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): August 5, 2016
CENTERPOINT ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Texas | 1-31447 | 74-0694415 | ||
| (State or other jurisdiction | (Commission | (IRS Employer | ||
| of incorporation) | File Number) | Identification No.) |
| 1111 Louisiana | ||||
| Houston, Texas | 77002 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (713) 207-1111
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Conditions.
On August 5, 2016, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported second quarter 2016 earnings. For additional information regarding CenterPoint Energy’s second quarter 2016 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 second quarter 2016 earnings on August 5, 2016. Information about the call can be found in the Press Release furnished herewith as Exhibit 99.1. For additional information regarding CenterPoint Energy’s second quarter 2016 earnings, please refer to the supplemental materials which are being posted on CenterPoint Energy’s website and are attached to this report as Exhibit 99.2 (the “Supplemental Materials”), which Supplemental Materials are incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
The information in the Press Release and the Supplemental Materials is being furnished, not filed, pursuant to Item 2.02 and 7.01, respectively. Accordingly, the information in the Press Release and the Supplemental Materials will not be incorporated by reference into any registration statement filed by CenterPoint Energy under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
| (d) | Exhibits. |
| EXHIBIT NUMBER |
EXHIBIT DESCRIPTION | |
| 99.1 | Press Release issued August 5, 2016 regarding CenterPoint Energy, Inc.’s second quarter 2016 earnings | |
| 99.2 | Supplemental Materials regarding CenterPoint Energy, Inc.’s second quarter 2016 earnings | |
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: August 5, 2016 | By: | /s/ Kristie L. Colvin | ||||
| Kristie L. Colvin | ||||||
| Senior Vice President and Chief Accounting Officer | ||||||
EXHIBIT INDEX
| EXHIBIT NUMBER |
EXHIBIT DESCRIPTION | |
| 99.1 | Press Release issued August 5, 2016 regarding CenterPoint Energy, Inc.’s second quarter 2016 earnings | |
| 99.2 | Supplemental Materials regarding CenterPoint Energy, Inc.’s second quarter 2016 earnings | |
Exhibit 99.1
|
For more information contact Media: Leticia Lowe Phone 713.207.7702 Investors: David Mordy Phone 713.207.6500 |
For Immediate Release
CenterPoint Energy reports second quarter 2016 net loss of $0.01 per diluted share; $0.17 earnings per diluted share on a guidance basis
| • | Utility growth and performance remain on track |
| • | Earnings reduced by $0.17 per share associated with ZENS primarily due to the merger of Time Warner Cable and Charter Communications |
| • | Company reaffirms full-year guidance of $1.12 – $1.20 per diluted share |
| • | Company concludes REIT review |
Houston, TX – August 5, 2016 - CenterPoint Energy, Inc. (NYSE: CNP) today reported a net loss of $2 million, or a loss of $0.01 per diluted share, for the second quarter of 2016, compared with net income of $77 million, or $0.18 per diluted share, for the same period of the prior year. On a guidance basis, second quarter 2016 earnings were $0.17 per diluted share, consisting of $0.14 from utility operations and $0.03 from midstream investments, compared with earnings of $0.19 per diluted share in the second quarter of 2015, consisting of $0.13 from utility operations and $0.06 from midstream investments.
Operating income for the second quarter of 2016 was $182 million, compared with $186 million in the second quarter of the prior year. Equity income from midstream investments was $31 million for the second quarter of 2016, compared with $43 million for the same period in the prior year.
“Throughput and customer growth remain strong for both of our utility businesses, and we remain on track to achieve our earnings guidance of $1.12 – $1.20 per share by year end,” said Scott M. Prochazka, president and chief executive officer of CenterPoint Energy. “Milder than normal weather at our electric utility and losses attributable to changes in the fair value of commodity derivatives at Enable Midstream accounted for most of the headwinds we experienced this quarter.”
REIT Review
As disclosed in February 2016, the company undertook a process to explore the use of a Real Estate Investment Trust (REIT) business model for all or part of the utility business. The company has completed its evaluation and decided not to pursue forming a REIT structure for its utility business, or any part thereof.
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“Given a broad range of assumptions, we have determined that the potential to create long-term shareholder value by forming a REIT is very limited and does not justify exposure to the associated risks,” said Prochazka. “We continue to focus on increasing shareholder value by investing in our growing utility businesses.”
Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $158 million for the second quarter of 2016, consisting of $135 million from the regulated electric transmission & distribution utility operations (TDU) and $23 million related to securitization bonds. Operating income for the second quarter of 2015 was $158 million, consisting of $131 million from the TDU and $27 million related to securitization bonds.
Operating income for the TDU benefited primarily from higher net transmission-related revenues ($8 million), customer growth ($8 million) and higher equity return ($5 million), primarily related to true-up proceeds. These benefits were partially offset by higher depreciation and other taxes ($12 million) as well as lower usage per customer, primarily due to milder weather ($4 million).
Natural Gas Distribution
The natural gas distribution segment reported operating income of $20 million for the second quarter of 2016, compared with $19 million for the same period of 2015. Operating income benefited from rate increases ($9 million) and customer growth ($2 million). These benefits were offset by higher depreciation and other taxes ($7 million) as well as increased contractor services expense ($5 million).
Energy Services
The energy services segment reported operating income of $-0- for the second quarter of 2016 compared with $9 million for the same period in the prior year. Second quarter operating income for 2016 included a mark-to-market accounting loss of $7 million, compared to a gain of $2 million for the same period of the prior year. Excluding mark-to-market adjustments, operating income would have been $7 million in both second quarter 2016 and second quarter 2015.
The second quarter of 2016 also included $2 million of operation and maintenance expenses and $1 million of amortization expenses related to the acquisition and integration of the retail energy services business and wholesale assets of Continuum Energy, which closed April 1, 2016.
