UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 27, 2020
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 February 27, 2020, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported fourth quarter and full-year 2019 earnings. For additional information regarding CenterPoint Energy’s fourth quarter and full-year 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 fourth quarter and full-year 2019 earnings on February 27, 2020. Information about the call can be found in the Press Release furnished herewith as Exhibit 99.1. For additional information regarding CenterPoint Energy’s fourth quarter and full-year 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: February 27, 2020 | 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 full-year 2019 earnings of $1.33 per
diluted share; $1.79 earnings per diluted share on a guidance basis,
excluding certain Vectren merger impacts and impairment charges
• Strong utility performance drives 2019 results well above upper end of EPS guidance basis range of $1.60 - $1.70 |
• Sale of Energy Services and Infrastructure Services businesses |
• Announced 2020 Utility EPS guidance range of $1.10 - $1.20; 2020 Midstream Investments EPS expected range of $0.23 - $0.28 |
Houston - February 27, 2020 - CenterPoint Energy, Inc. (NYSE: CNP) today reported income available to common shareholders of $674 million, or $1.33 per diluted share, for the full-year 2019, compared with $333 million, or $0.74 per diluted share for the full-year 2018. On a guidance basis, full-year 2019 earnings were $1.79 per diluted share, excluding certain impacts associated with the Vectren merger (the merger) and non-cash impairment charges recorded at Energy Services and Midstream Investments. Full-year 2019 earnings, on a guidance basis, included $0.12 of favorable weather and one-time tax benefits. Full-year 2018 earnings, on a guidance basis and excluding certain impacts associated with the merger, were $1.60 per diluted share.
Fourth quarter 2019 earnings were $0.25 per diluted share, compared to $0.18 per diluted share for the fourth quarter of 2018. On a guidance basis and excluding certain impacts associated with the merger and non-cash impairment charges, fourth quarter 2019 earnings were $0.45 per diluted share, compared to $0.36 per diluted share for the fourth quarter of 2018.
“I am very pleased with our 2019 results, driven by strong utility performance, primarily as a result of customer growth and disciplined cost management, as well as favorable weather and tax related outcomes,” said John W. Somerhalder II, interim president and chief executive officer of CenterPoint Energy. “The recently announced agreements to sell our Energy Services and Infrastructure Services businesses will further sharpen the company’s focus on our core utility businesses, improving our business profile and earnings quality, while at the same time strengthening our balance sheet and enhancing our investment grade credit quality.”
Business Segments
Houston Electric - Transmission & Distribution
The Houston electric - transmission & distribution segment reported operating income of $624 million for the full-year 2019, consisting of $590 million from the regulated electric transmission and distribution utility operations (TDU) and $34 million related to securitization bonds. Operating income for the TDU for 2019 includes $10 million of merger-related expenses. Excluding merger-related expenses, 2019 TDU operating income was $600 million.
Operating income for 2018 was $623 million, consisting of $568 million from the TDU and $55 million related to securitization bonds. Excluding merger-related expenses, operating income for the TDU benefited primarily from rate relief, lower operation and maintenance expenses, customer growth and miscellaneous revenues, primarily
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related to right-of-way revenues. These benefits were partially offset by increased depreciation and amortization expense, lower usage, lower revenues related to the Tax Cuts and Jobs Act (TCJA) and lower equity return, primarily related to the annual true-up of transition charges.
Indiana Electric – Integrated
The Indiana electric – integrated segment reported operating income of $90 million for the full-year 2019. Operating income includes $21 million of merger-related expenses. These results are not comparable to 2018 as this segment was acquired in the merger in February 2019.
Natural Gas Distribution
The natural gas distribution segment reported operating income of $408 million for the full-year 2019. Operating income includes $55 million of merger-related expenses. Excluding merger-related expenses, 2019 natural gas distribution segment operating income was $463 million. Natural gas distribution segment operating income for the full-year 2018 was $266 million.
Excluding merger-related expenses, operating income increased $136 million due to the gas utilities acquired in the merger in February 2019. The remaining increase is primarily due to favorable weather and usage, driven by timing of a decoupling mechanism in Minnesota, rate relief, customer growth and lower operation and maintenance expenses. These increases were partially offset by increased depreciation and amortization expense.
Energy Services
The energy services segment reported operating income of $32 million for the full-year 2019, which included a mark-to-market gain of $39 million and a non-cash impairment charge of $48 million recorded for goodwill, compared with an operating loss of $47 million for 2018, which included a mark-to-market loss of $110 million. Excluding mark-to-market adjustments and the non-cash impairment charge, operating income was $41 million for the full-year 2019 compared to $63 million for 2018. Operating income, excluding mark-to-market adjustments and the non-cash impairment charge, decreased primarily as a result of a decrease in margin due to fewer opportunities to optimize natural gas supply costs in 2019 relative to 2018.
Infrastructure Services
The infrastructure services segment reported operating income of $95 million for the full-year 2019. Operating income includes $32 million of merger-related expenses. These results are not comparable to 2018 as this segment was acquired in the merger in February 2019.
Midstream Investments
The midstream investments segment reported $229 million of equity income for the full-year 2019, which included the company's share, $46 million, of the non-cash impairment charge Enable Midstream Partners, LP (Enable) recorded for goodwill. Equity income for 2018 was $307 million. For further detail, please refer to Enable's investor materials provided during its 4th quarter earnings call on February 19, 2020.
Corporate and Other
The corporate and other segment reported an operating loss of $23 million for the full-year 2019, compared with an $11 million operating loss for 2018. Operating income in 2019 included $79 million of merger-related expenses. Operating income for 2018 included $46 million of merger-related expenses.
Earnings Outlook
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To provide greater transparency on utility earnings, 2020 guidance will be presented in two components, a guidance basis Utility EPS range and a Midstream Investments EPS expected range.
• | 2020 guidance basis Utility EPS range of $1.10 - $1.20 |
• | 2020 - 2024 target of 5 - 7% compound annual guidance basis Utility EPS growth, using the 2020 range of $1.10 - $1.20 as the starting EPS |
• | 2020 Midstream Investments EPS expected range is $0.23 - $0.28 |
Utility EPS Guidance Range
• | Utility EPS guidance range includes net income from Houston Electric, Indiana Electric and Natural Gas Distribution business segments, as well as after tax operating income from the Corporate and Other business segment. |
• | The 2020 Utility EPS 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, recovery of capital invested through rate cases and other rate filings, effective tax rates, financing activities and related interest rates, regulatory and judicial proceedings and anticipated cost savings as a result of the merger. The Utility EPS guidance range also assumes an allocation of corporate overhead based upon its relative earnings contribution. Corporate overhead consists of interest expense, preferred stock dividend requirements and other items directly attributable to the parent along with the associated income taxes. |
• | Utility EPS guidance excludes: |
◦ | Certain integration and transaction-related fees and expenses associated with the merger |
◦ | Severance costs |
◦ | Midstream Investments and allocation of associated corporate overhead |
◦ | Results related to Infrastructure Services and Energy Services prior to the anticipated closing of the sale of those businesses, including anticipated costs and impairment resulting from the sale of Infrastructure Services and Energy Services |
◦ | Earnings or losses from the change in value of ZENS and related securities |
◦ | Changes in accounting standards |
In providing this 2020 guidance, CenterPoint Energy uses a non-GAAP measure of adjusted diluted earnings per share that does not consider the items noted above and other potential impacts, including unusual items, which 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 is not estimable as it is highly variable and difficult to predict due to various factors outside of management’s control.
Midstream Investments EPS Expected Range
The 2020 Midstream Investments EPS expected range is $0.23 - $0.28. In providing this EPS range for Midstream Investments, the company assumes a 53.7 percent limited partner ownership interest in Enable and includes the amortization of its basis differential in Enable and assumes an allocation of CenterPoint Energy corporate overhead based upon Midstream Investments relative earnings contribution. The Midstream Investments EPS expected range takes into account such factors as Enable’s most recent public outlook for 2020 dated Feb. 19, 2020, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards, impairments or Enable’s unusual items.
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Quarter Ended | |||||||||||||||
December 31, 2019 | December 31, 2018 | ||||||||||||||
Dollars in millions | Diluted EPS(1) | Dollars in millions | Diluted EPS(1) | ||||||||||||
Consolidated income available to common shareholders and diluted EPS | $ | 128 | $ | 0.25 | $ | 90 | $ | 0.18 | |||||||
Timing effects impacting CES (2): | |||||||||||||||
Mark-to-market (gains) losses (net of taxes of $2 and $9) (3) | 6 | 0.01 | 30 | 0.06 | |||||||||||
ZENS-related mark-to-market (gains) losses: | |||||||||||||||
Marketable securities (net of taxes of $16 and $19) (3)(4) | (60 | ) | (0.12 | ) | 69 | 0.13 | |||||||||
Indexed debt securities (net of taxes of $16 and $18) (3) | 60 | 0.12 | (66 | ) | (0.13 | ) | |||||||||
Consolidated on a guidance basis | $ | 134 | $ | 0.26 | $ | 123 | $ | 0.24 | |||||||
Impacts associated with the Vectren merger: | |||||||||||||||
Impacts associated with the Vectren merger (net of taxes of $1 and $2) (3) | 17 | 0.03 | 37 | 0.07 | |||||||||||
Impact of increased share count on EPS | — | — | — | 0.05 | |||||||||||
Total merger impacts | 17 | 0.03 | 37 | 0.12 | |||||||||||
Loss on CenterPoint's share of Enable's impairment of its goodwill (net of taxes of $11) (3) | 35 | 0.07 | — | — | |||||||||||
Loss on impairment of Energy Services goodwill (net of taxes of $3) (3) | 45 | 0.09 | — | — | |||||||||||
Consolidated on a guidance basis, excluding impacts associated with the Vectren merger and losses on impairment of Energy Services and Midstream Investments | $ | 231 | $ | 0.45 | $ | 160 | $ | 0.36 | |||||||
(1) | Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares of common stock 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. |
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Twelve Months Ended | |||||||||||||||
December 31, 2019 | December 31, 2018 | ||||||||||||||
Dollars in millions | Diluted EPS (1) | Dollars in millions | Diluted EPS (1) | ||||||||||||
Consolidated income available to common shareholders and diluted EPS | $ | 674 | $ | 1.33 | $ | 333 | $ | 0.74 | |||||||
Timing effects impacting CES (2): | |||||||||||||||
Mark-to-market (gains) losses (net of taxes of $9 and $26) (3) | (30 | ) | (0.07 | ) | 84 | 0.18 | |||||||||
ZENS-related mark-to-market (gains) losses: | |||||||||||||||
Marketable securities (net of taxes of $59 and $5) (3)(4) | (223 | ) | (0.44 | ) | 17 | 0.04 | |||||||||
Indexed debt securities (net of taxes of $61 and $49) (3)(5) | 231 | 0.46 | 183 | 0.40 | |||||||||||
Consolidated on a guidance basis | $ | 652 | $ | 1.28 | $ | 617 | $ | 1.36 | |||||||
Impacts associated with the Vectren merger: | |||||||||||||||
Impacts associated with the Vectren merger (net of taxes of $40 and $12) (3) | 163 | 0.33 | 81 | 0.18 | |||||||||||
Impact of increased share count on EPS | — | 0.02 | — | 0.06 | |||||||||||
Total merger impacts | 163 | 0.35 | 81 | 0.24 | |||||||||||
Loss on CenterPoint's share of Enable's impairment of its goodwill (net of taxes of $11) (3) | 35 | 0.07 | — | — | |||||||||||
Loss on impairment of Energy Services goodwill (net of taxes of $3) (3) | 45 | 0.09 | — | — | |||||||||||
Consolidated on a guidance basis, excluding impacts associated with the Vectren merger and losses on impairment of Energy Services and Midstream Investments | $ | 895 | $ | 1.79 | $ | 698 | $ | 1.60 | |||||||
(1) | Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares of common stock 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 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 |
Filing of Form 10-K for CenterPoint Energy, Inc.
