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): April 1, 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 7.01. Regulation FD Disclosure.
CenterPoint Energy, Inc. (the “Company”) owns, indirectly through its wholly-owned subsidiary CenterPoint Energy Midstream, Inc., approximately 53.7% of the common units representing limited partner interests in Enable Midstream Partners, LP (“Enable”). On April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. This reduction is expected to result in one or more quarterly distributions to the Company that fall below the Company’s previously disclosed expected minimum quarterly distribution from Enable of $0.2875 per common unit. This reduction in Enable’s quarterly distributions per common unit is expected to reduce Enable common unit distributions to the Company by approximately $155 million per year.
The Company issued a press release on April 1, 2020 (the “Press Release”) and supplemental materials (the “Supplemental Materials”) on April 2, 2020 to provide a business update related to certain measures it expects to take in response to the current business environment to strengthen its financial position and to adjust for the reduction in cash flow related to the reduction in Enable quarterly common unit distributions recently announced by Enable. These measures are expected to include reducing the Company’s (i) quarterly common stock dividend per share from $0.2900 to $0.1500; (ii) anticipated 2020 capital spending by approximately $300 million, with the Company continuing to target five-year total capital investment of approximately $13 billion as previously disclosed; and (iii) anticipated operation and maintenance expenses for 2020 by a target of approximately $40 million, excluding certain merger costs, utility costs to achieve, severance and amounts with revenue offsets. For additional information regarding these measures, please refer to the Press Release and Supplemental Materials, which are furnished herewith as Exhibits 99.1 and 99.2, respectively, and incorporated herein by reference. The Press Release and Supplemental Materials highlight certain topics that are expected to be addressed on the Company’s first quarter 2020 earnings conference call, which is currently scheduled for May 7, 2020.
The information in this Item 7.01 of this Current Report on Form 8-K, including the Press Release and Supplemental Materials (Exhibits 99.1 and 99.2 hereto) is being furnished, not filed, pursuant to Item 7.01. Accordingly, the information in this Item 7.01 of this Current Report on Form 8-K, the Press Release and Supplemental Materials (i) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and (ii) 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.
Item 8.01. Other Events.
The information in the first paragraph of Item 7.01 above relating to the announcement by Enable of the reduction of Enable’s quarterly distributions per common unit and the related impact on the Company’s cash flows is incorporated in this Item 8.01 by reference.
Item 9.01. Financial Statements and Exhibits.
(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: April 2, 2020 | By: | /s/ Jason M. Ryan |
Jason M. Ryan | ||
Senior Vice President and General Counsel | ||
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 announces measures to strengthen financial position
in response to Enable distribution reduction
Houston – April 1, 2020 – CenterPoint Energy, Inc. (NYSE: CNP) today announced a series of measures to strengthen its financial position and provide multi-year flexibility as to equity issuances. In a separate news release issued earlier today, Enable Midstream Partners, LP (Enable) announced a 50% distribution reduction for common units, representing limited partner interests in Enable. Given CenterPoint Energy’s 53.7% ownership of the outstanding common units of Enable, this decrease is expected to reduce distributions to CenterPoint Energy by approximately $155 million per year on an annualized basis.
To adjust for this reduction in cash flow and strengthen CenterPoint Energy’s financial position, the company expects to take the following measures intended to maintain solid investment grade credit quality:
• | A targeted reduction in the company’s quarterly common stock dividend from $0.2900 per share to $0.1500 per share, targeting a 50% - 55% utility earnings payout ratio; |
• | An approximately $40 million target reduction in 2020 operation and maintenance (O&M) expenses, excluding certain merger costs, utility costs to achieve, severance and amounts with revenue offsets; previous plans indicated the company’s intent to hold 2020 O&M flat to 2019 levels; and |
• | An approximately $300 million reduction in 2020 capital spending from $2.6 billion to $2.3 billion; the company will continue to target five-year total capital investment of approximately $13 billion as previously disclosed. |
With the above three steps and the increased earnings contribution from utilities, the company expects that its financial position will be strengthened and its credit quality improved, which will also provide multi-year flexibility as to the timing and total amount of equity issuances. The company will evaluate market and economic conditions, including the potential impacts of COVID-19, and will remain opportunistic as it assesses equity needs.