Midstream Investments
The midstream investments segment reported $31 million of equity income for the second quarter of 2016, compared with $43 million in the second quarter of the prior year. Second quarter 2016 equity income from Enable Midstream was lower by $16 million versus the second quarter 2015 as a result of increased losses attributed to changes in the fair market value of commodity derivatives.
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2
Enable Midstream also declared a quarterly cash distribution of $0.318 per common and subordinated unit on August 2, 2016. Please refer to Enable Midstream’s August 3, 2016 earnings press release for details.
ZENS-Related Impact
In connection with the merger between Charter Communications and Time Warner Cable, CenterPoint Energy received $100 and 0.4891 shares of Charter Common for each share of TWC Common held, resulting in cash proceeds of $178 million and 872,531 shares of Charter Common. In accordance with the terms of the Zero-Premium Exchangeable Subordinated Notes (ZENS), the company remitted $178 million to ZENS note holders in June 2016, which reduced contingent principal. As a result, the company recorded a pre-tax loss of $117 million, which is included in Loss on indexed debt securities on the Statements of Consolidated Income.
Dividend Declaration
On July 28, 2016, CenterPoint Energy’s board of directors declared a regular quarterly cash dividend of $0.2575 per share of common stock payable on September 9, 2016, to shareholders of record as of the close of business on August 16, 2016.
Outlook for 2016
On a consolidated basis, CenterPoint Energy reaffirms its guidance for 2016 in the range of $1.12 – $1.20 per diluted share.
The guidance range considers utility operations performance to date and certain significant variables that may impact earnings, such as weather, regulatory and judicial proceedings, throughput, commodity prices, effective tax rates, and financing activities. In providing this guidance, the company uses a non-GAAP measure of adjusted diluted earnings per share that does not consider other potential impacts, such as changes in accounting standards or unusual items, earnings or losses from the change in the value of the ZENS securities and the related stocks, or the timing effects of mark-to-market accounting in the company’s Energy Services business.
In providing guidance, the company assumes for midstream investments a 55.4 percent limited partner ownership interest in Enable Midstream and includes the amortization of CenterPoint Energy’s basis difference in Enable Midstream. CenterPoint Energy’s guidance takes into account such factors as Enable Midstream’s most recent public outlook for 2016, dated August 3, 2016, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards or Enable Midstream’s unusual items.
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3
CenterPoint Energy, Inc. and Subsidiaries
Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS
used in providing 2016 annual earnings guidance
| Quarter Ended June 30, 2016 |
Six Months Ended June 30, 2016 |
|||||||||||||||
| Net Income (in millions) |
Diluted EPS |
Net Income (in millions) |
Diluted EPS |
|||||||||||||
| Consolidated net income and diluted EPS as reported |
$ | (2 | ) | $ | (0.01 | ) | $ | 152 | $ | 0.35 | ||||||
| Midstream Investments |
(13 | ) | (0.03 | ) | (50 | ) | (0.12 | ) | ||||||||
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| Utility Operations (1) |
(15 | ) | (0.04 | ) | 102 | 0.23 | ||||||||||
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| Timing effects impacting CES(2): |
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| Mark-to-market (gains) losses (net of taxes of $3 and $6)(3) |
4 | 0.01 | 10 | 0.02 | ||||||||||||
| ZENS-related mark-to-market (gains) losses: |
||||||||||||||||
| Marketable securities (net of taxes of $6 and $38) (3)(4) |
(14 | ) | (0.03 | ) | (72 | ) | (0.16 | ) | ||||||||
| Indexed debt securities (net of taxes of $45 and $65) (3)(5) |
85 | 0.20 | 121 | 0.28 | ||||||||||||
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| Utility operations earnings on an adjusted guidance basis |
$ | 60 | $ | 0.14 | $ | 161 | $ | 0.37 | ||||||||
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| Adjusted net income and adjusted diluted EPS used in providing 2016 earnings guidance: |
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| Utility Operations on a guidance basis |
$ | 60 | $ | 0.14 | $ | 161 | $ | 0.37 | ||||||||
| Midstream Investments |
13 | 0.03 | 50 | 0.12 | ||||||||||||
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| 2016 Consolidated on a guidance basis |
$ | 73 | $ | 0.17 | $ | 211 | $ | 0.49 | ||||||||
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| (1) | CenterPoint earnings excluding Midstream Investments |
| (2) | Energy Services segment |
| (3) | Taxes are computed based on the impact removing such item would have on tax expense |
| (4) | Time Warner Inc., Time Warner Cable Inc., Time Inc. and Charter Communications, Inc. |
| (5) | Includes amount associated with the Charter Communications, Inc. and Time Warner Cable Inc. merger |
4
Filing of Form 10-Q for CenterPoint Energy, Inc.
Today, CenterPoint Energy, Inc. filed with the Securities and Exchange Commission (SEC) its Quarterly Report on Form 10-Q for the period ended June 30, 2016. A copy of that report is available on the company’s website, under the Investors section. Other filings the company makes with the SEC and certain documents relating to its corporate governance can also be found under the Investors section.
Webcast of Earnings Conference Call
CenterPoint Energy’s management will host an earnings conference call on Friday, August 5, 2016 at 10 a.m. Central time or 11 a.m. Eastern time. Interested parties may listen to a live audio broadcast of the conference call on the company’s website under the Investors section. A replay of the call can be accessed approximately two hours after the completion of the call and will be archived on the website for at least one year.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and energy services operations. The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. The company also owns a 55.4 percent limited partner interest in Enable Midstream Partners, a publicly traded master limited partnership it jointly controls with OGE Energy Corp., which owns, operates and develops natural gas and crude oil infrastructure assets. With more than 7,400 employees, CenterPoint Energy and its predecessor companies have been in business for more than 140 years. For more information, visit the website at www.CenterPointEnergy.com.