Today, CenterPoint Energy, Inc. filed with the Securities and Exchange Commission (SEC) its Annual Report on Form 10-K for the fiscal year ended December 31, 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 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.
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Webcast of Earnings Conference Call
CenterPoint Energy’s management will host an earnings conference call on Thursday, February 27, 2020, at 10:00 a.m. Central time/11:00 a.m. Eastern time. Interested parties may listen to a live audio broadcast of the conference call on the company’s website under the Investors section. A replay of the call can be accessed approximately two hours after the completion of the call and will be archived on the website for at least one year.
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 under 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 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,
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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 cancellations 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, among other things 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 existing and future investments, including those related to the Indiana Electric’s anticipated Integrated Resource 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, including the proposed sales of Infrastructure Services and CES, which CenterPoint Energy and Enable cannot assure will be completed or will have the anticipated benefits to CenterPoint Energy or Enable; (32) the recording of impairment charges, including any impairment associated with Infrastructure Services and CES; (33) 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; (34) acquisition and merger activities involving CenterPoint Energy or its competitors, including the ability to successfully complete merger, acquisition and divestiture plans; (35) CenterPoint Energy’s or Enable’s ability to recruit, effectively transition and retain management and key employees and maintain good labor relations; (36) the outcome of litigation; (37) 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; (38) changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation; (39) the impact of alternate energy sources on the demand for natural gas; (40) the timing and outcome of any audits, disputes and other proceedings related to taxes; (41) the effective tax rates; (42) the transition to a replacement for the LIBOR benchmark interest rate; (43) the effect of changes in and application of accounting standards and pronouncements; and (44) other factors discussed in CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 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. 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.
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To provide greater transparency on utility earnings, CenterPoint Energy’s 2020 guidance will be presented in two components, a guidance basis Utility EPS range and a Midstream Investments EPS expected range. The 2020 Utility EPS guidance range includes net income from Houston Electric, Indiana Electric and Natural Gas Distribution business segments, as well as after tax operating income from the Corporate and Other business segment. The 2020 Utility EPS 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, recovery of capital invested through rate cases and other rate filings, effective tax rates, financing activities and related interest rates, regulatory and judicial proceedings and anticipated cost savings as a result of the merger. The 2020 Utility EPS guidance range also assumes an allocation of corporate overhead based upon its relative earnings contribution. Corporate overhead consists of interest expense, preferred stock dividend requirements and other items directly attributable to the parent along with the associated income taxes. Utility EPS guidance excludes (a) certain integration and transaction-related fees and expenses associated with the merger, (b) severance costs, (c) Midstream Investments and associated allocation of corporate overhead, (d) results related to Infrastructure Services and Energy Services prior to the anticipated closing of the sale of those businesses, including anticipated costs and impairment resulting from the sale of Infrastructure Services and Energy Services, and (e) earnings or losses from the change in value of ZENS and related securities. 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, which 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 is not estimable as it is highly variable and difficult to predict due to various factors outside of management’s control.
The 2020 Midstream Investments EPS expected range assumes a 53.7 percent limited partner ownership interest in Enable and includes the amortization of the Company’s basis differential in Enable and assumes an allocation of CenterPoint Energy corporate overhead based upon Midstream Investments relative earnings contribution. The Midstream Investments EPS expected range takes into account such factors as Enable’s most recent public outlook for 2020 dated Feb. 19, 2020, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards, impairments or Enable’s unusual items.
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
Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Utility revenues | $ | 1,907 | $ | 1,629 | $ | 7,162 | $ | 6,163 | |||||||
Non-utility revenues | 1,323 | 1,407 | 5,139 | 4,426 | |||||||||||
Total | 3,230 | 3,036 | 12,301 | 10,589 | |||||||||||
Expenses: | |||||||||||||||
Utility natural gas, fuel and purchased power | 505 | 451 | 1,683 | 1,410 | |||||||||||
Non-utility cost of revenues, including natural gas | 1,016 | 1,437 | 4,029 | 4,364 | |||||||||||
Operation and maintenance | 934 | 621 | 3,550 | 2,335 | |||||||||||
Depreciation and amortization | 300 | 261 | 1,287 | 1,243 | |||||||||||
Taxes other than income taxes | 125 | 99 | 478 | 406 | |||||||||||
Goodwill impairment | 48 | — | 48 | — | |||||||||||
Total | 2,928 | 2,869 | 11,075 | 9,758 | |||||||||||
Operating Income | 302 | 167 | 1,226 | 831 | |||||||||||
Other Income (Expense): | |||||||||||||||
Gain (loss) on marketable securities | 76 | (88 | ) | 282 | (22 | ) | |||||||||
Gain (loss) on indexed debt securities | (76 | ) | 84 | (292 | ) | (232 | ) | ||||||||
Interest and other finance charges | (139 | ) | (102 | ) | (528 | ) | (361 | ) | |||||||
Interest on Securitization Bonds | (8 | ) | (13 | ) | (39 | ) | (59 | ) | |||||||
Equity in earnings of unconsolidated affiliates, net | 17 | 99 | 230 | 307 | |||||||||||
Other, net | 10 | 34 | 50 | 50 | |||||||||||
Total | (120 | ) | 14 | (297 | ) | (317 | ) | ||||||||
Income Before Income Taxes | 182 | 181 | 929 | 514 | |||||||||||
Income tax expense | 25 | 61 | 138 | 146 | |||||||||||
Net Income | 157 | 120 | 791 | 368 | |||||||||||
Preferred stock dividend requirement | 29 | 30 | 117 | 35 | |||||||||||
Income Available to Common Shareholders | $ | 128 | $ | 90 | $ | 674 | $ | 333 | |||||||
Reference is made to the Combined Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K
of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Millions of Dollars, Except Share and Per Share Amounts)
(Unaudited)
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Basic Earnings Per Common Share | $ | 0.25 | $ | 0.18 | $ | 1.34 | $ | 0.74 | |||||||
Diluted Earnings Per Common Share | $ | 0.25 | $ | 0.18 | $ | 1.33 | $ | 0.74 | |||||||
Dividends Declared per Common Share | $ | 0.2875 | $ | 0.5650 | $ | 0.8625 | $ | 1.1200 | |||||||
Dividends Paid per Common Share | $ | 0.2875 | $ | 0.2775 | $ | 1.1500 | $ | 1.1100 | |||||||
Weighted Average Common Shares Outstanding (000): | |||||||||||||||
- Basic | 502,241 | 500,437 | 502,050 | 448,829 | |||||||||||
- Diluted | 505,348 | 504,073 | 505,157 | 452,465 | |||||||||||
Operating Income (Loss) by Reportable Segment | |||||||||||||||
Houston Electric T&D: | |||||||||||||||
TDU | $ | 95 | $ | 88 | $ | 590 | $ | 568 | |||||||
Bond Companies | 7 | 12 | 34 | 55 | |||||||||||
Total Houston Electric T&D | 102 | 100 | 624 | 623 | |||||||||||
Indiana Electric Integrated | 26 | — | 90 | — | |||||||||||
Natural Gas Distribution | 167 | 100 | 408 | 266 | |||||||||||
Energy Services | (32 | ) | (27 | ) | 32 | (47 | ) | ||||||||
Infrastructure Services | 45 | — | 95 | — | |||||||||||
Corporate and Other | (6 | ) | (6 | ) | (23 | ) | (11 | ) | |||||||
Total | $ | 302 | $ | 167 | $ | 1,226 | $ | 831 | |||||||
Reference is made to the Combined Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K
of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Houston Electric T&D | |||||||||||||||||||||
Quarter Ended December 31, | % Diff | Year Ended December 31, | % Diff | ||||||||||||||||||
2019 | 2018 | Fav/Unfav | 2019 | 2018 | Fav/Unfav | ||||||||||||||||
Revenues: | |||||||||||||||||||||
TDU | $ | 641 | $ | 629 | 2 | % | $ | 2,684 | $ | 2,638 | 2 | % | |||||||||
Bond Companies | 42 | 101 | (58 | )% | 312 | 594 | (47 | )% | |||||||||||||
Total | 683 | 730 | (6 | )% | 2,996 | 3,232 | (7 | )% | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance, excluding Bond Companies | 390 | 388 | (1 | )% | 1,470 | 1,444 | (2 | )% | |||||||||||||
Depreciation and amortization, excluding Bond Companies | 95 | 93 | (2 | )% | 377 | 386 | 2 | % | |||||||||||||
Taxes other than income taxes | 61 | 60 | (2 | )% | 247 | 240 | (3 | )% | |||||||||||||
Bond Companies | 35 | 89 | 61 | % | 278 | 539 | 48 | % | |||||||||||||
Total expenses | 581 | 630 | 8 | % | 2,372 | 2,609 | 9 | % | |||||||||||||
Operating Income | $ | 102 | $ | 100 | 2 | % | $ | 624 | $ | 623 | — | ||||||||||
Operating Income: | |||||||||||||||||||||
TDU | $ | 95 | $ | 88 | 8 | % | $ | 590 | $ | 568 | 4 | % | |||||||||
Bond Companies | 7 | 12 | (42 | )% | 34 | 55 | (38 | )% | |||||||||||||
Total Segment Operating Income | $ | 102 | $ | 100 | 2 | % | $ | 624 | $ | 623 | — | ||||||||||
Actual MWH Delivered | |||||||||||||||||||||
Residential | 5,942,089 | 5,919,117 | — | 30,334,230 | 30,405,434 | — | |||||||||||||||
Total | 20,763,160 | 20,062,233 | 3 | % | 92,179,772 | 90,408,834 | 2 | % | |||||||||||||
Weather (percentage of 10-year average for service area): | |||||||||||||||||||||
Cooling degree days | 105 | % | 91 | % | 14 | % | 106 | % | 103 | % | 3 | % | |||||||||
Heating degree days | 102 | % | 119 | % | (17 | )% | 96 | % | 104 | % | (8 | )% | |||||||||
Number of metered customers - end of period: | |||||||||||||||||||||
Residential | 2,243,188 | 2,198,225 | 2 | % | 2,243,188 | 2,198,225 | 2 | % | |||||||||||||
