarter 2017 charge of $5 million for early redemption of bonds otherwise due in 2018, $14 million in additional income from a full year of dividends on the Enable preferred securities, taxes, AFUDC, other income, and Other Operations segment Note: Refer to slides 35 – 37 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (1) (3) (2) (4)
Consolidated Adjusted Diluted EPS Drivers 2016 v. 2017 (Guidance Basis, Excluding Tax Reform) (1) See previous slide (2) Midstream Investments components adjusted for the effective tax rate, excluding tax reform Note: Refer to slides 35 – 37 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (1) Midstream Investments Impact (2) Utility Operations Midstream Investments $1.16 $1.37
Tax Cuts and Jobs Act Impact Lower Effective Tax Rate The reduction in rates is expected to provide approximately a $0.10 increase in 2018 diluted EPS, primarily associated with our unregulated businesses CenterPoint’s consolidated effective tax rate, including state taxes, was approximately 36% in 2017(1) Forecasting 2018 effective tax rate, inclusive of state taxes, to be approximately 21%(2) Cash Flow Impact Changes to tax depreciation expense for utility assets will increase cash taxes, reducing expected near-term cash flows The timing of the return of the excess deferred tax regulatory liability may reduce expected near-term cash flows depending on the amortization schedules established in each jurisdiction Lower cash tax rate on unregulated income Anticipate Enable will decide to fully expense capital investments resulting in greater tax shield for CenterPoint (1) Excluding tax reform benefit (2) Includes the estimated amortization of excess deferred income taxes
Tax Cuts and Jobs Act Impact (1) See slide 28 (2) See slides 29 (3) See slide 30 (4) See slide 31 (5) See slides 32-33 Reduced Customer Rates Regulatory liability of approximately $1.3 billion is expected to be returned to customers over time Reduced federal tax rate from 35% to 21% is expected to be reflected in customer rates Balance Sheet and Credit Metric Impacts Consolidated percentage of equity increased while holding company debt declined Adjusted FFO/Total debt of 24% for 2017(5), anticipated to decline approximately 300 basis points in 2018 CenterPoint anticipated to remain within our target credit metrics Dec 31, 2017 Dec 31, 2016 CNP Equity to Capital Ratio(1) 40.2% 35.4% CEHE Equity to Capital Ratio(2) 44.6% 45.0% CERC Equity to Capital Ratio(3) 50.3% 54.8% Holding Company Debt to Consolidated Debt(4) 14% 21%
2018 Investment and Financing 2018 Investment and Financing Planned capital investment of approximately $1.7 billion Equity issuance not anticipated Current ratings and outlook Enable Midstream Units Intend to reduce our exposure to commodity prices through unit sales over a multi year period Timing and size of potential sales based on market conditions Any net proceeds would support our balance sheet and the recently announced increased investment in our utilities Moody’s S&P Fitch Company/Instrument Rating Outlook (1) Rating Outlook (2) Rating Outlook (3) CenterPoint Energy Senior Unsecured Debt Baa1 Stable BBB+ Stable BBB Positive Houston Electric Senior Secured Debt A1 Stable A Stable A+ Stable CERC Corp. Senior Unsecured Debt Baa2 Stable A- Stable BBB Positive (1) A Moody’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term. (2) An S&P rating outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term. (3) A Fitch rating outlook indicates the direction a rating is likely to move over a one- to two-year period.
