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 7, 2019
CENTERPOINT ENERGY, INC.
(Exact name of registrant as specified in its charter)
_______________________________
(State or other jurisdiction | (Commission File Number) | (IRS Employer | |||
of incorporation) | Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: | |||||
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):
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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. o
Item 2.02. Results of Operations and Financial Conditions.
On November 7, 2019, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported third quarter 2019 earnings. For additional information regarding CenterPoint Energy’s third quarter 2019 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 2019 earnings on November 7, 2019. 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 2019 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 Items 2.02 and 7.01, respectively. Accordingly, the information in the Press Release and the Supplemental Materials will not be incorporated by reference into any registration statement filed by CenterPoint Energy under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
(d) | Exhibits. | |
EXHIBIT NUMBER | EXHIBIT DESCRIPTION | |
99.1 | ||
99.2 | ||
104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document | |
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 7, 2019 | By: | /s/ Kristie L. Colvin |
Kristie L. Colvin | ||
Senior Vice President and Chief Accounting Officer | ||
Exhibit 99.1
 | For more information contact | |
Media: | ||
Alicia Dixon | ||
Phone | 713.825.9107 | |
Investors: | ||
David Mordy | ||
Phone | 713.207.6500 | |
For Immediate Release | ||||
CenterPoint Energy reports third quarter 2019 earnings of $0.47 per
diluted share; $0.53 earnings per diluted share on a guidance basis,
excluding certain impacts associated with the Vectren merger
• Reiterate full-year 2019 EPS guidance, anticipate achieving near the upper end of the $1.60 - $1.70 range |
• Utilities led company to a strong third quarter performance |
Houston - November 7, 2019 - CenterPoint Energy, Inc. (NYSE: CNP) today reported income available to common shareholders of $241 million, or $0.47 per diluted share, for the third quarter of 2019, compared with $153 million, or $0.35 per diluted share for the third quarter of 2018. On a guidance basis, third quarter 2019 earnings were $0.53 per diluted share, excluding certain impacts associated with the Vectren merger (the merger). Third quarter 2018 earnings, on a guidance basis and excluding certain impacts associated with the merger, were $0.39 per diluted share.
“Our utilities delivered another strong performance this quarter, driven by solid customer growth, disciplined cost management and favorable weather,” said Scott M. Prochazka, president and chief executive officer of CenterPoint Energy. “This strong performance is expected to drive our anticipated 2019 full year results towards the upper end of our guidance range.”
Business Segments
Houston Electric - Transmission & Distribution
The Houston electric - transmission & distribution segment reported operating income of $269 million for the third quarter of 2019, consisting of $261 million from the regulated electric transmission and distribution utility operations (TDU) and $8 million related to securitization bonds. Operating income for the third quarter of 2018 was $227 million, consisting of $214 million from the TDU and $13 million related to securitization bonds. Operating income for the TDU benefited primarily from lower operation and maintenance expenses, higher usage primarily due to warmer than normal weather, customer growth and rate relief. These benefits were partially offset by increased depreciation and amortization expense, lower equity return, primarily related to the annual true-up of transition charges, and lower revenues related to the Tax Cuts and Jobs Act (TCJA).
Indiana Electric – Integrated
The Indiana electric – integrated segment reported operating income of $48 million for the third quarter of 2019. These results are not comparable to the third quarter of 2018 as this segment was acquired in the merger in February 2019.
Natural Gas Distribution
--more--
The natural gas distribution segment reported operating income of $27 million for the third quarter of 2019, compared with $3 million for the third quarter of 2018. Operating income increased $7 million due to the gas utilities acquired in the merger in February 2019. The remaining increase is primarily due to lower operation and maintenance expenses, rate relief and customer growth. These increases were partially offset by the timing of a decoupling mechanism in Minnesota and lower revenues related to the TCJA.
Energy Services
The energy services segment reported operating income of $2 million for the third quarter of 2019, which included a mark-to-market loss of $2 million, compared with an operating loss of $9 million for the third quarter of 2018, which included a mark-to-market gain of $1 million. Excluding mark-to-market adjustments, operating income was $4 million for the third quarter of 2019 compared with an operating loss of $10 million for the third quarter of 2018. Operating income, excluding mark-to-market adjustments, increased primarily as a result of an increase in margin due to fewer opportunities to optimize natural gas supply costs in the third quarter of 2018 and decreased operation and maintenance expenses.
Infrastructure Services
The infrastructure services segment reported operating income of $42 million for the third quarter of 2019. Operating income includes $6 million of merger-related expenses. These results are not comparable to the third quarter of 2018 as this segment was acquired in the merger in February 2019.
Midstream Investments
The midstream investments segment reported $77 million of equity income for the third quarter of 2019, compared with $81 million in the third quarter of 2018. For further detail, please refer to Enable's investor materials provided during its 3rd quarter earnings call on November 6, 2019.
Corporate and Other
The corporate and other segment reported operating income of $4 million for the third quarter of 2019, compared with $5 million for the third quarter of 2018. Operating income for the third quarter of 2019 included $19 million of merger-related expenses. Operating income for the third quarter of 2018 included $5 million of merger-related expenses.
Earnings Outlook
• | Anticipate delivering full year 2019 guidance basis EPS near the upper end of our guidance range of $1.60 - $1.70. This guidance excludes: |
• | Certain impacts associated with the merger: |
▪ | Integration and transaction-related fees and expenses, including severance and other costs to achieve the anticipated cost savings as a result of the merger |
▪ | Merger financing impacts in January, prior to the completion of the merger, due to the issuance of debt and equity securities to fund the merger that resulted in higher net interest expense, preferred stock dividend requirements and higher common stock share count |
• | Potential impacts of the pending Houston Electric rate case |
• | 2020 guidance range and EPS growth target to be provided on fourth quarter 2019 earnings call following normal annual financial planning process |
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The 2019 guidance range considers operations performance to date and assumptions for certain significant variables that may impact earnings, such as customer growth (approximately 2% for electric operations and 1% for natural gas distribution) and usage including normal weather, throughput, commodity prices, recovery of capital invested through rate cases and other rate filings (excluding potential impacts of the pending Houston Electric rate case), effective tax rates, financing activities and related interest rates, and regulatory and judicial proceedings as well as the volume of work contracted in our infrastructure services business. The range also considers anticipated cost savings as a result of the merger. The range assumes the lower end of Enable Midstream Partners, LP’s (Enable) 2019 guidance range for net income attributable to common units, provided on Enable’s 3rd quarter earnings call on November 6, 2019.
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, including those from Enable, earnings or losses from the change in the value of ZENS and related securities, or the timing effects of mark-to-market accounting in the company’s Energy Services business, which, along with the certain excluded impacts associated with the merger and potential impacts of the pending Houston Electric rate case, could have a material impact on GAAP reported results for the applicable guidance period. CenterPoint Energy is unable to present a quantitative reconciliation of forward looking 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 as they are highly variable and difficult to predict due to various factors outside of management’s control.
Quarter Ended | |||||||||||||||
September 30, 2019 | September 30, 2018 | ||||||||||||||
Dollars in millions | Diluted EPS(1) | Dollars in millions | Diluted EPS(1) | ||||||||||||
Consolidated income available to common shareholders and diluted EPS | $ | 241 | $ | 0.47 | $ | 153 | $ | 0.35 | |||||||
Timing effects impacting CES (2): | |||||||||||||||
Mark-to-market (gains) losses (net of taxes of $1 and $0) (3) | 1 | — | (1 | ) | — | ||||||||||
ZENS-related mark-to-market (gains) losses: | |||||||||||||||
Marketable securities (net of taxes of $12 and $9) (3)(4) | (47 | ) | (0.09 | ) | (34 | ) | (0.08 | ) | |||||||
Indexed debt securities (net of taxes of $12 and $10) (3) | 50 | 0.10 | 34 | 0.08 | |||||||||||
Consolidated on a guidance basis | $ | 245 | $ | 0.48 | $ | 152 | $ | 0.35 | |||||||
Impacts associated with the Vectren merger: | |||||||||||||||
Impacts associated with the Vectren merger (net of taxes of $5 and $2) (3) | 20 | 0.05 | 18 | 0.04 | |||||||||||
Consolidated on a guidance basis, excluding impacts associated with the Vectren merger | $ | 265 | $ | 0.53 | $ | 170 | $ | 0.39 | |||||||
(1) | Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares outstanding during the quarter, and the sum of the quarters may not equal year-to-date diluted EPS |
(2) | Energy Services segment |
(3) | Taxes are computed based on the impact removing such item would have on tax expense |
(4) | Comprised of common stock of AT&T Inc. and Charter Communications, Inc. |
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 quarter ended September 30, 2019. A copy of that report is available on the company’s website, under the Investors section. 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
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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.
Webcast of Earnings Conference Call
CenterPoint Energy’s management will host an earnings conference call on Thursday, November 7, 2019, at 9:00 a.m. Central time/10:00 a.m. Eastern time. Interested parties may listen to a live audio broadcast of the conference call on the company’s website under the Investors section. A replay of the call can be accessed approximately two hours after the completion of the call and will be archived on the website for at least one year.
Headquartered in Houston, Texas, CenterPoint Energy, Inc. is an energy delivery company with regulated utility businesses in eight states and a competitive energy businesses footprint in nearly 40 states. Through its electric transmission & distribution, power generation and natural gas distribution businesses, the company serves more than 7 million metered customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas. CenterPoint Energy’s competitive energy businesses include natural gas marketing and energy-related services; energy efficiency, sustainability and infrastructure modernization solutions; and construction and repair services for pipeline systems, primarily natural gas. The company also owns 53.7 percent of the common units representing limited partner interests in Enable Midstream Partners, LP, a publicly traded master limited partnership that owns, operates and develops strategically located natural gas and crude oil infrastructure assets. With approximately 14,000 employees and approximately $35 billion in assets, CenterPoint Energy and its predecessor companies have been in business for more than 150 years. For more information, visit CenterPointEnergy.com.
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual events and results may differ materially from those expressed or implied by these forward-looking statements. Any statements in this news release regarding future earnings, and future financial performance and results of operations, including, but not limited to earnings guidance, targeted dividend growth rate and any other statements that are not historical facts are forward-looking statements. Each forward-looking statement contained in this news release speaks only as of the date of this release.