Total | 2,534,286 | 2,485,370 | 2 | % | 2,534,286 | 2,485,370 | 2 | % | |||||||||||||
Indiana Electric Integrated (1) | |||||||
Quarter Ended December 31, 2019 | Year Ended December 31, 2019 (1) | ||||||
Revenues | $ | 135 | $ | 523 | |||
Utility natural gas, fuel and purchased power | 37 | 149 | |||||
Revenues less Utility natural gas, fuel and purchased power | 98 | 374 | |||||
Expenses: | |||||||
Operation and maintenance | 43 | 179 | |||||
Depreciation and amortization | 25 | 91 | |||||
Taxes other than income taxes | 4 | 14 | |||||
Total expenses | 72 | 284 | |||||
Operating Income | $ | 26 | $ | 90 | |||
Actual MWH Delivered | |||||||
Retail | 1,033 | 4,310 | |||||
Wholesale | 85 | 376 | |||||
Total | 1,118 | 4,686 | |||||
Number of metered customers - end of period: | |||||||
Residential | 128,947 | 128,947 | |||||
Total | 147,942 | 147,942 | |||||
(1) Represents February 1, 2019 through December 31, 2019 results only due to the Merger. | |||||||
Reference is made to the Combined Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K
of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Natural Gas Distribution (1) | |||||||||||||||||||||
Quarter Ended December 31, | % Diff | Year Ended December 31, | % Diff | ||||||||||||||||||
2019 | 2018 | Fav/Unfav | 2019 (1) | 2018 | Fav/Unfav | ||||||||||||||||
Revenues | $ | 1,100 | $ | 909 | 21 | % | $ | 3,683 | $ | 2,967 | 24 | % | |||||||||
Utility natural gas, fuel and purchased power | 499 | 495 | (1 | )% | 1,617 | 1,467 | (10 | )% | |||||||||||||
Revenues less Utility natural gas, fuel and purchased power | 601 | 414 | 45 | % | 2,066 | 1,500 | 38 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 269 | 211 | (27 | )% | 1,036 | 803 | (29 | )% | |||||||||||||
Depreciation and amortization | 109 | 67 | (63 | )% | 417 | 277 | (51 | )% | |||||||||||||
Taxes other than income taxes | 56 | 36 | (56 | )% | 205 | 154 | (33 | )% | |||||||||||||
Total expenses | 434 | 314 | (38 | )% | 1,658 | 1,234 | (34 | )% | |||||||||||||
Operating Income | $ | 167 | $ | 100 | 67 | % | $ | 408 | $ | 266 | 53 | % | |||||||||
Throughput data in BCF | |||||||||||||||||||||
Residential | 86 | 63 | 37 | % | 246 | 186 | 32 | % | |||||||||||||
Commercial and Industrial | 132 | 77 | 71 | % | 458 | 285 | 61 | % | |||||||||||||
Total Throughput | 218 | 140 | 56 | % | 704 | 471 | 49 | % | |||||||||||||
Weather (average for service area) | |||||||||||||||||||||
Percentage of 10-year average: | |||||||||||||||||||||
Heating degree days | 102 | % | 112 | % | (10 | )% | 101 | % | 106 | % | (5 | )% | |||||||||
Number of customers - end of period: | |||||||||||||||||||||
Residential | 4,252,361 | 3,246,277 | 31 | % | 4,252,361 | 3,246,277 | 31 | % | |||||||||||||
Commercial and Industrial | 349,749 | 260,033 | 35 | % | 349,749 | 260,033 | 35 | % | |||||||||||||
Total | 4,602,110 | 3,506,310 | 31 | % | 4,602,110 | 3,506,310 | 31 | % | |||||||||||||
(1) Includes acquired natural gas operations February 1, 2019 through December 31, 2019 results only due to the Merger. | |||||||||||||||||||||
Energy Services | |||||||||||||||||||||
Quarter Ended December 31, | % Diff | Year Ended December 31, | % Diff | ||||||||||||||||||
2019 | 2018 | Fav/Unfav | 2019 | 2018 | Fav/Unfav | ||||||||||||||||
Revenues | $ | 936 | $ | 1,456 | (36 | )% | $ | 3,782 | $ | 4,521 | (16 | )% | |||||||||
Non-utility cost of revenues, including natural gas | 892 | 1,455 | 39 | % | 3,588 | 4,453 | 19 | % | |||||||||||||
Revenues less Non-utility cost of revenues, including natural gas | 44 | 1 | 4,300 | % | 194 | 68 | 185 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 23 | 22 | (5 | )% | 96 | 96 | — | ||||||||||||||
Depreciation and amortization | 4 | 4 | — | 16 | 16 | — | |||||||||||||||
Taxes other than income taxes | 1 | 2 | 50 | % | 2 | 3 | 33 | % | |||||||||||||
Goodwill Impairment | 48 | — | — | 48 | — | — | |||||||||||||||
Total expenses | 76 | 28 | (171 | )% | 162 | 115 | (41 | )% | |||||||||||||
Operating Income (Loss) | $ | (32 | ) | $ | (27 | ) | (19 | )% | $ | 32 | $ | (47 | ) | 168 | % | ||||||
Timing impacts of mark-to-market gain (loss) | $ | (8 | ) | $ | (39 | ) | 79 | % | $ | 39 | $ | (110 | ) | 135 | % | ||||||
Throughput data in BCF | 345 | 362 | (5 | )% | 1,305 | 1,355 | (4 | )% | |||||||||||||
Number of customers - end of period | 31,000 | 30,000 | 3 | % | 31,000 | 30,000 | 3 | % | |||||||||||||
Reference is made to the Combined Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K
of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Infrastructure Services (1) | |||||||
Quarter Ended December 31, 2019 | Year Ended December 31, 2019 (1) | ||||||
Revenues | $ | 341 | $ | 1,190 | |||
Non-utility cost of revenues, including natural gas | 81 | 309 | |||||
Revenues less Non-utility cost of revenues, including natural gas | 260 | 881 | |||||
Expenses: | |||||||
Operation and maintenance | 204 | 734 | |||||
Depreciation and amortization | 11 | 50 | |||||
Taxes other than income taxes | — | 2 | |||||
Total expenses | 215 | 786 | |||||
Operating Income | $ | 45 | $ | 95 | |||
Backlog at period end: | |||||||
Blanket contracts | $ | 628 | $ | 628 | |||
Bid contracts | 254 | 254 | |||||
Total | $ | 882 | $ | 882 | |||
(1) Represents February 1, 2019 through December 31, 2019 results only due to the Merger. | |||||||
Corporate and Other | |||||||||||||||||||||
Quarter Ended December 31, | % Diff | Year Ended December 31, | % Diff | ||||||||||||||||||
2019 | 2018 | Fav/Unfav | 2019 (1) | 2018 | Fav/Unfav | ||||||||||||||||
Revenues | $ | 85 | $ | 4 | 2,025 | % | $ | 300 | $ | 15 | 1,900 | % | |||||||||
Non-utility cost of revenues, including natural gas | 60 | — | — | 218 | — | — | |||||||||||||||
Revenues less Non-utility cost of revenues, including natural gas | 25 | 4 | 525 | % | 82 | 15 | 447 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 7 | (2 | ) | (450 | )% | 32 | (16 | ) | (300 | )% | |||||||||||
Depreciation and amortization | 22 | 9 | (144 | )% | 66 | 33 | (100 | )% | |||||||||||||
Taxes other than income taxes | 2 | 3 | 33 | % | 7 | 9 | 22 | % | |||||||||||||
Total expenses | 31 | 10 | (210 | )% | 105 | 26 | (304 | )% | |||||||||||||
Operating Loss | $ | (6 | ) | $ | (6 | ) | — | $ | (23 | ) | $ | (11 | ) | (109 | )% | ||||||
(1) Includes acquired corporate and other operations February 1, 2019 through December 31, 2019 results only due to the Merger. | |||||||||||||||||||||
Reference is made to the Combined Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K
of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Capital Expenditures by Segment | |||||||||||||||
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 (1) | 2018 | ||||||||||||
Houston Electric T&D | $ | 311 | $ | 283 | $ | 1,033 | $ | 952 | |||||||
Indiana Electric Integrated | 48 | — | 183 | — | |||||||||||
Natural Gas Distribution | 325 | 229 | 1,098 | 638 | |||||||||||
Energy Services | 3 | 7 | 12 | 20 | |||||||||||
Infrastructure Services | 15 | — | 67 | — | |||||||||||
Corporate and Other | 57 | 75 | 194 | 110 | |||||||||||
Total | $ | 759 | $ | 594 | $ | 2,587 | $ | 1,720 | |||||||
(1) Includes capital expenditures of acquired businesses from February 1, 2019 through December 31, 2019 only due to the Merger. | |||||||||||||||
Interest Expense Detail | |||||||||||||||
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Amortization of Deferred Financing Cost | $ | 7 | $ | 14 | $ | 29 | $ | 48 | |||||||
Capitalization of Interest Cost | (7 | ) | (2 | ) | (36 | ) | (8 | ) | |||||||
Securitization Bonds Interest Expense | 8 | 13 | 39 | 59 | |||||||||||
Other Interest Expense | 139 | 90 | 535 | 321 | |||||||||||
Total Interest Expense | $ | 147 | $ | 115 | $ | 567 | $ | 420 | |||||||
Reference is made to the Combined Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K
of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
December 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 241 | $ | 4,231 | |||
Other current assets | 3,606 | 2,794 | |||||
Total current assets | 3,847 | 7,025 | |||||
Property, Plant and Equipment, net | 20,945 | 14,044 | |||||
Other Assets: | |||||||
Goodwill | 5,164 | 867 | |||||
Regulatory assets | 2,117 | 1,967 | |||||
Investment in unconsolidated affiliates | 2,408 | 2,482 | |||||
Preferred units – unconsolidated affiliate | 363 | 363 | |||||
Other non-current assets | 595 | 261 | |||||
Total other assets | 10,647 | 5,940 | |||||
Total Assets | $ | 35,439 | $ | 27,009 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Current portion of securitization bonds long-term debt | 231 | 458 | |||||
Indexed debt, net | 19 | 24 | |||||
Current portion of other long-term debt | 618 | — | |||||
Other current liabilities | 3,020 | 2,820 | |||||
Total current liabilities | 3,888 | 3,302 | |||||
Other Liabilities: | |||||||
Deferred income taxes, net | 3,928 | 3,239 | |||||
Regulatory liabilities | 3,474 | 2,525 | |||||
Other non-current liabilities | 1,546 | 1,203 | |||||
Total other liabilities | 8,948 | 6,967 | |||||
Long-term Debt: | |||||||
VIE Securitization bonds | 746 | 977 | |||||
Other | 13,498 | 7,705 | |||||
Total long-term debt | 14,244 | 8,682 | |||||
Shareholders' Equity | 8,359 | 8,058 | |||||
Total Liabilities and Shareholders' Equity | $ | 35,439 | $ | 27,009 | |||
Reference is made to the Combined Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K
of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(Millions of Dollars)
(Unaudited)
Year Ended December 31, | |||||||
2019 | 2018 | ||||||
Net income | $ | 791 | $ | 368 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 1,340 | 1,291 | |||||
Deferred income taxes | 69 | 48 | |||||
Write-down of natural gas inventory | 4 | 2 | |||||
Equity in earnings of unconsolidated affiliates | (230 | ) | (307 | ) | |||
Distributions from unconsolidated affiliates | 261 | 267 | |||||
Changes in net regulatory assets and liabilities | (114 | ) | 28 | ||||
Changes in other assets and liabilities | (492 | ) | 427 | ||||
Other, net | 9 | 12 | |||||
Net cash provided by operating activities | 1,638 | 2,136 | |||||
Net cash used in investing activities | (8,421 | ) | (1,207 | ) | |||
Net cash provided by financing activities | 2,776 | 3,053 | |||||
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | (4,007 | ) | 3,982 | ||||
Cash, Cash Equivalents and Restricted Cash at Beginning of Year | 4,278 | 296 | |||||
Cash, Cash Equivalents and Restricted Cash at End of Year | $ | 271 | $ | 4,278 | |||
Reference is made to the Combined Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K
of CenterPoint Energy, Inc.
