10-QPeriod: Q2 FY2011

CENTERPOINT ENERGY INC Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 4, 2011For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported mixed financial results for the second quarter of 2011 compared to the same period in 2010. While consolidated net income increased to $119 million ($0.28 per diluted share) from $81 million ($0.20 per diluted share), driven by higher operating income and gains on marketable securities, the company faced a notable decrease in gains from indexed debt securities. The significant development during this period was the Texas Supreme Court's ruling on CenterPoint Houston's "true-up" application, which affirmed some recovery amounts but remanded others for further proceedings. This ruling, while favorable in parts, introduces ongoing regulatory uncertainty regarding the ultimate stranded cost recovery, estimated at around $1.88 billion including interest. Operationally, the Electric Transmission & Distribution segment saw increased revenues due to higher usage and customer growth, while Natural Gas Distribution experienced modest operating income growth. However, the Interstate Pipelines segment saw a slight decline in operating income due to an expiring contract and other factors. The company's liquidity remains sufficient, with expectations to meet near-term cash needs through existing credit facilities and cash flow, though it continues to manage various regulatory and legal proceedings that could impact future financial performance.

Financial Highlights

45 data points
Beta

Revenue

$1.84B

Net Income

$119.00M

6.5% Net Margin

EPS (Diluted)

$0.28

Total Assets

$19.68B

Cash & Equivalents

$190.00M

Free Cash Flow

$510.00M

Financial Statements
Beta
Revenue$1.84B
Operating Expenses$1.53B
Operating Income$303.00M
Net Income$119.00M
EPS (Basic)$0.28
EPS (Diluted)$0.28
Shares Outstanding (Basic)425.64M
Shares Outstanding (Diluted)428.28M

Key Highlights

  • 1Consolidated net income increased to $119 million ($0.28 per diluted share) for Q2 2011, up from $81 million ($0.20 per diluted share) in Q2 2010.
  • 2The Texas Supreme Court issued a ruling on CenterPoint Houston's "true-up" application, affirming some recovery amounts but remanding key issues for further proceedings, creating ongoing regulatory uncertainty.
  • 3Electric Transmission & Distribution segment revenues increased due to higher usage, customer growth, and the implementation of the Advanced Metering System (AMS).
  • 4Natural Gas Distribution segment operating income saw a modest increase, driven by volumetric revenue and customer growth, partially offset by increased operation and maintenance expenses.
  • 5Interstate Pipelines segment operating income decreased slightly due to an expiring backhaul contract and other factors, impacting revenue.
  • 6CenterPoint Energy's liquidity is considered sufficient, with plans to fund upcoming capital expenditures and debt obligations through operating cash flow and existing credit facilities.
  • 7The company is actively managing various legal, environmental, and regulatory matters, including ongoing proceedings related to natural gas market manipulation and manufactured gas plant sites, with management not expecting material adverse impacts.

Frequently Asked Questions

The Texas Supreme Court's ruling was mixed. It affirmed some amounts CenterPoint Houston sought to recover, such as capacity auction true-up amounts and depreciation-related stranded costs, which are favorable. However, it overturned the method for valuing former generating assets, which is unfavorable and requires further determination by the Texas Utility Commission. The ruling also remanded issues related to deferred tax amounts. CenterPoint Houston expects to seek recovery of approximately $1.88 billion in the remand process, but the final resolution and timing remain uncertain.

The Electric Transmission & Distribution segment saw revenue growth driven by increased usage, customer additions, and the AMS project. The Natural Gas Distribution segment experienced modest operating income growth due to higher volumes and customers. The Interstate Pipelines segment's operating income declined slightly due to an expiring contract and other factors. The Competitive Natural Gas Sales and Services segment improved its operating income, benefiting from derivative valuations and customer growth, though margin pressures existed. Field Services showed increased operating income due to new projects and core services.

CenterPoint Energy expects its liquidity and capital resources to be sufficient to meet its anticipated cash needs for the remainder of 2011, including capital expenditures, debt payments, and dividends. These needs are expected to be funded by proceeds from commercial paper, borrowings under credit facilities, and cash flow from operations. The company is also in the process of replacing expiring credit facilities with new five-year agreements.

Yes, CenterPoint Energy is involved in several legal, environmental, and regulatory proceedings. Key among these is the ongoing "true-up" proceedings in Texas. Other matters include natural gas market manipulation litigation, manufactured gas plant site remediation, and asbestos claims. While the company is actively contesting these matters and does not expect them to have a material adverse effect on its financial condition, results of operations, or cash flows based on current information, they represent potential risks.