10-QPeriod: Q2 FY2013

CENTERPOINT ENERGY INC Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 1, 2013For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported a net loss of $100 million for the three months ended June 30, 2013, a significant decrease from a net income of $126 million in the prior year period. This decline was primarily driven by a substantial increase in income tax expense, largely attributed to the formation of the Midstream Partnership. Despite the net loss, operating income saw a decline, but the company's core utility operations in Electric Transmission & Distribution and Natural Gas Distribution showed resilience, with Natural Gas Distribution experiencing improved operating income due to colder weather. The formation of the Midstream Partnership (Enable Midstream Partners, LP) with OGE Energy Corp. and ArcLight Capital Partners, LLC, effective May 1, 2013, is a transformative event. This joint venture combines CNP's former interstate pipeline and field services businesses. While this significantly alters the company's reporting structure and financial results due to accounting adjustments and new segment reporting, it is strategically positioned for growth in the midstream sector. The company's liquidity remains adequate, with expectations of sufficient cash flow to meet near-term obligations, supported by existing credit facilities and cash from operations.

Financial Highlights

45 data points
Beta

Revenue

$1.89B

Net Income

-$100.00M

-5.3% Net Margin

EPS (Diluted)

$-0.23

Total Assets

$21.66B

Cash & Equivalents

$497.00M

Free Cash Flow

$257.00M

Financial Statements
Beta
Revenue$1.89B
Operating Expenses$1.67B
Operating Income$223.00M
Net Income-$100.00M
EPS (Basic)$-0.23
EPS (Diluted)$-0.23
Shares Outstanding (Basic)428.57M
Shares Outstanding (Diluted)430.55M

Key Highlights

  • 1Reported a net loss of $100 million for Q2 2013, compared to a net income of $126 million in Q2 2012.
  • 2The significant increase in income tax expense (up $170 million in Q2 2013 vs. Q2 2012) is a primary driver of the net loss, largely due to Midstream Partnership formation accounting.
  • 3Completed the formation of Midstream Partnership (Enable Midstream Partners, LP) on May 1, 2013, with OGE Energy Corp. and ArcLight Capital Partners, LLC, creating a new reporting segment 'Midstream Investments'.
  • 4Operating income for the Electric Transmission & Distribution segment decreased by $26 million in Q2 2013 compared to Q2 2012, attributed to decreased usage and higher expenses.
  • 5Natural Gas Distribution segment operating income increased by $16 million in Q2 2013 compared to Q2 2012, benefiting from colder weather and rate increases.
  • 6Cash flow from operations decreased by $137 million for the first six months of 2013 compared to the same period in 2012, impacting overall liquidity.
  • 7The company maintained adequate liquidity, with expectations that cash flows, credit facilities, and Midstream Partnership distributions will cover upcoming obligations.

Frequently Asked Questions

The primary reason for the substantial decrease in net income, resulting in a net loss of $100 million in Q2 2013 compared to a net income of $126 million in Q2 2012, was a significant increase in income tax expense. This increase was largely driven by accounting adjustments related to the formation of the Midstream Partnership, including the recording of a $225 million deferred tax liability.

The formation of Midstream Partnership (Enable Midstream Partners, LP) on May 1, 2013, is a major strategic development. It involved the contribution of CenterPoint Energy's former interstate pipeline and field services businesses into a joint venture with OGE Energy Corp. and ArcLight Capital Partners, LLC. This transaction creates a new 'Midstream Investments' reporting segment and will influence future financial reporting, strategic focus, and potential growth opportunities in the midstream energy sector.

The Electric Transmission & Distribution segment saw a decrease in operating income in Q2 2013 compared to the prior year, primarily due to lower energy usage and increased expenses. Conversely, the Natural Gas Distribution segment reported an increase in operating income, benefiting from colder weather conditions, rate adjustments, and economic growth in its service territories.

CenterPoint Energy expects its liquidity and capital resources to be sufficient for the remainder of 2013. This expectation is based on anticipated cash flows from operations, existing credit facilities, and expected distributions from the newly formed Midstream Partnership. Key upcoming cash requirements include capital expenditures, bond redemptions, pension contributions, and dividend and interest payments.