Risks Related to CenterPoint Energy
Important factors that could cause actual results to differ materially from those indicated by the provided forward-looking information include risks and uncertainties relating to: (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 Enable 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 goodwill, long-lived asset or other than temporary impairment charges by or related to Enable; (F) the timing of payments from Enable’s customers in existing contracts, including minimum volume commitment payments; (G) changes in tax status; and (H) access to debt and equity capital; (2) CenterPoint Energy’s expected benefits of the merger with Vectren Corporation (Vectren) and integration, including the outcome of shareholder litigation filed against Vectren that could reduce anticipated benefits of the merger, as well as the ability to successfully integrate the Vectren businesses and to realize anticipated benefits and commercial opportunities; (3) industrial, commercial and residential growth in CenterPoint Energy’s service territories and changes in market demand, including the demand for CenterPoint Energy’s non-utility products and services and effects of energy efficiency measures and demographic patterns; (4) the outcome of the pending Houston Electric rate case; (5) timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment; (6) future economic conditions in regional and national markets and their effect on sales, prices and costs; (7) weather variations and other natural phenomena, including the impact of severe weather events on operations and capital; (8) 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; (9) tax legislation, including the effects of the comprehensive tax reform legislation informally referred to as the Tax Cuts and Jobs Act (which includes any potential changes
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to interest deductibility) and uncertainties involving state commissions’ and local municipalities’ regulatory requirements and determinations regarding the treatment of excess deferred income taxes and CenterPoint Energy’s rates; (10) CenterPoint Energy’s ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms; (11) the timing and extent of changes in commodity prices, particularly natural gas and coal, and the effects of geographic and seasonal commodity price differentials; (12) the ability of CenterPoint Energy’s and CERC’s non-utility business operating in the Energy Services reportable segment to effectively optimize opportunities related to natural gas price volatility and storage activities, including weather-related impacts; (13) actions by credit rating agencies, including any potential downgrades to credit ratings; (14) changes in interest rates and their impact on CenterPoint Energy’s costs of borrowing and the valuation of its pension benefit obligation; (15) problems with regulatory approval, legislative actions, 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; (16) the availability and prices of raw materials and services and changes in labor for current and future construction projects; (17) local, state and federal legislative and regulatory actions or developments relating to the environment, including those related to global climate change, air emissions, carbon, waste water discharges and the handling and disposal of coal combustion residuals (CCR) that could impact the continued operation, and/or cost recovery of generation plant costs and related assets; (18) the impact of unplanned facility outages or other closures; (19) any direct or indirect effects on CenterPoint Energy’s or Enable’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, ice, earthquakes, explosions, leaks, floods, droughts, hurricanes, tornadoes, pandemic health events or other occurrences; (20) CenterPoint Energy’s ability to invest planned capital and the timely recovery of CenterPoint Energy’s investments, including those related to the generation transition plan; (21) CenterPoint Energy’s ability to successfully construct and operate electric generating facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate; (22) CenterPoint Energy’s ability to control operation and maintenance costs; (23) the sufficiency of CenterPoint Energy’s insurance coverage, including availability, cost, coverage and terms and ability to recover claims; (24) the investment performance of CenterPoint Energy’s pension and postretirement benefit plans; (25) 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; (26) changes in rates of inflation; (27) inability of various counterparties to meet their obligations to CenterPoint Energy; (28) non-payment for CenterPoint Energy’s services due to financial distress of its customers; (29) the extent and effectiveness of CenterPoint Energy’s and Enable’s risk management and hedging activities, including but not limited to, financial and weather hedges and commodity risk management activities; (30) timely and appropriate regulatory actions, which include actions allowing securitization, for any future hurricanes or natural disasters or other recovery of costs, including costs associated with Hurricane Harvey; (31) CenterPoint Energy’s or Enable’s potential business strategies and strategic initiatives, including restructurings, joint ventures and acquisitions or dispositions of assets or businesses, which CenterPoint Energy and Enable cannot assure will be completed or will have the anticipated benefits to CenterPoint Energy or Enable; (32) the performance of projects undertaken by CenterPoint Energy’s non-utility businesses and the success of efforts to realize value from, invest in and develop new opportunities and other factors affecting those non-utility businesses, including, but not limited to, the level of success in bidding contracts, fluctuations in volume and mix of contracted work, mix of projects received under blanket contracts, failure to properly estimate cost to construct projects or unanticipated cost increases in completion of the contracted work, changes in energy prices that affect demand for construction services and projects and cancellation and/or reductions in the scope of projects by customers and obligations related to warranties and guarantees; (33) acquisition and merger activities involving CenterPoint Energy or its competitors, including the ability to successfully complete merger, acquisition and divestiture plans; (34) CenterPoint Energy’s or Enable’s ability to recruit, effectively transition and retain management and key employees and maintain good labor relations; (35) the outcome of litigation; (36) the ability of retail electric providers (REPs), including REP affiliates of NRG Energy, Inc. and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and its subsidiaries; (37) changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation; (38) the impact of alternate energy sources on the demand for natural gas; (39) the timing and outcome of any audits, disputes and other proceedings related to taxes; (40) the effective tax rates; (41) the transition to a replacement for the LIBOR benchmark interest rate; (42) the effect of changes in and application of accounting standards and pronouncements; and (43) other factors discussed in CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 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 income available to common shareholders and diluted earnings per share, CenterPoint Energy also provides guidance based on adjusted income and adjusted diluted earnings per share, which are non-GAAP financial measures.
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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 income and adjusted diluted earnings per share calculation excludes from income available to common shareholders 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’s guidance for 2019 also does not reflect (a) certain impacts associated with the Vectren merger, which are integration and transaction-related fees and expenses, including severance and other costs to achieve anticipated cost savings as a result of the merger and merger financing impacts in January, prior to the completion of the merger due to the issuance of debt and equity securities to fund the merger that resulted in higher net interest expense, preferred stock dividend requirements and higher common stock share count and (b) potential impacts of the pending Houston Electric rate case. CenterPoint Energy is unable to present a quantitative reconciliation of forward-looking adjusted 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 as they are highly variable and difficult to predict due to various factors outside of management’s control. These excluded items, along with the excluded impacts associated with the merger and potential impacts of the pending Houston Electric rate case, could have a material impact on GAAP reported results for the applicable guidance period.
Management evaluates the company’s financial performance in part based on adjusted income and adjusted diluted earnings per share. Management believes 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 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, income available to common shareholders 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
Condensed Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Utility revenues | $ | 1,539 | $ | 1,299 | $ | 5,255 | $ | 4,534 | |||||||
Non-utility revenues | 1,203 | 913 | 3,816 | 3,019 | |||||||||||
Total | 2,742 | 2,212 | 9,071 | 7,553 | |||||||||||
Expenses: | |||||||||||||||
Utility natural gas, fuel and purchased power | 179 | 134 | 1,178 | 959 | |||||||||||
Non-utility cost of revenues, including natural gas | 852 | 864 | 3,013 | 2,927 | |||||||||||
Operation and maintenance | 871 | 567 | 2,616 | 1,714 | |||||||||||
Depreciation and amortization | 334 | 326 | 987 | 982 | |||||||||||
Taxes other than income taxes | 114 | 95 | 353 | 307 | |||||||||||
Total | 2,350 | 1,986 | 8,147 | 6,889 | |||||||||||
Operating Income | 392 | 226 | 924 | 664 | |||||||||||
Other Income (Expense): | |||||||||||||||
Gain on marketable securities | 59 | 43 | 206 | 66 | |||||||||||
Loss on indexed debt securities | (62 | ) | (44 | ) | (216 | ) | (316 | ) | |||||||
Interest and other finance charges | (134 | ) | (90 | ) | (389 | ) | (259 | ) | |||||||
Interest on Securitization Bonds | (9 | ) | (16 | ) | (31 | ) | (46 | ) | |||||||
Equity in earnings of unconsolidated affiliates, net | 77 | 81 | 213 | 208 | |||||||||||
Other income, net | 9 | 9 | 40 | 16 | |||||||||||
Total | (60 | ) | (17 | ) | (177 | ) | (331 | ) | |||||||
Income Before Income Taxes | 332 | 209 | 747 | 333 | |||||||||||
Income tax expense | 62 | 51 | 113 | 85 | |||||||||||
Net Income | 270 | 158 | 634 | 248 | |||||||||||
Preferred stock dividend requirement | 29 | 5 | 88 | 5 | |||||||||||
Income Available to Common Shareholders | $ | 241 | $ | 153 | $ | 546 | $ | 243 | |||||||
