CNP 8-K
Centerpoint Energy Inc (CNP)
8-K
2020-08-06
For: 2020-08-06
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April 12, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 6, 2020
CENTERPOINT ENERGY, INC.
(Exact name of registrant as specified in its charter)
_______________________________
(State or other jurisdiction | (Commission File Number) | (IRS Employer | |||
of incorporation) | Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code: | |||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02. Results of Operations and Financial Conditions.
On August 6, 2020, CenterPoint Energy, Inc. (“CenterPoint Energy”) reported second quarter 2020 earnings. For additional information regarding CenterPoint Energy’s second quarter 2020 earnings, please refer to CenterPoint Energy’s press release attached to this report as Exhibit 99.1 (the “Press Release”), which Press Release is incorporated by reference herein.
Item 7.01. Regulation FD Disclosure.
CenterPoint Energy is holding a conference call to discuss its second quarter 2020 earnings on August 6, 2020. Information about the call can be found in the Press Release furnished herewith as Exhibit 99.1. For additional information regarding CenterPoint Energy’s second quarter 2020 earnings, please refer to the supplemental materials which are being posted on CenterPoint Energy’s website and are attached to this report as Exhibit 99.2 (the “Supplemental Materials”), which Supplemental Materials are incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits.
The information in the Press Release and the Supplemental Materials is being furnished, not filed, pursuant to Items 2.02 and 7.01, respectively. Accordingly, the information in the Press Release and the Supplemental Materials will not be incorporated by reference into any registration statement filed by CenterPoint Energy under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
(d) | Exhibits. | |
EXHIBIT NUMBER | EXHIBIT DESCRIPTION | |
99.1 | ||
99.2 | ||
104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CENTERPOINT ENERGY, INC. | ||
Date: August 6, 2020 | By: | /s/ Kristie L. Colvin |
Kristie L. Colvin | ||
Interim Executive Vice President and Chief Financial Officer and Chief Accounting Officer | ||
Exhibit 99.1
 | For more information contact | |
Media: | ||
Alicia Dixon | ||
Phone | 713.825.9107 | |
Investors: | ||
David Mordy | ||
Phone | 713.207.6500 | |
For Immediate Release | ||||
CenterPoint Energy reports Q2 2020 earnings of $0.11 per diluted share; $0.21 diluted EPS on a guidance basis, with $0.18 diluted EPS from utility operations, inclusive
of $0.06 COVID-19 impact, and $0.03 diluted EPS from midstream investments
• Utilities led company with strong second quarter results in spite of $0.06 COVID-19 impact |
• Reiterate 2020 Utility EPS guidance range of $1.10 - $1.20 and 5 - 7% Utility EPS CAGR, inclusive of anticipated COVID-19 impacts |
Houston - Aug. 6, 2020 - CenterPoint Energy, Inc. (NYSE: CNP) today reported income available to common shareholders of $59 million, or $0.11 per diluted share, for the second quarter of 2020, compared to income available to common shareholders of $165 million, or $0.33 per diluted share, for the second quarter of 2019.
On a guidance basis, second quarter 2020 earnings were $0.21 per diluted share, with $0.18 per diluted share from utility operations, inclusive of $0.06 unfavorable COVID-19 impact, and $0.03 per diluted share from midstream investments. Second quarter 2019 earnings, on a guidance basis, were $0.23 per diluted share from utility operations and $0.09 per diluted share from midstream investments. See “Reconciliation of Consolidated income (loss) available to common shareholders and diluted earnings (loss) per share (GAAP) to adjusted income and adjusted diluted earnings per share (Non-GAAP)” below.
“Our second quarter results demonstrate our employees’ resilience and dedication to safely serving our customers during these unique and challenging times,” said Dave Lesar, President and Chief Executive Officer of CenterPoint Energy. “I would especially like to thank our operations personnel for their unwavering commitment and tireless efforts to deliver on CenterPoint Energy’s brand promise of being ‘Always There’ for our customers.
"Despite the challenges brought on by COVID-19, our utilities delivered strong second quarter results driven by customer growth, rate relief and disciplined O&M management," said Lesar. "We are reiterating CenterPoint Energy's 2020 Utility EPS guidance range of $1.10 - $1.20 and expected 5 - 7% 5-year guidance basis Utility EPS CAGR, including the anticipated full year impacts of $0.10 - $0.15 related to COVID-19."
Lesar added, "As CEO and also Chairman of the Business Review and Evaluation Committee of the Board (the "Committee"), I am driving a process dedicated to thoroughly assessing opportunities to accomplish the objective of creating sustainable value for our stakeholders. The comprehensive review by the Committee is an on-going and robust process to unlock the potential of our Company, business and investments. Formal recommendations to the Board are expected in October 2020.
"I believe that CenterPoint Energy is a strong company with great regulated assets and attractive opportunities to invest incremental capital across premier organic growth jurisdictions," said Lesar. "I am greatly energized about the future of this company and will work tirelessly to drive maximum value for all of our stakeholders."
Business Segments
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Houston Electric - Transmission & Distribution
The Houston electric - transmission & distribution segment reported net income of $87 million for the second quarter of 2020, compared with $100 million for the second quarter of 2019. Net income for the second quarter of 2020 included $2 million of after-tax merger-related expenses. On a guidance basis, second quarter 2020 net income was $89 million, compared with $100 million for the second quarter of 2019. Results for the second quarter of 2020 benefited primarily from customer growth and lower operations and maintenance expense. These benefits were more than offset by lower commercial and industrial usage, primarily due to the effects of COVID-19, increased depreciation and amortization and other taxes expense, lower equity return, primarily due to the annual true-up of transition charges, and lower net revenues as a result of the most recent Houston Electric rate case.
Indiana Electric – Integrated
The Indiana electric - integrated segment reported net income of $19 million for the second quarter of 2020, compared with $16 million for the second quarter of 2019. Results for the second quarter of 2020 benefited primarily from lower operations and maintenance expense, partially offset by lower usage, primarily due to the effects of COVID-19.
Natural Gas Distribution
The natural gas distribution segment reported net income of $33 million for the second quarter of 2020, compared with $23 million for the second quarter of 2019. Net income for the second quarter of 2020 includes $2 million of after-tax merger-related expenses and severance costs. On a guidance basis, second quarter 2020 net income was $35 million, compared with $23 million for the second quarter of 2019. Results for the second quarter of 2020 benefited primarily from rate relief, lower operations and maintenance expense and customer growth. These increases were partially offset by lower usage and miscellaneous fee revenues due to the effects of COVID-19 and increased depreciation and amortization and other taxes expense.
Midstream Investments
The midstream investments segment reported net income of $24 million for the second quarter of 2020, compared with $50 million for the second quarter of 2019. For further detail, please refer to Enable's investor materials provided during its second quarter 2020 earnings call on August 5, 2020.
Corporate and Other
The corporate and other segment reported a net loss of $28 million for the second quarter of 2020, compared with a net loss of $38 million for the second quarter of 2019. The net loss for the second quarter of 2020 included $5 million of after-tax merger-related expenses and severance costs. The net loss for the second quarter of 2019 included $27 million of after-tax merger-related expenses.
Discontinued Operations - Energy Services and Infrastructure Services
Discontinued operations reported a net loss of $30 million for the second quarter of 2020, compared with net income of $44 million for the second quarter of 2019. Results related to discontinued operations are excluded from the company's guidance basis results.
Earnings Outlook
To provide greater transparency on utility earnings, 2020 guidance will be presented in two components, a guidance basis Utility EPS range and a Midstream Investments EPS expected range.