“In light of Enable’s recent distribution decrease, this reduction in CenterPoint Energy’s common stock dividend strengthens CenterPoint Energy’s business risk profile by significantly reducing the company’s reliance upon cash distributions from Enable,” said John W. Somerhalder II, interim president and CEO. “We anticipate utility earnings contribution will approach 90% for 2020 and increase to nearly 100% over the next few years. The net result of
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today’s actions supports CenterPoint Energy’s firm commitment to maintaining investment grade credit quality and our continued strategic focus on growing utility earnings contribution.”
A Focus on Safety and Reliability during COVID-19
CenterPoint Energy continues to be committed to providing its customers with safe and reliable service during the current COVID-19 situation. During this challenging time, CenterPoint Energy is committed to serving its customers and keeping them informed as the situation continues to evolve.
"We are committed to the safety and well-being of our customers, employees, contractors and communities," Somerhalder said. "CenterPoint Energy has implemented its Pandemic Preparedness Plan and we continue to monitor updates and follow protocols from the Centers for Disease Control and Prevention (CDC), World Health Organization (WHO) and state and local officials. We are also working closely with all regulatory agencies, government entities and emergency management organizations across our service territory."
Texas Regulators Support Efforts to Avoid Customer Disconnections
Following Houston Electric's two-week voluntary suspension of disconnecting customers who have not paid their bill to their retail electric provider during COVID-19, and following collaboration with the Public Utility Commission of Texas (PUCT) and other market participants, on March 26, 2020, the PUCT approved a balanced solution to minimize residential disconnections. The costs associated with that program will be recovered by Houston Electric in a surcharge that went into effect this week. The PUCT also issued an accounting order allowing Houston Electric to defer for recovery in a future proceeding its other incremental costs associated with COVID-19. The PUCT was one of the first utility regulators in the country to take this COVID-19 recovery action.
Q1 2020 Earnings Call
CenterPoint Energy continues to analyze the impact of recent events related to COVID-19 and may experience some reduction in electric and natural gas demand, as well as increased bad debt expense. While CenterPoint Energy is assessing the business impact of COVID-19 and current market and economic conditions, the company is unaware at this time of any other extraordinary factors currently having a material effect on business performance and continues to be confident in its liquidity position. CenterPoint Energy will release first quarter 2020 results on May 7, 2020, and will address pandemic impacts, capital expenditures, O&M reductions and 2020 guidance.
Forward Looking Statement
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this news release, the words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "objective," "plan," "potential," "predict," "projection," "should," "target," "will" or other similar words are intended to identify forward-looking statements. 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 the impact of COVID-19, including with respect to regulatory actions, future financial performance and earnings guidance, utility earnings contribution and targeted utility earnings payout ratio, anticipated dividend rate reductions, equity issuances, estimated cash flows decreases, reductions in distributions from Enable with respect to CenterPoint Energy’s holdings of Enable common units, capital spending, O&M expenses, expected business risk profile, and future events that are not historical facts are forward-looking statements.
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this news release, the words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "objective," "plan," "potential," "predict," "projection," "should," "target," "will" or other similar words are intended to identify forward-looking statements. 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 the impact of COVID-19, including with respect to regulatory actions, future financial performance and earnings guidance, utility earnings contribution and targeted utility earnings payout ratio, anticipated dividend rate reductions, equity issuances, estimated cash flows decreases, reductions in distributions from Enable with respect to CenterPoint Energy’s holdings of Enable common units, capital spending, O&M expenses, expected business risk profile, and future events that are not historical facts are forward-looking statements.