Reference is made to the Combined Notes to Unaudited Condensed 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
(Million of Dollars, Except Share and Per Share Amounts)
(Unaudited)
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Basic Earnings Per Common Share | $ | 0.48 | $ | 0.35 | $ | 1.09 | $ | 0.56 | |||||||
Diluted Earnings Per Common Share | $ | 0.47 | $ | 0.35 | $ | 1.08 | $ | 0.56 | |||||||
Dividends Declared per Common Share | $ | 0.2875 | $ | 0.2775 | $ | 0.5750 | $ | 0.5550 | |||||||
Dividends Paid per Common Share | $ | 0.2875 | $ | 0.2775 | $ | 0.8625 | $ | 0.8325 | |||||||
Weighted Average Common Shares Outstanding (000): | |||||||||||||||
- Basic | 502,228 | 431,554 | 501,986 | 431,437 | |||||||||||
- Diluted | 505,080 | 434,891 | 504,838 | 434,774 | |||||||||||
Operating Income (Loss) by Reportable Segment | |||||||||||||||
Houston Electric T&D: | |||||||||||||||
TDU | $ | 261 | $ | 214 | $ | 495 | $ | 480 | |||||||
Bond Companies | 8 | 13 | 27 | 43 | |||||||||||
Total Houston Electric T&D | 269 | 227 | 522 | 523 | |||||||||||
Indiana Electric Integrated | 48 | — | 64 | — | |||||||||||
Natural Gas Distribution | 27 | 3 | 241 | 166 | |||||||||||
Energy Services | 2 | (9 | ) | 64 | (20 | ) | |||||||||
Infrastructure Services | 42 | — | 50 | — | |||||||||||
Corporate and Other | 4 | 5 | (17 | ) | (5 | ) | |||||||||
Total | $ | 392 | $ | 226 | $ | 924 | $ | 664 | |||||||
Reference is made to the Combined Notes to Unaudited Condensed 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, Except Throughput and Customer Data)
(Unaudited)
Houston Electric T&D | |||||||||||||||||||||
Quarter Ended September 30, | % Diff | Nine Months Ended September 30, | % Diff | ||||||||||||||||||
2019 | 2018 | Fav/Unfav | 2019 | 2018 | Fav/Unfav | ||||||||||||||||
Revenues: | |||||||||||||||||||||
TDU | $ | 776 | $ | 735 | 6 | % | $ | 2,043 | $ | 2,009 | 2 | % | |||||||||
Bond Companies | 83 | 162 | (49 | )% | 270 | 493 | (45 | )% | |||||||||||||
Total | 859 | 897 | (4 | )% | 2,313 | 2,502 | (8 | )% | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance, excluding Bond Companies | 357 | 367 | 3 | % | 1,080 | 1,056 | (2 | )% | |||||||||||||
Depreciation and amortization, excluding Bond Companies | 95 | 95 | — | 282 | 293 | 4 | % | ||||||||||||||
Taxes other than income taxes | 63 | 59 | (7 | )% | 186 | 180 | (3 | )% | |||||||||||||
Bond Companies | 75 | 149 | 50 | % | 243 | 450 | 46 | % | |||||||||||||
Total expenses | 590 | 670 | 12 | % | 1,791 | 1,979 | 9 | % | |||||||||||||
Operating Income | $ | 269 | $ | 227 | 19 | % | $ | 522 | $ | 523 | — | ||||||||||
Operating Income: | |||||||||||||||||||||
TDU | $ | 261 | $ | 214 | 22 | % | $ | 495 | $ | 480 | 3 | % | |||||||||
Bond Companies | 8 | 13 | (38 | )% | 27 | 43 | (37 | )% | |||||||||||||
Total Segment Operating Income | $ | 269 | $ | 227 | 19 | % | $ | 522 | $ | 523 | — | ||||||||||
Actual MWH Delivered | |||||||||||||||||||||
Residential | 11,224,256 | 10,554,656 | 6 | % | 24,392,141 | 24,486,317 | — | ||||||||||||||
Total | 28,379,262 | 27,014,925 | 5 | % | 71,416,612 | 70,346,601 | 2 | % | |||||||||||||
Weather (percentage of 10-year average for service area): | |||||||||||||||||||||
Cooling degree days | 110 | % | 101 | % | 9 | % | 106 | % | 104 | % | 2 | % | |||||||||
Heating degree days | — | % | — | % | — | % | 93 | % | 95 | % | (2 | )% | |||||||||
Number of metered customers - end of period: | |||||||||||||||||||||
Residential | 2,232,740 | 2,188,211 | 2 | % | 2,232,740 | 2,188,211 | 2 | % | |||||||||||||
Total | 2,523,450 | 2,475,018 | 2 | % | 2,523,450 | 2,475,018 | 2 | % | |||||||||||||
Indiana Electric Integrated (1) | |||||||
Quarter Ended September 30, 2019 | Nine Months Ended September 30, 2019 (1) | ||||||
Revenues | $ | 165 | $ | 388 | |||
Utility natural gas, fuel and purchased power | 46 | 112 | |||||
Revenues less Utility natural gas, fuel and purchased power | 119 | 276 | |||||
Expenses: | |||||||
Operation and maintenance | 42 | 136 | |||||
Depreciation and amortization | 25 | 66 | |||||
Taxes other than income taxes | 4 | 10 | |||||
Total expenses | 71 | 212 | |||||
Operating Income | $ | 48 | $ | 64 | |||
Actual MWH Delivered | |||||||
Retail | 1,416 | 3,277 | |||||
Wholesale | 139 | 291 | |||||
Total | 1,555 | 3,568 | |||||
Number of metered customers - end of period: | |||||||
Residential | 128,381 | 128,381 | |||||
Total | 147,337 | 147,337 | |||||
(1) Represents February 1, 2019 through September 30, 2019 results only due to the Merger. | |||||||
Reference is made to the Combined Notes to Unaudited Condensed 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, Except Throughput and Customer Data)
(Unaudited)
Natural Gas Distribution (1) | |||||||||||||||||||||
Quarter Ended September 30, | % Diff | Nine Months Ended September 30, | % Diff | ||||||||||||||||||
2019 | 2018 | Fav/Unfav | 2019 (1) | 2018 | Fav/Unfav | ||||||||||||||||
Revenues | $ | 524 | $ | 410 | 28 | % | $ | 2,583 | $ | 2,058 | 26 | % | |||||||||
Utility natural gas, fuel and purchased power | 125 | 120 | (4 | )% | 1,118 | 972 | (15 | )% | |||||||||||||
Revenues less Utility natural gas, fuel and purchased power | 399 | 290 | 38 | % | 1,465 | 1,086 | 35 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 221 | 183 | (21 | )% | 767 | 592 | (30 | )% | |||||||||||||
Depreciation and amortization | 108 | 73 | (48 | )% | 308 | 210 | (47 | )% | |||||||||||||
Taxes other than income taxes | 43 | 31 | (39 | )% | 149 | 118 | (26 | )% | |||||||||||||
Total expenses | 372 | 287 | (30 | )% | 1,224 | 920 | (33 | )% | |||||||||||||
Operating Income | $ | 27 | $ | 3 | 800 | % | $ | 241 | $ | 166 | 45 | % | |||||||||
Throughput data in BCF | |||||||||||||||||||||
Residential | 16 | 13 | 23 | % | 160 | 123 | 30 | % | |||||||||||||
Commercial and Industrial | 88 | 53 | 66 | % | 326 | 208 | 57 | % | |||||||||||||
Total Throughput | 104 | 66 | 58 | % | 486 | 331 | 47 | % | |||||||||||||
Weather (average for service area) | |||||||||||||||||||||
Percentage of 10-year average: | |||||||||||||||||||||
Heating degree days | 18 | % | 119 | % | (101 | )% | 100 | % | 103 | % | (3 | )% | |||||||||
Number of customers - end of period: | |||||||||||||||||||||
Residential | 4,194,232 | 3,205,916 | 31 | % | 4,194,232 | 3,205,916 | 31 | % | |||||||||||||
Commercial and Industrial | 344,858 | 255,244 | 35 | % | 344,858 | 255,244 | 35 | % | |||||||||||||
Total | 4,539,090 | 3,461,160 | 31 | % | 4,539,090 | 3,461,160 | 31 | % | |||||||||||||
(1) Includes acquired natural gas operations February 1, 2019 through September 30, 2019 results only due to the Merger. | |||||||||||||||||||||
Energy Services | |||||||||||||||||||||
Quarter Ended September 30, | % Diff | Nine Months Ended September 30, | % Diff | ||||||||||||||||||
2019 | 2018 | Fav/Unfav | 2019 | 2018 | Fav/Unfav | ||||||||||||||||
Revenues | $ | 745 | $ | 920 | (19 | )% | $ | 2,846 | $ | 3,065 | (7 | )% | |||||||||
Non-utility cost of revenues, including natural gas | 716 | 897 | 20 | % | 2,696 | 2,998 | 10 | % | |||||||||||||
Revenues less Non-utility cost of revenues, including natural gas | 29 | 23 | 26 | % | 150 | 67 | 124 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 23 | 28 | 18 | % | 73 | 74 | 1 | % | |||||||||||||
Depreciation and amortization | 4 | 4 | — | 12 | 12 | — | |||||||||||||||
Taxes other than income taxes | — | — | — | 1 | 1 | — | |||||||||||||||
Total expenses | 27 | 32 | 16 | % | 86 | 87 | 1 | % | |||||||||||||
Operating Income (Loss) | $ | 2 | $ | (9 | ) | 122 | % | $ | 64 | $ | (20 | ) | 420 | % | |||||||
Timing impacts of mark-to-market gain (loss) | $ | (2 | ) | $ | 1 | (300 | )% | $ | 47 | $ | (71 | ) | 166 | % | |||||||
Throughput data in BCF | 283 | 307 | (8 | )% | 960 | 993 | (3 | )% | |||||||||||||
Number of customers - end of period | 31,000 | 30,000 | 3 | % | 31,000 | 30,000 | 3 | % | |||||||||||||
Reference is made to the Combined Notes to Unaudited Condensed 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, Except Throughput and Customer Data)
(Unaudited)
Infrastructure Services (1) | |||||||
Quarter Ended September 30, 2019 | Nine Months Ended September 30, 2019 (1) | ||||||
Revenues | $ | 377 | $ | 849 | |||
Non-utility cost of revenues, including natural gas | 96 | 228 | |||||
Revenues less Non-utility cost of revenues, including natural gas | 281 | 621 | |||||
Expenses: | |||||||
Operation and maintenance | 223 | 530 | |||||
Depreciation and amortization | 15 | 39 | |||||
Taxes other than income taxes | 1 | 2 | |||||
Total expenses | 239 | 571 | |||||
Operating Income | $ | 42 | $ | 50 | |||
Backlog at period end: | |||||||
Blanket contracts | $ | 637 | $ | 637 | |||
Bid contracts | 301 | 301 | |||||
Total | $ | 938 | $ | 938 | |||
(1) Represents February 1, 2019 through September 30, 2019 results only due to the Merger. | |||||||
Corporate and Other | |||||||||||||||||||||
Quarter Ended September 30, | % Diff | Nine Months Ended September 30, | % Diff | ||||||||||||||||||
2019 | 2018 | Fav/Unfav | 2019 (1) | 2018 | Fav/Unfav | ||||||||||||||||
Revenues | $ | 93 | $ | 3 | 3,000 | % | $ | 215 | $ | 11 | 1,855 | % | |||||||||
Non-utility cost of revenues, including natural gas | 68 | — | — | 158 | — | — | |||||||||||||||
Revenues less Non-utility cost of revenues, including natural gas | 25 | 3 | 733 | % | 57 | 11 | 418 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 2 | (13 | ) | (115 | )% | 25 | (14 | ) | (279 | )% | |||||||||||
Depreciation and amortization | 16 | 9 | (78 | )% | 44 | 24 | (83 | )% | |||||||||||||
Taxes other than income taxes | 3 | 2 | (50 | )% | 5 | 6 | 17 | % | |||||||||||||
Total expenses | 21 | (2 | ) | (1,150 | )% | 74 | 16 | (363 | )% | ||||||||||||
Operating Income (Loss) | $ | 4 | $ | 5 | (20 | )% | $ | (17 | ) | $ | (5 | ) | (240 | )% | |||||||
(1) Includes acquired corporate and other operations February 1, 2019 through September 30, 2019 results only due to the Merger. | |||||||||||||||||||||
Reference is made to the Combined Notes to Unaudited Condensed 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, Except Throughput and Customer Data)
(Unaudited)
Capital Expenditures by Segment | |||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 (1) | 2018 | ||||||||||||
Houston Electric T & D | $ | 239 | $ | 252 | $ | 722 | $ | 669 | |||||||
Indiana Electric Integrated | 46 | — | 135 | — | |||||||||||
Natural Gas Distribution | 324 | 170 | 773 | 409 | |||||||||||
Energy Services | — | 5 | 9 | 13 | |||||||||||
Infrastructure Services | 14 | — | 52 | — | |||||||||||
Corporate and Other | 43 | 7 | 137 | 35 | |||||||||||
Total | $ | 666 | $ | 434 | $ | 1,828 | $ | 1,126 | |||||||
(1) Includes capital expenditures of acquired businesses from February 1, 2019 through September 30, 2019 only due to the Merger. | |||||||||||||||
Interest Expense Detail | |||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Amortization of Deferred Financing Cost | $ | 8 | $ | 16 | $ | 22 | $ | 34 | |||||||