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual events and results may differ materially from those expressed or implied by these forward-looking statements. Any statements in this news release regarding future earnings, and future financial performance and results of operations, including, but not limited to earnings guidance, targeted dividend growth rate and any other statements that are not historical facts are forward-looking statements. Each forward-looking statement contained in this news release speaks only as of the date of this release. Factors that could affect actual results include (1) state and federal legislative and regulatory actions or developments affecting various aspects of CenterPoint Energy’s businesses (including the businesses of Enable Midstream Partners (Enable Midstream)), including, among others, energy deregulation or re-regulation, pipeline integrity and safety, health care reform, financial reform, tax legislation, and actions regarding the rates charged by CenterPoint Energy’s regulated businesses; (2) state and federal legislative and regulatory actions or developments relating to the environment, including those related to global climate change; (3) recording of non-cash goodwill, long-lived asset or other than temporary impairment charges by or related to Enable Midstream; (4) timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment; (5) the timing and outcome of any audits, disputes or other proceedings related to taxes; (6) problems with construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or in cost overruns that cannot be recouped in rates; (7) industrial, commercial and residential growth in CenterPoint Energy’s service territories and changes in market demand, including the effects of energy efficiency measures and demographic patterns; (8) the timing and extent of changes in commodity prices, particularly natural gas and natural gas liquids, and the effects of geographic and seasonal commodity price differentials, and the impact of commodity changes on producer related activities; (9) weather variations and other natural phenomena, including the impact on operations and capital from severe weather events; (10) any direct or indirect effects on CenterPoint Energy’s facilities, operations and financial condition resulting from terrorism, cyber-attacks, data security breaches or other attempts to disrupt its businesses or the businesses of third parties, or other catastrophic events; (11) the impact of unplanned facility outages; (12) timely and appropriate regulatory actions allowing securitization or other recovery of costs associated with any future hurricanes or natural disasters; (13) changes in interest rates or rates of inflation; (14) commercial bank and financial market conditions, CenterPoint Energy’s access to capital, the cost of such capital, and the results of its financing and refinancing efforts, including availability of funds in the debt capital markets; (15) actions by credit rating agencies; (16) effectiveness of CenterPoint Energy’s risk management activities; (17) inability of various counterparties to meet their obligations; (18) non-payment for services due to financial distress of CenterPoint Energy’s and Enable Midstream’s customers; (19) the ability of GenOn Energy, Inc. (formerly known as RRI Energy, Inc.), a wholly owned subsidiary of NRG Energy, Inc., and its subsidiaries to satisfy their obligations to CenterPoint Energy and its subsidiaries; (20) the ability of retail electric providers, and particularly the largest customers of the TDU, to satisfy their obligations
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5
to CenterPoint Energy and its subsidiaries; (21) the outcome of litigation; (22) CenterPoint Energy’s ability to control costs, invest planned capital, or execute growth projects; (23) the investment performance of pension and postretirement benefit plans; (24) potential business strategies, including restructurings, joint ventures, and acquisitions or dispositions of assets or businesses, for which no assurance can be given that they will be completed or will provide the anticipated benefits to CenterPoint Energy; (25) acquisition and merger activities and successful integration of such activities, involving CenterPoint Energy or its competitors; (26) the ability to recruit, effectively transition and retain management and key employees and maintain good labor relations; (27) future economic conditions in regional and national markets and their effects on sales, prices and costs; (28) the performance of Enable Midstream, the amount of cash distributions CenterPoint Energy receives from Enable Midstream, and the value of its interest in Enable Midstream, and factors that may have a material impact on such performance, cash distributions and value, including certain of the factors specified above and: (A) the integration of the operations of the businesses contributed to Enable Midstream; (B) the achievement of anticipated operational and commercial synergies and expected growth opportunities, and the successful implementation of Enable Midstream’s business plan; (C) competitive conditions in the midstream industry, and actions taken by Enable Midstream’s customers and competitors, including the extent and timing of the entry of additional competition in the markets served by Enable Midstream; (D) the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly natural gas and natural gas liquids, the competitive effects of the available pipeline capacity in the regions served by Enable Midstream, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable Midstream’s interstate pipelines; (E) the demand for crude oil, natural gas, NGLs and transportation and storage services; (F) changes in tax status; (G) access to growth capital; and (H) the availability and prices of raw materials for current and future construction projects; (29) effective tax rate; (30) the effect of changes in and application of accounting standards and pronouncements; (31) other factors discussed in CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as well as in CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and June 30, 2016, and other reports CenterPoint Energy or its subsidiaries may file from time to time with the Securities and Exchange Commission.
Use of Non-GAAP Financial Measures by CenterPoint Energy in Providing Guidance
In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), including presentation of net income and diluted earnings per share, CenterPoint Energy also provides guidance based on adjusted net income and adjusted diluted earnings per share, which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share calculation excludes from net income and diluted earnings per share, respectively, the impact of ZENS and related securities and mark-to-market gains or losses resulting from the company’s Energy Services business. A reconciliation of net income and diluted earnings per share to the basis used in providing 2016 guidance is provided in this news release. CenterPoint Energy is unable to present a quantitative reconciliation of forward looking adjusted net income and adjusted diluted earnings per share because changes in the value of ZENS and related securities and mark-to-market gains or losses resulting from the company’s Energy Services business are not estimable.
Management evaluates the company’s financial performance in part based on adjusted net income and adjusted diluted earnings per share. We believe that presenting these non-GAAP financial measures enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. The adjustments made in these non-GAAP financial measures exclude items that Management believes does not most accurately reflect the company’s fundamental business performance. These excluded items are reflected in the reconciliation table of this news release. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, net income and diluted earnings per share, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies.
