8-KEarnings & ResultsRegulation FDExhibits & Filings

CENTERPOINT ENERGY INC 8-K Report, Financial Results (Feb 26, 2016)

Filed February 26, 2016For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) filed an 8-K on February 26, 2016, to report its fourth quarter and full year 2015 earnings. The most significant development disclosed is a substantial non-cash impairment charge of $984 million. This charge is primarily related to CenterPoint Energy's 55.4 percent equity investment in Enable Midstream Partners, LP (Enable Midstream), including its proportionate share of impairments recognized by Enable Midstream on its long-lived assets. The impairment was deemed necessary due to sustained low common unit prices for Enable Midstream and projected continued depressed prices in the crude oil and natural gas markets, impacting the midstream sector. Management exercised considerable judgment in determining the impairment was other than temporary, utilizing both income and market approaches to estimate the fair value of their investment. Investors should note that this is a non-cash charge and does not impact the company's cash flows, but it significantly reduces the carrying value of the Enable Midstream investment on the balance sheet and impacts reported earnings.

Key Highlights

  • 1Reported Q4 and Full Year 2015 earnings on February 26, 2016.
  • 2Recorded a significant non-cash impairment charge of $984 million.
  • 3The impairment charge is primarily associated with the 55.4% equity investment in Enable Midstream Partners, LP.
  • 4Impairment reflects sustained low unit prices and a negative market outlook for crude oil and natural gas.
  • 5Management determined the impairment to be other than temporary, impacting earnings.
  • 6Conference call held on February 26, 2016, to discuss earnings results and related materials were furnished as exhibits.

Frequently Asked Questions

The $984 million impairment charge is primarily due to a decline in the value of CenterPoint Energy's 55.4% equity investment in Enable Midstream Partners, LP. This decline is attributed to sustained low common unit prices of Enable Midstream and the expectation of continued depressed prices in the oil and gas markets, which negatively impacts the midstream sector.

No, the $984 million impairment charge is a non-cash charge. It reflects a reduction in the carrying value of the investment on CenterPoint Energy's balance sheet to its estimated fair value, but it does not involve an outflow of cash.

CenterPoint Energy and its subsidiary used both the income approach and the market approach to estimate the fair value of their investment in Enable Midstream. This involved considering factors such as Enable Midstream's unit price, forecasted results, recent comparable transactions, and the limited float of its publicly traded units.

The impairment charge significantly reduces reported net income for the period. While non-cash, it signals a substantial decrease in the perceived value of the Enable Midstream investment and reflects challenging market conditions in the midstream energy sector. Investors should review the accompanying press release and supplemental materials for a detailed breakdown of the earnings impact and management's outlook.