Capitalization of Interest Cost | (10 | ) | (2 | ) | (29 | ) | (6 | ) | |||||||
Securitization Bonds Interest Expense | 9 | 16 | 31 | 46 | |||||||||||
Other Interest Expense | 136 | 76 | 396 | 231 | |||||||||||
Total Interest Expense | $ | 143 | $ | 106 | $ | 420 | $ | 305 | |||||||
Reference is made to the Combined Notes to Unaudited Condensed 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, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 259 | $ | 4,231 | |||
Other current assets | 3,157 | 2,794 | |||||
Total current assets | 3,416 | 7,025 | |||||
Property, Plant and Equipment, net | 20,328 | 14,044 | |||||
Other Assets: | |||||||
Goodwill | 5,179 | 867 | |||||
Regulatory assets | 2,194 | 1,967 | |||||
Investment in unconsolidated affiliates | 2,469 | 2,482 | |||||
Preferred units – unconsolidated affiliate | 363 | 363 | |||||
Other non-current assets | 693 | 261 | |||||
Total other assets | 10,898 | 5,940 | |||||
Total Assets | $ | 34,642 | $ | 27,009 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Current portion of securitization bonds long-term debt | 229 | 458 | |||||
Indexed debt | 21 | 24 | |||||
Current portion of other long-term debt | 618 | — | |||||
Other current liabilities | 2,566 | 2,820 | |||||
Total current liabilities | 3,434 | 3,302 | |||||
Other Liabilities: | |||||||
Accumulated deferred income taxes, net | 3,851 | 3,239 | |||||
Regulatory liabilities | 3,481 | 2,525 | |||||
Other non-current liabilities | 1,516 | 1,203 | |||||
Total other liabilities | 8,848 | 6,967 | |||||
Long-term Debt: | |||||||
Securitization bonds | 817 | 977 | |||||
Other | 13,197 | 7,705 | |||||
Total long-term debt | 14,014 | 8,682 | |||||
Shareholders' Equity | 8,346 | 8,058 | |||||
Total Liabilities and Shareholders' Equity | $ | 34,642 | $ | 27,009 | |||
Reference is made to the Combined Notes to Unaudited Condensed 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, | |||||||
2019 | 2018 | ||||||
Net income | $ | 634 | $ | 248 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 1,028 | 1,016 | |||||
Deferred income taxes | 8 | 33 | |||||
Write-down of natural gas inventory | 5 | 2 | |||||
Equity in earnings of unconsolidated affiliates, net of distributions | 13 | (15 | ) | ||||
Changes in net regulatory assets and liabilities | (101 | ) | 44 | ||||
Changes in other assets and liabilities | (511 | ) | 341 | ||||
Other, net | 10 | 10 | |||||
Net cash provided by operating activities | 1,086 | 1,679 | |||||
Net cash used in investing activities | (7,775 | ) | (674 | ) | |||
Net cash provided by (used in) financing activities | 2,708 | (970 | ) | ||||
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | (3,981 | ) | 35 | ||||
Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 4,278 | 296 | |||||
Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 297 | $ | 331 | |||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
Exhibit 99.2 3RD QUARTER 2019 EARNINGS CALL NOVEMBER 7, 2019
CAUTIONARY STATEMENT This presentation and the oral statements made in connection herewith contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this presentation and the oral statements made in connection herewith are forward-looking statements made in good faith by CenterPoint Energy, Inc. (“CenterPoint Energy” or the “Company”) and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995, including statements concerning CenterPoint Energy’s 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. 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 the acquisition and integration of Vectren Corporation (the “merger”), our growth and guidance (including earnings; customer, utility and rate base growth expectations; anticipated merger cost savings; and non-utility business performance), the performance of and our strategy with respect to Enable Midstream Partners, LP (“Enable”), operation and maintenance expense management efforts, capital resources and expenditures, our regulatory filings and projections (including the pending Houston Electric rate case and the potential impacts of the Proposal for Decision (“PFD”) issued by the administrative law judges in that case, and the Integrated Resources Plan and generation plan with an anticipated timeline in Indiana), our credit quality expectations, 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’s Form 10-K for the year ended December 31, 2018 and Form 10-Q for the quarter ended September 30, 2019 under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors Affecting Future Earnings” and in other filings with the SEC by the Company, which can be found at www.centerpointenergy.com on the Investor Relations page or on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov. A portion of slides 12 and 13 are derived from Enable’s investor presentation as presented during its Q3 2019 earnings presentation dated November 6, 2019. The information in these slides 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 at http://investors.enablemidstream.com. This presentation contains time sensitive information that is accurate as of the date hereof (unless otherwise specified as accurate as of another date). 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. 2
ADDITIONAL INFORMATION Use of Non-GAAP Financial Measures In addition to presenting its financial results in accordance with generally accepted accounting principles (“GAAP”), including presentation of income available to common shareholders and diluted earnings per share, the Company also provides guidance based on adjusted income and adjusted diluted earnings per share, which are non- GAAP financial measures. Additional non-GAAP financial measures used by the Company include funds from operations (“FFO”), core operating income and adjusted operating income. 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 income and adjusted diluted earnings per share used in providing earnings guidance calculation excludes from income available to common shareholders 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. The Company’s guidance for 2019 does not reflect (a) certain merger impacts, which are integration and transaction-related fees and expenses, including severance and other costs to achieve anticipated cost savings as a result of the merger and merger financing impacts in January, before the completion of the merger due to the issuance of debt and equity securities to fund the merger that resulted in higher net interest expense, preferred stock dividend requirements and higher common stock share count and (b) potential impacts of the pending Houston Electric rate case. The core operating income calculation for the Company’s Houston Electric – T&D reportable segment excludes the transition and system restoration bonds. The adjusted operating income calculation for Energy Services excludes mark-to-market gains and losses and for Infrastructure Services excludes certain merger-related expenses. A reconciliation of income available to common shareholders and diluted earnings per share to the basis used in providing guidance is provided in this presentation on slides 34-37. The Company is unable to present a quantitative reconciliation of forward-looking adjusted income and adjusted diluted earnings per share used in providing earnings guidance 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 as they are highly variable and difficult to predict due to various factors outside of management’s control. These excluded items, along with the excluded impacts associated with the merger and potential impacts of the pending Houston Electric rate case, could have a material impact on GAAP-reported results for the applicable guidance period. A reconciliation of adjusted operating income for Energy Services and Infrastructure Services are provided in this presentation on slide 38. Management evaluates the Company’s financial performance in part based on adjusted income, adjusted diluted earnings per share, core operating income and adjusted operating income. 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. 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 on slides 34-38. The Company’s adjusted income, adjusted diluted earnings per share, core operating income and adjusted operating income non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, income available to common shareholders, diluted earnings per share and operating income, 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. 2019 Earnings Per Share Guidance Assumptions CenterPoint Energy’s 2019 earnings per share guidance range considers operations performance to date and assumptions for certain significant variables that may impact earnings, such as customer growth (approximately 2% for electric operations and 1% for natural gas distribution) and usage including normal weather, throughput, commodity prices, recovery of capital invested through rate cases and other rate filings (excluding potential impacts of the pending Houston Electric rate case), effective tax rates, financing activities and related interest rates, and regulatory and judicial proceedings, as well as the volume of work contracted in our Infrastructure Services business. The range also considers anticipated cost savings as a result of the merger. The range assumes the lower end of Enable’s 2019 guidance range for net income attributable to common units, provided on Enable’s Q3 2019 earnings call on November 6, 2019. 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, including those from Enable, earnings or losses from the change in the value of ZENS and related securities, or the timing effects of mark-to-market accounting in the Company’s Energy Services business, which, along with the certain excluded impacts associated with the merger, could have a material impact on GAAP reported results for the applicable guidance period. Refer to the information above in “Use of Non-GAAP Financial Measures” for reconciliation information. 3
AGENDA Xia Liu Scott Prochazka Appendix EVP and CFO President and CEO • • • • • • • • • • • • • • • 2019 Guidance Basis Basis EPS Forecast 2019 Guidance Utility Highlights EPS Drivers Consolidated Quarter Third Objective Strategic Update Midstream Business Highlights Unit andRegulatory Performance Quarter Third Income, EPS and Operating Income Reconciliations Income Operating and EPS Income, Merger Updates Regulatory and Backlog Services Overview Infrastructure and Projections Performance Services Infrastructure and Services Energy Basis Drivers Guidance EPS YTDConsolidated Drivers Income Operating Business Segment Basis EPS Outlook 2020 Guidance - - - Indiana Electric Indiana Distribution Gas Natural Electric Houston - Related Expenses Expenses Detail Related – T&D 4