Agenda Scott Prochazka – President and CEO 2017 Performance and Highlights Segment Review Houston Electric Natural Gas Distribution Energy Services Midstream Investments Puerto Rico Mutual Assistance 2018-2020 Earnings Outlook Bill Rogers – Executive Vice President and CFO 2017 GAAP and Guidance Earnings 2017 Earnings Drivers Tax Cuts and Jobs Act Impact 2018 Investment and Financing Appendix Regulatory Review Equity to Capital and Holding Company Debt Review FFO/Debt, Core Operating Income and Net Income Reconciliation Equity Amortization Schedule
Electric Transmission and Distribution Q4 2017 Regulatory Update Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information AMS 47364 N/A Jun-17 Sep-17 Dec-17 Final reconciliation of AMS surcharge for a $29.2 million refund of AMS revenue in excess of expenses, for which a reserve has been recorded. Refunds began in September 2017 and will continue through August 2018. EECRF (2) 47232 11.0 Jun-17 Mar-18 Nov-17 Annual reconciliation filing for program year 2016 and includes performance bonus of $11 million. 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 Nov-17 Nov-17 Based on an incremental increase in total rate base of $263.4 million. TCOS N/A Feb-18 TBD TBD Revise TCOS application approved in November 2017 by a reduction of $41.6 million to recognize change in tax rates, amortize certain EDIT balances and adjust rate base by EDIT attributable to new plant since the last rate case, all of which are related to the TCJA AMS – Advanced Metering System; EECRF – Energy Efficiency Cost Recovery Factor; DCRF – Distribution Cost Recovery Factor; TCOS – Transmission Cost of Service; EDIT – Excess Deferred Income Tax; TCJA – Tax Cuts and Jobs Act; TBD – to be determined (1) Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates (2) Amounts are recorded when approved
Natural Gas Distribution Q4 2017 Regulatory Update Jurisdiction Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information Beaumont/East Texas/South Texas (RRC) GRIP 10618, 10619 7.6 Mar-17 Jul-17 Jun-17 Based on net change in invested capital of $46.5 million. South Texas (RRC) Rate Case 10669 0.5 Nov-17 TBD TBD Reflects a proposed 10.3% ROE on a 55% equity ratio for South Texas jurisdiction. 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 $7.6 million and was subsequently approved. Arkansas (APSC) BDA 06-161-U 3.9 Mar-17 Jun-17 Jun-17 For the evaluation period between January 2016 and August 2016. Amounts are recorded during the evaluation period. Arkansas (APSC) BDA 15-098-U 16.5 Dec-17 Feb-18 Jan-18 For the evaluation period between October 2016 and September 2017. Amounts are recorded during the evaluation period. GRIP – Gas Reliability Infrastructure Program; EECR – Energy Efficiency Cost Recovery; FRP – Formula Rate Plan; BDA – Billing Determinant Rate Adjustment; TBD – to be determined (1) Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates (2) Amounts are recorded when approved
Natural Gas Distribution Q4 2017 Regulatory Update Jurisdiction Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information Minnesota (MPUC) Rate Case G008/GR-17-285 56.5 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. 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 Feb-18 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 and $11.2 million was recognized in 2016 and 2017, respectively. 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 3.0 Sep-17 Dec-17 Jan-18 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 $0.4 million based on 2016 program performance. Oklahoma (OCC) PBRC PUD201700078 2.2 Mar-17 Nov-17 Oct-17 Based on ROE of 10%. CIP – Conservation Improvement Program; RRA – Rate Regulation Adjustment; RSP – Rate Stabilization Plan; EECR – Energy Efficiency Cost Recovery; PBRC – Performance Based Rate Change Plan; TBD – to be determined (1) Represents proposed increases when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates (2) Amounts are recorded when approved
Estimated Rate Filing Timelines as of December 31, 2017 Natural Gas Distribution (1) Houston Electric (1) (1) Rate filings and timelines are subject to change and may be impacted by factors such as regulatory, legislative and economic factors Houston Electric regulatory calendar will be refreshed upon the conclusion of the planned 2019 rate case filing
Consolidated Equity and Capitalization Ratios
Houston Electric Equity and Capitalization Ratios
CERC Equity and Capitalization Ratios
Holding Company Debt
