10-QPeriod: Q1 FY2021

CENTERPOINT ENERGY INC Quarterly Report for Q1 Ended Mar 31, 2021

Filed May 6, 2021For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported a net income of $363 million for the three months ended March 31, 2021, a significant improvement from a net loss of $1,199 million in the same period of 2020. This turnaround was largely driven by the absence of a substantial impairment charge on its investment in Enable Midstream Partners that occurred in the prior year, as well as improved operational performance across its utility segments. Key strategic initiatives are underway, including the announced sale of its Arkansas and Oklahoma Natural Gas businesses for $2.15 billion, expected to close by year-end 2021. Furthermore, the proposed merger of Enable Midstream Partners with Energy Transfer is anticipated to close in the second half of 2021, which will result in CenterPoint Energy receiving Energy Transfer units. The company also noted substantial deferrals related to the February 2021 winter storm event, particularly for natural gas costs, which are recorded as regulatory assets and are expected to be recovered from customers, though the timing remains uncertain.

Financial Highlights

46 data points
Beta

Revenue

$2.55B

98.4% Gross Margin

Net Income

$363.00M

14.3% Net Margin

EPS (Diluted)

$0.56

Total Assets

$35.91B

Cash & Equivalents

$146.00M

Free Cash Flow

-$1.68B

Financial Statements
Beta
Revenue$2.55B
Cost of Revenue$40.00M
Gross Profit$2.51B
Operating Expenses$2.09B
Operating Income$453.00M
Net Income$363.00M
EPS (Basic)$0.56
EPS (Diluted)$0.56
Shares Outstanding (Basic)551.55M
Shares Outstanding (Diluted)631.42M

Key Highlights

  • 1Significant increase in net income to $363 million from a net loss of $1,199 million year-over-year, primarily due to the absence of prior-year impairment charges.
  • 2Announced sale of Arkansas and Oklahoma Natural Gas businesses for $2.15 billion, expected to close by the end of 2021.
  • 3Proposed merger of Enable Midstream Partners with Energy Transfer, expected to close in the second half of 2021, with CenterPoint Energy receiving Energy Transfer units.
  • 4Substantial regulatory asset of $2.19 billion recorded for incremental natural gas costs incurred during the February 2021 winter storm event, with recovery mechanisms in place across various states.
  • 5Improved operating income in both Electric ($133 million vs. ($78) million) and Natural Gas ($318 million vs. $291 million) segments compared to the prior year.
  • 6Refinancing and issuance of new debt facilities and bonds to manage liquidity and fund operations, including addressing working capital needs related to the winter storm.
  • 7Conversion of Series C Mandatory Convertible Preferred Stock into common stock is underway, with a mandatory conversion expected in May 2021.

Frequently Asked Questions

The primary driver for the significant improvement in net income from a loss of $1,199 million in Q1 2020 to income of $363 million in Q1 2021 was the absence of a $1.54 billion impairment charge on CenterPoint Energy's investment in Enable Midstream Partners, which occurred in the first quarter of 2020. Additionally, improved operating results from the utility segments contributed positively.

CenterPoint Energy is undertaking two major transactions: the sale of its Arkansas and Oklahoma Natural Gas businesses for $2.15 billion, expected to close by year-end 2021, and the merger of Enable Midstream Partners with Energy Transfer, anticipated to close in the second half of 2021. The Enable merger will result in CenterPoint Energy receiving Energy Transfer units.

The company has recorded substantial regulatory assets totaling approximately $2.19 billion to capture incremental natural gas costs and other related expenses from the winter storm. Recovery of these costs is expected from customers through various state-specific regulatory mechanisms, though the timing of such recovery is uncertain. The company also secured significant debt financing to manage working capital needs arising from the event.

The filing indicates improved performance in both the Electric and Natural Gas segments compared to the prior year, driven by factors like rate relief, customer growth, favorable weather (net of COVID-19 impacts), and operational efficiencies. Several rate increase applications and capital tracking mechanisms are in progress, which are expected to support future earnings growth.