THIRD QUARTER 2019 PERFORMANCE Q3 YTD 2019 2018 2019 2018 GAAP Diluted EPS $0.47 $0.35 $1.08 $0.56 Vectren merger impacts(1) 0.05 0.04 0.32 0.10 Energy Services mark-to-market (gains) losses 0.00 0.00 (0.08) 0.13 ZENS-related mark-to-market (gains) losses: Marketable securities(2) (0.09) (0.08) (0.32) (0.12) Indexed debt securities(3) 0.10 0.08 0.34 0.57 Guidance Basis $0.53 $0.39 $1.34 $1.24 (Non-GAAP) Diluted EPS Notes: Refer to slide 3 for information on non-GAAP measures; YTD – Nine months ended September 30 (1) Integration and transaction-related fees and expenses, including severance and other costs to achieve anticipated cost savings, as well as financing impacts before the completion of the merger (2) As of and after June 14, 2018, comprised of common stock of AT&T Inc. and Charter Communications, Inc. Prior to June 14, 2018, comprised of common stock of Time Warner Inc. and Charter Communications, Inc. Results prior to January 31, 2018 also included common stock of Time Inc. 5 (3) YTD 2018 results include amount associated with the acquisition of Time Warner Inc. by AT&T Inc. as well as the Meredith tender offer for Time Inc. common stock
HOUSTON ELECTRIC PERFORMANCE METRICS Over 20% customer growth Approaching $8 billion capital deployed over past decade over past decade to serve growing 2.6 customer base $1,000 2.5 2.4 (in (in millions) $800 2.3 Numberofcustomers $ in millions in $ 2.2 $600 2.1 2.0 $400 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E Below average T&D rate(1) across ACSI highest residential customer utility peers in Texas satisfaction ranking(2) among investor- $0.060 owned utilities $0.055 $0.050 $0.045 $/kWh $0.040 $0.035 $0.030 Houston Electric Other investor-owned utilities Houston Electric Other Texas utilities Average Notes: ACSI – American Customer Satisfaction Index. Refer to slide 2 for information on forward-looking statements 6 (1) Based upon current tariffs (2) Based on ACSI Energy Utilities Report 2018 - 2019
HOUSTON ELECTRIC RATE CASE PFD FINANCIAL IMPLICATIONS • Operating income reduction: – ~$138 million(1) compared to request – ~$27 million(1) compared to current rates • FFO reduction from request to PFD of ~$130 million(1)(2)(3) • A pre-tax write-off of ~$120 million and a one-time refund(3) resulting from the rate base disallowances Note: Please refer to slide 3 for information on non-GAAP measures. Please see slides 28 – 29 for full detail on regulatory filings. On October 10, 2019, Houston Electric filed its exceptions to the PFD with the PUCT. The exceptions and any supplements or corrections to those exceptions may be viewed at the following website: http://interchange.puc.texas.gov/Search/Filings?UtilityType=A&ControlNumber=49421&ItemMatch=Equal&DocumentType=ALL&SortOrder=Ascending. Additionally, CenterPoint Energy and Houston Electric filed a Form 8-K on October 11, 2019, which may be viewed at the following website: https://www.sec.gov/ix?doc=/Archives/edgar/data/48732/000113031019000034/a8-k701ceheratecasepfd.htm PFD – Proposal for Decision; PUCT – Public Utility Commission of Texas; FFO – Funds From Operations (1) Assumes issues of $17 million identified in PFD are adjusted; proposed ring fencing provisions could further increase costs. (2) Inclusive of the after tax impacts of operating income change from request to PFD, reduced depreciation and amortization and acceleration of excess deferred income taxes proposed in PFD (3) In addition, a separate proceeding at the PUCT may be required that would determine the amount, if any, of $158 million excess deferred income taxes on securitized assets to be provided to customers 7
HOUSTON ELECTRIC RATE CASE TIMELINE ✓ ALJs at State Office of Administrative Hearings issue PFD on September 16th, returning case to PUCT PFD ✓ Houston Electric and parties exceptions to PFD filed on October 10th Exceptions th & ✓ Houston Electric and parties filed replies to exceptions on October 24 Responses • Deliberations by PUCT expected to begin at open meeting on November 14th, continuing if necessary at subsequent open meetings PUCT deliberation • PUCT order issued on the case & decision • Houston Electric or other parties could file motions for rehearing based on the order issued by the PUCT Motion for rehearing • New rates go into effect 45 days after PUCT order becomes final Rates effective Note: Please see slides 28 – 29 for full detail on regulatory filings. On October 10, 2019, Houston Electric filed its exceptions to the PFD with the PUCT. The exceptions and any supplements or corrections to those exceptions may be viewed at the following website: http://interchange.puc.texas.gov/Search/Filings?UtilityType=A&ControlNumber=49421&ItemMatch=Equal&DocumentType=ALL&SortOrder=Ascending. Additionally, CenterPoint Energy and Houston Electric 8 filed a Form 8-K on October 11, 2019, which may be viewed at the following website: https://www.sec.gov/ix?doc=/Archives/edgar/data/48732/000113031019000034/a8-k701ceheratecasepfd.htm; ALJ – Administrative Law Judge; PFD – Proposal for Decision; PUCT – Public Utility Commission of Texas
NATURAL GAS DISTRIBUTION PERFORMANCE METRICS Approaching 10% customer growth(1) Over $5 billion capital deployed over past over past decade. Addition of over 1 decade to serve growing customer base million customers from merger $1,000 3.6 $800 3.5 $600 3.4 millions in $ $400 (in (in millions) 3.3 $200 Numberofcustomers 3.2 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E Legacy CNP jurisdictions IN and OH jurisdictions Keeping rates low while providing safe, J.D. Power highest residential reliable service to our customers customer satisfaction ranking(2) $1.30 $1.25 $1.20 (3) $1.15 $1.10 $/CCF $1.05 $1.00 $0.95 2009 2014 2019E Notes: Refer to slide 2 for information on forward-looking statements. CCF – 100 cubic feet Natural Gas Distribution Other utilities (1) Exclusive of jurisdictions acquired through the merger (2) CenterPoint Energy received the highest score in the South Large segment of the J.D. Power 2017-2019 Gas Utility Residential Customer Satisfaction Studies (tied in 2017) of customers’ satisfaction with 9 their residential gas provider. Visit jdpower.com/awards (3) Annual average of $/CCF for each natural gas jurisdiction. Vectren natural gas distribution utilities were not a part of CenterPoint Energy until February 1, 2019; 2009 and 2014 amounts exclude Indiana and Ohio jurisdictions
NATURAL GAS DISTRIBUTION REGULATORY UPDATES ✓ Ohio rate case – $23 million(1) ✓ Ohio DRR – $11 million(1) ✓ Arkansas FRP – $7 million(1) ✓ Minnesota CIP – $11 million(2) • Indiana CSIA – requesting $7 million(1) • Louisiana RSP – requesting $3 million(1) • Minnesota general rate case – requesting $62 million(1); anticipate $53 million of interim rates going into effect early next year • Beaumont/East Texas general rate case – anticipated fourth quarter 2019 Note: Refer to slide 2 for information on forward-looking statements. Please see slides 30 – 32 for full detail on regulatory filings; DRR – Distribution Replacement Rider; FRP – Formula Rate Plan; CIP – Conservation Improvement Program; CSIA - Compliance and System Improvement Adjustment; RSP – Rate Stabilization Plan; photo of natural gas distribution pipeline work from the Minnesota region (1) Annual increase in current revenues 10 (2) Recovery of an $11 million incentive and incremental CIP costs as approved by the Minnesota Public Utility Commission
INDIANA ELECTRIC GENERATION TIMELINE Anticipated New Generation Timeline: 2019 2020 2021+ • Q3: Received all source RFP • Q2: Anticipate IRP filing • Anticipate decision on and began initial evaluation (does not require approval) proposed solutions • RFP evaluation to be shared • Q3/Q4: Potential filing(s) for • Potential investment begins at stakeholder meeting in certificate(s) of approval December 11 Note: RFP – Request for Proposals; IRP – Integrated Resource Plan. Refer to slide 2 for information on forward-looking statements
ENABLE EARNINGS CALL HIGHLIGHTS • Focus on securing and executing growth projects including Gulf Run and MASS(1) • Rig efficiencies helping to support volumes despite decline in rig count • Anticipate strong distribution coverage for 2020, with the ability to self-fund the majority of 2020 expansion capital with excess distributable cash flow • Announced 2020 guidance of $385 - $445 million net income attributable to common units 12 Source: Enable’s 3rd quarter earnings presentation dated November 6, 2019 (1) Merge, Arkoma, SCOOP and STACK transportation project
ENABLE: STABLE CASH DISTRIBUTION SUPPORTING UTILITY GROWTH Anticipated cumulative cash provided by Enable stake(1) $3.0 $2.5 $2.0 $1.5 $ Billions $ $1.0 $0.5 $0.0 2019E 2020E 2021E 2022E 2023E On November 5, 2019, Enable declared a quarterly cash distribution of $0.3305 per unit on all outstanding common units Note: Please reference Enable’s third quarter 2019 Form 10-Q and earnings materials dated November 6, 2019. Refer to slide 2 for information on forward-looking statements 13 (1) Represents distributions on Enable common units only; based on actual distributions received life-to-date through September 30, 2019 and anticipated future amounts based on current common unit distribution levels
STRATEGIC OBJECTIVE: INCREASE UTILITY EARNINGS CONTRIBUTION • Execute on merger integration 2019 Estimated Earnings(1) Contribution • Optimize regulatory outcomes 25% Non-Utility • Manage O&M 75% Utility • Invest in utilities Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures (1) Calculated as a combined total of operating income and Midstream equity earnings, where operating income excludes Houston Electric transition and system restoration bonds, Energy Services 14 mark-to-market gains and losses as well as certain merger-related expenses
AGENDA Xia Liu Scott Prochazka Appendix EVP and CFO President and CEO • • • • • • • • • • • • • • • 2019 Guidance Basis Basis EPS Forecast 2019 Guidance Utility Highlights EPS Drivers Consolidated Quarter Third Objective Strategic Update Midstream Business Highlights Unit andRegulatory Performance Quarter Third Income, EPS and Operating Income Reconciliations Income Operating and EPS Income, Merger Updates Regulatory and Backlog Services Overview Infrastructure and Projections Performance Services Infrastructure and Services Energy Basis Drivers Guidance EPS YTDConsolidated Drivers Income Operating Business Segment Basis EPS Outlook 2020 Guidance - - - Indiana Electric Indiana Distribution Gas Natural Electric Houston - Related Expenses Expenses Detail Related – T&D 15