CenterPoint Energy Consolidated Adjusted Funds From Operations (FFO) This slide includes adjusted funds from operations (“FFO”) which is net cash provided by operating activities: Excluding (I) changes in other assets and liabilities, (II) other, net and (III) amounts related to transition and system restoration bonds, as applicable; and Including distributions from unconsolidated affiliates in excess of cumulative earnings included in cash flow from investing activities, as applicable Note: Refer to slide 2 for information on non-GAAP measures Year Ended December 31, 2017 Year Ended December 31, 2016 Year Ended December 31, 2015 ($ in millions) Net cash provided by operating activities $ 1,421 $ 1,931 $ 1,870 Less: Changes in other assets and liabilities Accounts receivable and unbilled revenues, net 216 117 (345) Inventory 7 (34) (28) Taxes receivable (30) (142) (18) Accounts payable (136) (133) 224 Fuel cost recovery 85 72 (43) Non-trading derivatives, net 84 (30) 7 Margin deposits, net 55 (101) 4 Interest and taxes accrued (5) (5) 10 Net regulatory assets and liabilities 107 60 (63) Other current assets (1) 17 (10) Other current liabilities (34) (22) 50 Other assets 4 16 5 Other liabilities (36) (30) (8) Less: Other, net (24) (48) (27) Funds from Operations $ 1,713 $ 1,668 $ 1,628 Amounts included in Cash Flows from Investing Activities: Distributions from unconsolidated affiliates in excess of cumulative earnings 297 297 148 Less: Amounts associated with Transition and System Restoration Bond Companies (330) (456) (368) Adjusted Funds From Operations (FFO) $ 1,680 $ 1,509 $ 1,408
CenterPoint Energy Consolidated Ratio of Adjusted FFO/Total Debt Excluding Transition and System Restoration Bonds * 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 $122 million, $114 million, and $145 million as of December 31, 2017, December 31, 2016, and December 31, 2015, respectively. The principal amount on which 2% interest is paid was $828 million on each of December 31, 2017, December 31, 2016 and December 31, 2015. The contingent principal amount was $505 million, $514 million and $705 million as of December 31, 2017, December 31, 2016, and December 31, 2015, respectively. At maturity or upon redemption, holders of ZENS will receive cash at the higher of the contingent principal amount or the value of the reference shares of Time Warner Inc., Time Inc. and Charter Communications, Inc. This slide includes adjusted funds from operations (“FFO”) which is net cash provided by operating activities: Excluding (I) changes in other assets and liabilities, (II) other, net and (III) amounts related to transition and system restoration bonds, as applicable; and Including distributions from unconsolidated affiliates in excess of cumulative earnings included in cash flow from investing activities, as applicable Note: Refer to slide 2 for information on non-GAAP measures and slide 32 for CenterPoint Energy’s adjusted FFO calculation ($ in millions) December 31, 2017 December 31, 2016 December 31, 2015 Short-term Debt: Short-term borrowings $ 39 $ 35 $ 40 Current portion of transition and system restoration bonds* 434 411 391 Indexed debt (ZENS)** 122 114 145 Current portion of other long-term debt 50 500 328 Long-term Debt: Transition and system restoration bonds, net* 1,434 1,867 2,276 Other, net 6,761 5,665 5,590 Total Debt, net $ 8,840 $ 8,592 $ 8,770 Less: Transition and system restoration bonds (including current portion)* (1,868) (2,278) (2,667) Total Debt, excluding transition and system restoration bonds $ 6,972 $ 6,314 $ 6,103 Adjusted FFO/Total Debt, excluding transition and system restoration bonds 24.1% 23.9% 23.1%
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
Estimated Amortization for Pre-Tax Equity Earnings Associated with the Recovery of Certain Qualified Cost and Storm Restoration Costs The table provides the pre-tax equity return recognized by CenterPoint Energy, Inc. (CenterPoint Energy) during each of the years 2005 through 2017 related to CenterPoint Energy Houston Electric, LLC’s (CEHE) recovery of certain qualified costs or storm restoration costs, as applicable, pursuant to the past issuance of transition bonds by CenterPoint Energy Transition Bond Company II, LLC (Transition BondCo II) and CenterPoint Energy Transition Bond Company III, LLC (Transition BondCo III) or CenterPoint Energy Transition Bond Company IV, LLC (Transition BondCo IV) or system restoration bonds by CenterPoint Energy Restoration Bond Company, LLC (System Restoration BondCo), as applicable and the estimated pre-tax equity return currently expected to be recognized in each of the years 2018 through 2024 related to CEHE’s recovery of certain qualified costs or storm restoration costs, as applicable, pursuant to the past issuance of transition bonds by Transition BondCo II, Transition BondCo III or Transition BondCo IV or system restoration bonds by System Restoration BondCo, as applicable. The amounts reflected for 2018 through 2024 are based on CenterPoint Energy’s estimates as of December 31, 2017. However, the equity returns to be recognized in future periods with respect to each series of transition or system restoration bonds, as applicable, will be periodically subject to adjustment based on tariff adjustments for any overcollections or undercollections of transition charges or system restoration charges, as applicable. The equity return amounts reflected in the table are reported in the financial statements of CenterPoint Energy and CenterPoint Energy Houston Electric as revenues from electric transmission and distribution utility. As of December 31, 2017