Oct 21, 2003
CenterPoint Energy Reports Improved Third Quarter 2003 Results
CenterPoint Energy Reports Improved Third Quarter 2003 Results
Houston - October 21, 2003 - CenterPoint Energy, Inc. (NYSE: CNP) today reported income from continuing operations of $183 million, or $0.60 per diluted share for the quarter ended September 30, 2003. This compares to income from continuing operations of $162 million, or $0.54 per diluted share for the third quarter of 2002.
The company's net income for the third quarter of 2003 was $182 million, or $0.59 per diluted share, compared to a loss of $4.1 billion, or $13.77 per diluted share, for the same period of 2002. During the third quarter of 2002, the company recorded a loss from discontinued operations of $4.3 billion primarily related to the distribution of Reliant Resources, Inc. (RRI) to CenterPoint Energy shareholders on September 30, 2002. RRI's historical results are also reported as discontinued operations.
"I'm pleased to report improved operating results which reflect the continued strong performance of our core operating units and the significant contributions from Texas Genco and the ECOM true-up formula," said David McClanahan, president and chief executive officer of CenterPoint Energy. "I'm also pleased with the progress we continue to make operationally and in executing our strategy.
"We have also further enhanced our financial flexibility and liquidity," said McClanahan. "We continued to access the capital markets during the third quarter, and so far this year we have raised over $3.5 billion. We used these proceeds to repay maturing debt, refinance higher coupon debt, pay down the company's bank facilities and enhance our liquidity."
For the nine months ended September 30, 2003, income from continuing operations before cumulative effect of accounting change was $347 million, or $1.14 per diluted share, compared to $393 million, or $1.32 per diluted share for the same period of 2002.
Net income for the nine months ended September 30, 2003 was $413 million, or $1.35 per diluted share compared to a loss of $3.9 billion, or $12.92 per diluted share for the first nine months of 2002. During the first nine months of 2003, the company recorded a gain of $80 million relating to the implementation of SFAS No. 143, "Accounting for Asset Retirement Obligations" and a $14 million loss from discontinued operations primarily related to the company's planned sale of its energy management services business. The first nine months of 2002 included a loss from discontinued operations of $4.3 billion primarily related the distribution of RRI stock to shareholders.
2003 OUTLOOK
Based on the year-to-date results of the company's core operating units, the significant contributions from Texas Genco and the ECOM true-up formula, and expectations of solid performance for the balance of the year, CenterPoint Energy raised its 2003 guidance for earnings from continuing operations to $1.30-$1.40 per diluted share from its prior guidance of $0.85 - $1.00 per diluted share.
THIRD QUARTER HIGHLIGHTS
The company's operating performance and cash flow for the third quarter of 2003 compared to the same period of 2002 were affected by:
Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $383 million in the third quarter of 2003 consisting of $161 million for the regulated electric transmission & distribution utility and non-cash operating income of $222 million associated with generation-related regulatory assets, or Excess Cost Over Market (ECOM), as described below. For the third quarter of 2002, operating income was $399 million, consisting of $159 million from the regulated electric transmission & distribution utility and non-cash operating income of $240 million associated with ECOM.
The regulated electric transmission & distribution utility continues to benefit from solid customer growth. Revenues increased from the addition of over 50,000 metered customers since September 2002. Operating expenses increased from the comparable period of 2002 as higher pension and employee benefit expenses were partially offset by the absence of certain non-recurring expenses related to the transition to the deregulated market in 2002.
Under the Texas electric restructuring law, a regulated utility may recover, in its 2004 stranded cost true-up proceeding, the difference between market prices received by its affiliated power generation company in the Texas Public Utility Commission (PUC) mandated auctions and the prices used in the ECOM model established by the PUC. During 2002 and 2003, this difference, referred to as ECOM, produces non-cash income and is recorded as a regulatory asset. Beginning in 2004, this ECOM calculation no longer applies. The reduction in ECOM of $18 million from 2002 to 2003 resulted primarily from an increase in capacity auction prices at Texas Genco.