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• | Reiterate 2020 guidance basis Utility EPS range of $1.10 - $1.20 |
• | 2020 - 2024 target of 5 - 7% compound annual guidance basis Utility EPS growth, using the 2020 range of $1.10 - $1.20 as the starting EPS, assuming the COVID-19 scenario range described below |
• | 2020 Midstream Investments EPS expected range is $0.15 - $0.18 |
Utility EPS Guidance Range
• | Utility EPS guidance range includes net income from Houston Electric, Indiana Electric and Natural Gas Distribution segments, as well as after tax operating income from the Corporate and Other segment. |
• | The 2020 Utility EPS guidance range considers operations performance to date and assumptions for certain significant variables that may impact earnings, such as customer growth (approximately 2% for electric operations and 1% for natural gas distribution) and usage including normal weather, throughput, recovery of capital invested through rate cases and other rate filings, effective tax rates, financing activities and related interest rates, regulatory and judicial proceedings, anticipated cost savings as a result of the merger and reflects dilution and earnings as if the Series C preferred stock were issued as common stock. In addition, the Utility EPS guidance range incorporates a COVID-19 scenario range of $0.10 - $0.15 which assumes reduced demand levels and miscellaneous revenues with the second quarter as the peak and reflects anticipated deferral and recovery of certain incremental expenses, including bad debt. The COVID-19 scenario range also assumes a gradual re-opening of the economy in CenterPoint Energy's service territories, with anticipated reduced demand and lower miscellaneous revenues over the remainder of 2020. To the extent actual recovery deviates from these COVID-19 scenario range assumptions, the 2020 Utility EPS guidance range may not be met and our projected full-year guidance range may change. The Utility EPS guidance range also assumes an allocation of corporate overhead based upon its relative earnings contribution. Corporate overhead consists of interest expense, preferred stock dividend requirements, income on Enable preferred units and other items directly attributable to the parent along with the associated income taxes. |
• | Utility EPS guidance excludes: |
◦ | Certain expenses associated with merger integration and Business Review and Evaluation Committee activities |
◦ | Severance costs |
◦ | Midstream Investments and allocation of associated corporate overhead |
◦ | Results related to Infrastructure Services and Energy Services, including costs and impairment resulting from the sale of those businesses |
◦ | Earnings or losses from the change in value of ZENS and related securities |
In providing this 2020 guidance, CenterPoint Energy uses a non-GAAP measure of adjusted diluted earnings per share that does not consider the items noted above and other potential impacts such as any changes in accounting standards, impairments or other unusual items, which could have a material impact on GAAP reported results for the applicable guidance period. CenterPoint Energy is unable to present a quantitative reconciliation of forward looking adjusted diluted earnings per share because changes in the value of ZENS and related securities are not estimable as they are highly variable and difficult to predict due to various factors outside of management’s control.
Midstream Investments EPS Expected Range
The 2020 Midstream Investments EPS expected range is $0.15 - $0.18. In providing this EPS range for Midstream Investments, the company assumes a 53.7 percent ownership of Enable's common units and includes the amortization of its basis differential in Enable and assumes an allocation of CenterPoint Energy corporate overhead based upon Midstream Investments relative earnings contribution. The Midstream Investments EPS expected range reflects dilution and earnings as if CenterPoint Energy's Series C preferred stock were issued as common stock. The
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Midstream Investments EPS expected range takes into account such factors as Enable’s most recent public outlook for 2020 dated August 5, 2020, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards, impairments or Enable’s unusual items.
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Reconciliation of Consolidated income (loss) available to common shareholders and diluted earnings (loss) per share (GAAP) to adjusted income and adjusted diluted earnings per share (Non-GAAP)
Quarter Ended | ||||||||||||||||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||||||||||||||||
Utility Operations | Midstream Investments | Corporate and Other (6) | CES(1) & CIS(2) (Disc. Operations) | Consolidated | ||||||||||||||||||||||||||||||
Dollars in millions | Diluted EPS (3) | Dollars in millions | Diluted EPS (3) | Dollars in millions | Diluted EPS (3) | Dollars in millions | Diluted EPS (3) | Dollars in millions | Diluted EPS (3) | |||||||||||||||||||||||||
Consolidated income (loss) available to common shareholders and diluted EPS | $ | 139 | $ | 0.26 | $ | 24 | $ | 0.04 | $ | (74 | ) | $ | (0.13 | ) | $ | (30 | ) | $ | (0.06 | ) | $ | 59 | $ | 0.11 | ||||||||||
Timing effects impacting CES (1): | ||||||||||||||||||||||||||||||||||
Mark-to-market (gains) losses (net of taxes of $8)(4) | — | — | — | — | — | — | 25 | 0.05 | 25 | 0.05 | ||||||||||||||||||||||||
ZENS-related mark-to-market (gains) losses: | ||||||||||||||||||||||||||||||||||
Marketable securities (net of taxes of $15)(4)(5) | — | — | — | — | (60 | ) | (0.12 | ) | — | — | (60 | ) | (0.12 | ) | ||||||||||||||||||||
Indexed debt securities (net of taxes of $15)(4) | — | — | — | — | 61 | 0.12 | — | — | 61 | 0.12 | ||||||||||||||||||||||||
Impacts associated with the Vectren merger (net of taxes of $1, $1)(4) | 3 | — | — | — | 4 | 0.01 | — | — | 7 | 0.01 | ||||||||||||||||||||||||
Severance costs (net of taxes of $0, $0)(4) | 1 | — | — | — | 1 | — | — | — | 2 | — | ||||||||||||||||||||||||
Impacts associated with the sales of CES (1) and CIS (2) (net of taxes of $38)(4) | — | — | — | — | — | — | 4 | 0.01 | 4 | 0.01 | ||||||||||||||||||||||||
Impacts associated with Series C preferred stock | ||||||||||||||||||||||||||||||||||
Preferred stock dividend requirement and amortization of beneficial conversion feature | — | — | — | — | 16 | 0.03 | — | — | 16 | 0.03 | ||||||||||||||||||||||||
Impact of increased share count on EPS if issued as common stock | — | (0.01 | ) | — | — | — | — | — | — | — | (0.01 | ) | ||||||||||||||||||||||
Total Series C preferred stock impacts | — | (0.01 | ) | — | — | 16 | 0.03 | — | — | 16 | 0.02 | |||||||||||||||||||||||
Consolidated on a guidance basis | 143 | 0.25 | 24 | 0.04 | (52 | ) | (0.09 | ) | (1 | ) | — | 114 | 0.20 | |||||||||||||||||||||
Corporate and Other Allocation | (41 | ) | (0.07 | ) | (9 | ) | (0.01 | ) | 52 | 0.09 | (2 | ) | (0.01 | ) | — | — | ||||||||||||||||||
Exclusion of Discontinued Operations(7) | — | — | — | — | — | — | 3 | 0.01 | 3 | 0.01 | ||||||||||||||||||||||||
Consolidated on a guidance basis, with allocation of Corporate and Other | $ | 102 | $ | 0.18 | $ | 15 | $ | 0.03 | $ | — | $ | — | $ | — | $ | — | $ | 117 | $ | 0.21 | ||||||||||||||
(1) Energy Services segment | ||||||||||||||||||||||||||||||||||
(2) Infrastructure Services segment | ||||||||||||||||||||||||||||||||||
(3) Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares of common stock outstanding during the quarter, and the sum of the quarters may not equal year-to-date diluted EPS | ||||||||||||||||||||||||||||||||||
(4) Taxes are computed based on the impact removing such item would have on tax expense | ||||||||||||||||||||||||||||||||||
(5) Comprised of common stock of AT&T Inc. and Charter Communications, Inc. | ||||||||||||||||||||||||||||||||||
(6) Corporate and Other segment plus income allocated to preferred shareholders | ||||||||||||||||||||||||||||||||||
(7) Results related to discontinued operations are excluded from the company's guidance basis results | ||||||||||||||||||||||||||||||||||
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Quarter Ended | ||||||||||||||||||||||||||||||||||
June 30, 2019 | ||||||||||||||||||||||||||||||||||
Utility Operations | Midstream Investments | Corporate and Other (6) | CES(1) & CIS(2) (Disc. Operations) | Consolidated | ||||||||||||||||||||||||||||||
Dollars in millions | Diluted EPS (3) | Dollars in millions | Diluted EPS (3) | Dollars in millions | Diluted EPS (3) | Dollars in millions | Diluted EPS (3) | Dollars in millions | Diluted EPS (3) | |||||||||||||||||||||||||
Consolidated income (loss) available to common shareholders and diluted EPS | $ | 139 | $ | 0.28 | $ | 50 | $ | 0.10 | $ | (68 | ) | $ | (0.14 | ) | $ | 44 | $ | 0.09 | $ | 165 | $ | 0.33 | ||||||||||||
Timing effects impacting CES (1): | ||||||||||||||||||||||||||||||||||
Mark-to-market (gains) losses (net of taxes of $7)(4) | — | — | — | — | — | — | (23 | ) | (0.05 | ) | (23 | ) | (0.05 | ) | ||||||||||||||||||||
ZENS-related mark-to-market (gains) losses: | ||||||||||||||||||||||||||||||||||
Marketable securities (net of taxes of $14)(4)(5) | — | — | — | — | (50 | ) | (0.10 | ) | — | — | (50 | ) | (0.10 | ) | ||||||||||||||||||||
Indexed debt securities (net of taxes of $15) (4) | — | — | — | — | 53 | 0.11 | — | — | 53 | 0.11 | ||||||||||||||||||||||||
Consolidated on a guidance basis | 139 | 0.28 | 50 | 0.10 | (65 | ) | (0.13 | ) | 21 | 0.04 | 145 | 0.29 | ||||||||||||||||||||||
Impacts associated with the Vectren merger (net of taxes of $8, $2)(4) | — | — | — | — | 27 | 0.05 | 5 | 0.01 | 32 | 0.06 | ||||||||||||||||||||||||
Consolidated on a guidance basis, excluding impacts associated with the Vectren merger | 139 | 0.28 | 50 | 0.10 | (38 | ) | (0.08 | ) | 26 | 0.05 | 177 | 0.35 | ||||||||||||||||||||||
Corporate and Other Allocation | (22 | ) | (0.05 | ) | (6 | ) | (0.01 | ) | 38 | 0.08 | (10 | ) | (0.02 | ) | — | — | ||||||||||||||||||
Consolidated on a guidance basis, excluding impacts associated with the Vectren merger and with allocation of Corporate and Other | $ | 117 | $ | 0.23 | $ | 44 | $ | 0.09 | $ | — | $ | — | $ | 16 | $ | 0.03 | $ | 177 | $ | 0.35 | ||||||||||||||
(1) Energy Services segment | ||||||||||||||||||||||||||||||||||
(2) Infrastructure Services segment | ||||||||||||||||||||||||||||||||||
(3) Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares of common stock outstanding during the quarter, and the sum of the quarters may not equal year-to-date diluted EPS | ||||||||||||||||||||||||||||||||||
(4) Taxes are computed based on the impact removing such item would have on tax expense | ||||||||||||||||||||||||||||||||||
(5) Comprised of common stock of AT&T Inc. and Charter Communications, Inc. | ||||||||||||||||||||||||||||||||||
(6) Corporate and Other segment plus income allocated to preferred shareholders | ||||||||||||||||||||||||||||||||||
Filing of Form 10-Q for CenterPoint Energy, Inc.