Q3 2019 GUIDANCE BASIS EPS(1) $0.11 $0.01 $0.23 Primary Drivers: Enable performance $0.19 Primary Drivers: $0.08 Businesses Acquired in the Merger $0.03 Energy Services Primary Drivers: $0.03 Effective tax rate $0.19 Merger Financing $0.03 Interest and other Primary Drivers: $0.10 Businesses $0.53 Acquired in the Merger $0.08 O&M $0.39 Management $0.03 Rate Relief $0.02 Customer Growth $0.03 Weather $0.03 Other Q3 2018 Guidance Utility Operations Energy Services and Midstream Investments (4) Other(5) Q3 2019 Guidance Basis EPS (1) Operating Income (2) Infrastructure Services Basis EPS (1) Operating Income (3) Note: All bars exclude certain merger integration and transaction related fees and expenses. Bars for Utility Operations; Energy Services and Infrastructure Services; and Midstream Investments all utilize the 2018 tax rate and the 2018 share count (1) Please refer to slide 34 for reconciliation to GAAP measures and slide 3 for information on non-GAAP measures (2) Includes Houston Electric – T&D, Indiana Electric – Integrated and Natural Gas Distribution; excludes transition and system restoration bonds and TCJA revenue reductions. See slides 22 and 23 for details (3) Energy Services excludes mark-to-market loss of $2 million in 2019 and gain of $1 million in 2018 (4) Please reference Enable’s third quarter 2019 Form 10-Q and earnings materials dated November 6, 2019 (5) Includes the Corporate and Other segment, TCJA revenue reductions attributable to the Houston Electric – T&D and legacy CenterPoint Natural Gas Distribution jurisdictions, as well as other income, 16 interest expense (excluding transition and system restoration bonds), income taxes, preferred stock dividend requirements and the increase in share count
STRONG UTILITY CUSTOMER GROWTH 4,539 1,031 3,461 3,508 3,508 2,475 2,523 Number of customers (‘000s) of customers Number Q3 2018 Q3 2019 Q3 2018 Q3 2019 Total including jurisdictions Houston Electric Natural Gas Distribution acquired through the merger Note: 17 (1) Exclusive of jurisdictions acquired through the merger
STRONG UTILITY PERFORMANCE Utility O&M Management(1) Utility Capital Investments(2) 0.1 2.4 ~2.6 ~$100 million Anticipated YOY 2.3 decline(1) (6% reduction) $ Billions $ 1.6 $ Billions $ 1.5 2018 2019E 2019 capital (3) Anticipated 2019 2019 capital Anticipated average incremental capital forecast annual capital (4) forecast for 2020 - 2024 Note: Refer to slide 2 for information on forward-looking statements (1) Inclusive of Houston Electric, Indiana Electric Integrated and Natural Gas Distribution business segments. Excluding utility costs to achieve and amounts with revenue offsets. 2019 results include actuals for January 1, 2019 through September 30, 2019 and projections for October 1, 2019 through December 31, 2019. Amounts are inclusive of Vectren utilities even though they were not a part of CenterPoint Energy until February 1, 2019 (2) Inclusive of total CenterPoint Energy capital excluding Energy Services and Infrastructure Services 18 (3) Based on capital disclosed in Q4 2018 earnings materials (4) Anticipated to be at least at the average of annual forecasted capital level for the periods 2019 through 2023 per capital disclosed in Q4 2018 earnings materials
2019 GUIDANCE BASIS EPS (1) NEAR TOP END OF GUIDANCE RANGE First Nine Months $0.10(5) Three Months Remaining $0.08 $0.01 $0.49 $0.05 $0.16 $1.69 $1.60 $0.07 $1.70 $0.48 $0.15 $1.60 $0.36 Q4 $1.24 $1.34 Sept Sept YTD YTD $1.83 2018 Guidance Utility Energy Midstream Other (4) Utility Energy Midstream Other (4) 2019 Guidance Basis EPS (1) Operations Services and Investments Operations Services and Investments Basis EPS (1) Operating Infrastructure Operating Infrastructure Income (2) Services Income(2) Services Operating Operating Income(3) Income(3) Note: Refer to slide 2 for information on forward-looking statements and refer to slide 3 for information on non-GAAP measures and 2019 earnings per share guidance assumptions that include assumptions for certain significant variables that may impact earnings. Guidance does not consider other potential impacts, such as changes in accounting standards or unusual items, including those from Enable, earnings or losses from the change in the value of ZENS and related securities, or the timing effects of mark-to-market accounting in the Company’s Energy Services business and certain excluded impacts associated with the merger and potential impacts of the pending Houston Electric rate case. All bars exclude certain merger integration and transaction related fees and expenses as well as merger financing impacts before the completion of the merger. Legacy Vectren results represented for February 1, 2019 through December 31, 2019 only. Bars for Utility Operations; Energy Services and Infrastructure Services; and Midstream Investments all utilize the 2018 tax rate and the 2018 share count (1) Please refer to slides 34 – 37 for reconciliation to GAAP measures (2) Includes Houston Electric – T&D, Indiana Electric – Integrated and Natural Gas Distribution; excludes transition and system restoration bonds and TCJA revenue reductions (3) Energy Services excludes mark-to-market gains and losses (4) Includes the Corporate and Other segment, TCJA revenue reductions attributable to the Houston Electric – T&D and legacy CenterPoint Natural Gas Distribution jurisdictions, as well as other income, interest expense (excluding transition and system restoration bonds), income taxes, preferred stock dividend requirements and the increase in share count. Merger-related financing represents February 1, 2019 through December 31, 2019 19 results only (5) Please refer to slide 24 for September year-to-date variance walk
2020 GUIDANCE BASIS EPS TO BE PROVIDED ON Q4 EARNINGS CALL Nov 2019 Jan 2020 ✓ Enable 2020 • Finalize capital and guidance financial planning process Q4 2019 Feb 2020 • Expected timing Q4 CNP earnings call for Houston • 2020 guidance Electric rate (excluding Enable) case order • 5-year utility EPS growth • 5-year capital plan • Financing plan Notes: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures and 2019 earnings per share guidance assumptions that include assumptions for certain significant variables that may impact earnings. Guidance does not consider other potential impacts, such as changes in accounting standards or unusual items, including those from Enable, 20 earnings or losses from the change in the value of ZENS and related securities, or the timing effects of mark-to-market accounting in the Company’s Energy Services business and certain excluded impacts associated with the merger and potential impacts of the pending Houston Electric rate case.
AGENDA • Third Quarter Performance • Business Unit and Regulatory Highlights - Houston Electric – T&D - Natural Gas Distribution - Indiana Electric Scott Prochazka Scott • Midstream Update President and CEO and President • Strategic Objective • Third Quarter Consolidated EPS Drivers • Utility Highlights Xia Liu Xia • 2019 Guidance Basis EPS Forecast EVP and CFO and EVP • 2020 Guidance Basis EPS Outlook • Business Segment Operating Income Drivers • YTD Consolidated Guidance Basis EPS Drivers • Energy Services and Infrastructure Services Performance and Projections • Infrastructure Services Overview and Backlog Appendix • Regulatory Updates • Merger-Related Expenses Detail • Income, EPS and Operating Income Reconciliations 21
HOUSTON ELECTRIC – T&D: CORE OPERATING INCOME DRIVERS Q3 2019 V. Q3 2018 $41 $261 $9 $14 $9 $214 $9 $17 $3 Federal income tax expense is also decreased $ Millions $ $247 $197 (2) (3) Q3 2018 Houston TCJA revenue Rate relief Customer growth Other Depreciation and Q3 2019 Houston Electric - T&D Core reduction taxes Electric - T&D Core Operating Income (1) Operating Income (4) Operating Income, excluding equity return Equity return, primarily related to true-up proceeds Note: (1) Houston Electric – T&D Core Operating Income excludes $13 million from transition and system restoration bonds (2) Includes rate changes, exclusive of the TCJA impact (3) Includes lower operation and maintenance expenses of $29 million and higher usage of $12 million (weather alone accounted for $18 million of variance versus near normal weather for Q3 2018). These were partially offset by lower equity return of $3 million 22 (4) Houston Electric – T&D Core Operating Income excludes $8 million from transition and system restoration bonds
NATURAL GAS DISTRIBUTION: OPERATING INCOME DRIVERS Q3 2019 V. Q3 2018 $7 $7 $ Millions $ Federal income tax $3 $27 expense is also decreased $9 $3 $2 Q3 2018 Natural TCJA revenue Rate relief (1) Customer growth Other (2) Jurisdictions Q3 2019 Natural Gas Distribution reduction acquired in merger Gas Distribution Operating Income Operating Income Note: (1) Includes rate increases, exclusive of the TCJA impact 23 (2) Includes lower operation and maintenance expenses of $12 million, partially offset by decoupling normalization timing of $8 million
FIRST NINE MONTHS 2019 V. FIRST NINE MONTHS 2018 GUIDANCE BASIS EPS(1) $0.08 $0.01 $0.49 Primary Drivers: Primary Drivers: Enable performance $0.14 Businesses Acquired in the Merger $0.06 Energy Services $0.48 Primary Drivers: Primary Drivers: $0.29 Businesses $0.08 Effective tax rate Acquired in the Merger $0.48 Merger Financing $0.12 Rate Relief $0.08 Interest and other $0.07 O&M Management $0.06 Customer Growth $1.34 $1.24 $0.02 Weather $0.05 Equity Return $0.02 Other Nine Months Ended 2018 Utility Operations Energy Services and Midstream Investments (4) Other(5) Nine Months Ended 2019 Guidance Basis EPS (1) Operating Income (2) Infrastructure Services Guidance Basis EPS (1) Operating Income(3) Note: All bars exclude certain merger integration and transaction related fees and expenses as well as financing impacts before the completion of the merger. Legacy Vectren results represented for February 1, 2019 through September 30, 2019 only. Bars for Utility Operations; Energy Services and Infrastructure Services; and Midstream Investments all utilize the 2018 tax rate and the 2018 share count (1) Please refer to slide 35 for reconciliation to GAAP measures and slide 3 for information on non-GAAP measures (2) Includes Houston Electric – T&D, Indiana Electric – Integrated and Natural Gas Distribution; excludes transition and system restoration bonds and TCJA revenue reductions. (3) Energy Services excludes mark-to-market gain of $47 million in 2019 and loss of $71 million in 2018 (4) Please reference Enable’s third quarter 2019 Form 10-Q and earnings materials dated November 6, 2019 (5) Includes the Corporate and Other segment, TCJA revenue reductions attributable to the Houston Electric – T&D and legacy CenterPoint Natural Gas Distribution jurisdictions, as well as other income, 24 interest expense (excluding transition and system restoration bonds), income taxes, preferred stock dividend requirements and the increase in share count. Merger-related financing represents February 1, 2019 through September 30, 2019 results only
