10-QPeriod: Q2 FY2016

CENTERPOINT ENERGY INC Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 5, 2016For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported a net loss of $2 million for the three months ended June 30, 2016, a significant decrease from a net income of $77 million in the prior year's comparable period. This decline was largely driven by a substantial increase in losses related to indexed debt securities (ZENS) due to the Charter merger, a decrease in gains on marketable securities, and lower equity earnings from its investment in Enable Midstream Partners. For the six-month period, net income also decreased to $152 million from $208 million year-over-year, primarily due to similar factors, including the ZENS loss and lower equity earnings from Enable. Despite the net loss in the quarter, the company's operating income remained relatively stable year-over-year for the three-month period, indicating resilience in its core utility operations. The company completed the acquisition of Continuum's retail energy services business and natural gas wholesale assets for $98 million, which is expected to contribute to future revenues. Management anticipates sufficient liquidity for its near-term capital expenditures and operational needs, supported by existing credit facilities and anticipated cash flows.

Financial Highlights

45 data points
Beta

Revenue

$1.57B

Net Income

-$2.00M

-0.1% Net Margin

EPS (Diluted)

$-0.01

Total Assets

$21.01B

Cash & Equivalents

$271.00M

Free Cash Flow

$424.00M

Financial Statements
Beta
Revenue$1.57B
Operating Expenses$1.39B
Operating Income$182.00M
Net Income-$2.00M
EPS (Basic)$-0.01
EPS (Diluted)$-0.01
Shares Outstanding (Basic)430.65M
Shares Outstanding (Diluted)430.65M

Key Highlights

  • 1Net loss of $2 million in Q2 2016 compared to net income of $77 million in Q2 2015, driven by ZENS losses and lower marketable securities gains.
  • 2Six-month net income decreased to $152 million from $208 million, primarily due to the ZENS loss related to the Charter merger.
  • 3Acquired Continuum's retail energy services business and natural gas wholesale assets for $98 million on April 1, 2016.
  • 4Operating income for the three months ended June 30, 2016, was stable year-over-year at $182 million, demonstrating resilience in core operations.
  • 5Midstream Investments (Enable) contributed $31 million in equity earnings for the quarter, down from $43 million in the prior year.
  • 6The company refinanced its revolving credit facilities, increasing the total available amount to $2.5 billion.
  • 7Anticipates sufficient liquidity to meet its projected cash needs for the remainder of 2016, including capital expenditures and debt service.

Frequently Asked Questions

The significant drop in net income for the three months ended June 30, 2016, was primarily due to a $117 million loss on indexed debt securities related to the Charter merger, a $59 million decrease in gains on marketable securities, and a $12 million decrease in equity earnings from its investment in Enable. These factors were partially offset by a decrease in income tax expense.

The acquisition of Continuum's retail energy services business and natural gas wholesale assets for $98 million closed on April 1, 2016. For the three and six months ended June 30, 2016, the acquisition contributed $108 million in revenues and less than $1 million in operating income. The goodwill recognized from this acquisition was $21 million.

CenterPoint Energy expects to have sufficient liquidity to meet its anticipated cash needs for the remaining six months of 2016, which include capital expenditures of approximately $695 million, scheduled principal payments on Securitization Bonds, dividend payments, and interest payments. Funding is expected to come from borrowings under credit facilities, commercial paper, operational cash flows, and distributions from Enable.

CenterPoint Energy uses derivative instruments to mitigate commodity price risk and has entered into forward interest rate agreements to hedge against interest rate volatility on future debt issuances. The company actively manages its exposure to interest rate and equity market value risks, and its financial results are impacted by these factors, as seen with the ZENS and indexed debt securities.