Today, CenterPoint Energy, Inc. filed with the Securities and Exchange Commission (SEC) its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. A copy of that report is available on the company’s website, under the Investors section. Investors and others should note that we may announce material information using SEC filings, press releases, public conference calls, webcasts, and the Investor Relations page of our website. In the future, we will continue to use these channels to distribute material information about the company and to communicate important information about the company, key personnel, corporate initiatives, regulatory updates and other matters. Information that we post on our website could be deemed material; therefore we encourage investors, the media, our customers, business partners and others interested in our company to review the information we post on our website.
Webcast of Earnings Conference Call
CenterPoint Energy’s management will host an earnings conference call on Thursday, August 6, 2020, at 10:00 a.m. Central time/11:00 a.m. Eastern time. Interested parties may listen to a live audio broadcast of the conference call on the company’s
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website under the Investors section. A replay of the call can be accessed approximately two hours after the completion of the call and will be archived on the website for at least one year.
As the only investor owned electric and gas utility based in Texas, CenterPoint Energy, Inc. (NYSE: CNP) is an energy delivery company with electric transmission and distribution, power generation and natural gas distribution operations that serve more than 7 million metered customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas. As of June 30, 2020, the company owned approximately $32 billion in assets and also owned 53.7 percent of the common units representing limited partner interests in Enable Midstream Partners, LP, a publicly traded master limited partnership that owns, operates and develops strategically located natural gas and crude oil infrastructure assets. With approximately 9,600 employees, CenterPoint Energy and its predecessor companies have been in business for more than 150 years. For more information, visit CenterPointEnergy.com.
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this news release, the words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "objective," "plan," "potential," "predict," "projection," "should," "target," "will" or other similar words are intended to identify forward-looking statements. These forward-looking statements are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual events and results may differ materially from those expressed or implied by these forward-looking statements. Any statements in this news release regarding capital investments, future earnings, and future financial performance and results of operations, including, but not limited to earnings guidance, impact of COVID-19, including with respect to regulatory actions and the COVID-19 scenario range discussed in this news release, the Business Review and Evaluation Committee activities and any outcome of its review process, value creation and any other statements that are not historical facts are forward-looking statements. Each forward-looking statement contained in this news release speaks only as of the date of this release.
Risks Related to CenterPoint Energy
Important factors that could cause actual results to differ materially from those indicated by the provided forward-looking information include risks and uncertainties relating to: (1) the performance of Enable Midstream Partners, LP (Enable), the amount of cash distributions CenterPoint Energy receives from Enable, Enable's ability to redeem the Enable Series A Preferred Units in certain circumstances and the value of CenterPoint Energy's interest in Enable, and factors that may have a material impact on such performance, cash distributions and value, including factors such as: (A) competitive conditions in the midstream industry, and actions taken by Enable's customers and competitors, including drilling, production and capital spending decisions of third parties and the extent and timing of the entry of additional competition in the markets served by Enable; (B) the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly prices of natural gas and natural gas liquids (NGLs), the competitive effects of the available pipeline capacity in the regions served by Enable, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable's interstate pipelines and its commodity risk management activities; (C) economic effects of the recent actions of Saudi Arabia, Russia and other oil-producing countries, which have resulted in a substantial decrease in oil and natural gas prices and the combined impact of these events and COVID-19 on commodity prices; (D) the demand for crude oil, natural gas, NGLs and transportation and storage services; (E) environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing; (F) recording of goodwill, long-lived asset or other than temporary impairment charges by or related to Enable; (G) the timing of payments from Enable's customers under existing contracts, including minimum volume commitment payments; (H) changes in tax status; and (I) access to debt and equity capital; (2) CenterPoint Energy's expected benefits of the merger with Vectren Corporation (Vectren) and integration, including the outcome of shareholder litigation filed against Vectren that could reduce anticipated benefits of the merger, as well as the ability to successfully integrate the Vectren businesses and to realize anticipated benefits and commercial opportunities; (3) the recording of impairment charges; (4) industrial, commercial and residential growth in CenterPoint Energy's service territories and changes in market demand, including the demand for CenterPoint Energy's non-utility products and services and effects of energy efficiency measures and demographic patterns; (5) timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment; (6) future economic conditions in regional and national markets and their effect on sales, prices and costs; (7) weather variations and other natural phenomena, including the impact of severe weather events on operations and capital; (8) the COVID-19 pandemic and its effect on CenterPoint Energy’s and Enable’s operations, business and financial condition, the industries and communities they serve, U.S. and world financial markets and supply chains, potential regulatory actions and changes in customer and stakeholder behaviors relating thereto; (9) volatility and a substantial recent decline in the markets for oil and natural gas as a result of the actions of crude-oil exporting nations and the Organization of Petroleum Exporting Countries and reduced worldwide consumption due to the COVID-19 pandemic; (10) state and federal legislative and regulatory actions or developments affecting various aspects of CenterPoint Energy's and Enable's businesses, including, among others, energy deregulation or re-regulation, pipeline integrity and safety and changes in regulation and legislation pertaining to trade, health care, finance and
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actions regarding the rates charged by our regulated businesses; (11) tax legislation, including the effects of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the comprehensive tax reform legislation informally referred to as the Tax Cuts and Jobs Act (which includes but is not limited to any potential changes to tax rates, tax credits and/or interest deductibility) and uncertainties involving state commissions' and local municipalities' regulatory requirements and determinations regarding the treatment of excess deferred income taxes and CenterPoint Energy's rates; (12) CenterPoint Energy's ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms; (13) actions by credit rating agencies, including any potential downgrades to credit ratings; (14) problems with regulatory approval, legislative actions, construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or cancellation or in cost overruns that cannot be recouped in rates; (15) the availability and prices of raw materials and services and changes in labor for current and future construction projects and operations and maintenance costs, including CenterPoint Energy's ability to control such costs; (16) local, state and federal legislative and regulatory actions or developments relating to the environment, including, among others, those related to global climate change, air emissions, carbon, waste water discharges and the handling and disposal of coal combustion residuals (CCR) that could impact the continued operation, and/or cost recovery of generation plant costs and related assets; (17) the impact of unplanned facility outages or other closures; (18) any direct or indirect effects on CenterPoint Energy's or Enable's facilities, operations and financial condition resulting from terrorism, cyber-attacks, data security breaches or other attempts to disrupt CenterPoint Energy's businesses or the businesses of third parties, or other catastrophic events such as fires, ice, earthquakes, explosions, leaks, floods, droughts, hurricanes, tornadoes, pandemic health events or other occurrences; (19) CenterPoint Energy's ability to invest planned capital and the timely recovery of CenterPoint Energy's investments, including those related to Indiana Electric's Integrated Resource Plan; (20) CenterPoint Energy's ability to successfully construct and operate electric generating facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate; (21) the sufficiency of CenterPoint Energy's insurance coverage, including availability, cost, coverage and terms and ability to recover claims; (22) the investment performance of CenterPoint Energy's pension and postretirement benefit plans; (23) changes in interest rates and their impact on CenterPoint Energy's costs of borrowing and the valuation of its pension benefit obligation; (24) commercial bank and financial market conditions, CenterPoint Energy's access to capital, the cost of such capital, and the results of CenterPoint Energy's financing and refinancing efforts, including availability of funds in the debt capital markets; (25) changes in rates of inflation; (26) inability of various counterparties to meet their obligations to CenterPoint Energy; (27) non-payment for CenterPoint Energy's services due to financial distress of its customers; (28) the extent and effectiveness of CenterPoint Energy's and Enable's risk management and hedging activities, including but not limited to, financial and weather hedges; (29) timely and appropriate regulatory actions, which include actions allowing securitization, for any future hurricanes or natural disasters or other recovery of costs; (30) the ability of retail electric providers (REPs), including REP affiliates of NRG Energy, Inc. and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and its subsidiaries; (31) CenterPoint Energy's or Enable's potential business strategies and strategic initiatives, including restructurings, joint ventures and acquisitions or dispositions of assets or businesses, which CenterPoint Energy and Enable cannot assure will be completed or will have the anticipated benefits to CenterPoint Energy or Enable; (32) acquisition and merger activities involving CenterPoint Energy or its competitors, including the ability to successfully complete merger, acquisition and divestiture plans; (33) CenterPoint Energy's or Enable's ability to recruit, effectively transition and retain management and key employees and maintain good labor relations; (34) the outcome of litigation; (35) the development of new opportunities and the performance of projects undertaken by ESG, including, among other factors, the level of success in bidding contracts and cancellation and/or reductions in the scope of projects by customers, and obligations related to warranties and guarantees; (36) changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation; (37) the impact of alternate energy sources on the demand for natural gas; (38) the timing and outcome of any audits, disputes and other proceedings related to taxes; (39) the effective tax rates; (40) the transition to a replacement for the LIBOR benchmark interest rate; (41) the effect of changes in and application of accounting standards and pronouncements; and (42) other factors discussed in CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, CenterPoint Energy’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and other reports CenterPoint Energy or its subsidiaries may file from time to time with the Securities and Exchange Commission.