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6
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues: |
||||||||||||||||
| Electric Transmission & Distribution |
$ | 763 | $ | 705 | $ | 1,423 | $ | 1,317 | ||||||||
| Natural Gas Distribution |
421 | 427 | 1,316 | 1,620 | ||||||||||||
| Energy Services |
397 | 408 | 836 | 1,058 | ||||||||||||
| Other Operations |
4 | 3 | 8 | 7 | ||||||||||||
| Eliminations |
(11 | ) | (11 | ) | (25 | ) | (37 | ) | ||||||||
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| Total |
1,574 | 1,532 | 3,558 | 3,965 | ||||||||||||
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| Expenses: |
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| Natural gas |
496 | 529 | 1,348 | 1,883 | ||||||||||||
| Operation and maintenance |
513 | 488 | 1,034 | 986 | ||||||||||||
| Depreciation and amortization |
289 | 239 | 549 | 456 | ||||||||||||
| Taxes other than income taxes |
94 | 90 | 195 | 198 | ||||||||||||
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| Total |
1,392 | 1,346 | 3,126 | 3,523 | ||||||||||||
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| Operating Income |
182 | 186 | 432 | 442 | ||||||||||||
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| Other Income (Expense): |
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| Gain on marketable securities |
20 | 79 | 110 | 62 | ||||||||||||
| Loss on indexed debt securities |
(130 | ) | (91 | ) | (186 | ) | (67 | ) | ||||||||
| Interest and other finance charges |
(86 | ) | (89 | ) | (173 | ) | (178 | ) | ||||||||
| Interest on securitization bonds |
(23 | ) | (27 | ) | (47 | ) | (55 | ) | ||||||||
| Equity in earnings of unconsolidated affiliate |
31 | 43 | 91 | 95 | ||||||||||||
| Other - net |
14 | 13 | 21 | 24 | ||||||||||||
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| Total |
(174 | ) | (72 | ) | (184 | ) | (119 | ) | ||||||||
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| Income Before Income Taxes |
8 | 114 | 248 | 323 | ||||||||||||
| Income Tax Expense |
10 | 37 | 96 | 115 | ||||||||||||
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| Net Income (Loss) |
$ | (2 | ) | $ | 77 | $ | 152 | $ | 208 | |||||||
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Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Millions of Dollars, Except Share and Per Share Amounts)
(Unaudited)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Basic Earnings (Loss) Per Common Share |
$ | (0.01 | ) | $ | 0.18 | $ | 0.35 | $ | 0.48 | |||||||
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| Diluted Earnings (Loss) Per Common Share |
$ | (0.01 | ) | $ | 0.18 | $ | 0.35 | $ | 0.48 | |||||||
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| Dividends Declared per Common Share |
$ | 0.2575 | $ | 0.2475 | 0.5150 | $ | 0.4950 | |||||||||
| Weighted Average Common Shares Outstanding (000): |
||||||||||||||||
| - Basic |
430,653 | 430,235 | 430,530 | 430,096 | ||||||||||||
| - Diluted |
430,653 | 431,733 | 432,973 | 431,594 | ||||||||||||
| Operating Income by Segment |
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| Electric Transmission & Distribution: |
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| Electric Transmission and Distribution Operations |
$ | 135 | $ | 131 | $ | 194 | $ | 199 | ||||||||
| Transition and System Restoration Bond Companies |
23 | 27 | 47 | 55 | ||||||||||||
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| Total Electric Transmission & Distribution |
158 | 158 | 241 | 254 | ||||||||||||
| Natural Gas Distribution |
20 | 19 | 180 | 165 | ||||||||||||
| Energy Services |
— | 9 | 6 | 22 | ||||||||||||
| Other Operations |
4 | — | 5 | 1 | ||||||||||||
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| Total |
$ | 182 | $ | 186 | $ | 432 | $ | 442 | ||||||||
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Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Electric Transmission & Distribution | ||||||||||||||||||||||||
| Quarter Ended June 30, |
% Diff | Six Months Ended June 30, |
% Diff | |||||||||||||||||||||
| 2016 | 2015 | Fav/(Unfav) | 2016 | 2015 | Fav/(Unfav) | |||||||||||||||||||
| Results of Operations: |
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| Revenues: |
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| Electric transmission and distribution utility |
$ | 616 | $ | 585 | 5 | % | $ | 1,156 | $ | 1,099 | 5 | % | ||||||||||||
| Transition and system restoration bond companies |
147 | 120 | 23 | % | 267 | 218 | 22 | % | ||||||||||||||||
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| Total |
763 | 705 | 8 | % | 1,423 | 1,317 | 8 | % | ||||||||||||||||
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| Expenses: |
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| Operation and maintenance |
330 | 315 | (5 | %) | 659 | 622 | (6 | %) | ||||||||||||||||
| Depreciation and amortization |
94 | 84 | (12 | %) | 189 | 167 | (13 | %) | ||||||||||||||||
| Taxes other than income taxes |
57 | 55 | (4 | %) | 114 | 111 | (3 | %) | ||||||||||||||||
| Transition and system restoration bond companies |
124 | 93 | (33 | %) | 220 | 163 | (35 | %) | ||||||||||||||||
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| Total |
605 | 547 | (11 | %) | 1,182 | 1,063 | (11 | %) | ||||||||||||||||
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| Operating Income |
$ | 158 | $ | 158 | — | $ | 241 | $ | 254 | (5 | %) | |||||||||||||
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|
|
|
|
|
|||||||||||||||||
| Operating Income: |
||||||||||||||||||||||||
| Electric transmission and distribution operations |
$ | 135 | $ | 131 | 3 | % | $ | 194 | $ | 199 | (3 | %) | ||||||||||||
| Transition and system restoration bond companies |
23 | 27 | (15 | %) | 47 | 55 | (15 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Segment Operating Income |
$ | 158 | $ | 158 | — | $ | 241 | $ | 254 | (5 | %) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Electric Transmission & Distribution Operating Data: |
||||||||||||||||||||||||
| Actual MWH Delivered |
||||||||||||||||||||||||
| Residential |
7,631,518 | 7,483,440 | 2 | % | 12,650,973 | 12,896,234 | (2 | %) | ||||||||||||||||
| Total |
22,190,347 | 21,751,298 | 2 | % | 40,320,948 | 39,766,074 | 1 | % | ||||||||||||||||
| Weather (average for service area): |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Cooling degree days |