4TH QUARTER 2019 EARNINGS CALL FEBRUARY 27, 2020
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 our growth and guidance (including earnings; dividend growth, yield and payout ratio; total shareholder return; and customer, utility and rate base growth (CAGR) expectations), our transition to become core utility focused, including the percentage of earnings therefrom, our proposed sales of Infrastructure Services and CES, including the expected timing and benefits therefrom, our goals with respect to carbon emissions reductions, including the development of customer program offerings and the timing for continued replacement of cast-iron pipe in legacy Vectren service territories, our anticipated equity and debt issuances, the performance of Enable Midstream Partners, LP (“Enable”), including anticipated distributions received on its common units, operation and maintenance expense management efforts, capital resources and expenditures, our regulatory filings and projections (including the Integrated Resources Plan in Indiana), our credit quality and balance sheet 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, 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 slide 14 is derived from Enable’s investor presentation as presented during its Q4 2019 earnings presentation dated February 19, 2020. The information in this slide is included for informational purposes only. The content has not been verified by us, and we assume no liability for the same. You should consider Enable’s investor materials in the context of its SEC filings and its entire investor presentation, which is available 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, CenterPoint Energy also provides guidance based on adjusted income, adjusted diluted earnings per share and adjusted funds from operations (“FFO”), which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. To provide greater transparency on utility earnings, CenterPoint Energy’s 2020 guidance will be presented in two components, a guidance basis Utility EPS range and a Midstream Investments EPS expected range. Refer to slide 30 for further detail. The 2020 Utility EPS guidance range includes net income from Houston Electric, Indiana Electric and Natural Gas Distribution business segments, as well as after tax operating income from the Corporate and Other business segment. The 2020 Utility EPS 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, recovery of capital invested through rate cases and other rate filings, effective tax rates, financing activities and related interest rates, regulatory and judicial proceedings and anticipated cost savings as a result of the merger. The 2020 Utility EPS guidance range also assumes an allocation of corporate overhead based upon its relative earnings contribution. Corporate overhead consists of interest expense, preferred stock dividend requirements and other items directly attributable to the parent along with the associated income taxes. Utility EPS guidance excludes (a) certain integration and transaction-related fees and expenses associated with the merger, (b) severance costs, (c) Midstream Investments and associated allocation of corporate overhead, (d) results related to Infrastructure Services and Energy Services prior to the anticipated closing of the sale of those businesses, including anticipated costs and impairment resulting from the sale of Infrastructure Services and Energy Services, and (e) earnings or losses from the change in value of ZENS and related securities. 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, which 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 is not estimable as it is highly variable and difficult to predict due to various factors outside of management’s control. The 2020 Midstream Investments EPS expected range assumes a 53.7 percent limited partner ownership interest in Enable and includes the amortization of the Company’s basis differential in Enable and assumes an allocation of CenterPoint Energy corporate overhead based upon Midstream Investments relative earnings contribution. The Midstream Investments EPS expected range takes into account such factors as Enable’s most recent public outlook for 2020 dated Feb. 19, 2020, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards, impairments or Enable’s unusual items. 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 45 and 46. 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 are not estimable as they are highly variable and difficult to predict due to various factors outside of management’s control. These excluded items, including unusual items, could have a material impact on GAAP-reported results for the applicable guidance period. A reconciliation of adjusted FFO is provided in this presentation on slides 47 and 48. Management evaluates the company’s financial performance in part based on adjusted income, adjusted diluted earnings per share and adjusted FFO. 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, adjusted diluted earnings per share and adjusted FFO 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 net cash from operating activities, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies. 3
AGENDA Xia Liu John Somerhalder EVP and CFO Interim President and CEO • • • • • • • • • • • • • 2019 Guidance Basis Basis EPS Drivers 2019 Guidance Value Investor Proposition Strategy Utility Focused Highlights Regulatory 2019 Highlights Highlights ESG Overview CenterPoint Commitment to Dividend to Commitment Plan and Financing QualityCredit Disciplined Management O&M and Rates Growth Utility Customer LT GrowthBase and Rate Capital Investment 2020 UtilityEPS Guidance <Guidance Outlook Utility EPS Growth 4
CENTERPOINT UTILITIES AT A GLANCE ND 8 States MN of Operation SD WI MI IA (1) NE ~96% IN OH IL T&D / Gas LDC WV Rate Base KS MO KY VA OK AR TN NC 7.5% Rate base SC MS AL GA 5 year Growth (2) TX LA CAGR FL >7 Million Customers(3) CenterPoint Energy Utilities Service Territory Company HQ Note: Map does not include Energy Services, Infrastructure Services, Energy Systems Group or Enable service territories 5 (1) Based on 2019E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions (2) For the period 2019 through 2024 (3) Metered customers as of December 31, 2019
ESG RECOGNITION ✓ 15th EEI Emergency ✓ Multi-year recipient of ✓ Top Corporation for Assistance Award for ENERGY STAR’s Partner of Women’s Business outstanding power the Year Sustained Enterprise(3) restoration efforts(4) Excellence Award ✓ Culture Transformation ✓ 3-peat winner of J.D. Power ✓ Newsweek Green Ranking Award recipient from Smart Customer Satisfaction out of publicly traded Energy Consumer Study(1) companies Collaborate ✓ Ranked #1 nationally among (2) ✓ Tree Line USA Award ✓ Houston Business Journal investor-owned utilities by ACSI for residential customer Corporate Philanthropy satisfaction Award Notes: Refer to our corporate website for further detail on awards and recognitions www.centerpointenergy.com. ACSI – American Customer Satisfaction Index; EEI – Edison Electric Institute (1) 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 their residential gas provider. Visit jdpower.com/awards (2) According to the ACSI Energy Utilities Report 2018-2019 (3) Named one of 2018 America’s Top Corporations by the Women’s Business Enterprise National Council 6 (4) In 2019, CenterPoint Energy received its 12th, 13th, 14th and 15th Edison Electric Institute (EEI) “Emergency Assistance Awards” for the outstanding power restoration efforts after Hurricanes Michael, Barry, Dorian and the Dallas thunderstorms
ESG ENVIRONMENTAL STEWARDSHIP LEADER (1) REDUCING GAS DISTRIBUTION ~96% REGULATED GAS LDC / T&D GHG EMISSIONS Generation 4% ~30% reduction Gas LDC 45% T&D 51% 2012 2019 ✓ Generation represents ~4% of rate base(1) ✓ Elimination of cast iron pipelines across all legacy CNP gas jurisdictions by YE 2018; ✓ Reduced CO2 emissions from generation assets by 20% from 2005 to 2019 legacy Vectren jurisdictions targeted by 2023/2024 ✓ Indiana IRP (~Q2 2020) to address long-term direction for generation ✓ ~$5B anticipated capital investment 2020 thru 2024 focused on gas distribution ✓ Minimum carbon footprint within T&D system improvements ✓ Committed to reducing methane emissions Notes: Refer to slide 2 for information on forward-looking statements. CenterPoint Energy’s 2018 Corporate Responsibility Report is available at https://investors.centerpointenergy.com; report not inclusive of Vectren entities. GHG – Greenhouse gases; IRP – Integrated Resource Plan 7 (1) Based on 2019E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions
ESG CARBON REDUCTION GOAL CENTERPOINT IS COMMITTED TO A CLEAN ENERGY FUTURE NEW GOALS TO REDUCE CARBON EMISSIONS from 2005 levels 70% 20–30% reduction from our operations reduction from gas customer usage by 2035 by 2040 ➢ Offering customers affordable conservation and energy-efficiency programs ➢ Continuing to develop alternative fuels programs ➢ Working with suppliers to lower their methane emissions ➢ Piloting and supporting research and development 8
2019 PERFORMANCE Q4 YTD 2018 2019 2018 2019 GAAP Diluted EPS $0.18 $0.25 $0.74 $1.33 Vectren merger impacts(1) 0.12 0.03 0.24 0.35 CNP’s share of Enable’s goodwill impairment ― 0.07 ― 0.07 Energy Services goodwill impairment ― 0.09 ― 0.09 Energy Services mark-to-market (gains) losses 0.06 0.01 0.18 (0.07) ZENS-related mark-to-market (gains) losses: Marketable securities(2) 0.13 (0.12) 0.04 (0.44) Indexed debt securities(3) (0.13) 0.12 0.40 0.46 Guidance Basis $0.36 $0.45 $1.60 $1.79 (Non-GAAP) Diluted EPS Notes: Refer to slide 3 for information on non-GAAP measures; YTD – Year ended December 31. 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 (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. 9 (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
2019 HIGHLIGHTS ✓ Exceeded earnings guidance expectations • Delivered $1.79 guidance basis diluted EPS(1), or $0.19 above 2018 guidance basis diluted EPS(1) of $1.60 • $0.09 above the top end of the guidance range of $1.60 - $1.70 ✓ Growth driven by our utility businesses • Approximately $2.5 billion utility capital deployed, focused on load growth, system modernization and pipeline replacement across growing service territories • Approximately 2.0% electric and 1.2% gas Y-o-Y customer growth(2) ✓ Disciplined O&M Management • Realized approximately $100 million(3) O&M savings Y-o-Y through merger and operational efficiencies • Exceeded targeted merger cost efficiencies of $50 million in 2019 ✓ Optimized regulatory outcomes • Increased utility incremental annual revenue by $113 million(4) • Houston Electric rate case settled (final order expected ~Q1 2020), providing regulatory clarity and earnings certainty in largest jurisdiction going forward Note: (1) Refer to slide 3 for information on non-GAAP measures and slide 46 for reconciliation to GAAP measures (2) Representative of Houston Electric and legacy CenterPoint natural gas jurisdictions only. Vectren natural gas distribution utilities were not a part of CenterPoint Energy until February 1, 2019 (3) Inclusive of Houston Electric, Indiana Electric Integrated and Natural Gas Distribution business segments. Excluding utility costs to achieve and amounts with revenue offsets. Amounts are inclusive of 10 Vectren utilities even though they were not a part of CenterPoint Energy until February 1, 2019 and inclusive of an annualized amount of synergies (4) Related to 2019 finalized regulatory proceedings, exclusive of TCJA impacts