ENERGY SERVICES AND INFRASTRUCTURE SERVICES ADJUSTED OPERATING INCOME(1) Energy Services Infrastructure Services $84 - $94 Three Months Remaining $63 $66 $66 $56 $42 $47 $35 - $45 Three Months YTD Remaining YTD (2) 2016A 2017A 2018A 2019E (2) 2016A 2017A 2018A 2019E $60 $60 $ Millions $ $50 $50 $40 $40 $30 $30 $20 $20 $10 $10 $0 $0 ($10) ($10) 2017 2018 2019A 2017 2018 2019A ($20) ($20) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures and 2019 earnings per share guidance assumptions that include assumptions for certain significant variables that may impact earnings including weather, commodity prices and volume of work contracted 25 (1) Excludes Energy Services mark-to-market gains and losses and Infrastructure Services merger-related expenses (2) 2019 results include actuals for January 1, 2019 through September 30, 2019 and projections for October 1, 2019 through December 31, 2019. Infrastructure Services was not a part of CenterPoint Energy until February 1, 2019. January 2019 actual results included an operating loss of $10 million as part of Vectren and are reflected above. Refer to slide 38 for a reconciliation to GAAP measures
INFRASTRUCTURE SERVICES OVERVIEW • Long-term relationships with customers averages approximately 35 years with top 10 distribution customers • Building on history and reputation with addition of several significant new customers over the past few years • Three construction divisions: Distribution Transmission Municipal Revenue Composition (1) Pipeline Pipeline Pipeline As of September 30, 2019 construction and construction and construction and maintenance in maintenance in oil, repair in water and 3% natural gas natural gas and wastewater distribution liquids pipeline pipeline markets pipeline industry construction industry Geographic focus 51% Geographic focus within Midwest and 46% across 30 states Geographic focus Southern U.S. within Midwest and Northern U.S. Transmission Distribution Municipal 26 Note: (1) From the period February 1, 2019 through September 30, 2019
INFRASTRUCTURE SERVICES BACKLOG • Backlog represents the amount of revenue CIS expects to realize from work to be performed on uncompleted contracts in the next twelve months • CIS primarily operates under two types of contracts, both of which are generally less than 1 year and consist of fixed price, unit, and time and materials billing structure – Blanket contracts: master service agreement contracts billed at least monthly, with no contractual volume commitment – Bid contracts: contractual commitment of customer to specific service to be performed for specific price 12 Month Backlog (in millions) $996 $933 $938 $730 $455 $317 $301 32% $250 $616 $637 68% $480 $541 Q4'18 Q1'19 Q2'19 Q3'19(1) Blanket Bid 27 Note: CIS – CenterPoint Infrastructure Services (1) Approximately one-third of the $300 million single transmission project remains in backlog as of September 30, 2019
ELECTRIC OPERATIONS Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism Additional Information (Decrease) (1) Date Date Date (in millions) CenterPoint Energy - Houston Electric (PUCT) On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates, seeking approval for revenue increases of approximately $194 million, excluding a rider to refund approximately $40 million annually over three years discussed below. This rate filing is based on a rate base of $6.4 billion, a 50% debt, 50% equity capital structure, and a 10.4% ROE. Houston Electric last filed for a base rate increase on June 30, 2010, with a test year ending December 31, 2009. Houston Electric also requested a prudency determination on all capital investments made since January 1, 2010, the establishment of a rider to refund over three years to its customers approximately $119 million of unprotected EDIT resulting from the TCJA, updated depreciation rates and approval to clarify and update various non-rate tariff provisions. Recovery of all reasonable and necessary rate case expenses for this case and certain prior rate case proceedings were severed into a separate proceeding. A hearing was held June 24–28, 2019. On September 16, 2019, the ALJs issued a PFD recommending a revenue increase of approximately $2.6 million based on a 55% debt, 45% equity capital structure, a 9.42% ROE, rate base reductions Rate Case (1) $155 Apr-19 TBD TBD of approximately $350 million, operation and maintenance expense disallowances and certain “ring- fencing” measures. If the PFD were approved in its entirety, it would result, among other things, in a one-time refund obligation of capital previously recovered through Houston Electric’s TCOS and DCRF mechanisms, and a pre-tax write-off of approximately $120 million for rate base disallowance of assets recorded in CenterPoint Energy’s and Houston Electric’s Condensed Consolidated Balance Sheets as of September 30, 2019. The amount of any refunds for previously recovered capital would be determined in a separate proceeding with the PUCT. Furthermore, the PFD recommends a separate proceeding with the PUCT to determine the amount, if any, of $158 million EDIT on Houston Electric’s securitized assets to be provided to customers. Parties filed exceptions and replies to exceptions in October 2019. The PUCT has not yet begun deliberating on the PFD, which is prepared by judges at a different state agency. A final order from the PUCT is currently expected in the fourth quarter of 2019, but motions for rehearing, if granted, could result in the order being issued in 2020. CenterPoint Energy and Houston Electric cannot predict the outcome of the proceeding. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) EDIT – Excess Deferred Income Taxes; TCJA – Tax Cuts and Jobs Act; ALJ – Administrative Law Judge; PFD – Proposal for Decision TCOS – Transmission Cost of Service; DCRF – Distribution Cost Recovery Factor 28 (1) Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates
ELECTRIC OPERATIONS Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism Additional Information (Decrease) (1) Date Date Date (in millions) CenterPoint Energy - Houston Electric (PUCT) The PUCT issued a final order in October 2019 approving recovery of 2020 EECRF of $35 million, EECRF $7 May-19 Mar-2020 Oct-2019 including a $7 million performance bonus. CenterPoint Energy - Indiana Electric (IURC) Requested an increase of $24 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is TDSIC 3 Feb-19 May-19 May-19 deferred until next rate case. The mechanism also includes refunds associated with the TCJA, resulting in a change of $5 million, and a change in the total (over)/under-recovery variance of $5 million annually. Requested an increase of $35 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is TDSIC (1) 4 Aug-19 Nov-19 TBD deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance of $4 million annually. Requested an increase of $58 million to rate base, which reflects a $13 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is ECA - MATS 13 Feb-18 Jan-19 Apr-19 deferred until next rate case. The mechanism includes recovery of prior accounting deferrals associated with investments (depreciation, carrying costs, operating expenses). Requested an increase of $13 million to rate base related to solar pilot investments, which reflects a CECA 2 Feb-19 Jun-19 May-19 $2 million annual increase in current revenues. Additional solar investment to supply 50 MW of solar capacity is approved and will be included for recovery once completed in 2021. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) EECRF – Energy Efficiency Cost Recovery Factor; TDSIC – Transmission, Distribution and Storage System Improvement Charge; ECA – Environmental Cost Adjustment; CECA – Clean Energy Cost Adjustment 29 (1) Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates
NATURAL GAS DISTRIBUTION Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and CERC - Beaumont/East Texas, South Texas, Houston and Texas Coast (Railroad Commission) GRIP $20 Mar-19 Jul-19 Jun-19 Based on net change in invested capital of $123 million. CenterPoint Energy and CERC – Houston and Texas Coast (Railroad Commission) On August 1, 2019, and subsequent supplemental filings in August and Administrative October 2019, Houston and Texas Coast proposed a rider to refund over N/A Aug-19 TBD TBD 104.111 three years to its Houston and Texas Coast customers combined, approximately $18 million of unprotected EDIT related to the TCJA. CenterPoint Energy and CERC - Arkansas (APSC) Based on ROE of 9.5% approved in the last rate case. On August 23, 2019, the APSC approved a unanimous comprehensive settlement that results in FRP 7 Apr-19 Oct-19 Aug-19 an FRP revenue increase of $7 million and includes additional non- monetary items. CenterPoint Energy and CERC - Louisiana (LPSC) RSP(1) 3 Sep-19 Dec-19 TBD Based on ROE of 9.95% CenterPoint Energy and CERC – Minnesota (MPUC) CIP Financial 11 May-19 Oct-19 Sep-19 CIP Financial Incentive based on 2018 activity. Incentive Represents over-recovery of $21 million recorded for and during the period Decoupling N/A Sep-19 Sep-19 TBD July 1, 2018 through June 30, 2019, partially offset by over-refund of $2 million related to the period July 1, 2017 through June 30, 2018. Reflects a proposed 10.15% ROE on a 51.39% equity ratio. Interim rates Rate Case(1) 62 Oct-19 TBD TBD reflecting an annual increase of $53 million requested to be effective January 1, 2020. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) GRIP – Gas Reliability Infrastructure Program; FRP – Formula Rate Plan; CIP – Conservation Improvement Program 30 (1) Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates
NATURAL GAS DISTRIBUTION Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and CERC - Mississippi (MPSC) RRA (1) $2 May-19 TBD TBD Based on ROE of 9.26%. CenterPoint Energy and CERC - Oklahoma (OCC) Based on ROE of 10%. On July 26, 2019, the ALJ recommended that the PBRC 2 Mar-19 Sep-19 Aug-19 OCC approve an increase of $2 million. On August 29, 2019, the OCC approved the ALJ-recommended revenue increase of $2 million. CenterPoint Energy - Indiana South - Gas (IURC) Requested an increase of $16 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate CSIA 3 Oct-18 Jan-19 Jan-19 case. The mechanism also includes refunds associated with the TCJA, resulting in a change of $(1) million, and a change in the total (over)/under- recovery variance of $(3) million annually. Requested an increase of $22 million to rate base, which reflects a $5 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate CSIA 5 Apr-19 Jul-19 Jul-19 case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $3 million annually. Requested an increase of $18 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate CSIA(1) 3 Oct-19 Jan-20 TBD case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $(0.2) million annually. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) RRA – Rate Regulation Adjustment; PBRC – Performance Based Rate Change; CSIA – Compliance and System Improvement Adjustment 31 (1) Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates
