10-QPeriod: Q2 FY2015

CENTERPOINT ENERGY INC Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 10, 2015For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported net income of $77 million ($0.18 per diluted share) for the three months ended June 30, 2015, a decrease from $107 million ($0.25 per diluted share) in the prior year period. For the first six months of 2015, net income was $208 million ($0.48 per diluted share), down from $292 million ($0.68 per diluted share) in the same period of 2014. This decline was primarily driven by a significant increase in losses related to indexed debt securities and a decrease in equity earnings from unconsolidated affiliates, notably Enable Midstream Partners. Despite the overall decrease in net income, the company's Electric Transmission & Distribution segment showed improved operating income, driven by higher usage and customer growth. However, the Natural Gas Distribution and Energy Services segments experienced lower operating income due to decreased usage and unfavorable mark-to-market accounting for derivatives. The company's balance sheet shows total assets of $22.6 billion and total liabilities of $17.2 billion as of June 30, 2015. Management expects that existing cash flows, credit facilities, and distributions from Enable will be sufficient to meet its liquidity and capital requirements for the remainder of 2015.

Financial Highlights

45 data points
Beta

Revenue

$1.53B

Net Income

$77.00M

5.0% Net Margin

EPS (Diluted)

$0.18

Total Assets

$22.60B

Cash & Equivalents

$245.00M

Free Cash Flow

$456.00M

Financial Statements
Beta
Revenue$1.53B
Operating Expenses$1.35B
Operating Income$186.00M
Net Income$77.00M
EPS (Basic)$0.18
EPS (Diluted)$0.18
Shares Outstanding (Basic)430.24M
Shares Outstanding (Diluted)431.73M

Key Highlights

  • 1Net income decreased by $30 million in Q2 2015 compared to Q2 2014, primarily due to higher losses on indexed debt securities and lower equity earnings from affiliates.
  • 2For the six months ended June 30, 2015, net income decreased by $84 million compared to the same period in 2014, attributed to reduced equity earnings from unconsolidated affiliates and increased indexed debt security losses.
  • 3Operating income for the Electric Transmission & Distribution segment increased for both the three and six-month periods, driven by higher usage and customer growth.
  • 4Natural Gas Distribution operating income decreased due to lower usage, attributed partly to weather patterns in 2014, and higher depreciation and amortization expenses.
  • 5The Energy Services segment saw a decrease in operating income, largely due to unfavorable mark-to-market accounting for derivatives.
  • 6CenterPoint Energy's investment in Enable Midstream Partners remains significant, valued at $4.5 billion as of June 30, 2015. Management believes the decline in its value is temporary.
  • 7The company's effective tax rate decreased in the first six months of 2015 due to a lower Texas tax rate and favorable book-tax differences.

Frequently Asked Questions

The decrease in net income of $84 million for the six months ended June 30, 2015, compared to the same period in 2014, was primarily due to a $67 million decrease in equity earnings from unconsolidated affiliates, a $60 million increase in losses on indexed debt securities, and a $39 million decrease in operating income across segments. These were partially offset by a $56 million decrease in income tax expense and a $20 million increase in the gain on marketable securities.

As of June 30, 2015, CenterPoint Energy's investment in Enable Midstream Partners was valued at $4.5 billion. While the carrying value per unit ($19.12) was above the market price per unit ($15.98), management assessed the decline in value as temporary, considering Enable's investment grade credit rating and expansion projects. However, a sustained low unit price could lead to an impairment charge in the future.

Management expects that its current cash flows from operations, distributions from Enable, borrowings under its credit facilities, and proceeds from commercial paper will be sufficient to meet its anticipated cash needs for the remainder of 2015. Major upcoming cash requirements include capital expenditures of approximately $832 million and debt-related payments.

Several regulatory filings are underway. CenterPoint Houston has filed for approval of the Brazos Valley Connection project and an interim update for its Transmission Cost of Service (TCOS). The Natural Gas Distribution (NGD) segment has settled rate cases in Texas Coast and is undergoing a rate case in Minnesota. Various other rate adjustments and cost recovery filings are in progress across different jurisdictions.