REGULATORY HIGHLIGHTS Accomplishments ✓ Houston Electric rate case(1) Rate base by state(2) ― 9.4% ROE and 42.5% equity ratio ✓ Bailey to Jones Creek Other(3) ― ~$483 million capital spend expected 8% MN ― Estimated construction timeline ~ early 2021 to 2022 8% ✓ Ohio rate case OH ― 7.48% overall rate of return 6% TX 54% Pending Regulatory Cases/IRP IN • Minnesota rate case (anticipated outcome ~Q1 2021) 24% ✓ $53 million interim rates (effective Jan. 1, 2020) • Beaumont/East Texas rate case (anticipated outcome ~ Q2 2020) • Houston Electric TCOS (anticipated outcome ~late Q2 2020) • Houston Electric DCRF (anticipated filing April 2021) • Indiana IRP (anticipated filing ~ Q2 2020) • Indiana South & North gas rate cases (anticipated filing ~Q2/Q3 2020) Note: Refer to slides 37 – 43 for full detail on regulatory filings; TCOS – Transmission Cost of Service adjustment; DCRF – Distribution Cost Recovery Factor; IRP – Integrated Resource Plan (1) Settlement approved by the PUCT in February 2020; final order expected in ~ Q1 2020 11 (2) Total projected rate base for the year ended December 31, 2019 and not just the amount that has been reflected in rates. Amounts may differ from regulatory filings. (3) Includes Arkansas, Louisiana, Mississippi and Oklahoma gas distribution jurisdictions. These jurisdictions utilize cost of service mechanisms to true up capital and expense recovery
SALE OF INFRASTRUCTURE SERVICES & ENERGY SERVICES FOR $1.25B Transaction Details Strategic Rationale • Infrastructure Services(1) ✓ Improves(3) Business Risk Profile ― Sales price $850 million ✓ Strengthens Balance Sheet and ― Net after-tax proceeds ~$670 million Credit Quality(4) used to repay outstanding debt ― Expected closing ~ Q2 2020 ✓ Increases Earnings Contribution • Energy Services(2) from Core Utility ― Sales price $400 million ✓ Reduces Earnings Volatility ― Net after-tax proceeds ~$385 million used to repay outstanding debt ✓ Focuses on Robust Utility Capital ― Expected closing ~ Q2 2020 Investment Program Note: Refer to slide 2 for information on forward-looking statements (1) For additional detail, refer to press release and Form 8-K filed on February 3, 2020 (2) For additional detail, refer to press release and Form 8-K filed on February 24, 2020 (3) As determined by rating agencies 12 (4) Specifically CenterPoint Energy and CERC
CENTERPOINT’S CONTINUED TRANSITION TO MORE UTILITY FOCUSED STRATEGY 2018A(1) 2020E(2) 2024E(2) Announced Vectren utilities acquisition of and sale of Energy Services / Core utility focus Vectren Infrastructure Services 70% 82% 86% Utility(1) Utility(2) Utility(2) ❑ Regulated utility ❑ Pure play gas LDC and ❑ ~$22B(5) rate base across 8 states serving T&D utility driven driven by robust 7.5%(6) over ~7M customers purchase compound annual rate base growth ❑ Vectren added scale ❑ ~$15B rate base, 96% with $4B rate base and regulated gas LDC / ❑ Core utility business 1.1M customers T&D(3) approaching 90% earnings contribution ❑ Enhanced credit quality post sale(4) 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 Investments equity earnings, where operating income excludes Houston Electric transition and system restoration bonds, Energy Services mark-to-market gains and losses as well as certain merger-related expenses (2) Calculated as the relative earnings contribution of both Utility Operations and Midstream Investments. Refer to slide 30 for further detail (3) Based on 2019E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions (4) Specifically CenterPoint Energy and CERC 13 (5) Based on 2024E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions (6) For the period 2019 through 2024, see slide 21 for further detail
ENABLE’S STRONG CASH FLOW SUPPORTS OUR ROBUST UTILITY GROWTH Cumulative cash provided by Enable common units to CenterPoint 2013 2015 2017 2019 2021E 2024E $1.0 billion $2.0 billion $3.0 billion(1) > than $300 million ✓ Consistent cash distribution recycled into robust utility Capital capital investment at Recycling attractive ROEs ✓ Zero capital commitment from CenterPoint Annual Enable Cash Distributions 14 Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures. ROE – Return on equity (1) Estimate based off CenterPoint Energy’s ownership of Enable common units as of December 31, 2019 and Enable’s most recent cash distribution rate of $0.3305 declared on February 7, 2020
OUR INVESTOR VALUE PROPOSITION Largely pure-play regulated gas LDC and T&D utility across 8 states Regulatory Strategy 8-10% Capital investment Total Shareholder Return Pure-play regulated utility ~$13B 5-year(2) capital with diversified portfolio investment plan to provide and favorable mechanisms safe and reliable service to providing timely recovery customers across high of capital 5-7% > 4% growth jurisdictions Utility EPS(1)(2) Dividend Growth Yield Predictable Investment Grade Earnings Growth Credit Quality 5 – 7% utility EPS(1)(2) Continued commitment to growth supported by ~7.5% Low 70s solid investment grade strong regulated Rate Base Targeted credit quality and balance investment and rate base (3) CAGR Payout Ratio sheet strength growth Supported by strong cash flow from Enable to fund regulated growth Note: Refer to slide 2 for information on forward-looking statements (1) Utility earnings per share on a guidance basis 15 (2) Compound annual growth rate over the period 2020 through 2024 (3) Based off 2019E through 2024E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions
2019 GUIDANCE BASIS EPS(1) DRIVERS $0.19 $0.63 $0.06 Primary Drivers: $1.79 Enable performance $1.60 Primary Drivers: $0.23 Businesses $0.57 Acquired in the Merger $0.04 Energy Services Primary Drivers: $0.23 Effective tax rate $0.67 Merger Financing $0.13 Interest and Other Primary Drivers: $0.45 Businesses Acquired in the Merger $0.27 legacy utility O&M Management, Rate Relief and Customer Growth $0.02 Weather $0.08 Depreciation and Amortization $0.06 Equity Return 2018 Consolidated Utility Operations Energy Services and Midstream Investments (4) Other (5) 2019 Consolidated Guidance Operating Income (2) Infrastructure Services Guidance (1) Basis EPS Operating Income (3) Basis EPS(1) 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) Refer to slide 3 for information on non-GAAP measures and slide 46 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. See slides 49 and 50 for details (3) Energy Services excludes mark-to-market gain of $39 million in 2019 and mark-to-market loss of $110 million in 2018, as well as the goodwill impairment charge of $48 million in 2019 (4) Excludes CenterPoint Energy’s share, $46 million, of the goodwill impairment charge Enable recorded in 2019. Please reference Enable’s 2019 Form 10-K and fourth quarter 2019 earnings materials dated February 19, 2020 (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
INITIATING 2020 UTILITY EPS GUIDANCE Utility EPS on a Guidance (non-GAAP) Basis of $1.10 - $1.20(2) Non-Utility Operations $0.50 (1) $0.06 - $0.16 (2) $0.05 $1.10–$1.20 $0.05 $0.15 Utility Operations (1) $1.19 $1.29 2019 Consolidated Utility Weather One-time items: 2019 Normalized Houston Electric Customer growth, rate 2020 Utility Guidance Guidance - Tax benefit Utility Guidance rate case and equity relief, O&M management Basis EPS Range Basis EPS - Other Basis EPS return impacts and other Utility Operations Non-Utility Operations 2020 Utility EPS guidance range excludes certain measures, including: (2) • $0.23 - $0.28 of Midstream Investments EPS converted from Enable’s guidance range(3) • Results related to Energy Services and Infrastructure Services prior to sale closings(4) Note: Refer to slide 3 for information on 2020 Utility EPS guidance assumptions and non-GAAP measures (1) Refer to slide 29 for additional detail (2) Refer to slide 30 for additional detail 17 (3) Refer to Enable’s 4th quarter and full-year 2019 earnings materials dated February 19, 2020 (4) Including anticipated costs and impairment resulting from the sale of Infrastructure Services and Energy Services
2020 – 2024 UTILITY GUIDANCE BASIS EPS OUTLOOK Robust regulated utility growth plan drives 5-7% utility growth 5 – 7% Utility EPS CAGR through ➢ $13 billion 5-year capital investment plan 2024 $1.10 – $1.20(1) ➢ 7.5% rate base CAGR from 2019 – 2024 ➢ Top quartile customer growth ➢ Electric(2) and gas rates below peer average ➢ Continued disciplined O&M management ➢ Premium utility portfolio targeting allowed ROEs 2020 Utility Guidance Basis EPS Range Note: Refer to slide 3 for information on 2020 Utility EPS guidance assumptions and non-GAAP measures 18 (1) Refer to slide 30 for additional detail (2) Houston Electric service territory
ACHIEVING OUR 5-7% UTILITY GROWTH TARGET Top Quartile Customer Growth Lower-risk T&D and Gas LDC and Low Customer Rates ◼ 96%(1) of rate base from lower-risk Gas ◼ Electric customer growth of 2.0%(2) and LDC and electric T&D utility asset bases gas of 1.2%(3), both above the national ◼ Premium utilities earning their allowed average ROEs ◼ Electric T&D(2) and natural gas distribution customer rates below peers Scale Utility Operations Disciplined O&M Control ◼ Total rate base: $15B(1) ◼ Focus on O&M creates rate headroom ◼ Serve over 7M(4) customers and drives earnings growth and ◼ Diversified across 8 states shareholder value creation 7.5%(5) Rate Base CAGR Investment Grade Credit ◼ $13B(6) regulated capital investment plan Metrics ◼ Investments supported by attractive capital ◼ Continued focus on strengthening the recycling from Enable cash flow balance sheet and maintaining strong credit quality across our utilities Note: (1) Based on 2019E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions (2) Houston Electric service territory customer growth rate from 2019 versus 2018 (3) Exclusive of jurisdictions acquired through the merger, customer growth rate from 2019 versus 2018 (4) As of December 31, 2019 19 (5) Based off 2019E through 2024E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions (6) For the period 2020E through 2024E
ROBUST UTILITY CAPITAL INVESTMENT… ~$13B capital to be deployed over next 5 years $2.8 $2.6 $2.6 $0.1 $2.7 $2.5 $0.1 $0.2 $0.1 $0.1 $1.4 $1.3 $1.1 $1.0 $1.3 $0.3 $0.3 $0.4 $ in billions in $ $0.3 $0.4 $1.0 $1.1 $0.9 $0.9 $0.9 2020E 2021E 2022E 2023E 2024E Houston Electric Indiana Electric Integrated Natural Gas Distribution Other 20 Note: Amounts include allowance for funds used during construction and exclude Energy Services and Infrastructure Services. For additional breakdown of utility capital, refer to slides 31 – 33
…SUPPORTS STRONG RATE BASE GROWTH $21.6 $20.5 $19.0 $17.5 $16.2 $10.2 $15.1 $9.5 $8.6 CAGR: $8.0 8.8% $7.3 $6.7 $2.2 $2.3 CAGR: $2.1 $ in billions in $ $2.0 6.2% $1.8 $1.7 CAGR: $8.3 $8.8 $9.1 $6.7 $7.1 $7.5 6.4% 2019E 2020E 2021E 2022E 2023E 2024E Houston Electric Indiana Electric Integrated Natural Gas Distribution Note: (1) The projected year-end rate base is subject to change depending on actual capital investment and deferred taxes, the time frame over which excess deferred taxes are returned to customers, and the 21 actual rate base authorized. Projected year-end rate base is the total rate base for the year and not just the amount that has been reflected in rates. Amounts shown may differ from regulatory filings
