01—Abstract
Summary
Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
CenterPoint Energy, Inc. (CNP) is a public utility holding company with a diversified business encompassing electric transmission and distribution (T&D) and natural gas distribution across multiple states.
The company's 2019 Form 10-K highlights the significant impact of the acquisition of Vectren Corporation, completed in February 2019, which broadened its regulated utility footprint into Indiana and Ohio. Financially, the company reported increased revenues driven by the Vectren acquisition and growth in its Houston Electric T&D and Natural Gas Distribution segments. However, the company also incurred significant integration costs and faced impairments, particularly in its Energy Services segment, leading to a goodwill impairment of $48 milliona.
Strategic divestitures of the Infrastructure Services and Energy Services businesses were announced in early 2020, signaling a focus on core utility operations. The company's financial health remains influenced by regulatory environments, capital expenditures for infrastructure, and its equity investment in Enable Midstream Partners.
02—Key points
Key Highlights
- The company completed the significant acquisition of Vectren Corporation for approximately $6 billion in cash in February 2019, expanding its regulated utility operations into Indiana and Ohio.
- CenterPoint Energy announced plans to divest its Infrastructure Services business (expected Q2 2020), citing strategic focus, and its Energy Services business (CES) to Athena Energy Services (expected Q2 2020).
- The company recorded a $48 million goodwill impairment charge related to its Energy Services reporting unit, driven by early-stage bids indicating the carrying value exceeded fair value.
- Houston Electric T&D experienced an increase in operating income primarily due to higher transmission-related revenues, customer growth, and rate increases, partially offset by lower usage and the impact of the Tax Cuts and Jobs Act (TCJA).
- CenterPoint Energy's Natural Gas Distribution segment saw a significant increase in operating income, largely due to the inclusion of Vectren's businesses and positive weather/usage impacts, although offset by higher depreciation and maintenance costs.
- The company's equity investment in Enable Midstream Partners (Enable) was valued at $2.4 billion, with a temporary decline in value noted, but management believes the carrying value will be recovered.
- Capital expenditures were substantial, with $2.587 billion in 2019, primarily directed towards infrastructure improvements, and significant capital investment planned for the next five years.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, CenterPoint Energy kept $0.10.
- Revenue$7.56B100.0%
- Cost of revenue−$257.0M3.4%
- Gross profit$7.31B96.6%
- Operating costs−$6.24B82.4%
- Operating income$1.07B14.2%
- Interest, other & tax−$280.0M3.7%
- Net income$791.0M10.5%
Where FY2019 revenue went
$7.56B- Operating costs: $6.24B, 82% of revenue
- Net income: $791.0M, 10% of revenue
- Cost of revenue: $257.0M, 3.4% of revenue
- Interest, other & tax: $280.0M, 3.7% of revenue
Kept 10% as net incomeNet income $791.0M · 10%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $7.56B$6.28B | +20.5% |
| Cost of Revenue | $257.00M$40.00M | +542.5% |
| Gross Profit | $7.31B$6.24B | +17.2% |
| Operating Expenses | $6.49B$5.41B | +20.0% |
| Operating Income | $1.07B$868.00M | +23.4% |
| Interest Expense | $528.00M$361.00M | +46.3% |
| Net Income | $791.00M$368.00M | +114.9% |
| EPS (Basic) | $1.34$0.74 | +81.1% |
| EPS (Diluted) | $1.33$0.74 | +79.7% |
| Shares Outstanding (Basic) | 502.05M448.83M | +11.9% |
| Shares Outstanding (Diluted) | 505.16M452.46M | +11.6% |
05—Questions
Frequently Asked Questions
What was the most significant event impacting CenterPoint Energy's financial statements in 2019?
The most significant event was the completion of the acquisition of Vectren Corporation in February 2019 for approximately $6 billion in cash. This acquisition significantly expanded CenterPoint Energy's regulated utility operations, adding electric and gas utility businesses in Indiana and Ohio.
What strategic divestitures did CenterPoint Energy announce in early 2020?
CenterPoint Energy announced plans to sell its Infrastructure Services business and its Energy Services business (CES), with both transactions expected to close in the second quarter of 2020. These divestitures are part of a strategic focus on core utility operations.
How did the Tax Cuts and Jobs Act (TCJA) impact CenterPoint Energy's financial results?
The TCJA, enacted in late 2017, reduced the U.S. corporate income tax rate from 35% to 21%. This resulted in a deferred tax benefit for CenterPoint Energy in 2017 and lower effective tax rates in subsequent years. Regulatory adjustments were made across various jurisdictions to reflect these lower tax rates, impacting revenues and regulatory assets/liabilities.
What is the status of CenterPoint Energy's investment in Enable Midstream Partners?
As of December 31, 2019, CenterPoint Energy held a 53.7% limited partner interest in Enable Midstream Partners, valued at approximately $2.4 billion. While the value of the investment declined below its carrying value, management believed this decline was temporary and that the carrying value would be recovered. The company recognized a $46 million share of Enable's goodwill impairment charge in 2019.
06—Continue