10-QPeriod: Q3 FY2009

CENTERPOINT ENERGY INC Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 28, 2009For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported a decrease in net income for the nine months ended September 30, 2009, compared to the same period in 2008, primarily driven by a significant decrease in operating income across multiple segments, notably Natural Gas Distribution and Competitive Natural Gas Sales and Services. The company also experienced a reduction in equity in earnings of unconsolidated affiliates and an increase in interest expense. These factors were partially offset by a decrease in income tax expense and gains on marketable and indexed debt securities. The company is actively managing its financial condition through various debt and equity transactions, including the issuance of new common stock and adjustments to credit facilities, aiming to ensure liquidity. Significant ongoing matters include the recovery of Hurricane Ike restoration costs, which has progressed with regulatory approval for securitization, and the continued appeal of the Texas electric restructuring "true-up" order, which could still result in substantial financial impact. Operationally, the company saw mixed results across its segments. While Electric Transmission & Distribution showed an increase in operating income due to rate increases and recovery of Hurricane Ike-related costs, Natural Gas Distribution and Competitive Natural Gas Sales and Services experienced declines, influenced by lower sales volumes, unfavorable derivative accounting impacts, and increased operating expenses like pension costs. The Interstate Pipelines segment also saw a decrease in operating income, largely due to declining commodity prices affecting contract margins. Despite these challenges, the company is proceeding with significant capital expenditures, particularly in its Field Services segment, and is exploring new asset management agreements, subject to regulatory approval.

Financial Highlights

42 data points
Beta

Revenue

$1.58B

Net Income

$114.00M

7.2% Net Margin

EPS (Diluted)

$0.31

Total Assets

$18.65B

Cash & Equivalents

$61.00M

Free Cash Flow

$381.00M

Financial Statements
Beta
Revenue$1.58B
Operating Expenses$1.29B
Operating Income$287.00M
Net Income$114.00M
EPS (Basic)$0.31
EPS (Diluted)$0.31
Shares Outstanding (Basic)370
Shares Outstanding (Diluted)372

Key Highlights

  • 1Net income decreased by $92 million to $267 million for the nine months ended September 30, 2009, compared to the same period in 2008.
  • 2Operating income across key segments, particularly Natural Gas Distribution and Competitive Natural Gas Sales and Services, declined significantly.
  • 3CenterPoint Houston has received regulatory approval for the securitization of $643 million in Hurricane Ike distribution-related restoration costs.
  • 4The company raised substantial capital through equity offerings, receiving $280 million from an underwritten public offering in September 2009.
  • 5Operating income for Electric Transmission & Distribution increased by $17 million to $450 million for the nine months ended September 30, 2009.
  • 6Net cash provided by operating activities significantly increased by $713 million to $1,437 million for the nine months ended September 30, 2009, driven by decreased inventory and tax payments.
  • 7The company is actively managing its long-term debt, with total long-term debt decreasing from $10.18 billion at year-end 2008 to $8.83 billion at September 30, 2009.

Frequently Asked Questions

CenterPoint Houston incurred substantial system restoration costs due to Hurricane Ike in September 2008. While initial losses were estimated around $28 million for insured property, uninsured costs were deferred. In August 2009, the Texas Utility Commission approved the recovery of $663 million in costs, with $643 million eligible for securitization through bonds and the remaining $20 million to be recovered through existing transmission cost mechanisms. This has resulted in a net regulatory asset of $662 million as of September 30, 2009.

CenterPoint Houston is involved in an ongoing appeal to the Texas Supreme Court regarding the 'true-up' order, which initially allowed recovery of approximately $2.3 billion. The company believes it has a reasonable chance of success, but an unfavorable outcome could result in an additional pre-tax loss ranging from $170 million to $385 million, plus interest. The resolution of this matter, along with a related tax normalization issue, remains uncertain.

CenterPoint Energy has actively managed its capital structure. Long-term debt decreased from $10.18 billion at December 31, 2008, to $8.83 billion at September 30, 2009. The company also raised significant equity capital, including a $280 million public offering in September 2009. Net cash provided by operating activities more than doubled, indicating improved operational cash generation, while net cash used in investing activities decreased. Despite these positive trends, the company has reduced its reliance on revolving credit facilities.

The primary drivers for the decrease in net income were a $145 million decrease in operating income, a $38 million decrease in equity in earnings of unconsolidated affiliates, and a $38 million increase in interest expense. These were partially offset by an $83 million decrease in income tax expense and a net gain on marketable and indexed debt securities of $21 million. The decline in operating income was largely due to lower performance in the Natural Gas Distribution and Competitive Natural Gas Sales and Services segments.