10-QPeriod: Q3 FY2007

CENTERPOINT ENERGY INC Quarterly Report for Q3 Ended Sep 30, 2007

Filed November 2, 2007For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported for the nine months ended September 30, 2007, a net income of $291 million ($0.85 per diluted share), a decrease from $365 million ($1.14 per diluted share) in the same period of 2006. This decline was primarily attributed to increased income tax expense and higher interest expenses, partially offset by improved operating income in several segments. The company is actively managing regulatory matters, including the ongoing appeals related to the Texas electric restructuring law, which impact the recovery of certain balances. Significant investments are being made in infrastructure, particularly in the Interstate Pipelines segment with the expansion of the Carthage to Perryville pipeline. Liquidity appears to be managed through credit facilities and anticipated operating cash flows, with the company actively managing its debt structure through new note issuances and amendments to existing facilities.

Key Highlights

  • 1Net income for the nine months ended September 30, 2007, decreased to $291 million compared to $365 million in the prior year period.
  • 2Diluted earnings per share for the nine months ended September 30, 2007, were $0.85, down from $1.14 in the comparable period of 2006.
  • 3The Interstate Pipelines segment showed strong growth, with operating income increasing by $39 million for the nine months ended September 30, 2007, driven by new pipeline projects like Carthage to Perryville.
  • 4The company completed significant debt financing, including issuing $500 million in senior notes by CERC Corp. in October 2007.
  • 5CenterPoint Energy is actively engaged in various regulatory proceedings, particularly concerning the recovery of true-up balances and environmental retrofit costs in Texas, with ongoing appeals and securitization efforts.
  • 6Capital expenditures increased significantly, totaling $933 million for the first nine months of 2007, primarily for pipeline projects, reflecting continued investment in infrastructure.
  • 7The company continues to manage its convertible debt, with the 3.75% convertible senior notes classified as current long-term debt due to stock price performance, indicating potential future conversion.

Frequently Asked Questions

The primary drivers for the decrease in net income were increased income tax expense ($129 million) and higher interest expense ($15 million), partially offset by increased operating income in segments like Natural Gas Distribution and Interstate Pipelines.

CenterPoint Energy is actively pursuing appeals and securitization strategies related to the Texas electric restructuring law. This includes efforts to recover true-up balances and environmental retrofit costs through financing orders and transition bonds, while also managing ongoing litigation and regulatory commission decisions.

The company significantly increased its investing activities, with capital expenditures rising to $933 million for the first nine months of 2007. A major focus is on pipeline projects, notably the expansion of the Carthage to Perryville pipeline and the Southeast Supply Header (SESH) project, which are crucial for the Interstate Pipelines business segment.

The company expects its credit facilities and operating cash flows to meet its near-term cash needs. It has actively managed its debt structure by issuing new senior notes and amending existing credit facilities to provide greater flexibility and liquidity. However, potential downgrades in credit ratings could increase borrowing costs.