92 | % | 102 | % | (10 | %) | 94 | % | 97 | % | (3 | %) | ||||||||||||
| Heating degree days |
54 | % | 8 | % | 46 | % | 85 | % | 130 | % | (45 | %) | ||||||||||||
| Number of metered customers - end of period: |
||||||||||||||||||||||||
| Residential |
2,106,396 | 2,054,777 | 3 | % | 2,106,396 | 2,054,777 | 3 | % | ||||||||||||||||
| Total |
2,377,352 | 2,322,164 | 2 | % | 2,377,352 | 2,322,164 | 2 | % | ||||||||||||||||
| Natural Gas Distribution | ||||||||||||||||||||||||
| Quarter Ended June 30, |
% Diff Fav/(Unfav) |
Six Months Ended June 30, |
% Diff Fav/(Unfav) |
|||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 421 | $ | 427 | (1 | %) | $ | 1,316 | $ | 1,620 | (19 | %) | ||||||||||||
| Natural gas |
130 | 152 | 14 | % | 575 | 908 | 37 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
291 | 275 | 6 | % | 741 | 712 | 4 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
178 | 169 | (5 | %) | 367 | 355 | (3 | %) | ||||||||||||||||
| Depreciation and amortization |
60 | 55 | (9 | %) | 119 | 110 | (8 | %) | ||||||||||||||||
| Taxes other than income taxes |
33 | 32 | (3 | %) | 75 | 82 | 9 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
271 | 256 | (6 | %) | 561 | 547 | (3 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 20 | $ | 19 | 5 | % | $ | 180 | $ | 165 | 9 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Natural Gas Distribution Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
||||||||||||||||||||||||
| Residential |
20 | 19 | 5 | % | 93 | 116 | (20 | %) | ||||||||||||||||
| Commercial and Industrial |
56 | 56 | — | 142 | 144 | (1 | %) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Throughput |
76 | 75 | 1 | % | 235 | 260 | (10 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Weather (average for service area) |
||||||||||||||||||||||||
| Percentage of 10-year average: |
||||||||||||||||||||||||
| Heating degree days |
87 | % | 81 | % | 6 | % | 87 | % | 109 | % | (22 | %) | ||||||||||||
| Number of customers - end of period: |
||||||||||||||||||||||||
| Residential |
3,145,655 | 3,112,902 | 1 | % | 3,145,655 | 3,112,902 | 1 | % | ||||||||||||||||
| Commercial and Industrial |
252,172 | 249,142 | 1 | % | 252,172 | 249,142 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
3,397,827 | 3,362,044 | 1 | % | 3,397,827 | 3,362,044 | 1 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
| Energy Services | ||||||||||||||||||||||||
| Quarter Ended June 30, |
% Diff Fav/(Unfav) |
Six Months Ended June 30, |
% Diff Fav/(Unfav) |
|||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 397 | $ | 408 | (3 | %) | $ | 836 | $ | 1,058 | (21 | %) | ||||||||||||
| Natural gas |
377 | 388 | 3 | % | 798 | 1,012 | 21 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Gross Margin |
20 | 20 | — | 38 | 46 | (17 | %) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Expenses: |
||||||||||||||||||||||||
| Operation and maintenance |
17 | 9 | (89 | %) | 27 | 21 | (29 | %) | ||||||||||||||||
| Depreciation and amortization |
3 | 1 | (200 | %) | 4 | 2 | (100 | %) | ||||||||||||||||
| Taxes other than income taxes |
— | 1 | 100 | % | 1 | 1 | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
20 | 11 | (82 | %) | 32 | 24 | (33 | %) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | — | $ | 9 | (100 | %) | $ | 6 | $ | 22 | (73 | %) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Mark-to-market gain (loss) |
$ | (7 | ) | $ | 2 | (450 | %) | $ | (16 | ) | $ | (2 | ) | (700 | %) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Energy Services Operating Data: |
||||||||||||||||||||||||
| Throughput data in BCF |
199 | 136 | 46 | % | 370 | 321 | 15 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Number of customers - end of period |
30,675 | 18,073 | 70 | % | 30,675 | 18,073 | 70 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Other Operations | ||||||||||||||||||||||||
| Quarter Ended June 30, |
% Diff Fav/(Unfav) |
Six Months Ended June 30, |
% Diff Fav/(Unfav) |
|||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| Results of Operations: |
||||||||||||||||||||||||
| Revenues |
$ | 4 | $ | 3 | 33 | % | $ | 8 | $ | 7 | 14 | % | ||||||||||||
| Expenses |
— | 3 | 100 | % | 3 | 6 | 50 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Operating Income |
$ | 4 | $ | — | — | $ | 5 | $ | 1 | 400 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Capital Expenditures by Segment | ||||||||||||||||||||||||
| (Millions of Dollars) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| Capital Expenditures by Segment |
||||||||||||||||||||||||
| Electric Transmission & Distribution |
$ | 215 | $ | 220 | $ | 427 | $ | 428 | ||||||||||||||||
| Natural Gas Distribution |
139 | 153 | 228 | 244 | ||||||||||||||||||||
| Energy Services |
2 | — | 2 | 1 | ||||||||||||||||||||
| Other Operations |
2 | 8 | 10 | 17 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ | 358 | $ | 381 | $ | 667 | $ | 690 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Interest Expense Detail | ||||||||||||||||||||||||
| (Millions of Dollars) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
| Interest Expense Detail |
||||||||||||||||||||||||
| Amortization of Deferred Financing Cost |
$ | 6 | $ | 7 | $ | 12 | $ | 13 | ||||||||||||||||
| Capitalization of Interest Cost |
(1 | ) | (2 | ) | (3 | ) | (5 | ) | ||||||||||||||||
| Transition and System Restoration Bond Interest Expense |
23 | 27 | 47 | 55 | ||||||||||||||||||||
| Other Interest Expense |
81 | 84 | 164 | 170 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Interest Expense |
$ | 109 | $ | 116 | $ | 220 | $ | 233 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
| June 30, 2016 |
December 31, 2015 |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 271 | $ | 264 | ||||
| Other current assets |
2,001 | 2,425 | ||||||
|
|
|
|
|
|||||
| Total current assets |
2,272 | 2,689 | ||||||
|
|
|
|
|
|||||
| Property, Plant and Equipment, net |
11,898 | 11,537 | ||||||
|
|
|
|
|
|||||
| Other Assets: |
||||||||
| Goodwill |
861 | 840 | ||||||
| Regulatory assets |
2,913 | 3,129 | ||||||
| Investment in unconsolidated affiliate |
2,536 | 2,594 | ||||||
| Preferred units – unconsolidated affiliate |
363 | — | ||||||
| Other non-current assets |
169 | 501 | ||||||
|
|
|
|
|
|||||
| Total other assets |
6,842 | 7,064 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 21,012 | $ | 21,290 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Short-term borrowings |