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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 drilling, production and capital spending decisions of third parties and 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) economic effects of the recent actions of Saudi Arabia and Russia which have resulted in a substantial decrease in oil and natural gas prices and the combined impact of these events and COVID-19 on commodity prices; (D) the demand for crude oil, natural gas, NGLs and transportation and storage services; (E) environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing; (F) recording of goodwill, long-lived asset or other than temporary impairment charges by or related to Enable; (G) the timing of payments from Enable’s customers under existing contracts, including minimum volume commitment payments; (H) changes in tax status; and (I) 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) risks relating to the COVID-19 pandemic and its effect on CenterPoint Energy, its industry and the communities it serves, U.S. and world financial markets, potential regulatory actions, changes in customer and stakeholder behaviors and impacts on and modifications to CenterPoint Energy’s and its affiliates’ operations, business and financial condition relating thereto; (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, 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
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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 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
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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.
About CenterPoint Energy
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 nearly $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.
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 nearly $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.
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Exhibit 99.2 INVESTOR MARKET UPDATE APRIL 2, 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 the performance of Enable Midstream Partners, LP (“Enable”), including reductions to distributions on its common units and the amount thereof, our targeted reduction to our quarterly common stock dividend, 2020 capital spending and 2020 O&M expense, our utility earnings contribution and utility earnings payout ratio, the impact of COVID-19, our transition to become core utility focused, including the percentage of earnings therefrom and CAGR growth, our proposed sales of Infrastructure Services and Energy Services, regulatory actions, our credit quality, 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 3 is derived from Enable’s press release dated April 1, 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
REDUCTION TO ANNUAL CASH DISTRIBUTION FROM MIDSTREAM INVESTMENTS • Enable Midstream Partners, LP (Enable) announced a reduction to its annual LP common unit distributions • Enable’s 50% reduction in distributions results in approximately $155 million of lower annualized cash flow to CNP relative to CNP’s 2020 financial plan of ~$310 million in distributions described on the Q4 earnings call • To adjust for the reduction in cash flow and strengthen its financial position, CNP expects to take the following measures intended to maintain solid investment grade credit quality: – Targeted reduction in CNP’s quarterly common stock dividend from $0.2900 per share(1) to $0.1500 per share(1), targeting approximately 50% - 55% utility earnings payout ratio – Approximately $40 million target reduction in 2020 O&M expense(2) – Approximately $300 million(3) reduction in anticipated 2020 utility capital investment from $2.6 billion to $2.3 billion; CNP will continue to target 5-year total capital investment of approximately $13 billion Note: Refer to Enable’s press release dated April 1, 2020 for further detail. (1) Representative of a targeted reduction to CenterPoint Energy’s common stock dividend, as the Board of Directors have not formally declared a common stock dividend as of the date of this presentation (2) Inclusive of Houston Electric, Indiana Electric Integrated and Natural Gas Distribution business segments. Excluding certain merger costs, utility costs to achieve, severance and amounts with revenue offsets 3 (3) Deferrals by business unit are estimated at the following levels: Houston Electric - $120 - $130 million; Indiana Electric Integrated - $12 - $13 million; Natural Gas Distribution - $150 million; Other - $15 million
DISCIPLINED O&M MANAGEMENT • Accelerated action on key O&M management initiatives seeking to realize incremental targeted savings of ~$40 million in 2020 Utility O&M Management(1) Key O&M Management Initiatives ($40) ➢ Continued systematic review of operating areas to reduce O&M by aligning work activities with core utilities and optimizing organizational design $1,500 $1,460 ➢ Seek to drive O&M savings from $ in millions in $ increased process improvements, workforce planning and strategic alignment 2020E Utility O&M Incremental O&M Revised 2020E per Q4'19 earnings call reduction in 2020 Utility O&M ➢ Use of data analytics to streamline decision making across all functional areas Note: Refer to slide 2 for information on forward-looking statements 4 (1) Inclusive of Houston Electric, Indiana Electric Integrated and Natural Gas Distribution business segments. Excluding certain merger costs, utility costs to achieve, severance and amounts with revenue offsets