Operating income for the nine months ended September 30, 2003 was $823 million, consisting of $368 million from the regulated electric transmission & distribution utility and non-cash operating income of $455 million from ECOM. This compares to $927 million for the same period of 2002 consisting of $376 million from the regulated electric transmission & distribution utility and non-cash operating income of $551 million from ECOM.
Electric Generation
Texas Genco owns over 14,000 MW of electric generation in Texas and sells capacity, energy, and ancillary services in the Texas electric market, primarily through capacity auctions. It reported operating income of $125 million for the third quarter of 2003 compared to operating income of $7 million for the same period of 2002.
Wholesale electricity prices were much higher in 2003 due to substantially higher natural gas prices which led to increased capacity auction revenues for Texas Genco's baseload products. Energy revenues also increased, which more than offset an increase in fuel costs. Operation and maintenance expenses increased by $2 million due to higher pension and employee benefit expenses and costs associated with unplanned outages at Unit 1 of the South Texas Project nuclear facility and at Unit 8 of the W. A. Parish coal plant, which were partially offset by a reduction in technical support costs. Both units were returned to full service during the quarter. Texas Genco estimated that the added cost of replacement energy associated with the unplanned outages negatively impacted gross margin by approximately $35 million for the quarter. Texas Genco also indicated that some level of unplanned outages can be expected in the business.
Operating income for the nine months ended September 30, 2003 was $158 million, compared to an operating loss of $74 million for the same period of 2002.
Natural Gas Distribution
The natural gas distribution segment reported an operating loss of $5 million for the third quarter of 2003 compared to the prior year's third quarter operating loss of $4 million. Due to seasonal impacts, operating results for the third quarter are typically the weakest of the year.
Continued customer growth and higher revenues from rate increases implemented in 2002 did not completely offset higher expenses primarily related to increased pension and employee benefit expenses, depreciation and other taxes. In addition, the costs associated with a receivables facility, which was modified in November 2002, reduced operating income by $2 million, whereas prior to the amendment, these costs were included in interest expense.
Operating income for the nine months ended September 30, 2003 was $146 million, compared to $114 million for the same period of 2002.
Pipelines and Gathering
The pipelines and gathering segment reported operating income of $39 million in the third quarter of 2003 compared to $43 million for the same period of 2002. The decline was primarily related to higher pension, employee benefit and other miscellaneous expenses.
Operating income for the nine months ended September 30, 2003 was $124 million, compared to $119 million for the same period of 2002.
Other Operations
The company's other operations reported operating income for the third quarter of 2003 of $7 million compared to an operating loss of $14 million for the same period of 2002. Operating income for the nine months ended September 30, 2003 was $5 million, compared to an operating loss of $13 million for the same period of 2002.
WEBCAST OF EARNINGS CONFERENCE CALL
CenterPoint Energy's management will host an earnings conference call on Tuesday Oct. 21, 2003, at 10:30 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.CenterPointEnergy.com/investors/events. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
The management of Texas Genco, the company's 81 percent-owned subsidiary, will host an earnings conference call on Tuesday Oct. 21, 2003, at 9 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.txgenco.com/investor.html. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Missouri, Oklahoma, and Texas. Assets total approximately $20 billion. CenterPoint Energy became the new holding company for the regulated operations of the former Reliant Energy, Incorporated in August 2002. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years.
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This news release includes forward-looking statements. Actual events and results may differ materially from those projected. The statements in this news release regarding future financial performance and results of operations and other statements that are not historical facts are forward-looking statements. Factors that could affect actual results include the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or its subsidiaries' business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas, the impact of unplanned facility outages and other factors discussed in CenterPoint Energy's and its subsidiaries' Form 10-Qs for the quarterly period ended June 30, 2003 and other filings with the Securities and Exchange Commission.
For more information contact:
Media: Leticia Lowe, 713.207.7702
Investors: Marianne Paulsen, 713.207.6500
The company's net income for the third quarter of 2003 was $182 million, or $0.59 per diluted share, compared to a loss of $4.1 billion, or $13.77 per diluted share, for the same period of 2002. During the third quarter of 2002, the company recorded a loss from discontinued operations of $4.3 billion primarily related to the distribution of Reliant Resources, Inc. (RRI) to CenterPoint Energy shareholders on September 30, 2002. RRI's historical results are also reported as discontinued operations.
