10-QPeriod: Q1 FY2008

CENTERPOINT ENERGY INC Quarterly Report for Q1 Ended Mar 31, 2008

Filed April 30, 2008For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported mixed financial results for the first quarter of 2008 compared to the same period in 2007. While consolidated revenues saw an increase to $3.36 billion from $3.11 billion, net income decreased to $123 million ($0.36 per diluted share) from $130 million ($0.38 per diluted share). This decline was primarily driven by reduced operating income in the Competitive Natural Gas Sales and Services, Electric Transmission & Distribution, and Natural Gas Distribution segments. Key operational highlights include the in-service of the third phase of CEGT's Carthage to Perryville pipeline expansion and the securitization of the remaining Competition Transition Charge (CTC) balance through the issuance of $488 million in transition bonds. However, ongoing legal and regulatory proceedings, particularly related to the Texas electric restructuring true-up balance, continue to present potential financial risks, with an estimated loss ranging from $130 million to $350 million if current appellate rulings are not overturned.

Key Highlights

  • 1Consolidated revenues increased to $3.36 billion for Q1 2008, up from $3.11 billion in Q1 2007.
  • 2Net income decreased to $123 million ($0.36 EPS) in Q1 2008 from $130 million ($0.38 EPS) in Q1 2007.
  • 3The Competitive Natural Gas Sales and Services segment saw a significant decrease in operating income, down to $6 million from $56 million year-over-year.
  • 4CenterPoint Energy Houston Electric completed the securitization of the remaining Competition Transition Charge (CTC) balance by issuing $488 million in transition bonds.
  • 5The Carthage to Perryville pipeline expansion (Phase III) by CEGT was placed in-service, increasing pipeline capacity.
  • 6The company is actively managing its convertible debt, with significant conversions and a pending redemption call for the 3.75% convertible senior notes.
  • 7Ongoing litigation related to the Texas electric restructuring true-up proceedings could result in a potential loss of $130 million to $350 million.

Frequently Asked Questions

The decrease in net income was primarily due to a substantial decline in operating income from the Competitive Natural Gas Sales and Services segment, alongside reduced operating income in the Electric Transmission & Distribution and Natural Gas Distribution segments. These decreases were partially offset by gains in the Interstate Pipelines and Field Services segments.

The true-up proceedings are ongoing, with CenterPoint Houston planning to seek further review by the Texas Supreme Court after the Court of Appeals denied motions for rehearing. If the current appellate decisions are not overturned, the company anticipates recording an additional loss of $130 million to $350 million, plus interest, which would impact financial results.

The company has experienced significant conversions of its 3.75% convertible senior notes during the quarter and in April 2008. In April 2008, CenterPoint Energy announced a call for redemption of these notes, which are expected to be converted by holders prior to the redemption date, with conversions largely settled by issuing common stock and cash.

Key risks include the resolution of ongoing regulatory and legal proceedings, particularly the Texas true-up matter. Other risks include regulatory actions, changes in commodity prices, interest rate fluctuations, and the ability of counterparties to meet their obligations.