10-QPeriod: Q3 FY2011

CENTERPOINT ENERGY INC Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 2, 2011For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported significant net income growth for the nine months ended September 30, 2011, primarily driven by the favorable resolution of a long-standing "true-up" appeal in Texas. This resolution resulted in an after-tax extraordinary gain of $587 million and a $352 million return on the true-up balance, substantially boosting overall profitability compared to the prior year. While operating income also saw a moderate increase, particularly in the Electric Transmission & Distribution and Field Services segments, the extraordinary items were the dominant factor in the surge in net income. The company is actively managing its debt, with efforts to refinance and extend maturities, as evidenced by the issuance of new senior notes by CERC Corp. and the replacement of revolving credit facilities. Despite a decrease in cash from financing activities due to higher debt payments and lower stock issuances, the company's liquidity remains adequate, supported by operating cash flows and available credit facilities. Investors should note the ongoing nature of regulatory proceedings and the potential impact of commodity price fluctuations, though the company employs derivative instruments to mitigate some of these risks.

Financial Highlights

45 data points
Beta

Revenue

$1.88B

Net Income

$973.00M

51.7% Net Margin

EPS (Diluted)

$2.27

Total Assets

$20.95B

Cash & Equivalents

$103.00M

Free Cash Flow

$312.00M

Financial Statements
Beta
Revenue$1.88B
Operating Expenses$1.52B
Operating Income$357.00M
Net Income$973.00M
EPS (Basic)$2.28
EPS (Diluted)$2.27
Shares Outstanding (Basic)425.88M
Shares Outstanding (Diluted)428.84M

Key Highlights

  • 1Net income surged to $1.24 billion for the nine months ended September 30, 2011, up from $318 million in the prior year, largely due to an extraordinary gain from the resolution of a Texas "true-up" appeal.
  • 2Operating income increased to $1.02 billion for the nine months ended September 30, 2011, from $947 million in the comparable period of 2010, reflecting improved performance across several segments, notably Electric Transmission & Distribution and Field Services.
  • 3CenterPoint Houston is authorized to recover an additional true-up balance of $1.695 billion, with a financing order issued for the securitization of this balance through transition bonds.
  • 4Capital expenditures for the nine months ended September 30, 2011, decreased to $960 million from $1.05 billion in the prior year, with $200 million in DOE grant funding contributing to advanced metering and intelligent grid projects.
  • 5The company refinanced a significant portion of its debt in early 2011, issuing new senior notes and exchanging existing ones, aimed at extending maturities and reducing interest costs.
  • 6Cash flows from operating activities improved significantly, reaching $1.45 billion for the nine months ended September 30, 2011, up from $983 million, partly due to increased tax refunds.
  • 7Despite a challenging environment for competitive natural gas sales, the company's overall financial position appears stable, supported by regulated utility operations and ongoing strategic financial management.

Frequently Asked Questions

The primary driver was the resolution of a long-standing "true-up" appeal by CenterPoint Houston with the Texas Utility Commission. This resulted in an after-tax extraordinary gain of $587 million and a $352 million return on the true-up balance, significantly boosting the net income compared to the prior year.

CenterPoint Energy has been actively managing its debt. In early 2011, CERC Corp. issued new senior notes and exchanged existing ones to extend maturities. The company also replaced its revolving credit facilities with new five-year agreements. Additionally, the company plans to securitize a significant "true-up" balance through transition bonds, which will impact its capital structure.

Capital expenditures for the first nine months of 2011 were $960 million, a decrease from the prior year. The company anticipates further capital expenditures, which are expected to be funded by operating cash flows, borrowings under credit facilities, and potentially new debt or equity issuances. A significant $200 million grant from the U.S. Department of Energy is supporting advanced metering and intelligent grid projects.

Yes, the company is involved in various legal and regulatory proceedings, including rate case appeals and environmental matters. While the company believes most of these will not have a material adverse impact on its financial condition, results of operations, or cash flows, investors should monitor ongoing developments. The "true-up" appeal resolution is a positive development, but other regulatory matters and potential appeals of new orders remain relevant.