10-QPeriod: Q3 FY2008

CENTERPOINT ENERGY INC Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 5, 2008For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported a significant increase in revenues and net income for the nine months ended September 30, 2008, compared to the same period in 2007. This growth was driven by strong performance across several segments, particularly Interstate Pipelines and Field Services, and a notable improvement in the Competitive Natural Gas Sales and Services segment. The company also saw a substantial increase in cash flow from operations. However, the company is facing significant challenges, most notably the substantial damage to its electric delivery system from Hurricane Ike, with estimated restoration costs ranging from $650 million to $750 million. While management believes these costs will be recoverable through regulatory processes, the immediate impact and the path to full recovery present a key area of focus for investors. Despite the hurricane's impact, CenterPoint Energy is actively managing its financial resources, as evidenced by increased cash flow from operations. The company's balance sheet shows an increase in total assets and liabilities, with a notable rise in long-term debt, reflecting investments in infrastructure and business development. Investors should closely monitor the company's ability to recover the extensive costs associated with Hurricane Ike and its ongoing efforts to manage its debt levels and capital expenditures.

Financial Highlights

21 data points
Beta

Revenue

$2.52B

Net Income

$136.00M

5.4% Net Margin

EPS (Diluted)

$0.39

Cash & Equivalents

$84.00M

Free Cash Flow

-$144.00M

Financial Statements
Beta
Revenue$2.52B
Operating Expenses$2.18B
Operating Income$337.00M
Net Income$136.00M
EPS (Basic)$0.40
EPS (Diluted)$0.39

Key Highlights

  • 1Consolidated revenues increased to $8,548 million for the nine months ended September 30, 2008, up from $7,021 million in the prior year period.
  • 2Net income rose to $360 million for the nine months ended September 30, 2008, compared to $291 million in the same period of 2007.
  • 3Cash flow from operating activities saw a significant increase, rising to $724 million for the nine months ended September 30, 2008, from $492 million in the prior year.
  • 4Hurricane Ike caused substantial damage to CenterPoint Houston's electric delivery system, with estimated restoration costs between $650 million and $750 million.
  • 5The company is deferring uninsured storm restoration costs, expecting recovery through regulatory processes, thus preventing an immediate impact on reported net income for 2008.
  • 6Long-term debt increased to $9,797 million as of September 30, 2008, from $8,364 million at December 31, 2007.
  • 7The Southeast Supply Header (SESH) pipeline project, a joint venture, began commercial service in September 2008.

Frequently Asked Questions

Hurricane Ike caused significant damage to CenterPoint Houston's electric delivery system, with estimated restoration costs ranging from $650 million to $750 million. While the poles, wires, and related equipment are generally uninsured, other property like office buildings and substations are covered. The company is deferring uninsured storm restoration costs, expecting to recover them through the regulatory process, meaning these costs will not immediately impact net income. Recovery is anticipated through securitization bonds or traditional regulatory mechanisms.

CenterPoint Energy experienced a strong performance in the first nine months of 2008. Consolidated revenues increased to $8,548 million from $7,021 million in the prior year, and net income grew to $360 million from $291 million. This growth was primarily driven by improved operating income in the Interstate Pipelines and Field Services segments, along with positive contributions from the Competitive Natural Gas Sales and Services segment and reduced interest expenses.

CenterPoint Energy's liquidity is managed through operating cash flows, revolving credit facilities, and potential capital market issuances. While the company expects existing cash flows and credit facilities to be sufficient for its needs, the ongoing global financial crisis poses risks. The bankruptcy of Lehman Brothers Bank, FSB, a participant in its credit facilities, caused a minor reduction in available capacity. Furthermore, a downgrade in credit ratings could increase borrowing costs and limit access to capital. The company is also closely monitoring the financial health of its major customer, RRI, and potential collateral requirements related to derivative contracts.

The company is involved in various legal, environmental, and regulatory proceedings. Notably, there are ongoing matters related to 'Gas Market Manipulation Cases' and 'Electricity Market Manipulation Cases' stemming from past activities of its former affiliate RRI, though the company believes it is largely dismissed or protected by settlements. Other proceedings include natural gas measurement lawsuits, gas cost recovery litigation, and environmental matters such as manufactured gas plant sites. While many of these matters are complex, the company generally believes their ultimate outcomes will not have a material adverse effect on its financial condition, results of operations, or cash flows.