LEADING UTILITY CUSTOMER GROWTH AND RATES Customer Growth Customer Rates Below average T&D rate(2) across +67% utility peers in Texas ~2.0(1)% $0.060 $0.055 ~1.2% Top quartile of $0.050 national electric $0.045 $/kWh Electric utility customer $0.040 growth $0.035 $0.030 National Electric Utility Houston Electric Average Houston Electric Other Texas utilities Average Keeping rates low while providing safe, +10% reliable service to our customers ~1.2(1)% $1.30 ~1.1% $1.25 $1.20 Top half of Gas $1.15 (3) national Gas LDC $1.10 $1.05 customer growth $/CCF $1.00 $0.95 National Gas LDC Natural Gas Distribution $0.90 Average $0.85 $0.80 2009 2014 2019 Note: (1) Based upon 2019 customer count. Exclusive of jurisdictions acquired through the merger (2) Based upon tariffs published semi-annually by PUCT as of September 1, 2019 (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 22 and Ohio jurisdictions
DISCIPLINED O&M MANAGEMENT Utility O&M Management(1) Key O&M Management Initiatives ➢ Continued systematic review of operating areas to reduce O&M by aligning work activities with core utilities 5-year 1.6 cumulative and optimizing organizational design savings of (2) 1.5 ~$450M ➢ Drive O&M savings from increased process improvements, workforce planning and strategic alignment Target flat O&M ➢ Use of data analytics to streamline 2018 2019 2020E 2021E 2022E 2023E 2024E decision making across all functional areas Earnings growth, Disciplined O&M management shareholder value and customer rate headroom 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. 2018 and 2019 amounts are inclusive of Vectren utilities even though they were not a part of 23 CenterPoint Energy until February 1, 2019. Excluding certain merger costs, utility costs to achieve and amounts with revenue offsets (2) Calculated as a function of assuming a 2% hypothetical rate of O&M escalation to illustrate projected cumulative savings
COMMITTED TO MAINTAINING SOLID, INVESTMENT-GRADE CREDIT QUALITY ✓ Balance sheet strength provides base to capture the robust capital investment Consolidated Adjusted FFO/Debt opportunity in our regulated utility portfolio Low to mid-14% (1) 13.6% ✓ Improved business risk profile from sale of Energy Services and Infrastructure Services seen as credit positive by rating agencies ✓ Proceeds from sale of Energy Services and Infrastructure Services to pay down debt 2019 2020E - 2024E ✓ Rigorous capital allocation process “The [CIS] transaction will be credit supportive by ✓ On-going disciplined O&M management reducing debt and lowering CenterPoint’s business risk profile.” February 3, 2020 ✓ Committed to raising equity as necessary to “The [CES] transaction is credit positive for CNP because support our robust utility capital investments it will reduce its business risk profile and debt.” and our credit metrics February 25, 2020 Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures 24 (1) Reference slides 47 and 48 for reconciliation
ANTICIPATED EQUITY ISSUANCE 2020E – 2022E Projected annual sources of equity funding ~$0.1 - $0.2 $0.5 - $0.7 Strengthen balance sheet $0.8 $ $ in billions $0.3 - $0.5 $0.3 - $0.5 $0.1 - $0.3 Fund growth 2020 Equity to address: 2021 ATM/DRIP (1) 2022 ATM/DRIP(1) - Houston Electric rate case outcome -Stengthen balance sheet -Fund utility investment • Rebases credit metrics at BBB/Baa2 post-Houston Electric rate case • Incremental equity funds 15%-20% of ~$2.6 billion average annual utility investment capital • Anticipate ~$800 million of equity in 2020 to strengthen balance sheet and fund utility growth investment • 2021 – 2022 utility equity investment needs expected to be funded via ATM/DRIP(1) programs Note: Refer to slide 2 for information on forward-looking statements. 2021 and 2022 estimates presented represent annualized averages for the years 2021 – 2022. ATM – At the market offering program; 25 DRIP – Dividend Reinvestment Plan (CenterPoint Energy’s Investor Choice Plan) (1) Estimated annual DRIP proceeds approximate $30 million
ONGOING COMMITMENT TO THE COMMON STOCK DIVIDEND Payout ratio over time: 2020E Post Long-term 2019A 2009A CIS/CES target (1) 72% 10 years of DPS increases 64% 83% Mid-70s Going forward: +1-3% per year $1.15 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E Common Stock Dividend per share Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures 26 (1) Assumes the midpoint of 2020 utility guidance basis EPS range and Midstream Investments earnings range, which utilizes the Enable Midstream Partners’ 2020 guidance range as provided on Enable’s 4th quarter earnings call on February 19, 2020 and assumes an allocation of CenterPoint Energy corporate overhead based upon its relative earnings contributions
OUR INVESTOR VALUE PROPOSITION Largely pure-play regulated gas LDC and T&D utility across 8 states Regulatory Strategy 8-10% Capital investment Total Shareholder Return Pure-play regulated utility ~$13B 5-year(2) capital with diversified portfolio investment plan to provide and favorable mechanisms safe and reliable service to providing timely recovery customers across high of capital 5-7% > 4% growth jurisdictions Utility EPS(1)(2) Dividend Growth Yield Predictable Investment Grade Earnings Growth Credit Quality 5 – 7% utility EPS(1)(2) Continued commitment to growth supported by ~7.5% Low 70s solid investment grade strong regulated Rate Base Targeted credit quality and balance investment and rate base (3) CAGR Payout Ratio sheet strength growth Supported by strong cash flow from Enable to fund regulated growth Note: Refer to slide 2 for information on forward-looking statements (1) Utility earnings per share on a guidance basis 27 (2) Compound annual growth rate over the period 2020 through 2024 (3) Based off 2019E through 2024E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions
APPENDIX 28
2019 GUIDANCE BASIS EARNINGS PRESENTED ACCORDING TO 2020 EARNINGS GUIDANCE METHODOLOGY Twelve Months Ended December 31, 2019 Dollars in millions Diluted EPS Guidance basis (non-GAAP) income and diluted EPS (1) Utility (2) $ 741 $ 1.48 Non-utility (3) 285 0.57 Corporate (4) (131) (0.26) Consolidated $ 895 $ 1.79 Allocation of corporate Utility (95) (0.19) Non-utility (36) (0.07) Corporate 131 0.26 Consolidated - - Guidance basis (non-GAAP) income and diluted EPS with allocation of corporate Utility $ 646 $ 1.29 Non-utility 249 0.50 Consolidated $ 895 $ 1.79 Note: Refer to slide 46 for reconciliation to GAAP measures and slide 3 for information on non-GAAP measures (1) Excludes ZENS, CES mark-to-market adjustments, certain merger integration and transaction related fees and expenses, CenterPoint's share of Enable's goodwill impairment and the CES goodwill impairment (2) Includes Houston Electric - T&D, Indiana Electric - Integrated and Natural Gas Distribution (3) Includes Energy Services, Infrastructure Services and Midstream Investments (4) Includes the Corporate and Other segment and eliminations 29
2020 EPS GUIDANCE BASIS CONSIDERATIONS Translating Enable Guidance to CenterPoint’s Portion (in millions, except percentages) Guidance basis EPS before allocation of Corporate & Other Enable Net Income Attributable $385 - $445(2) to Common Units Midstream Utility Operations Corporate & Other Investments CNP Common Unit ownership percentage 53.7%(3) $1.40 - $1.50 $0.29 - $0.34 ($0.36) (4) (1) (1) Basis difference amortization $47 ~82% ~18% Interest 4.5% on $1,200 (CNP Midstream internal note) Marginal effective tax rate 24% Guidance basis EPS Estimated 2020 CNP Share Count 525 after allocation of Corporate & Other Midstream Investments EPS Utility Operations Midstream Investments $0.29 - $0.34 before allocation of Corporate & Other Proportion share of $1.10 - $1.20 $0.23 - $0.28 ($0.06) Corporate & Other allocation (18%) ~82% ~18% Midstream Investments EPS $0.23 – $0.28 after allocation of Corporate & Other Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures and for additional detail on the 2020 Utility EPS guidance range assumptions and 2020 Midstream Investments EPS expected range assumptions (1) Calculated as the relative contribution of each reporting area based off the guidance basis EPS for Utility Operations and Midstream Investments EPS expected range attributable to CenterPoint’s share of Enable’s Net Income Attributable to Common Units guidance range. The guidance basis earnings (loss) per share related to Corporate & Other is then proportionally allocated based on each reporting range’s relative contribution (2) Source: Enable’s 4th quarter and full-year 2019 earnings presentation dated February 19, 2020 30 (3) Assumes no change in Enable ownership position as of December 31, 2019 (4) Does not consider any potential loss on dilution, net of proportional basis difference recognition
HOUSTON ELECTRIC CAPITAL INVESTMENT OUTLOOK $4.9B Five Year Capital Plan $1,082 $1,031 $54 $83 $934 $934 $156 $876 $107 $108 $196 $109 $281 $182 $189 $134 $163 $37 $214 $215 $178 $204 $197 $ Millions $ $403 $413 $404 $423 $407 2020E 2021E 2022E 2023E 2024E Load Growth Reliability & Modernization Bailey to Jones Creek Project Other Baseline Other 31 Note: Amounts include allowance for funds used during construction
NATURAL GAS DISTRIBUTION CAPITAL INVESTMENT OUTLOOK $6.1B Five Year Capital Plan (by type of spend) $1,373 $1,331 $1,261 $93 $92 $97 $1,124 $218 $178 $121 $1,037 $154 $91 $157 $144 $ Millions $ $1,010 $1,062 $1,061 $846 $802 2020E 2021E 2022E 2023E 2024E System Modernization Growth Other 32 Note: Amounts include allowance for funds used during construction
NATURAL GAS DISTRIBUTION CAPITAL INVESTMENT OUTLOOK $6.1B Five Year Capital Plan (by state) $1,373 $1,331 $1,261 $1,124 $367 $269 $374 $1,037 $174 $57 $126 $135 $132 $140 $158 $254 $279 $330 $286 $282 $ Millions $ $232 $225 $231 $228 $223 $359 $356 $296 $319 $294 2020E 2021E 2022E 2023E 2024E TX MN IN OH Other 33 Note: Amounts include allowance for funds used during construction (1) Consists of Arkansas, Louisiana, Mississippi and Oklahoma
FINANCING ROBUST UTILITY GROWTH 2021E and 2022E Illustrative annual sources / uses of funding Funds ~15% -20% of annual capital investment supporting utility growth ~($0.7) ~$2.2 ~($2.5) $ $ in billions Funding utility growth & ~$0.5 - $0.7 reliability ~$0.3 - $0.5 (1) (2) FFO Dividends Annual capex Equity (ATM/DRIP) (3) Incremental long-term debt Sources Uses Anticipate ~$300 to $500 million per year 2021 thru 2022 via ATM/DRIP programs ✓ Supports ~$2.5 billion average annual utility capital investment ✓ Creates balance sheet flexibility to pursue accretive future capital investment opportunities Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures. 2021 and 2022 estimates presented represent annualized averages for the years 2021 – 2022. FFO – Funds from Operations; ATM – At the market offering program; DRIP – Dividend Reinvestment Plan (CenterPoint Energy’s Investor Choice Plan) (1) Including amounts related to transition and restoration bonds and distributions on Enable common units (2) Consists of CenterPoint Energy dividends on both common stock and preferred stock 34 (3) Estimated annual DRIP proceeds approximate $30 million