Use of Non-GAAP Financial Measures by CenterPoint Energy in Providing Guidance
In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), including presentation of income (loss) available to common shareholders and diluted earnings (loss) per share, CenterPoint Energy also provides guidance based on adjusted income and adjusted diluted earnings per share, which are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure.
8
To provide greater transparency on utility earnings, CenterPoint Energy’s 2020 guidance will be presented in two components, a guidance basis Utility EPS range and a Midstream Investments EPS expected range. The 2020 Utility EPS guidance range includes net income from Houston Electric, Indiana Electric and Natural Gas Distribution business segments, as well as after tax operating income from the Corporate and Other segment. The 2020 Utility EPS guidance range considers operations performance to date and assumptions for certain significant variables that may impact earnings, such as customer growth (approximately 2% for electric operations and 1% for natural gas distribution) and usage including normal weather, throughput, recovery of capital invested through rate cases and other rate filings, effective tax rates, financing activities and related interest rates, regulatory and judicial proceedings, anticipated cost savings as a result of the merger and reflects dilution and earnings as if the Series C preferred stock were issued as common stock. In addition, the 2020 Utility EPS guidance range incorporates a COVID-19 scenario range of $0.10 - $0.15 which assumes reduced demand levels and miscellaneous revenues with the second quarter as the peak and reflects anticipated deferral and recovery of certain incremental expenses, including bad debt. The COVID-19 scenario range also assumes a gradual re-opening of the economy in CenterPoint Energy's service territories, with anticipated reduced demand and lower miscellaneous revenues over the remainder of 2020. To the extent actual recovery deviates from these COVID-19 scenario range assumptions, the 2020 Utility EPS guidance range may not be met and our projected full-year guidance range may change. The 2020 Utility EPS guidance range also assumes an allocation of corporate overhead based upon its relative earnings contribution. Corporate overhead consists of interest expense, preferred stock dividend requirements, income on Enable preferred units and other items directly attributable to the parent along with the associated income taxes. Utility EPS guidance excludes (a) certain expenses associated with merger integration and Business Review and Evaluation Committee activities, (b) severance costs, (c) Midstream Investments and associated allocation of corporate overhead, (d) results related to Infrastructure Services and Energy Services, including costs and impairment resulting from the sale of those businesses, and (e) earnings or losses from the change in value of ZENS and related securities. In providing this guidance, CenterPoint Energy uses a non-GAAP measure of adjusted diluted earnings per share that does not consider other potential impacts, such as changes in accounting standards, impairments or unusual items, which could have a material impact on GAAP reported results for the applicable guidance period. CenterPoint Energy is unable to present a quantitative reconciliation of forward looking adjusted diluted earnings per share because changes in the value of ZENS and related securities are not estimable as they are highly variable and difficult to predict due to various factors outside of management’s control.
The 2020 Midstream Investments EPS expected range assumes a 53.7 percent ownership of Enable's common units and includes the amortization of the Company’s basis differential in Enable and assumes an allocation of CenterPoint Energy corporate overhead based upon Midstream Investments relative earnings contribution. The Midstream Investments EPS expected range reflects dilution and earnings as if the CenterPoint Energy Series C preferred stock were issued as common stock. The Midstream Investments EPS expected range takes into account such factors as Enable’s most recent public outlook for 2020 dated August 5, 2020, and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards, impairments or Enable’s unusual items.
Management evaluates the company’s financial performance in part based on adjusted income and adjusted diluted earnings per share. Management believes that presenting these non-GAAP financial measures enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. The adjustments made in these non-GAAP financial measures exclude items that Management believes do not most accurately reflect the company’s fundamental business performance. These excluded items are reflected in the reconciliation tables of this news release, where applicable. CenterPoint Energy’s adjusted income and adjusted diluted earnings per share non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, income available to common shareholders and diluted earnings per share, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies.