"I'm pleased to report improved operating results which reflect the continued strong performance of our core operating units and the significant contributions from Texas Genco and the ECOM true-up formula," said David McClanahan, president and chief executive officer of CenterPoint Energy. "I'm also pleased with the progress we continue to make operationally and in executing our strategy.
"We have also further enhanced our financial flexibility and liquidity," said McClanahan. "We continued to access the capital markets during the third quarter, and so far this year we have raised over $3.5 billion. We used these proceeds to repay maturing debt, refinance higher coupon debt, pay down the company's bank facilities and enhance our liquidity."
For the nine months ended September 30, 2003, income from continuing operations before cumulative effect of accounting change was $347 million, or $1.14 per diluted share, compared to $393 million, or $1.32 per diluted share for the same period of 2002.
Net income for the nine months ended September 30, 2003 was $413 million, or $1.35 per diluted share compared to a loss of $3.9 billion, or $12.92 per diluted share for the first nine months of 2002. During the first nine months of 2003, the company recorded a gain of $80 million relating to the implementation of SFAS No. 143, "Accounting for Asset Retirement Obligations" and a $14 million loss from discontinued operations primarily related to the company's planned sale of its energy management services business. The first nine months of 2002 included a loss from discontinued operations of $4.3 billion primarily related the distribution of RRI stock to shareholders.
2003 OUTLOOK
Based on the year-to-date results of the company's core operating units, the significant contributions from Texas Genco and the ECOM true-up formula, and expectations of solid performance for the balance of the year, CenterPoint Energy raised its 2003 guidance for earnings from continuing operations to $1.30-$1.40 per diluted share from its prior guidance of $0.85 - $1.00 per diluted share.
THIRD QUARTER HIGHLIGHTS
The company's operating performance and cash flow for the third quarter of 2003 compared to the same period of 2002 were affected by:
- improved operating income of $118 million from our 81 percent-owned subsidiary, Texas Genco Holdings, Inc. (NYSE:TGN), partially offset by an $18 million reduction in ECOM
- continued customer growth with the addition of nearly 90,000 metered electric and gas customers since September of 2002, or an annualized 2 percent growth
- an increase in revenues of $6 million from rate increases in the natural gas distribution operations
- an increase in interest expense of $53 million
- higher pension, employee benefit and insurance costs of $23 million
- a reduction in capital expenditures of $22 million
- raising $500 million in the capital markets and using the proceeds to reduce the company's bank credit facility to $2.35 billion
- replacing the company's $2.35 billion bank credit facility with a new, lower-cost 3-year facility, composed of a $1.425 billion bank revolver and a $925 million term loan from institutional investors
Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $383 million in the third quarter of 2003 consisting of $161 million for the regulated electric transmission & distribution utility and non-cash operating income of $222 million associated with generation-related regulatory assets, or Excess Cost Over Market (ECOM), as described below. For the third quarter of 2002, operating income was $399 million, consisting of $159 million from the regulated electric transmission & distribution utility and non-cash operating income of $240 million associated with ECOM.
The regulated electric transmission & distribution utility continues to benefit from solid customer growth. Revenues increased from the addition of over 50,000 metered customers since September 2002. Operating expenses increased from the comparable period of 2002 as higher pension and employee benefit expenses were partially offset by the absence of certain non-recurring expenses related to the transition to the deregulated market in 2002.
Under the Texas electric restructuring law, a regulated utility may recover, in its 2004 stranded cost true-up proceeding, the difference between market prices received by its affiliated power generation company in the Texas Public Utility Commission (PUC) mandated auctions and the prices used in the ECOM model established by the PUC. During 2002 and 2003, this difference, referred to as ECOM, produces non-cash income and is recorded as a regulatory asset. Beginning in 2004, this ECOM calculation no longer applies. The reduction in ECOM of $18 million from 2002 to 2003 resulted primarily from an increase in capacity auction prices at Texas Genco.
