10-KPeriod: FY2014

CENTERPOINT ENERGY INC Annual Report, Year Ended Dec 31, 2014

Filed February 26, 2015For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) in its 2014 10-K filing reported solid performance driven by its core utility operations in electric transmission & distribution and natural gas distribution. The company saw a significant increase in net income for 2014 compared to 2013, primarily due to a decrease in income tax expense and increased equity earnings from its Midstream Investments segment, notably its stake in Enable Midstream Partners, LP. This performance reflects growth in customer base and rate increases in regulated utility segments, partially offset by factors like milder weather impacting natural gas usage. Key strategic developments include the ongoing integration and performance of Enable Midstream Partners, which contributes significantly to the company's equity earnings. The company also continues to invest heavily in its infrastructure, with substantial capital expenditures planned for both electric and natural gas distribution to maintain reliability and expand services. Investors should note the company's regulated rate structures, which provide a degree of stability, but also subject earnings to regulatory proceedings and decisions. The company's financial health appears robust, with manageable debt levels and access to credit facilities, though it continues to monitor potential risks including regulatory changes, commodity price volatility, and environmental compliance.

Financial Highlights

46 data points
Beta

Revenue

$9.23B

Net Income

$611.00M

6.6% Net Margin

EPS (Diluted)

$1.42

Total Assets

$23.15B

Cash & Equivalents

$298.00M

Free Cash Flow

$1.40B

Financial Statements
Beta
Revenue$9.23B
Operating Expenses$8.29B
Operating Income$935.00M
Net Income$611.00M
EPS (Basic)$1.42
EPS (Diluted)$1.42
Shares Outstanding (Basic)429.63M
Shares Outstanding (Diluted)431.67M

Key Highlights

  • 1Net income increased significantly to $611 million in 2014 from $311 million in 2013, driven by lower tax expenses and strong performance from the Midstream Investments segment.
  • 2Electric Transmission & Distribution segment operating income was $595 million, with TDU operating income increasing by $3 million due to customer growth and higher equity returns.
  • 3Natural Gas Distribution segment operating income grew to $287 million, benefiting from colder weather, rate increases, and customer growth.
  • 4The company continues significant capital expenditures, with over $1.5 billion planned for 2015, primarily for infrastructure upgrades in electric and natural gas distribution.
  • 5CenterPoint Energy holds a 55.4% limited partner interest in Enable Midstream Partners, LP, which contributed significantly to equity earnings and is a key strategic investment.
  • 6The company managed its debt effectively, with total debt of $8.0 billion at year-end 2014 and access to significant revolving credit facilities.
  • 7CenterPoint Houston's Advanced Metering System (AMS) deployment was substantially completed, and the company is pursuing electric distribution grid automation.

Frequently Asked Questions

The significant increase in net income to $611 million in 2014 from $311 million in 2013 was primarily driven by a $196 million decrease in income tax expense, a $120 million increase in equity earnings from unconsolidated affiliates (largely from Enable Midstream Partners), and a $107 million decrease in losses on indexed debt securities. These positive factors were partially offset by a $75 million decrease in operating income from the company's segments and a $73 million decrease in gains on marketable securities.

CenterPoint Energy's investment in Enable Midstream Partners, LP (Enable), accounted for under the equity method, is a significant contributor to the company's financial results. For 2014, the company recorded $303 million in equity earnings from Enable. Enable is a midstream energy infrastructure company involved in natural gas and crude oil gathering, processing, and transportation. The performance of Enable is crucial to CenterPoint Energy's Midstream Investments segment results.

The company anticipates significant capital expenditures, with approximately $1.5 billion planned for 2015. These investments are primarily directed towards maintaining and enhancing the reliability and safety of its electric transmission and distribution and natural gas distribution systems, as well as expanding these systems through value-added projects.

Key risks include: dependence on distributions from subsidiaries for cash flow, potential limitations on these distributions by law or contract; the inability to secure future financing on acceptable terms; potential adverse impacts from poor investment performance of its pension plan; financial losses from the use of derivative contracts; and impairment charges on goodwill, long-lived assets, or equity investments. Specific business risks include rate regulation delays for CenterPoint Houston and CERC Corp., seasonality affecting revenues, customer concentration in CenterPoint Houston, mandatory reliability standards, potential AMS issues, natural gas price volatility, and competition for Energy Services. Risks related to Enable include its performance, commodity price fluctuations, contract renewals, customer dependencies, and capital expenditure needs.