9
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Income
(Millions of Dollars)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | |||||||||||||||
Utility revenues | $ | 1,476 | $ | 1,565 | $ | 3,549 | $ | 3,736 | |||||||
Non-utility revenues | 99 | 93 | 193 | 151 | |||||||||||
Total | 1,575 | 1,658 | 3,742 | 3,887 | |||||||||||
Expenses: | |||||||||||||||
Utility natural gas, fuel and purchased power | 202 | 260 | 811 | 1,057 | |||||||||||
Non-utility cost of revenues, including natural gas | 69 | 61 | 133 | 108 | |||||||||||
Operation and maintenance | 643 | 673 | 1,317 | 1,421 | |||||||||||
Depreciation and amortization | 297 | 322 | 579 | 622 | |||||||||||
Taxes other than income taxes | 129 | 113 | 265 | 239 | |||||||||||
Goodwill Impairment | — | — | 185 | — | |||||||||||
Total | 1,340 | 1,429 | 3,290 | 3,447 | |||||||||||
Operating Income | 235 | 229 | 452 | 440 | |||||||||||
Other Income (Expense): | |||||||||||||||
Gain (loss) on marketable securities | 75 | 64 | (69 | ) | 147 | ||||||||||
Gain (loss) on indexed debt securities | (76 | ) | (68 | ) | 59 | (154 | ) | ||||||||
Interest expense and other finance charges | (128 | ) | (134 | ) | (267 | ) | (255 | ) | |||||||
Interest expense on Securitization Bonds | (7 | ) | (10 | ) | (15 | ) | (22 | ) | |||||||
Equity in earnings (loss) of unconsolidated affiliates, net | 43 | 74 | (1,432 | ) | 136 | ||||||||||
Interest income | 1 | 1 | 1 | 13 | |||||||||||
Interest income from Securitization Bonds | — | 1 | 1 | 3 | |||||||||||
Other income, net | 21 | 9 | 34 | 15 | |||||||||||
Total | (71 | ) | (63 | ) | (1,688 | ) | (117 | ) | |||||||
Income (Loss) from Continuing Operations Before Income Taxes | 164 | 166 | (1,236 | ) | 323 | ||||||||||
Income tax expense (benefit) | 29 | 15 | (318 | ) | 29 | ||||||||||
Income (Loss) from Continuing Operations | 135 | 151 | (918 | ) | 294 | ||||||||||
Income (loss) from Discontinued Operations (net of tax expense of $38, $14, $21 and $22, respectively) | (30 | ) | 44 | (176 | ) | 70 | |||||||||
Net Income (Loss) | 105 | 195 | (1,094 | ) | 364 | ||||||||||
Income allocated to preferred shareholders | 46 | 30 | 75 | 59 | |||||||||||
Income (Loss) Available to Common Shareholders | $ | 59 | $ | 165 | $ | (1,169 | ) | $ | 305 | ||||||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Million of Dollars, Except Share and Per Share Amounts)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Basic earnings (loss) per common share - continuing operations | $ | 0.17 | $ | 0.24 | $ | (1.93 | ) | $ | 0.47 | ||||||
Basic earnings (loss) per common share - discontinued operations | (0.06 | ) | 0.09 | (0.34 | ) | 0.14 | |||||||||
Basic Earnings (loss) Per Common Share | $ | 0.11 | $ | 0.33 | $ | (2.27 | ) | $ | 0.61 | ||||||
Diluted earnings (loss) per common share - continuing operations | $ | 0.17 | $ | 0.24 | $ | (1.93 | ) | $ | 0.47 | ||||||
Diluted earnings (loss) per common share - discontinued operations | (0.06 | ) | 0.09 | (0.34 | ) | 0.14 | |||||||||
Diluted Earnings Per Common Share | $ | 0.11 | $ | 0.33 | $ | (2.27 | ) | $ | 0.61 | ||||||
Dividends Declared per Common Share | $ | 0.1500 | $ | 0.2875 | $ | 0.4400 | $ | 0.2875 | |||||||
Dividends Paid per Common Share | $ | 0.1500 | $ | 0.2875 | $ | 0.4400 | $ | 0.5750 | |||||||
Weighted Average Common Shares Outstanding (in millions): | |||||||||||||||
- Basic | 528 | 502 | 515 | 502 | |||||||||||
- Diluted | 531 | 505 | 515 | 504 | |||||||||||
Net Income (Loss) by Reportable Segment | |||||||||||||||
Houston Electric T&D | $ | 87 | $ | 100 | $ | 124 | $ | 130 | |||||||
Indiana Electric Integrated | 19 | 16 | (152 | ) | 7 | ||||||||||
Natural Gas Distribution | 33 | 23 | 237 | 143 | |||||||||||
Midstream Investments | 24 | 50 | (1,103 | ) | 74 | ||||||||||
Corporate and Other | (28 | ) | (38 | ) | (24 | ) | (60 | ) | |||||||
Income (Loss) from Continuing Operations | 135 | 151 | (918 | ) | 294 | ||||||||||
Income (loss) from Discontinued Operations, net of tax | (30 | ) | 44 | (176 | ) | 70 | |||||||||
Net Income (Loss) | $ | 105 | $ | 195 | $ | (1,094 | ) | $ | 364 | ||||||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Houston Electric T&D | |||||||||||||||||||||
Three Months Ended June 30, | % Diff | Six Months Ended June 30, | % Diff | ||||||||||||||||||
2020 | 2019 | Fav/Unfav | 2020 | 2019 | Fav/Unfav | ||||||||||||||||
Utility Revenues: | |||||||||||||||||||||
TDU | $ | 672 | $ | 672 | — | $ | 1,272 | $ | 1,267 | — | |||||||||||
Bond Companies | 48 | 93 | (48 | )% | 86 | 187 | (54 | )% | |||||||||||||
Total revenues | 720 | 765 | (6 | )% | 1,358 | 1,454 | (7 | )% | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance, excluding Bond Companies | 362 | 357 | (1 | )% | 720 | 723 | — | ||||||||||||||
Depreciation and amortization, excluding Bond Companies | 101 | 94 | (7 | )% | 200 | 187 | (7 | )% | |||||||||||||
Taxes other than income taxes | 64 | 61 | (5 | )% | 128 | 123 | (4 | )% | |||||||||||||
Bond Companies | 41 | 84 | 51 | % | 72 | 168 | 57 | % | |||||||||||||
Total expenses | 568 | 596 | 5 | % | 1,120 | 1,201 | 7 | % | |||||||||||||
Operating Income | 152 | 169 | (10 | )% | 238 | 253 | (6 | )% | |||||||||||||
Other Income (Expense) | |||||||||||||||||||||
Interest expense and other finance charges | (43 | ) | (42 | ) | (2 | )% | (84 | ) | (82 | ) | (2 | )% | |||||||||
Interest expense on Securitization Bonds | (7 | ) | (10 | ) | 30 | % | (15 | ) | (22 | ) | 32 | % | |||||||||
Interest income | — | 6 | — | 1 | 10 | (90 | )% | ||||||||||||||
Interest income from Securitization Bonds | — | 1 | — | 1 | 3 | (67 | )% | ||||||||||||||
Other income (expense), net | 1 | (1 | ) | 200 | % | 4 | (3 | ) | 233 | % | |||||||||||
Income From Continuing Operations Before Income Taxes | 103 | 123 | (16 | )% | 145 | 159 | (9 | )% | |||||||||||||
Income tax expense | 16 | 23 | 30 | % | 21 | 29 | 28 | % | |||||||||||||
Net Income | $ | 87 | $ | 100 | (13 | )% | $ | 124 | $ | 130 | (5 | )% | |||||||||
Actual GWH Delivered | |||||||||||||||||||||
Residential | 8,440 | 7,985 | 6 | % | 13,791 | 13,168 | 5 | % | |||||||||||||
Total | 23,160 | 24,018 | (4 | )% | 43,262 | 43,037 | 1 | % | |||||||||||||
Weather (percentage of 10-year average for service area): | |||||||||||||||||||||
Cooling degree days | 103 | % | 103 | % | — | % | 113 | % | 101 | % | 12 | % | |||||||||
Heating degree days | 74 | % | 171 | % | (97 | )% | 68 | % | 93 | % | (25 | )% | |||||||||
Number of metered customers - end of period: | |||||||||||||||||||||
Residential | 2,275,006 | 2,217,326 | 3 | % | 2,275,006 | 2,217,326 | 3 | % | |||||||||||||
Total | 2,567,699 | 2,506,124 | 2 | % | 2,567,699 | 2,506,124 | 2 | % | |||||||||||||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Indiana Electric Integrated | |||||||||||||||||||||
Quarter Ended June 30, | % Diff | Six Months Ended June 30, | % Diff | ||||||||||||||||||
2020 | 2019 | Fav / Unfav | 2020 | 2019 (1) | Fav / Unfav | ||||||||||||||||
Utility revenues | $ | 128 | $ | 140 | (9 | )% | $ | 257 | $ | 223 | 15 | % | |||||||||
Utility natural gas, fuel and purchased power | 32 | 40 | 20 | % | 67 | 66 | (2 | )% | |||||||||||||
Utility revenues less Utility natural gas, fuel and purchased power | 96 | 100 | (4 | )% | 190 | 157 | 21 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 38 | 46 | 17 | % | 82 | 94 | 13 | % | |||||||||||||
Depreciation and amortization | 26 | 25 | (4 | )% | 51 | 41 | (24 | )% | |||||||||||||
Taxes other than income taxes | 4 | 4 | — | 8 | 6 | (33 | )% | ||||||||||||||
Goodwill impairment | — | — | — | 185 | — | — | |||||||||||||||
Total expenses | 68 | 75 | 9 | % | 326 | 141 | (131 | )% | |||||||||||||
Operating Income (Loss) | 28 | 25 | 12 | % | (136 | ) | 16 | (950 | )% | ||||||||||||
Other Income (Expense) | |||||||||||||||||||||
Interest expense and other finance charges | (5 | ) | (7 | ) | 29 | % | (11 | ) | (10 | ) | (10 | )% | |||||||||
Other income, net | 1 | 1 | — | 3 | 2 | 50 | % | ||||||||||||||
Income (Loss) From Continuing Operations Before Income Taxes | 24 | 19 | 26 | % | (144 | ) | 8 | (1,900 | )% | ||||||||||||
Income tax expense | 5 | 3 | (67 | )% | 8 | 1 | (700 | )% | |||||||||||||
Net Income (Loss) | $ | 19 | $ | 16 | 19 | % | $ | (152 | ) | $ | 7 | (2,271 | )% | ||||||||
Actual GWH Delivered | |||||||||||||||||||||
Retail | 1,010 | 1,157 | (13 | )% | 2,088 | 1,861 | 12 | % | |||||||||||||
Wholesale | 58 | 94 | (38 | )% | 121 | 152 | (20 | )% | |||||||||||||
Total | 1,068 | 1,251 | (15 | )% | 2,209 | 2,013 | 10 | % | |||||||||||||
Number of metered customers - end of period: | |||||||||||||||||||||
Residential | 129,761 | 128,167 | 1 | % | 129,761 | 128,167 | 1 | % | |||||||||||||
Total | 148,823 | 147,076 | 1 | % | 148,823 | 147,076 | 1 | % | |||||||||||||