Operating income for the nine months ended September 30, 2003 was $823 million, consisting of $368 million from the regulated electric transmission & distribution utility and non-cash operating income of $455 million from ECOM. This compares to $927 million for the same period of 2002 consisting of $376 million from the regulated electric transmission & distribution utility and non-cash operating income of $551 million from ECOM.
Electric Generation
Texas Genco owns over 14,000 MW of electric generation in Texas and sells capacity, energy, and ancillary services in the Texas electric market, primarily through capacity auctions. It reported operating income of $125 million for the third quarter of 2003 compared to operating income of $7 million for the same period of 2002.
Wholesale electricity prices were much higher in 2003 due to substantially higher natural gas prices which led to increased capacity auction revenues for Texas Genco's baseload products. Energy revenues also increased, which more than offset an increase in fuel costs. Operation and maintenance expenses increased by $2 million due to higher pension and employee benefit expenses and costs associated with unplanned outages at Unit 1 of the South Texas Project nuclear facility and at Unit 8 of the W. A. Parish coal plant, which were partially offset by a reduction in technical support costs. Both units were returned to full service during the quarter. Texas Genco estimated that the added cost of replacement energy associated with the unplanned outages negatively impacted gross margin by approximately $35 million for the quarter. Texas Genco also indicated that some level of unplanned outages can be expected in the business.
Operating income for the nine months ended September 30, 2003 was $158 million, compared to an operating loss of $74 million for the same period of 2002.
Natural Gas Distribution
The natural gas distribution segment reported an operating loss of $5 million for the third quarter of 2003 compared to the prior year's third quarter operating loss of $4 million. Due to seasonal impacts, operating results for the third quarter are typically the weakest of the year.
Continued customer growth and higher revenues from rate increases implemented in 2002 did not completely offset higher expenses primarily related to increased pension and employee benefit expenses, depreciation and other taxes. In addition, the costs associated with a receivables facility, which was modified in November 2002, reduced operating income by $2 million, whereas prior to the amendment, these costs were included in interest expense.
Operating income for the nine months ended September 30, 2003 was $146 million, compared to $114 million for the same period of 2002.
Pipelines and Gathering
The pipelines and gathering segment reported operating income of $39 million in the third quarter of 2003 compared to $43 million for the same period of 2002. The decline was primarily related to higher pension, employee benefit and other miscellaneous expenses.
Operating income for the nine months ended September 30, 2003 was $124 million, compared to $119 million for the same period of 2002.
Other Operations
The company's other operations reported operating income for the third quarter of 2003 of $7 million compared to an operating loss of $14 million for the same period of 2002. Operating income for the nine months ended September 30, 2003 was $5 million, compared to an operating loss of $13 million for the same period of 2002.
WEBCAST OF EARNINGS CONFERENCE CALL
CenterPoint Energy's management will host an earnings conference call on Tuesday Oct. 21, 2003, at 10:30 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.CenterPointEnergy.com/investors/events. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
The management of Texas Genco, the company's 81 percent-owned subsidiary, will host an earnings conference call on Tuesday Oct. 21, 2003, at 9 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call at www.txgenco.com/investor.html. A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Missouri, Oklahoma, and Texas. Assets total approximately $20 billion. CenterPoint Energy became the new holding company for the regulated operations of the former Reliant Energy, Incorporated in August 2002. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years.
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This news release includes forward-looking statements. Actual events and results may differ materially from those projected. The statements in this news release regarding future financial performance and results of operations and other statements that are not historical facts are forward-looking statements. Factors that could affect actual results include the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or its subsidiaries' business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas, the impact of unplanned facility outages and other factors discussed in CenterPoint Energy's and its subsidiaries' Form 10-Qs for the quarterly period ended June 30, 2003 and other filings with the Securities and Exchange Commission.
For more information contact:
Media: Leticia Lowe, 713.207.7702
Investors: Marianne Paulsen, 713.207.6500