NATURAL GAS DISTRIBUTION Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy - Indiana North - Gas (IURC) Requested an increase of $54 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate CSIA $3 Oct-18 Jan-19 Jan-19 case. The mechanism also includes refunds associated with the TCJA, resulting in a change of $(11) million, and a change in the total (over)/under-recovery variance of $(19) million annually. Requested an increase of $58 million to rate base, which reflects a $12 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate CSIA 12 Apr-19 Jul-19 Jul-19 case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $14 million annually. Requested an increase of $29 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until next rate CSIA(1) 4 Oct-19 Jan-20 TBD case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $(7) million annually. CenterPoint Energy - Ohio (PUCO) Requested an increase of $78 million to rate base for investments made in 2018, which reflects a $11 million annual increase in current revenues. A DRR 11 May-19 Sep-19 Aug-19 change in (over)/under-recovery variance of $(3) million annually is also included in rates. All pre-2018 investments are included in rate case request. Settlement agreement approved by PUCO Order that provides for a $23 million annual increase in current revenues. Order based upon $622 million Rate Case 23 Mar-18 Sep-19 Aug-19 of total rate base, a 7.48% overall rate of return, and extension of conservation and DRR programs. Application to flow back to customers certain benefits from the TCJA. Initial impact reflects credits for 2018 of $(10) million and 2019 of $(8) million, TSCR (1) (18) Jan-19 TBD TBD with mechanism to begin subsequent to new base rates. Order is expected in the fourth quarter of 2019 or early 2020. 32 Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) CSIA – Compliance and System Improvement Adjustment; DRR – Distribution Replacement Rider; TSCR – Tax Savings Credit Rider
SUMMARY OF MERGER-RELATED EXPENSES(1) Quarter Ended September 30, 2019 Nine Months Ended September 30, 2019 O&M Amortization of Total O&M Amortization of Total ($ in millions) Expense Intangibles(3) Impact Expense(2) Intangibles(3) Impact Houston Electric - T&D $ - $ - $ - $ 10 $ - $ 10 Indiana Electric - Integrated - - - 20 - 20 Natural Gas Distribution(4) 1 - 1 54 - 54 Infrastructure Services - 6 6 13 15 28 Corporate and Other(5) 18 1 19 64 3 67 Operating Income Impact $ 19 $ 7 $ 26 $ 161 $ 18 $ 179 Quarter Ended September 30, 2018 Nine Months Ended September 30, 2018 O&M Amortization of Total O&M Amortization of Total ($ in millions) Expense Intangibles Impact Expense(2) Intangibles Impact Corporate and Other $ 5 $ - $ 5 $ 32 $ - $ 32 Operating Income Impact $ 5 $ - $ 5 $ 32 $ - $ 32 Notes: (1) Represents certain impacts reported in operating income which are excluded from guidance basis EPS (2) 2019 amount primarily consists of severance and incentive compensation costs; 2018 amount primarily consists of transaction costs (3) Attributable to construction backlog; reported in non-utility cost of revenues, including natural gas (4) Includes $10 million attributable to legacy CenterPoint Natural Gas Distribution jurisdictions and $44 million attributable to new jurisdictions acquired through the merger 33 (5) Includes amounts associated with Energy Systems Group (ESG)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended September 30, 2019 September 30, 2018 Dollars Dollars in millions Diluted EPS (1) in millions Diluted EPS (1) Consolidated income available to common shareholders and diluted EPS $ 241 $ 0.47 $ 153 $ 0.35 Timing effects impacting CES(2): Mark-to-market (gains) losses (net of taxes of $1 and $0)(3) 1 - (1) - ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $12 and $9) (3)(4) (47) (0.09) (34) (0.08) Indexed debt securities (net of taxes of $12 and $10) (3) 50 0.10 34 0.08 Consolidated on a guidance basis $ 245 $ 0.48 $ 152 $ 0.35 Impacts associated with the Vectren merger (net of taxes of $5 and $2) (3) 20 0.05 18 0.04 Consolidated on a guidance basis, excluding impacts associated with the Vectren merger $ 265 $ 0.53 $ 170 $ 0.39 Notes: Refer to slide 3 for information on non-GAAP measures (1) Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares outstanding during the quarter, and the sum of the quarters may not equal year-to- date diluted EPS (2) Energy Services segment 34 (3) Taxes are computed based on the impact removing such item would have on tax expense (4) Comprised of common stock of AT&T Inc. and Charter Communications, Inc.
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Nine Months Ended September 30, 2019 September 30, 2018 Dollars Dollars in millions Diluted EPS (1) in millions Diluted EPS (1) Consolidated income available to common shareholders and diluted EPS $ 546 $ 1.08 $ 243 $ 0.56 Timing effects impacting CES(2): Mark-to-market (gains) losses (net of taxes of $11 and $17)(3) (36) (0.08) 54 0.13 ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $43 and $14) (3)(4) (163) (0.32) (52) (0.12) Indexed debt securities (net of taxes of $45 and $67) (3)(5) 171 0.34 249 0.57 Consolidated on a guidance basis $ 518 $ 1.02 $ 494 $ 1.14 Impacts associated with the Vectren merger: Merger impacts other than the increase in share count (net of taxes of $39 and $10) (3) 146 0.30 44 0.10 Impact of increased share count on EPS - 0.02 - - Total merger impacts 146 0.32 44 0.10 Consolidated on a guidance basis, excluding impacts associated with the Vectren merger $ 664 $ 1.34 $ 538 $ 1.24 Notes: Refer to slide 3 for information on non-GAAP measures (1) Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares outstanding during the quarter, and the sum of the quarters may not equal year-to- date diluted EPS (2) Energy Services segment (3) Taxes are computed based on the impact removing such item would have on tax expense (4) As of and after June 14, 2018, comprised of common stock of AT&T Inc. and Charter Communications, Inc. Prior to June 14, 2018, comprised of common stock of Time Warner Inc. and Charter 35 Communications, Inc. Results prior to January 31, 2018 also included common stock of Time Inc. (5) 2018 results include amount associated with the acquisition of Time Warner Inc. by AT&T Inc. as well as the Meredith tender offer for Time Inc. common stock
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended December 31, 2018 Dollars in millions Diluted EPS Consolidated income available to common shareholders and diluted EPS $ 90 $ 0.18 Timing effects impacting CES(1): Mark-to-market (gains) losses (net of taxes of $9)(2) 30 0.06 ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $19)(2)(3) 69 0.13 Indexed debt securities (net of taxes of $18)(2) (66) (0.13) Consolidated on a guidance basis $ 123 $ 0.24 Impacts associated with the Vectren merger Merger impacts excluding increase in share count (net of taxes of $2)(2) 37 0.07 Impact of increased share count on EPS - 0.05 Total merger impacts 37 0.12 Consolidated on a guidance basis, excluding impacts associated with the Vectren merger $ 160 $ 0.36 Notes: Refer to slide 3 for information on non-GAAP measures (1) Energy Services segment 36 (2) Taxes are computed based on the impact removing such item would have on tax expense (3) Comprised of common stock of AT&T Inc. and Charter Communications, Inc
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Twelve Months Ended December 31, 2018 Dollars in millions Diluted EPS Consolidated income available to common shareholders and diluted EPS $ 333 $ 0.74 Midstream Investments (223) (0.49) Utility Operations (1) 110 0.25 Timing effects impacting CES(2): Mark-to-market (gains) losses (net of taxes of $26)(3) 84 0.18 ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $5) (3)(4) 17 0.04 Indexed debt securities (net of taxes of $49) (3)(5) 183 0.40 Utility operations earnings on an adjusted guidance basis $ 394 $ 0.87 Adjusted net income and adjusted diluted EPS used in providing earnings guidance: Utility Operations on a guidance basis $ 394 $ 0.87 Midstream Investments 223 0.49 Consolidated on a guidance basis $ 617 $ 1.36 Impacts associated with the Vectren merger: Merger impacts other than the increase in share count (net of taxes of $12) (3) 81 0.18 Impact of increased share count on Utility EPS - 0.04 Impact of increased share count on Midstream EPS - 0.02 Total merger impacts 81 0.24 Utility Operations on a guidance basis, excluding impacts associated with the Vectren merger $ 475 $ 1.09 Midstream Investments excluding impacts associated with the Vectren merger 223 0.51 Consolidated on a guidance basis, excluding impacts associated with the Vectren merger $ 698 $ 1.60 (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 June 14, 2018, comprised of AT&T Inc. and Charter Communications, Inc. Prior to June 14, 2018, comprised of Time Warner Inc. and Charter Communications, Inc. Results prior to January 31, 2018 also included Time Inc. Notes: Refer(5) 2018to slide includes 3 for informationamounts associated on non -withGAAP the measures acquisition of Time Warner Inc. by AT&T Inc. as well as the Meredith tender offer for Time Inc. common stock (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 and after June 14, 2018, comprised of common stock of AT&T Inc. and Charter Communications, Inc. Prior to June 14, 2018, comprised of common stock of Time Warner Inc. and Charter 37 Communications, Inc. Results prior to January 31, 2018 also included common stock of Time Inc. (5) 2018 results include amount associated with the acquisition of Time Warner Inc. by AT&T Inc. as well as the Meredith tender offer for Time Inc. common stock
RECONCILIATION: OPERATING INCOME TO ADJUSTED OPERATING INCOME FOR CES AND CIS CES CIS Year Ended Year Ended 2016 2017 2018 2019E(1)(4) 2016 2017 2018 2019E(1)(4) (Dollars in Millions) Operating Income on GAAP Basis $ 21 $ 126 $ (47) $ 87 $ 56 $ 66 $ 66 $ 61 CES mark-to-market (gains) losses(2) 21 (79) 110 (47) - - - - Merger-related expenses (3) - - - - - - - 28 Adjusted Operating Income $ 42 $ 47 $ 63 $ 40 $ 56 $ 66 $ 66 $ 89 Notes: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures and 2019 earnings per share guidance assumptions that include assumptions for certain significant variables that may impact earnings including weather, commodity prices and volume of work contracted. CES - CenterPoint Energy Services; CIS - CenterPoint Energy Infrastructure Services (1) 2019 results include actuals for January 1, 2019 through September 30, 2019 and projections for October 1, 2019 through December 31, 2019. Infrastructure Services was not a part of CenterPoint Energy until February 1, 2019. January 2019 actual results included an operating loss of $10 million as part of Vectren and are reflected above (2) 2019 amount is for the nine months ended September 30, 2019. The Company is unable to present a quantitative reconciliation of forward-looking adjustments used in providing earnings guidance (3) Includes severance and incentive compensation costs, as well as amortization of intangibles attributable to construction backlog for the nine months ended September 30, 2019. The Company is unable 38 to present a quantitative reconciliation of forward-looking adjustments used in providing earnings guidance (4) Represents the midpoint of the 2019 operating income estimates presented on slide 25