(1) Represents February 1, 2019 through June 30, 2019 results only due to the Merger. | |||||||||||||||||||||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Natural Gas Distribution | |||||||||||||||||||||
Three Months Ended June 30, | % Diff | Six Months Ended June 30, | % Diff | ||||||||||||||||||
2020 | 2019 | Fav/Unfav | 2020 | 2019 (1) | Fav/Unfav | ||||||||||||||||
Utility revenues | $ | 628 | $ | 660 | (5 | )% | $ | 1,934 | $ | 2,059 | (6 | )% | |||||||||
Non-utility revenues | 13 | 13 | — | 25 | 29 | (14 | )% | ||||||||||||||
Total revenues | 641 | 673 | (5 | )% | 1,959 | 2,088 | (6 | )% | |||||||||||||
Utility natural gas, fuel and purchased power | 170 | 220 | 23 | % | 744 | 991 | 25 | % | |||||||||||||
Non-utility cost of revenues, including natural gas | 7 | 8 | 13 | % | 13 | 18 | 28 | % | |||||||||||||
Revenues less Utility natural gas, fuel and purchased power and Non-utility cost of revenue | 464 | 445 | 4 | % | 1,202 | 1,079 | 11 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 232 | 244 | 5 | % | 499 | 554 | 10 | % | |||||||||||||
Depreciation and amortization | 113 | 107 | (6 | )% | 224 | 202 | (11 | )% | |||||||||||||
Taxes other than income taxes | 56 | 46 | (22 | )% | 123 | 106 | (16 | )% | |||||||||||||
Total expenses | 401 | 397 | (1 | )% | 846 | 862 | 2 | % | |||||||||||||
Operating Income | 63 | 48 | 31 | % | 356 | 217 | 64 | % | |||||||||||||
Other Income (Expense) | |||||||||||||||||||||
Interest expense and other finance charges | (29 | ) | (24 | ) | (21 | )% | (61 | ) | (47 | ) | (30 | )% | |||||||||
Interest income | 2 | — | — | 3 | 1 | 200 | % | ||||||||||||||
Other expense, net | — | — | — | (2 | ) | (1 | ) | (100 | )% | ||||||||||||
Income From Continuing Operations Before Income Taxes | 36 | 24 | 50 | % | 296 | 170 | 74 | % | |||||||||||||
Income tax expense | 3 | 1 | (200 | )% | 59 | 27 | (119 | )% | |||||||||||||
Net Income | $ | 33 | $ | 23 | 43 | % | $ | 237 | $ | 143 | 66 | % | |||||||||
Throughput data in BCF | |||||||||||||||||||||
Residential | 32 | 30 | 7 | % | 139 | 144 | (3 | )% | |||||||||||||
Commercial and industrial | 87 | 102 | (15 | )% | 233 | 238 | (2 | )% | |||||||||||||
Total Throughput | 119 | 132 | (10 | )% | 372 | 382 | (3 | )% | |||||||||||||
Weather (average for service area) | |||||||||||||||||||||
Percentage of 10-year average: | |||||||||||||||||||||
Heating degree days | 121 | % | 93 | % | 28 | % | 90 | % | 101 | % | (11 | )% | |||||||||
Number of customers - end of period: | |||||||||||||||||||||
Residential | 4,282,921 | 4,195,222 | 2 | % | 4,282,921 | 4,195,222 | 2 | % | |||||||||||||
Commercial and industrial | 348,661 | 347,092 | - | 348,661 | 347,092 | — | |||||||||||||||
Total | 4,631,582 | 4,542,314 | 2 | % | 4,631,582 | 4,542,314 | 2 | % | |||||||||||||
(1) Includes acquired natural gas operations February 1, 2019 through June 30, 2019 results only due to the Merger. | |||||||||||||||||||||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Midstream Investments | |||||||||||||||||||||
Quarter Ended June 30, | % Diff | Six Months Ended June 30, | % Diff | ||||||||||||||||||
2020 | 2019 | Fav/Unfav | 2020 | 2019 | Fav/Unfav | ||||||||||||||||
Non-utility revenues | $ | — | $ | — | — | $ | — | $ | — | — | |||||||||||
Taxes other than income taxes | — | — | — | (1 | ) | — | — | ||||||||||||||
Total expenses | — | — | — | (1 | ) | — | — | ||||||||||||||
Operating Income | — | — | — | 1 | — | — | |||||||||||||||
Other Income (Expense) | |||||||||||||||||||||
Interest expense and other finance charges | (13 | ) | (14 | ) | 7 | % | (27 | ) | (26 | ) | (4 | )% | |||||||||
Equity in earnings (loss) from Enable, net | 43 | 74 | (42 | )% | (1,432 | ) | 136 | (1,153 | )% | ||||||||||||
Interest income | 1 | 3 | (67 | )% | 1 | 5 | (80 | )% | |||||||||||||
Income (Loss) From Continuing Operations Before Income Taxes | 31 | 63 | (51 | )% | (1,457 | ) | 115 | (1,367 | )% | ||||||||||||
Income tax expense (benefit) | 7 | 13 | 46 | % | (354 | ) | 41 | 963 | % | ||||||||||||
Net Income (Loss) | $ | 24 | $ | 50 | (52 | )% | $ | (1,103 | ) | $ | 74 | (1,591 | )% | ||||||||
Corporate and Other | |||||||||||||||||||||
Three Months Ended June 30, | % Diff | Six Months Ended June 30, | % Diff | ||||||||||||||||||
2020 | 2019 | Fav/Unfav | 2020 | 2019 (1) | Fav/Unfav | ||||||||||||||||
Non-utility revenues | $ | 86 | $ | 80 | 8 | % | $ | 168 | $ | 122 | 38 | % | |||||||||
Non-utility cost of revenues, including natural gas | 62 | 53 | (17 | )% | 120 | 90 | (33 | )% | |||||||||||||
Non-utility revenues less Non-utility cost of revenues, including natural gas | 24 | 27 | (11 | )% | 48 | 32 | 50 | % | |||||||||||||
Expenses: | |||||||||||||||||||||
Operation and maintenance | 8 | 22 | 64 | % | 13 | 46 | 72 | % | |||||||||||||
Depreciation and amortization | 18 | 14 | (29 | )% | 35 | 28 | (25 | )% | |||||||||||||
Taxes other than income taxes | 5 | 2 | (150 | )% | 7 | 4 | (75 | )% | |||||||||||||
Total expenses | 31 | 38 | 18 | % | 55 | 78 | 29 | % | |||||||||||||
Operating Loss | (7 | ) | (11 | ) | 36 | % | (7 | ) | (46 | ) | 85 | % | |||||||||
Other Income (Expense) | |||||||||||||||||||||
Gain (loss) on marketable securities | 75 | 64 | 17 | % | (69 | ) | 147 | (147 | )% | ||||||||||||
Gain (loss) on indexed debt securities | (76 | ) | (68 | ) | (12 | )% | 59 | (154 | ) | 138 | % | ||||||||||
Interest expense and other finance charges | (67 | ) | (94 | ) | 29 | % | (163 | ) | (178 | ) | 8 | % | |||||||||
Interest income | 27 | 39 | (31 | )% | 75 | 85 | (12 | )% | |||||||||||||
Other income, net | 18 | 7 | 157 | % | 29 | 17 | 71 | % | |||||||||||||
Loss From Continuing Operations Before Income Taxes | (30 | ) | (63 | ) | 52 | % | (76 | ) | (129 | ) | 41 | % | |||||||||
Income tax benefit | (2 | ) | (25 | ) | (92 | )% | (52 | ) | (69 | ) | (25 | )% | |||||||||
Net Loss | $ | (28 | ) | $ | (38 | ) | 26 | % | $ | (24 | ) | $ | (60 | ) | 60 | % | |||||
(1) Includes acquired corporate and other operations February 1, 2019 through June 30, 2019 results only due to the Merger. | |||||||||||||||||||||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars, Except Throughput and Customer Data)
(Unaudited)
Capital Expenditures by Segment | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 (1) | ||||||||||||
Houston Electric T&D | $ | 232 | $ | 248 | $ | 514 | $ | 483 | |||||||
Indiana Electric Integrated | 66 | 52 | 114 | 89 | |||||||||||
Natural Gas Distribution | 312 | 283 | 550 | 449 | |||||||||||
Corporate and Other | 22 | 26 | 48 | 94 | |||||||||||
Continuing Operations | $ | 632 | $ | 609 | 1,226 | 1,115 | |||||||||
Discontinued Operations | — | 25 | 21 | 47 | |||||||||||
Total Capital Expenditures | $ | 632 | $ | 634 | $ | 1,247 | $ | 1,162 | |||||||
(1) Includes capital expenditures of acquired businesses from February 1, 2019 through June 30, 2019 only due to the Merger. | |||||||||||||||
Interest Expense Detail | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Amortization of Deferred Financing Cost | $ | 8 | $ | 7 | $ | 15 | $ | 14 | |||||||
Capitalization of Interest Cost | (7 | ) | (10 | ) | (13 | ) | (19 | ) | |||||||
Securitization Bonds Interest Expense | 7 | 10 | 15 | 22 | |||||||||||
Other Interest Expense | 127 | 137 | 265 | 260 | |||||||||||
Total Interest Expense | $ | 135 | $ | 144 | $ | 282 | $ | 277 | |||||||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
June 30, 2020 | December 31, 2019 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 168 | $ | 241 | |||
Current assets held for sale | — | 1,002 | |||||
Other current assets | 2,333 | 2,694 | |||||
Total current assets | 2,501 | 3,937 | |||||
Property, Plant and Equipment, net | 21,348 | 20,624 | |||||
Other Assets: | |||||||
Goodwill | 4,697 | 4,882 | |||||
Regulatory assets | 2,149 | 2,117 | |||||
Investment in unconsolidated affiliates | 855 | 2,408 | |||||
Preferred units – unconsolidated affiliate | 363 | 363 | |||||
Non-current assets held for sale | — | 962 | |||||
Other non-current assets | 235 | 236 | |||||
Total other assets | 8,299 | 10,968 | |||||
Total Assets | $ | 32,148 | $ | 35,529 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Current portion of securitization bonds long-term debt | $ | 206 | $ | 231 | |||
Indexed debt | 17 | 19 | |||||
Current portion of other long-term debt | 1,707 | 618 | |||||
Current liabilities held for sale | — | 455 | |||||
Other current liabilities | 2,379 | 2,655 | |||||
Total current liabilities | 4,309 | 3,978 | |||||
Other Liabilities: | |||||||
Deferred income taxes, net | 3,491 | 3,928 | |||||
Regulatory liabilities | 3,463 | 3,474 | |||||
Non-current liabilities held for sale | — | 43 | |||||
Other non-current liabilities | 1,556 | 1,503 | |||||
Total other liabilities | 8,510 | 8,948 | |||||