FINANCING ROBUST UTILITY GROWTH LONG-TERM DEBT(1) ISSUANCE 2020 Estimated Scheduled Debt Net Long-term Debt (2) ($ in millions) Issuance Range Maturities Issuances Corporate $ ― $ ― $ ― Houston Electric(3) $ 300 ̶ $500 $ ― $ 300 ̶ $500 CERC $ ― $ ― $ ― VUHI(4) $ 400 ̶ $500 $ 400 $ 0 ̶ $100 Total $ 700 ̶ $1,000 $ 400 $ 300 ̶ $600 Note: Refer to slide 2 for information on forward-looking statements. Financing plans are subject to change, depending on capital expenditures, regulatory outcomes, internal cash generation, market conditions and other factors. Table does not consider future opportunistic re-financings of existing short and/or long-term debt. Table does not include activity related to Vectren Capital Corp. due to the pending sale of Infrastructure Services. CERC – CenterPoint Energy Resources Corp.; VUHI – Vectren Utility Holdings, Inc. (1) Includes maturing term loans, excluding Infrastructure Services (2) Reference slide 36 for details and the CenterPoint Q4 2019 debt and liquidity schedules posted to www.investors.centerpointenergy.com 35 (3) Excluding amounts related to transition and restoration bonds (4) Includes debt financing activity at both the holding company level and associated operating companies level
PRINCIPAL AMOUNTS OF MATURING EXTERNAL DEBT DEBT AS OF DECEMBER 31, 2019 CenterPoint Energy, Inc. Principal Amounts of Maturing External Debt As of December 31, 2019 ($ in millions) Transition & System CenterPoint Restoration Year Energy (1) CEHE CERC VUHI IGC SIGECO VCC Sub-total Bonds (2) Total 2020 - - - 400 - - 200 600 231 831 2021-2025 4,633 (3) 902 (6) 1,270 (5) 380 (7) 10 69 - (8) 7,264 747 8,011 2026-2030 1,043 (4) 600 300 60 86 80 - 2,169 - 2,169 2031-2035 - 312 - 75 - - - 387 - 387 2036-2040 - - 400 - - 44 - 444 - 444 2041-2045 - 1,100 300 185 - 62 - 1,647 - 1,647 2046-2050 300 1,100 300 - - - - 1,700 - 1,700 2051-2055 - - - - - 38 - 38 - 38 2056+ - - - - - - - - - - Total $ 5,976 $ 4,014 $ 2,570 $ 1,100 $ 96 $ 293 $ 200 $ 14,249 $ 978 $ 15,227 (1) Debt collateralized by General Mortgage Bonds of CenterPoint Energy Houston Electric, LLC (CEHE) matures on the follow ing dates: 2028, $68 million. (2) Using scheduled payment dates. (3) Includes commercial paper of $1,633 million and bank borrow ings of $1,000 million. (4) Includes ZENS at their contingent principal amount of $75 million. As of December 31, 2019, the principal amount of ZENS on w hich interest is paid w as $828 million and the ZENS debt component reflected on CenterPoint Energy's financial statements w as $19 million. At maturity or upon redemption, holders of ZENS w ill receive cash at the higher of the contingent principal amount or the value of the reference shares of AT&T Inc. and Charter Communications, Inc. (5) Includes commercial paper of $376 million. (6) Includes bank borrow ings of $0 million. (7) Includes commercial paper of $268 million and bank borrow ings of $300 million. (8) Includes bank borrow ings of $200 million. 36
ELECTRIC OPERATIONS Q4 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and Houston Electric (PUCT) For full disclosure on Houston Electric rate case, refer to "Regulatory Matters" in Item 7 Rate Case (1) $155 Apr-19 TBD TBD of CenterPoint Energy's 2019 Form 10-K The PUCT issued a final order in October 2019 approving recovery of 2020 EECRF of EECRF 7 May-19 Mar-20 Oct-19 $35 million, 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 TDSIC 3 Feb-19 May-19 May-19 rate increase and 20% is 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 TDSIC 4 Aug-19 Nov-19 Nov-19 rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance of $4 million annually. Requested an increase of $34 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested TDSIC (1) 4 Feb-20 May-20 TBD rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance of $2 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 ECA - MATS 13 Feb-18 Jan-19 Apr-19 rate increase and 20% is 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, CECA 2 Feb-19 Jun-19 May-19 which reflects a $2 million annual increase in current revenues. Requested an increase of $0.1 million to rate base related to solar pilot investments, which reflects an immaterial change to current revenues. The mechanism also includes CECA (1) 0.1 Feb-20 Jun-20 TBD a change in (over)/under-recovery variance of $0.1 million annually. 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; TCJA – Tax Cuts and Jobs Act; TDSIC – Transmission, Distribution, and Storage System Improvement Charge; ECA – Federal Mandates under Indiana Senate Bills 251 and 29 (or Environmental Cost Adjustment); MATS – Mercury and Air Toxic Standards; CECA – Clean Energy Cost Adjustment 37 (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 Q4 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. Reflects a proposed 10.40% ROE on a 58% equity ratio. Additionally, the proposal includes a refund for an Unprotected EDIT Rider amortized over 3 years of which Rate Case (1) 7 Nov-19 TBD TBD $2.2 million is refunded in Year 1 and a request of $0.2 million for a Hurricane Surcharge, resulting from Hurricane Harvey, over 1 year. CenterPoint Energy and CERC - Houston and Texas Coast (Railroad Commission) On August 1, 2019, and subsequent supplemental filings in August and October Administrative 2019, Houston and Texas Coast proposed a rider to refund over three years to its N/A Aug-19 Jan-20 Oct-19 104.111 Houston and Texas Coast customers combined, approximately $18 million of unprotected EDIT related to the TCJA. CenterPoint Energy and CERC - South Texas (Railroad Commission) Administrative On November 14, 2019, South Texas proposed to refund protected EDIT, amortized N/A Nov-19 Mar-20 Jan-20 104.111 over ARAM. The estimated refund for the first year is $0.6 million. CenterPoint Energy and CERC - Arkansas (APSC) Based on ROE of 9.5% approved in the last rate case. On August 23, 2019, the FRP 7 Apr-19 Oct-19 Aug-19 APSC approved a unanimous comprehensive settlement that results in an FRP revenue increase of $7 million and includes additional non-monetary items. CenterPoint Energy and CERC - Louisiana (LPSC) RSP 3 Sep-19 Dec-19 Dec-19 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 July 1, Decoupling N/A Sep-19 Sep-19 Jan-20 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 were Rate Case (1) 62 Oct-19 TBD TBD approved and reflect an annual increase of $53 million, effective January 1, 2020. CenterPoint Energy and CERC - Mississippi (MPSC) RRA 2 May-19 Nov-19 Nov-19 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 OCC PBRC 2 Mar-19 Sep-19 Aug-19 approve an increase of $2 million. On August 29, 2019, the OCC approved the ALJ- recommended revenue increase of $2 million. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) GRIP – Gas Reliability Infrastructure Program; EDIT – Excess Deferred Income Taxes; ARAM – Average rate assumption method; FRP – Formula Rate Plan; RSP – Rate Stabilization Plan; CIP – Conservation 38 Improvement Program; RRA – Rate Regulation Adjustment; PBRC – Performance Based Rate Change Plan; ALJ – Administrative Law Judge (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 Q4 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) 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 case. The mechanism CSIA 3 Oct-18 Jan-19 Jan-19 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 case. The CSIA 5 Apr-19 Jul-19 Jul-19 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 case. The CSIA 3 Oct-19 Jan-20 Jan-20 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. 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 case. The mechanism CSIA 3 Oct-18 Jan-19 Jan-19 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 case. The mechanism CSIA 12 Apr-19 Jul-19 Jul-19 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 case. The mechanism CSIA 4 Oct-19 Jan-20 Jan-20 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. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) 39 CSIA – Compliance and System Improvement Adjustment (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 Q4 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) 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 change in DRR 11 May-19 Sep-19 Aug-19 (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 of total rate Rate Case 23 Mar-18 Sep-19 Aug-19 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 TSCR (1) N/A Jan-19 TBD TBD reflects credits for 2018 of $(10) million and 2019 of $(8) million, with mechanism to begin subsequent to new base rates. Order is expected in early 2020. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) DRR – Distribution Replacement Rider; TSCR – Tax Savings Credit Rider 40 (1) Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates
REGULATORY ESTIMATED FILING TIMELINE ELECTRIC OPERATIONS 2020 2021 2022 2023 2024 Jurisdiction Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 TCOS TCOS TCOS TCOS TCOS TCOS TCOS TCOS DCRF DCRF DCRF T&D GRC Houston Electric Houston TDSIC-6 TDSIC-7 TDSIC-8 TDSIC-9 TDSIC-10 TDSIC-11 TDSIC-12 TDSIC-13 TDSIC-14 TDSIC (Phase II) CECA-2 CECA-3 CECA-4 CECA-5 CECA-6 (1) ECA-1 ECA-2 ECA-3 ECA-4 ECA-5 Integrated Indiana ElectricIndiana GRC GRC (Phase I) (Phase II) Rate Case Proceedings (GRC) Mechanisms Other Filings Note: Rate filings and timelines are subject to change and may be impacted by factors such as regulatory, legislative and economic factors; TCOS – Transmission Cost of Service; DCRF – Distribution Cost Recovery Factor; TDSIC – Transmission, Distribution and Storage System Improvement Charge; CECA – Clean Energy Cost Adjustment; ECA – Federal Mandates under Indiana Senate Bills 251 and 29 (or Environmental Cost Adjustment). TCOS filings are anticipated to require approximately 60 days and can be filed twice per year 41 (1) ECA – Ash Pond filing
REGULATORY ESTIMATED FILING TIMELINE NATURAL GAS DISTRIBUTION 2020 2021 2022 2023 2024 Jurisdiction Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 GRIP GRIP GRIP GRIP Houston Gas GRC GRIP GRIP GRIP GRIP Texas Coast GRC GRIP GRIP GRIP GRIP South Texas GRIP GRC GRIP GRIP GRIP GRIP Beaumont/East Texas GRC Minnesota GRC (Interim rates) GRC (Interim rates) GRC (Interim rates) Arkansas & FRP FRP FRP FRP FRP Texarkana TX Oklahoma PBRC PBRC PBRC PBRC PBRC Louisiana RSP RSP RSP RSP RSP Mississippi RRA RRA RRA RRA RRA Rate Case Proceedings (GRC) Mechanisms Note: Rate filings and timelines are subject to change and may be impacted by factors such as regulatory, legislative and economic factors; GRIP – Gas Reliability Infrastructure Program; FRP – Formula Rate 42 Plan; PBRC – Performance Based Rate Change Plan; RSP – Rate Stabilization Plan; RRA – Rate Regulation Adjustment
REGULATORY ESTIMATED FILING TIMELINE NATURAL GAS DISTRIBUTION 2020 2021 2022 2023 2024 Jurisdiction Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 CSIA-11 CSIA-12 CSIA-13 CSIA-14 CSIA-1 (Phs. II) CSIA-2 (Phs. II) CSIA-3 (Phs. II) CSIA-4 (Phs. II) CSIA-5 (Phs. II) CSIA-6 (Phs. II) CSIA Phase II Plan Indiana North DSM GRC GRC (Phase I) (Phase II) CSIA-11 CSIA-12 CSIA-13 CSIA-14 CSIA-1 (Phs. II) CSIA-2 (Phs. II) CSIA-3 (Phs. II) CSIA-4 (Phs. II) CSIA-5 (Phs. II) CSIA-6 (Phs. II) CSIA Phase II Plan Indiana South DSM GRC (Phase I) GRC (Phase II) DRR DRR DRR DRR DRR Ohio CEP CEP CEP CEP CEP GRC Rate Case Proceedings (GRC) Mechanisms Other Filings Note: Rate filings and timelines are subject to change and may be impacted by factors such as regulatory, legislative and economic factors; CSIA – Compliance and System Improvement Adjustment; 43 DSM – Demand Side Management and Decoupling Extension; DRR – Distribution Replacement Rider; CEP – Capital Expenditure Program