$ | 17 | $ | 40 | ||||
| Current portion of securitization bonds long-term debt |
402 | 391 | ||||||
| Indexed debt |
111 | 145 | ||||||
| Current portion of other long-term debt |
250 | 328 | ||||||
| Other current liabilities |
1,461 | 1,554 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
2,241 | 2,458 | ||||||
|
|
|
|
|
|||||
| Other Liabilities: |
||||||||
| Accumulated deferred income taxes, net |
5,121 | 5,047 | ||||||
| Regulatory liabilities |
1,284 | 1,276 | ||||||
| Other non-current liabilities |
1,189 | 1,182 | ||||||
|
|
|
|
|
|||||
| Total other liabilities |
7,594 | 7,505 | ||||||
|
|
|
|
|
|||||
| Long-term Debt: |
||||||||
| Securitization bonds |
2,059 | 2,276 | ||||||
| Other |
5,721 | 5,590 | ||||||
|
|
|
|
|
|||||
| Total long-term debt |
7,780 | 7,866 | ||||||
|
|
|
|
|
|||||
| Shareholders’ Equity |
3,397 | 3,461 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Shareholders’ Equity |
$ | 21,012 | $ | 21,290 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(Millions of Dollars)
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2016 | 2015 | |||||||
| Cash Flows from Operating Activities: |
||||||||
| Net income |
$ | 152 | $ | 208 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
562 | 470 | ||||||
| Deferred income taxes |
69 | 4 | ||||||
| Write-down of natural gas inventory |
1 | 2 | ||||||
| Equity in (earnings) losses of unconsolidated affiliate, net of distributions |
(91 | ) | 50 | |||||
| Changes in net regulatory assets |
(21 | ) | 78 | |||||
| Changes in other assets and liabilities |
376 | 304 | ||||||
| Other, net |
10 | 6 | ||||||
|
|
|
|
|
|||||
| Net Cash Provided by Operating Activities |
1,058 | 1,122 | ||||||
| Net Cash Used in Investing Activities |
(467 | ) | (671 | ) | ||||
| Net Cash Used in Financing Activities |
(584 | ) | (504 | ) | ||||
|
|
|
|
|
|||||
| Net Increase (Decrease) in Cash and Cash Equivalents |
7 | (53 | ) | |||||
| Cash and Cash Equivalents at Beginning of Period |
264 | 298 | ||||||
|
|
|
|
|
|||||
| Cash and Cash Equivalents at End of Period |
$ | 271 | $ | 245 | ||||
|
|
|
|
|
|||||
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
Utility growth and performance remain on track Earnings reduced by $0.17 per share associated with ZENS primarily due to the merger of Time Warner Cable and Charter Communications Company reaffirms full-year guidance of $1.12 - $1.20 per diluted share Company concludes REIT review 2nd Quarter 2016 Earnings Call August 5, 2016 Exhibit 99.2
Cautionary Statement This presentation and the oral statements made in connection herewith contain statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future operations, events, financial position, earnings, growth, costs, prospects capital investments or performance or underlying assumptions (including future regulatory filings and recovery, liquidity, capital resources, balance sheet, cash flow, capital investments and management, financing costs, and rate base or customer growth) and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “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 Continuum acquisition and integration, including statements about future financial performance, margin and operating income and growth, guidance, including earnings and dividend growth, future financing plans and expectation for liquidity and capital resources, tax rates and interest rates, 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 Midstream’s performance and ability to pay distributions, and other factors described in CenterPoint Energy, Inc.’s Form 10-K for the period ended December 31, 2015 and Form 10-Q for the period ended June 30, 2016 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 CenterPoint Energy, which can be found at www.centerpointenergy.com on the Investor Relations page or on the SEC’s website at www.sec.gov. This presentation contains time sensitive information that is accurate as of the date hereof. Some of the information in this presentation is unaudited and may be subject to change. We undertake no obligation to update the information presented herein except as required by law. Investors and others should note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and the Investor Relations page of our website. In the future, we will continue to use these channels to distribute material information about the Company and to communicate important information about the Company, key personnel, corporate initiatives, regulatory updates and other matters. Information that we post on our website could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website. Use of Non-GAAP Financial Measures In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), including presentation of net income and diluted earnings per share, CenterPoint Energy also provides guidance based on adjusted net income and adjusted diluted earnings per share, which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share calculation excludes from net income and diluted earnings per share, respectively, the impact of ZENS and related securities and mark-to-market gains or losses resulting from the company’s Energy Services business. A reconciliation of net income and diluted earnings per share to the basis used in providing 2016 guidance is provided in this presentation on slides 16 and 21. CenterPoint Energy is unable to present a quantitative reconciliation of forward-looking adjusted net income and adjusted diluted earnings per share because changes in the value of ZENS and related securities and mark-to-market gains or losses resulting from the company’s Energy Services business are not estimable. Management evaluates the company’s financial performance in part based on adjusted net income and adjusted diluted earnings per share. We believe that presenting these non-GAAP financial measures enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. The adjustments made in these non-GAAP financial measures exclude items that Management believes do not most accurately reflect the company’s fundamental business performance. These excluded items are reflected in the reconciliation table on slides 16 and 21 of this presentation. CenterPoint Energy’s adjusted net income and adjusted diluted earnings per share non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, net income and diluted earnings per share, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies.