Long-term Debt: | |||||||
Securitization bonds | 639 | 746 | |||||
Other | 10,298 | 13,498 | |||||
Total long-term debt | 10,937 | 14,244 | |||||
Shareholders' Equity | 8,392 | 8,359 | |||||
Total Liabilities and Shareholders' Equity | $ | 32,148 | $ | 35,529 | |||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(Millions of Dollars)
(Unaudited)
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
Net income (loss) | $ | (1,094 | ) | $ | 364 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 595 | 679 | |||||
Deferred income taxes | (477 | ) | (21 | ) | |||
Goodwill impairment and loss from classification to held for sale | 172 | — | |||||
Goodwill impairment | 185 | — | |||||
Write-down of natural gas inventory | 3 | 3 | |||||
Equity in (earnings) losses of unconsolidated affiliates | 1,432 | (136 | ) | ||||
Distributions from unconsolidated affiliates | 109 | 149 | |||||
Changes in net regulatory assets and liabilities | (80 | ) | (77 | ) | |||
Changes in other assets and liabilities | 333 | (395 | ) | ||||
Other, net | 3 | 8 | |||||
Net cash provided by operating activities | 1,181 | 574 | |||||
Net cash used in investing activities | (143 | ) | (7,149 | ) | |||
Net cash provided by (used in) financing activities | (1,115 | ) | 2,629 | ||||
Net Decrease in Cash, Cash Equivalents and Restricted Cash | (77 | ) | (3,946 | ) | |||
Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 271 | 4,278 | |||||
Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 194 | $ | 332 | |||
Reference is made to the Combined Notes to Unaudited Condensed Consolidated Financial Statements
contained in the Quarterly Report on Form 10-Q of CenterPoint Energy, Inc.
Exhibit 99.2 2ND QUARTER 2020 INVESTOR UPDATE AUGUST 6, 2020
CAUTIONARY STATEMENT This presentation and the oral statements made in connection herewith contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this presentation and the oral statements made in connection herewith are forward-looking statements made in good faith by CenterPoint Energy, Inc. (“CenterPoint Energy” or the “Company”) and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995, including statements concerning CenterPoint Energy’s expectations, beliefs, plans, objectives, goals, strategies, future operations, events, financial position, earnings, growth, impact of COVID-19, costs, prospects, capital investments or performance or underlying assumptions (including future regulatory filings and recovery, liquidity, capital resources, balance sheet, cash flow, capital investments and management, financing costs and rate base or customer growth) and other statements that are not historical facts. You should not place undue reliance on forward-looking statements. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “target,” “will,” or other similar words. The absence of these words, however, does not mean that the statements are not forward-looking. Examples of forward-looking statements in this presentation include statements about the impacts of COVID-19 on our business (including impacts on customer demand and growth, value creation, capital expenditures and projects, bad debt expense, supply chain, and expectations regarding plans to return to normal operations), our growth and guidance (including earnings and customer, utility and rate base growth (CAGR) expectations, taking into account assumptions and scenarios related to COVID-19), O&M expense management initiatives and projected savings therefrom, commitment to investment-grade credit, balance sheet strengthening and target FFO/Debt ratio, the performance of Enable Midstream Partners, LP (“Enable”), including anticipated distributions received on its common units, our regulatory filings and projections (including the recovery and/or deferral of COVID-19 expenses and the Integrated Resources Plan as proposed in Indiana, including the anticipated timeline and benefits under its preferred portfolio), our credit quality and balance sheet expectations, the activities of the Business Review and Evaluation Committee of the Board of Directors (including any recommendations or other outcomes or actions from its review process), among other statements. We have based our forward-looking statements on our management’s beliefs and assumptions based on information currently available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions, and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Some of the factors that could cause actual results to differ from those expressed or implied by our forward-looking statements include but are not limited to the impact of COVID-19 and the scenario ranges, the timing and impact of future regulatory, legislative and IRS decisions, financial market conditions, future market conditions, economic and employment conditions, customer growth, Enable’s performance and ability to pay distributions and other factors described in CenterPoint Energy’s Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 under “Risk Factors”, in CenterPoint Energy’s Form 10-K for the year ended December 31, 2019 under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Certain Factors Affecting Future Earnings” and in other filings with the Securities and Exchange Commission’s (“SEC”) by the Company, which can be found at www.centerpointenergy.com on the Investor Relations page or on the SEC website at www.sec.gov. A portion of slide 18 is derived from Enable’s investor presentation as presented during its Q2 2020 earnings presentation dated August 5, 2020. The information in this slide is included for informational purposes only. The content has not been verified by us, and we assume no liability for the same. You should consider Enable’s investor materials in the context of its SEC filings and its entire investor presentation, which is available at http://investors.enablemidstream.com. This presentation contains time sensitive information that is accurate as of the date hereof (unless otherwise specified as accurate as of another date). Some of the information in this presentation is unaudited and may be subject to change. We undertake no obligation to update the information presented herein except as required by law. Investors and others should note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and the Investor Relations page of our website. In the future, we will continue to use these channels to distribute material information about the Company and to communicate important information about the Company, key personnel, corporate initiatives, regulatory updates and other matters. Information that we post on our website could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website. 2
ADDITIONAL INFORMATION Use of Non-GAAP Financial Measures In addition to presenting its financial results in accordance with generally accepted accounting principles (GAAP), including presentation of income (loss) available to common shareholders and diluted earnings (loss) per share, CenterPoint Energy also provides guidance based on adjusted income, adjusted diluted earnings per share and adjusted funds from operations (“FFO”), which are non-GAAP financial measures. CenterPoint Energy also uses the non-GAAP financial measure of adjusted parent-level debt in addition to the presentation of total parent debt. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure. To provide greater transparency on utility earnings, CenterPoint Energy’s 2020 guidance will be presented in two components, a guidance basis Utility EPS range and a Midstream Investments EPS expected range. Refer to slide 18 for further detail. The 2020 Utility EPS guidance range includes net income from Houston Electric, Indiana Electric and Natural Gas Distribution business segments, as well as after tax operating income from the Corporate and Other segment. The 2020 Utility EPS guidance range considers operations performance to date and assumptions for certain significant variables that may impact earnings, such as customer growth (approximately 2% for electric operations and 1% for natural gas distribution) and usage including normal weather, throughput, recovery of capital invested through rate cases and other rate filings, effective tax rates, financing activities and related interest rates, regulatory and judicial proceedings, anticipated cost savings as a result of the merger and reflects dilution and earnings as if the Series C preferred stock were issued as common stock. In addition, the 2020 Utility EPS guidance range incorporates a COVID-19 scenario range of $0.10 - $0.15 which assumes reduced demand levels and miscellaneous revenues with the second quarter as the peak and reflects anticipated deferral and recovery of