SUMMARY OF MERGER-RELATED EXPENSES(1) Quarter Ended December 31, 2019 Year Ended December 31, 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 1 - 1 21 - 21 Natural Gas Distribution(4) 1 - 1 55 - 55 Infrastructure Services - 4 4 13 19 32 Corporate and Other(5) 11 1 12 75 5 80 Operating Income Impact $ 13 $ 5 $ 18 $ 174 $ 24 $ 198 Quarter Ended December 31, 2018 Year Ended December 31, 2018 O&M Amortization of Total O&M Amortization of Total ($ in millions) Expense(2) Intangibles Impact Expense(2) Intangibles Impact Corporate and Other $ 14 $ - $ 14 $ 46 $ - $ 46 Operating Income Impact $ 14 $ - $ 14 $ 46 $ - $ 46 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 $45 million attributable to new jurisdictions acquired through the merger 44 (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 December 31, 2019 December 31, 2018 Dollars Dollars in millions Diluted EPS (1) in millions Diluted EPS (1) Consolidated income available to common shareholders and diluted EPS $ 128 $ 0.25 $ 90 $ 0.18 Timing effects impacting CES(2): Mark-to-market (gains) losses (net of taxes of $2 and $9)(3) 6 0.01 30 0.06 ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $16 and $19) (3)(4) (60) (0.12) 69 0.13 Indexed debt securities (net of taxes of $16 and $18) (3) 60 0.12 (66) (0.13) Consolidated on a guidance basis $ 134 $ 0.26 $ 123 $ 0.24 Impacts associated with the Vectren merger: Impacts associated with the Vectren merger (net of taxes of $1 and $2) (3) 17 0.03 37 0.07 Impact of increased share count on EPS - - - 0.05 Total merger impacts 17 0.03 37 0.12 Loss on CenterPoint's share of Enable's impairment of its goodwill (net of taxes of $11) (3) 35 0.07 - - Loss on impairment of Energy Services goodwill (net of taxes of $3) (3) 45 0.09 - - Consolidated on a guidance basis, excluding impacts associated with the Vectren merger and loss on impairments $ 231 $ 0.45 $ 160 $ 0.36 (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. 45 Note: Refer to slide 3 for information on non-GAAP measures
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Twelve Months Ended December 31, 2019 December 31, 2018 Dollars Dollars in millions Diluted EPS (1) in millions Diluted EPS (1) Consolidated income available to common shareholders and diluted EPS $ 674 $ 1.33 $ 333 $ 0.74 Timing effects impacting CES(2): Mark-to-market (gains) losses (net of taxes of $9 and $26)(3) (30) (0.07) 84 0.18 ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $59 and $5) (3)(4) (223) (0.44) 17 0.04 Indexed debt securities (net of taxes of $61 and $49) (3)(5) 231 0.46 183 0.40 Consolidated on a guidance basis $ 652 $ 1.28 $ 617 $ 1.36 Impacts associated with the Vectren merger: Merger impacts other than the increase in share count (net of taxes of $40 and $12) (3) 163 0.33 81 0.18 Impact of increased share count on EPS - 0.02 - 0.06 Total merger impacts 163 0.35 81 0.24 Loss on CenterPoint's share of Enable's impairment of its goodwill (net of taxes of $11) (3) 35 0.07 - - Loss on impairment of Energy Services goodwill (net of taxes of $3) (3) 45 0.09 - - Consolidated on a guidance basis, excluding impacts associated with the Vectren merger and loss on impairments $ 895 $ 1.79 $ 698 $ 1.60 (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 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 46 Note: Refer to slide 3 for information on non-GAAP measures
CENTERPOINT ENERGY CONSOLIDATED ADJUSTED CASH FROM OPERATIONS PRE-WORKING CAPITAL Year Ended December 31, 2019 ($ in millions) Net cash provided by operating activities 1,638 Less: Changes in other assets and liabilities Accounts receivable and unbilled revenues, net (226) Inventory 52 Taxes receivable 106 Accounts payable 455 Fuel cost recovery (92) Margin deposits, net 56 Interest and taxes accrued (54) Other current assets 22 Other current liabilities 107 Cash From Operations, Pre-working Capital 2,064 Amounts included in Cash Flows from Investing Activities Distributions from unconsolidated affiliates in excess of cumulative earnings 42 Cash From Operations, Pre-working Capital, including Distributions 2,106 Plus: Other Adjustments Defined Benefit Plan Contribution Less Service Cost 69 Operating Leases Rent Expense 19 Adjusted Cash From Operations Pre-Working Capital 2,194 Note: Refer to slide 3 for information on non-GAAP measures. This slide includes adjusted cash from operations pre-working capital which is net cash provided by operating activities excluding certain changes in other assets and liabilities, and including (i) distributions from unconsolidated affiliates in excess of cumulative earnings included in cash flow from investing activities, as applicable and (ii) other adjustment for defined benefit plans and operating leases. 47
CENTERPOINT ENERGY CONSOLIDATED RATIO OF ADJUSTED CASH FROM OPERATIONS PRE-WORKING CAPITAL/ADJUSTED TOTAL DEBT Year Ended December 31, 2019 ($ in millions) Short-term Debt: Short-term borrowings - Current portion of transition and system restoration bonds 231 Indexed debt (ZENS)** 19 Current portion of other long-term debt 618 Long-term Debt: Transition and system restoration bonds, net* 746 Other, net 13,498 Total Debt, net 15,112 Plus: Other Adjustments 50% of Series A Preferred Stock Aggregate Liquidation Value 400 Benefit obligations 448 Present Value of Operating Lease Liabilities 63 Unamortized debt issuance costs and unamortized discount and premium, net 95 Adjusted Total Debt 16,118 Adjusted Cash From Operations Pre-Working Capital/Adjusted Total Debt (Adjusted FFO/Debt) 13.6% Note: Refer to slide 3 for information on non-GAAP measures and slide 47 for CenterPoint Energy's adjusted cash from operations pre-working capital calculation. This slide includes adjusted cash from operations pre-working capital which is net cash provided by operating activities excluding certain changes in other assets and liabilities, and including (i) distributions from unconsolidated affiliates in excess of cumulative earnings included in cash flow from investing activities, as applicable and (ii) other adjustment for defined benefit plans and operating leases. *The transition and system restoration bonds are serviced with dedicated revenue streams, and the bonds are non-recourse to CenterPoint Energy and CenterPoint Energy Houston Electric. **The debt component reflected on the financial statements was $19 million as of December 31, 2019. The principal amount on which 2% interest is paid was $828 million on each of December 31, 48 2019. The contingent principal amount was $75 million as of December 31, 2019. At maturity or upon redemption, holders of ZENS will receive cash at the higher of the continent principal amount or the value of the reference shares of AT&T and Charter Communications, Inc.
HOUSTON ELECTRIC – TDU: CORE OPERATING INCOME DRIVERS 2019 V. 2018 $28 $8 $37 $26 $10 $45 $74 $15 Federal income tax expense is also decreased $ Millions $ $545 $494 (2) 2018 Houston TCJA revenue Rate relief Customer growth Other (3) Depreciation and Merger-related 2019 Houston Electric - T&D reduction taxes expenses Electric - T&D Core Operating Core Operating Income (1) 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 $55 million from transition and system restoration bonds (2) Includes rate changes, exclusive of the TCJA impact (3) Includes lower operation and maintenance expenses of $44 million, increased miscellaneous revenues of $14 million, primarily related to right-of-way revenues, and favorable weather of $4 million versus near normal weather for 2018. These were partially offset by lower equity return of $29 million and lower usage of $24 million. 49 (4) Houston Electric – T&D Core Operating Income excludes $34 million from transition and system restoration bonds
NATURAL GAS DISTRIBUTION: CORE OPERATING INCOME DRIVERS 2019 V. 2018 $136 Federal income tax expense is also increased $55 $29 $14 $12 $6 $ Millions $ $408 $266 (1) (2) 2018 Natural Gas TCJA revenue Rate relief Customer growth Other Jurisdictions Merger-related 2019 Natural Gas Distribution reduction acquired in expenses (4) Distribution Operating Income merger(3) Operating Income Note: (1) Includes rate increases, exclusive of the TCJA impact (2) Includes increased weather and usage of $30 million (inclusive of $14 million favorable weather versus 2018), partially driven by timing of decoupling normalization in Minnesota, and lower operation and maintenance expenses of $9 million, partially offset by increased depreciation and amortization of $13 million 50 (3) Represents February 1, 2019 through December 31, 2019 results only, excluding merger-related expenses (4) Includes $10 million attributable to legacy CenterPoint Natural Gas Distribution jurisdictions and $45 million attributable to new jurisdictions acquired through the merger
Estimated Amortization for Pre-Tax Equity Earnings Associated with the Recovery of Certain Qualified Cost and Storm Restoration Costs As of Dec 31, 2019 ** The table provides TBC II TBC III TBC IV SRBC Total 1) the pre-tax equity return recognized by CenterPoint Energy, Inc. (CenterPoint Energy) during each of the years 2005 through Dec. 31, 2019 related to 2005 (213,804) (213,804) CenterPoint Energy Houston Electric, LLC’s 2006 (6,644,004) (6,644,004) (CEHE) recovery of certain qualified costs 2007 (7,140,194) (7,140,194) or storm restoration costs, as applicable, 2008 (6,673,765) (4,743,048) (11,416,813) pursuant to the past issuance of transition 2009 (7,279,677) (6,074,697) (95,841) (13,450,215) bonds by CenterPoint Energy Transition 2010 (9,071,326) (5,745,580) (2,657,384) (17,474,291) Bond Company II, LLC (Transition BondCo 2011 (9,902,590) (6,994,650) (2,840,737) (19,737,978) II) and CenterPoint Energy Transition Bond 2012 (9,717,059) (6,837,290) (27,873,514) (2,473,992) (46,901,855) Company III, LLC (Transition BondCo III) or CenterPoint Energy Transition Bond Actual 2013 (10,383,183) (7,251,470) (24,082,419) (2,235,567) (43,952,640) Company IV, LLC (Transition BondCo IV) or 2014 (11,442,612) (8,699,455) (42,944,063) (3,680,587) (66,766,717) system restoration bonds by CenterPoint 2015 (13,547,311) (12,683,240) (18,689,309) (2,358,968) (47,278,828) Energy Restoration Bond Company, LLC 2016 (12,508,807) (5,121,694) (42,041,721) (4,901,568) (64,573,791) (System Restoration BondCo), as 2017 (14,637,270) (11,467,234) (14,687,161) (779,120) (41,570,784) applicable and 2018 (13,767,589) (10,386,899) (43,023,458) (6,523,406) (73,701,353) 2) the estimated pre-tax equity return currently 2019 (4,720,857) (8,330,707) (29,627,102) (2,395,082) (45,073,748) expected to be recognized in each of the 2020 (29,092,495) (2,073,602) (31,166,097) years 2020 through 2024 related to 2021 (33,130,955) (2,775,302) (35,906,256) CEHE’s recovery of certain qualified costs 2022 (34,497,153) (1,663,396) (36,160,549) or storm restoration costs, as applicable, 2023 (35,922,746) (35,922,746) pursuant to the past issuance of transition Estimated 2024 (29,173,016) (29,173,016) bonds by Transition BondCo II, Transition BondCo III or Transition BondCo IV or (137,650,048) (94,335,964) (404,785,110) (37,454,553) (674,225,675) system restoration bonds by System Restoration BondCo, as applicable. The amounts reflected for Jan. 1, 2020, through 2024 are based on CenterPoint Energy’s estimates as of Dec. 31, 2019. However, the equity returns to be recognized in future periods with respect to each series of transition or system restoration bonds, as applicable, will be periodically subject to adjustment based on tariff adjustments for any overcollections or undercollections of transition charges or system restoration charges, as applicable. The equity return amounts reflected in the table are reported in the financial statements of CenterPoint Energy and CenterPoint Energy Houston Electric as revenues from electric transmission and distribution utility. 51