Earnings Call Highlights Second Quarter Performance Enable Midstream Highlights Full-Year Outlook Scott Prochazka – President and CEO
Second Quarter 2016 Performance Highlights (1) Refer to slide 16 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) Excluding ZENS and mark-to-market adjustments Q2 2016 vs Q2 2015 Drivers (2) h Favorable Variance i Unfavorable Variance Interest Expense Rate Relief Customer Growth Midstream Investments O&M expense Depreciation Weather Q2 EPS Q2 EPS on a Guidance (Non-GAAP) Basis (1) Second quarter 2016 EPS loss of $0.01, including a $0.17 per share charge associated with ZENS primarily due to the merger of Time Warner Cable and Charter Communications, compared with second quarter 2015 EPS of $0.18
Enable Midstream (1) Enable is one of the top gathering and processing companies in the country in terms of customer drilling activity, driven by a strong focus on customer service and continued infrastructure investments 29 rigs are currently contractually dedicated to Enable (2), representing approximately 6% of the total US active rig count (3) The Bradley II processing plant, a 200 million cubic feet per day (MMcf/d) natural gas processing plant, is now fully operational Focused on continuous improvement, including deploying capital efficiently and reducing costs Declared a second quarter 2016 cash distribution of $0.318 per common and subordinated unit and a cash distribution of $0.625 per Series A Preferred Unit Highlights (1) Source: Enable Midstream Partners, August 3, 2016, Press Release and Q2 Earnings Call. Please refer to these materials for an overview of Enable’s Q2 performance (2) As of July 26, 2016 (3) Rigs contractually dedicated to Enable as of July 26, 2016 compared to total U.S. rig count of 463 as reported by Baker Hughes as of July 29, 2016 (4) Rig data per Drillinginfo as of July 26, 2016, and Enable assets on map are as of July 18, 2016 SCOOP and STACK Map (4)
Full-Year Outlook Our focus remains to invest in our current utility service territories to address ongoing growth, maintenance, reliability, safety and customer service Earnings from Utility Operations are expected to represent 75% - 80% of overall earnings in 2016 We anticipate 2016 Utility Operations earnings growth will be driven by: (1) Refer to slide 21 for reconciliation to 2015 GAAP measures and slide 2 for information on non-GAAP measures 2016 Guidance Range vs. 2015 EPS on a Guidance (Non-GAAP) Basis (1) $1.12 - $1.20 $1.10 Effective capital management Optimization of financing and operating costs Customer growth Efficient rate recovery
Earnings Call Highlights Houston Electric Results Houston Electric Regulatory Update Tracy Bridge – EVP & President, Electric Division Construction of a new 345kV double circuit tower
(1) Houston Electric’s customer count increased from 2,322,164 as of June 30, 2015 to 2,377,352 as of June 30, 2016 (2) 2015 TDU core operating income represents total segment operating income of $158 million, excluding operating income from transition and system restoration bonds of $27 million (3) Net transmission-related revenue (4) Includes higher equity return primarily related to true-up proceeds of $5 million and higher right-of-way revenues of $1 million (5) 2016 TDU core operating income represents total segment operating income of $158 million, excluding operating income from transition and system restoration bonds of $23 million $ Millions 2% YoY Customer Growth (1) (2) (3) (5) Electric Transmission and Distribution Operating Income Drivers: Q2 2015 vs Q2 2016 (4)
DCRF – Distribution Cost Recovery Factor; PUCT – Texas Public Utility Commission; TCOS – Transmission Cost of Service; EECRF – Energy Efficiency Cost Recovery Factor (1) Performance incentive approved and recognized in October 2015 was $6.6 million Mechanism Effective Date Annual DCRF Revenue Requirement ($MM) Comments Docket # DCRF September 2016 $45.0 Filed in April 2016; June 2016 settlement with PUCT provides for an annualized DCRF revenue requirement of $45.0 million effective September 2016 through August 2017; unless otherwise changed in subsequent DCRF filing, provides for an annualized DCRF revenue requirement of $49.0 million effective September 2017; approved in July 2016 45747 Annualized DCRF revenue requirement: $45.0 million Electric Transmission and Distribution Q2 2016 Regulatory Update Mechanism Expected Effective Date Annual Performance Incentive ($MM) Comments Docket # EECRF March 2017 $10.6 Filed in June 2016; requested amount based on 2015 program performance; pending approval; requested approval effective by March 2017; recognized when approved 46014 Requested energy efficiency incentives expected to be recognized in 2016 (1): $10.6 million Mechanism Expected Effective Date Annual Revenue Increase ($MM) Comments Docket # TCOS Q3 2016 $3.5 Filed in July 2016; annual increase in revenue of $3.5 million; approval expected during Q3 2016 46230 Expected annualized rate relief from pending 2016 filings: $3.5 million
2015 Minnesota Beltline Replacement Project in downtown Minneapolis Earnings Call Highlights Natural Gas Distribution Results Natural Gas Distribution Regulatory Update Energy Services Results Joe McGoldrick – EVP & President, Gas Division
1% YoY Customer Growth (1) $ Millions Natural Gas Distribution Operating Income Drivers: Q2 2015 vs Q2 2016 (2) (1) Natural Gas Distribution’s customer count increased from 3,362,044 as of June 30, 2015 to 3,397,827 as of June 30, 2016 (2) Increased miscellaneous revenues, primarily due to weather-related decoupling and increased usage due to improved economic activity in Minnesota (3) Includes increased contractor services expense of $5 million, primarily due to pipeline integrity work and higher disconnect activities that are recovered when service is reconnected and increased labor and benefits expense of $2 million (3)
