10-QPeriod: Q3 FY2016

CENTERPOINT ENERGY INC Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 4, 2016For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported a significant turnaround in its financial performance for the nine months ended September 30, 2016, compared to the same period in 2015. The company posted a net income of $331 million, a substantial improvement from a net loss of $183 million in the prior year. This recovery was largely driven by a significant increase in equity earnings from its investment in Enable Midstream Partners, LP, primarily due to the absence of large impairment charges experienced in 2015. Operating income across its core segments remained relatively stable, with Electric Transmission & Distribution showing consistent performance and Natural Gas Distribution experiencing growth driven by rate increases and customer additions. The Energy Services segment saw a decline in operating income due to mark-to-market accounting for derivatives. Despite the positive net income trend, investors should note the considerable impact of Enable's performance and fluctuations in marketable securities and indexed debt securities on overall profitability.

Financial Highlights

45 data points
Beta

Revenue

$1.89B

Net Income

$179.00M

9.5% Net Margin

EPS (Diluted)

$0.41

Total Assets

$21.29B

Cash & Equivalents

$270.00M

Free Cash Flow

$394.00M

Financial Statements
Beta
Revenue$1.89B
Operating Expenses$1.60B
Operating Income$284.00M
Net Income$179.00M
EPS (Basic)$0.42
EPS (Diluted)$0.41
Shares Outstanding (Basic)430.68M
Shares Outstanding (Diluted)433.40M

Key Highlights

  • 1Net income swung to $331 million for the first nine months of 2016 from a net loss of $183 million in the prior year, driven by improved equity earnings from Enable Midstream Partners.
  • 2Operating income from Electric Transmission & Distribution remained strong, reflecting customer growth and regulatory rate adjustments.
  • 3Natural Gas Distribution segment showed increased operating income due to rate hikes, stabilization adjustments, and customer growth.
  • 4Energy Services segment's operating income declined due to negative mark-to-market adjustments on derivatives.
  • 5The company strengthened its liquidity by refinancing its revolving credit facilities, increasing the total aggregate amount to $2.5 billion.
  • 6CenterPoint Energy acquired the retail energy services business and natural gas wholesale assets of Continuum for $102 million, adding goodwill of $22 million.
  • 7The company's effective tax rate decreased from 41% to 37% for the nine-month period, largely due to the absence of prior-year impairment charges impacting earnings.

Frequently Asked Questions

The primary driver was a substantial improvement in equity earnings from CenterPoint Energy's investment in Enable Midstream Partners, LP. This was largely due to the absence of significant impairment charges on this investment that occurred in the same period of 2015.

The Electric Transmission & Distribution segment showed stable operating income, supported by customer growth and rate adjustments. The Natural Gas Distribution segment also saw an increase in operating income, benefiting from rate increases, customer additions, and regulatory stabilization adjustments.

CenterPoint Energy refinanced its revolving credit facilities in March 2016, increasing the total available amount to $2.5 billion, which enhances its liquidity. The company's debt-to-capitalization ratios remain within covenant limits.

The acquisition of Continuum for $102 million contributed to the Energy Services segment's revenue and operating income. It resulted in the recognition of $22 million in goodwill and $38 million in identifiable intangible assets.