UTILITY CAPITAL INVESTMENT DEFERRAL Reduce 2020 utility capital investment from $2.6B to $2.3B Continue to target ~$13B of total capital to be invested over next 5 years 2021E – 2024E Incremental capital opportunity Redeploy deferred 2020 capital of $0.3B(1) $2.8 $2.6 $2.7 $2.5 $2.6 (1) ($0.3) $2.3 $ in billions in $ 2020E per Delay of Revised 2020E 2021E 2022E 2023E 2024E Q4'19 earnings call 2020E capital Note: Amounts include allowance for funds used during construction and exclude Energy Services and Infrastructure Services 5 (1) Deferrals by business unit are estimated at the following levels: Houston Electric - $120 - $130 million; Indiana Electric Integrated - $12 - $13 million; Natural Gas Distribution - $150 million; Other - $15 million
COMMON STOCK DIVIDEND REBALANCE Target approximately 50% - 55% payout ratio relative to utility earnings ($0.56) ~48% annualized reduction(1) $1.16 annualized $0.60 annualized Previous annualized Reduction to Revised annualized common stock dividend common stock dividend common stock dividend Common Stock Dividend per share 6 Note: Refer to slide 2 for information on forward-looking statements (1) Representative of a targeted reduction to CenterPoint Energy’s common stock dividend, as the Board of Directors have not formally declared a common stock dividend as of the date of this presentation
PRUDENT AND APPROPRIATE ACTIONS STRENGTHEN FINANCIAL POSITION $40 million $300 million ~48% Incremental O&M Deferral of utility Reduction to common reductions capital investment stock dividend(1) • Planned actions above and increased earnings contribution from utilities are expected to strengthen CenterPoint Energy’s financial position and improve credit quality, which will also provide multi-year flexibility as to the timing and total amount of equity issuances • Company will evaluate market and economic conditions, including the potential impacts of COVID-19, and will remain opportunistic as it assesses equity needs 7 Note: Refer to slide 2 for information on forward-looking statements (1) Representative of a targeted reduction to CenterPoint Energy’s common stock dividend, as the Board of Directors have not formally declared a common stock dividend as of the date of this presentation
CENTERPOINT’S CONTINUED TRANSITION TO MORE UTILITY FOCUSED STRATEGY 2018A(1) 2020E(2) 2022E(2) Announced Vectren utilities acquisition of and sale of Energy Services / Core utility focus Vectren Infrastructure Services 70% 87% 97% Utility(1) Utility(2) Utility(2) ❑ Regulated utility ❑ Pure play gas LDC and ❑ ~$19B(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 100% earnings contribution ❑ Enhanced credit quality post sale(4) (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. (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 8 (5) Based on 2022E Electric T&D, Electric Generation and Natural Gas Distribution rate base as calculated by the individual jurisdictions (6) For the period 2020E through 2024E
AREAS OF STRATEGIC FOCUS 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 9 (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
APPENDIX 10
PANDEMIC UPDATE • The COVID-19 pandemic poses safety, economic and financial challenges throughout the United States – CenterPoint maintains liquidity via our $5.1 billion credit facilities, utility cash flow and commercial paper programs – CenterPoint has engaged with regulators and industry partners to respond to the pandemic, supporting the company’s financial position and safety of our employees and communities • In response to COVID-19, CenterPoint has reviewed business continuity plans for the entire enterprise – Non-essential personnel are working from home and performing daily functions remotely – Essential personnel are practicing social distancing, rotational shifts and alternative work facilities – Back up control centers have been established as appropriate 11
TEXAS ELECTRIC REGULATORY UPDATE • The PUCT approved an accounting order approving a regulatory asset for Houston Electric’s incremental expenses associated with COVID-19 – The amount of carrying costs and the period of recovery will be addressed in a future proceeding – Constructive precedent for use in other jurisdictions • Retail Electric Provider reimbursement program for residential customers was also approved – Program will provide a DNP moratorium for qualified residential customers, subject to third party verification – Initial rate set to recover ~$2.5 million/month; PUCT expressed willingness to address a revised rate as needed – Company will receive an interest-free loan from ERCOT to help address regulatory lag – Program is temporary, lasting initially for 6 months but extension will be revisited at a future open meeting – Company will still process DNP for customers not participating in the program which includes non-residential customers Note: Refer to slide 2 for information on forward-looking statements; PUCT – Public Utility Commission of Texas; DNP – Disconnect for non-pay; ERCOT – Electric Reliability Council of Texas 12