GRIP – Gas Reliability Infrastructure Program; RRA – Rate Regulation Adjustment; CIP – Conservation Improvement Program (1) Performance incentive approved and recognized in August 2015 was $11.6 million Jurisdictions Effective Date Annual Increase ($MM) Comments Docket # Houston South Texas Beaumont/East Texas Texas Coast July 2016 $18.2 Annual GRIP filings submitted in March 2016; approved and implemented by July 2016 10508 10509 10510 10511 Annualized rate relief from 2016 filings: $18.2 million Natural Gas Distribution Q2 2016 Regulatory Update Mechanism Expected Effective Date Annual Performance Incentive ($MM) Comments Docket # Minnesota Q4 2016 $12.7 Minnesota CIP filed in May 2016; requested incentive amount based on 2015 program performance; pending approval; recognized when approved G008/M-16-366 Requested energy efficiency incentives expected to be recognized in 2016 (1): $12.7 million Jurisdiction Expected Effective Date Annual Increase ($MM) Comments Docket # Mississippi Q3 2016 $3.3 $3.3 million RRA adjustment with an adjusted ROE of 9.47% is pending approval 12-UN-139 Expected annualized rate relief from pending 2016 filings: $3.3 million
Jurisdiction Effective Date Rate Relief ($MM) Comments Docket # Minnesota October 2015 Interim rates effective in October 2015 (1) Rate case; interim increase of $47.8 million effective in October 2015; MPUC order issued in June 2016 includes $27.5 million rate increase based on an ROE of 9.49%; request for reconsideration filed in June 2016; interim rate refunds and final rates implemented after MPUC accepts compliance filing 15-424 APSC – Arkansas Public Service Commission; MPUC – Minnesota Public Utilities Commission; BDA – Billing Determinant Rate Adjustment (1) Interim rates begin the recognition of revenue, subject to a refund (pending issuance of final order) Jurisdiction Expected Effective Date Annual Increase ($MM) Comments Docket # Arkansas Q3 2016 $14.2 Rate case; non-unanimous settlement agreement reached includes annual increase of $14.2 million, ROE of 9.5% and adoption of an annual rate mechanism to recover future capital and expenses; hearing held in July 2016 for APSC to consider non-unanimous settlement; pending approval 15-098-U Expected annualized rate relief from pending 2015 filings currently not included in rates: $14.2 million Additional pending 2015 filings currently in rates Natural Gas Distribution Q2 2016 Regulatory Update Jurisdiction Date Recognized Rate Relief ($MM) Comments Docket # Arkansas December 2015 $5.5 BDA filed in March 2016; revenue recognized in Q4 2015; rates were implemented in June 2016 06-161-U Rate relief from 2016 filings recognized in 2015: $5.5 million
Second Quarter Operating Income Operating income was $7 million for both the second quarter 2016 and the same period last year, excluding a mark-to-market loss of $7 million and a gain of $2 million, respectively Acquisition Integration Integration efforts from recent acquisition is expected to be substantially complete this year Acquisition increased total metered customers by more than 12,000 Outlook for Combined Operations Anticipate 2016 performance to be similar to 2015, including integration and acquisition costs Expect operating income of $45 - $55 million in 2017 Energy Services Results
Bill Rogers – EVP & CFO Earnings Call Highlights Second Quarter Earnings ZENS Guidance Parameters Financing, Interest Expense & Tax
Note: Refer to slide 2 for information on non-GAAP measures Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance
The Charter Communications merger with Time Warner Cable (TWC) closed May 18, 2016 Upon closing of the merger, CenterPoint received $100 and 0.4891 shares of Charter Common for each share of TWC Common, cash proceeds of $178 million In accordance with the terms of ZENS, CenterPoint remitted $178 million to ZENS note holders in June 2016, resulting in the following: ZENS Cash payment to ZENS note holders $178 Indexed debt – reduction (40) Indexed debt securities derivative – reduction (21) Loss on indexed debt securities $117 As of June 30, 2016 the reference shares for each ZENS note consisted of 0.5 share of TW Common, 0.0625 share of Time Common, 0.061382 share of Charter Common, and the contingent principal balance was $519 million (in millions)
2016 Earnings Guidance (1) Midstream Investments $0.31 2015 Consolidated EPS: $1.10 Utility Operations 2016 Consolidated EPS: $1.12 - $1.20 2015 2016 2017 2018 $0.79 $0.88 to $0.92 $0.24 to $0.28 4-6% YoY EPS Growth Earnings from Utility Operations were ~70% of overall earnings in 2015 and are expected to represent 75% - 80% in 2016 Utility Operations are expected to produce 75 - 80% of cash flow in 2016 2016 Utility Operations EPS growth expected to include: Enable preferred investment Interest expense benefit Utility operating income growth (1) Refer to slide 21 for reconciliation to 2015 GAAP measures and slide 2 for information on non-GAAP measures 4-6% YoY EPS Growth 4-6% YoY EPS Growth
Liquidity and Capital Resources Anticipate strong balance sheet and cash flow Project total capital investment of ~$1.4 billion for 2016 Net incremental borrowings of ~$200 million for 2016, inclusive of funding for the acquisition of the retail energy services business and natural gas wholesale assets of Continuum Equity issuance not anticipated in 2016 or 2017 Minimal incremental financing needs for 2017; dependent on factors including bonus depreciation, capital investment plans and working capital Tax Rates Anticipate 37% effective tax rate for 2016; increase from 36% effective tax rate due to deferred tax expense related to Enable income from a Louisiana state tax law change Interest Rates Full-year 2016 interest expense projected to be lower than 2015 Near-term maturities and refinancing suggest interest expense savings Financing, Interest Expense and Tax Excludes transition and system restoration bonds Total debt includes revolver and commercial paper borrowings; excludes money pool borrowing Equity/Total Capital (2) (as of June 30, 2016) CenterPoint Energy Inc. Consolidated 35.8% CenterPoint Energy Houston Electric, LLC 42.3% CenterPoint Energy Resources Corp. 60.8%
Appendix
Note: Refer to slide 2 for information on non-GAAP measures Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance