10-KPeriod: FY2013

CENTERPOINT ENERGY INC Annual Report, Year Ended Dec 31, 2013

Filed February 26, 2014For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) operates as a public utility holding company, primarily engaged in electric transmission and distribution in Texas and natural gas distribution across six states. In 2013, the company finalized the formation of Enable Midstream Partners, LP, contributing significant midstream assets. This strategic move diversifies its operations and creates a new revenue stream through equity earnings from this partnership. The company's regulated utility segments (electric and gas) are subject to rate regulation, which influences their financial performance. Weather conditions and customer growth are key drivers for these segments. While the company generated positive operating income, its net income saw a decrease compared to the previous year, impacted by a substantial non-cash goodwill impairment charge in the Energy Services segment in 2012 and a significant deferred tax expense related to the Enable formation in 2013. CNP's financial health is supported by its diverse business segments, including a growing midstream investment. However, the company faces risks associated with regulatory changes, competition from alternative energy sources, and potential fluctuations in commodity prices. The formation of Enable introduces new dynamics and potential growth opportunities but also associated integration risks and ongoing performance dependencies. The company maintains significant debt levels, with a focus on managing credit ratings and ensuring access to capital markets for future investments and operations.

Financial Highlights

47 data points
Beta

Revenue

$8.11B

Net Income

$311.00M

3.8% Net Margin

EPS (Diluted)

$0.72

Total Assets

$21.87B

Cash & Equivalents

$208.00M

Free Cash Flow

$1.61B

Financial Statements
Beta
Revenue$8.11B
Operating Expenses$7.10B
Operating Income$1.01B
Net Income$311.00M
EPS (Basic)$0.73
EPS (Diluted)$0.72
Shares Outstanding (Basic)428.47M
Shares Outstanding (Diluted)430.93M

Key Highlights

  • 1Formation of Enable Midstream Partners, LP on May 1, 2013, creating a significant midstream investment accounted for under the equity method.
  • 2Electric Transmission & Distribution segment operating income was $607 million in 2013, with revenues of $2,570 million, reflecting steady performance despite a slight decrease from 2012.
  • 3Natural Gas Distribution segment operating income increased to $263 million in 2013 from $226 million in 2012, driven by colder weather and rate increases.
  • 4Energy Services segment reported an operating income of $13 million in 2013, a significant improvement from a $250 million loss in 2012, which included a substantial goodwill impairment charge.
  • 5Total consolidated operating income for 2013 was $1,010 million, slightly down from $1,038 million in 2012, with net income decreasing from $417 million to $311 million.
  • 6CenterPoint Energy Houston Electric, LLC (CenterPoint Houston) faces customer concentration risk, with a significant portion of receivables from a few large Retail Electric Providers (REPs).
  • 7The company's overall debt-to-capitalization ratio remained robust, with ongoing management of credit facilities and debt maturities.

Frequently Asked Questions

CenterPoint Energy's financial health appears stable, characterized by consistent operating income from its regulated utility segments (Electric Transmission & Distribution and Natural Gas Distribution). The company successfully managed its debt levels and credit facilities. However, net income decreased in 2013 compared to 2012, largely due to a significant deferred tax expense related to the formation of Enable Midstream Partners, LP and a prior year goodwill impairment charge. The company is reliant on capital markets for financing and has substantial debt obligations.

The most significant strategic event was the formation of Enable Midstream Partners, LP on May 1, 2013. This involved contributing substantial midstream assets (formerly Interstate Pipelines and Field Services) into a partnership jointly controlled with OGE Energy Corp. This move aims to leverage these assets for future growth and generates equity earnings for CenterPoint Energy. Other events include the retirement of significant debt amounts and amendments to credit facilities.

Key risks include regulatory actions that could impact rates and cost recovery, competition from alternative energy sources affecting natural gas demand, potential fluctuations in commodity prices (natural gas), and customer payment defaults (especially from large REPs in the electric segment). The company also faces risks related to the integration and performance of its Midstream Investments segment (Enable) and potential cyber-attacks or disruptions to its operational infrastructure.

CenterPoint Energy manages its debt through a combination of internally generated cash, borrowings under credit facilities, and access to capital markets for debt and equity issuances. As of December 31, 2013, the company had $8.4 billion in outstanding debt. It aims to maintain investment-grade credit ratings to access capital on reasonable terms and has credit facilities in place with scheduled termination dates in 2018. Future capital needs are expected to be met through a mix of cash flows, borrowings, and potential debt/equity issuances.