certain incremental expenses, including bad debt. The COVID-19 scenario range also assumes a gradual re- opening of the economy in CenterPoint Energy's service territories, with anticipated reduced demand and lower miscellaneous revenues over the remainder of 2020. To the extent actual recovery deviates from these COVID-19 scenario range assumptions, the 2020 Utility EPS guidance range may not be met and our projected full-year guidance range may change. The 2020 Utility EPS guidance range also assumes an allocation of corporate overhead based upon its relative earnings contribution. Corporate overhead consists of interest expense, preferred stock dividend requirements, income on Enable preferred units and other items directly attributable to the parent along with the associated income taxes. Utility EPS guidance excludes (a) certain expenses associated with merger integration and Business Review and Evaluation Committee activities, (b) severance costs, (c) Midstream Investments and associated allocation of corporate overhead, (d) results related to Infrastructure Services and Energy Services, including costs and impairment resulting from the sale of those businesses and (e) earnings or losses from the change in value of ZENS and related securities. In providing this guidance, CenterPoint Energy uses a non-GAAP measure of adjusted diluted earnings per share that does not other potential impacts, such as changes in accounting standards, impairments or unusual items, which could have a material impact on GAAP reported results for the applicable guidance period. CenterPoint Energy is unable to present a quantitative reconciliation of forward looking adjusted diluted earnings per share because changes in the value of ZENS and related securities are not estimable as they are highly variable and difficult to predict due to various factors outside of management’s control. The 2020 Midstream Investments EPS expected range assumes a 53.7% ownership of Enable’s common units and includes the amortization of the CenterPoint Energy’s basis differential in Enable and assumes an allocation of CenterPoint Energy corporate overhead based upon Midstream Investments relative earnings contribution. The Midstream Investments EPS expected range reflects dilution and earnings as if the CenterPoint Energy Series C preferred stock were issued as common stock. The Midstream Investments EPS expected range takes into account such factors as Enable’s most recent public outlook for 2020 dated August 5, 2020, and effective tax rates. CenterPoint Energy does not include other potential impacts such as any changes in accounting standards, impairments or Enable’s unusual items. A reconciliation of income (loss) available to common shareholders and diluted earnings (loss) per share to the basis used in providing guidance is provided in this presentation on slides 19 and 20. The Company is unable to present a quantitative reconciliation of forward-looking adjusted income and adjusted diluted earnings per share used in providing earnings guidance because changes in the value of ZENS and related securities are not estimable as they are highly variable and difficult to predict due to various factors outside of management’s control. These excluded items, including unusual items, could have a material impact on GAAP-reported results for the applicable guidance period. A reconciliation of total parent debt to adjusted total parent-level debt is provided in this presentation on slide 21. A reconciliation of net cash from operating activities to adjusted FFO is provided in this presentation on slides 22 and 23. Management evaluates the company’s financial performance in part based on adjusted income, adjusted diluted earnings per share and adjusted FFO. Management believes that presenting these non-GAAP financial measures enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. Management believes that adjusted parent-level debt is an important measure to monitor leverage and credit ratings and evaluate the balance sheet. The adjustments made in these non-GAAP financial measures exclude items that Management believes does not most accurately reflect the Company’s fundamental business performance. These excluded items are reflected in the reconciliation tables, where applicable. CenterPoint Energy’s adjusted income, adjusted diluted earnings (loss) per share, adjusted FFO and adjusted parent-level debt non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, income (loss) available to common shareholders, diluted earnings per share, net cash from operating activities and total parent debt, which respectively are the most directly comparable GAAP financial measures. These non-GAAP financial measures also may be different than non-GAAP financial measures used by other companies. 3
KEY TAKEAWAYS Strong Second Quarter Utility Performance Organic customer growth, O&M management and rate relief more than offset COVID-19 impacts Mitigating COVID-19 Impact Constructive regulatory mechanisms currently in place for all jurisdictions Disciplined O&M Management Continued focus results in approximately 4%(1) Q-o-Q reduction Completion of Infrastructure Services & Energy Services Divestitures Strengthened the balance sheet and credit quality, leading to an upgrade at CERC(2) Reiterating Utility EPS Guidance and Growth Target 2020 Utility EPS of $1.10 - 1.20 and 5-7% Utility EPS CAGR, including anticipated COVID-19 impacts Notes: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures, full year 2020 COVID-19 scenario range assumptions and other guidance assumptions. CERC – CenterPoint Energy Resources Corp. 4 (1) Inclusive of Houston Electric, Indiana Electric Integrated and Natural Gas Distribution business segments. Excluding utility costs to achieve, severance costs and amounts with revenue offsets (2) For additional detail, refer to Moody’s report dated June 4, 2020
SECOND QUARTER 2020 HIGHLIGHTS UTILITY OPERATIONS Second quarter 2020 consolidated earnings of $0.11 diluted EPS $0.18 Utility EPS on a guidance basis (non-GAAP), inclusive of COVID-19 impacts Capital Investment Disciplined O&M Regulatory Investment Grade & Growth Management Strategy Credit Quality (2) • Over $600 million utility • Achieved 4% Q-o-Q • Received approval for • Improved business risk capital deployed across reduction over $40 million(3) of profile & credit quality(5) growing service incremental annual as a result of non-utility • Supports long-term territories revenue asset divestitures & EPS growth, capital equity raise • Approximately 2.4% investment & • Filed Indiana IRP, (1) electric & 2.0% investment-grade which plans to • CERC upgrade at natural gas Y-o-Y credit metrics substantially increase Moody’s from Baa1 to customer growth renewable resources(4) A3(6) Note: Refer to slide 3 for information on non-GAAP measures and slides 19 and 20 for reconciliation to GAAP measures. Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares outstanding during the quarter, and the sum of the quarters may not equal year-to-date diluted EPS. IRP – Integrated Resource Plan; CERC – CenterPoint Energy Resources Corp. (1) Representative of consolidated customer growth at Houston Electric and Indiana Electric Integrated (2) Inclusive of Houston Electric, Indiana Electric Integrated and Natural Gas Distribution business segments. Excluding utility costs to achieve, severance costs and amounts with revenue offsets (3) Exclusive of TCJA impacts. See slides 15 – 17 for full detail on regulatory filings 5 (4) See slides 9 and 10 for additional detail (5) As determined by the rating agencies (6) For additional detail, refer to Moody’s report dated June 4, 2020
Q2 2020 V Q2 2019 GUIDANCE BASIS (NON-GAAP) EPS(1) DRIVERS FOR CONTINUING OPERATIONS Utility Operations(2) $0.01 $0.00 $0.09 Midstream $0.04 Investments $0.02 Primary Drivers Primary Drivers Primary Drivers Primary Drivers $0.02 O&M $0.01 O&M $0.04 Rate Relief $0.03 Net $0.03 Management Management $0.01 O&M interest expense $0.06 Midstream $0.01 Customer $0.01 COVID-19 Management $0.03 Income Investments Growth $0.01 Customer Taxes $0.02 COVID-19 Growth $0.01 COVID-19 $0.02 $0.03 $0.01 Other Depreciation and Depreciation and Amortization and Amortization and Other Taxes Other Taxes $0.23 $0.02 Share $0.02 COVID-19 Utility count Operations $0.01 Equity Return $0.18 Utility Operations Q2 2019 Consolidated Houston Indiana Electric Natural Gas Corporate & Other Midstream Q2 2020 Consolidated Guidance Basis EPS(1) Electric Integrated Distribution Allocation Investments(3) Guidance Basis EPS(1) Note: All bars exclude certain expenses associated with merger integration and severance costs. Quarterly 2019 Utility EPS on a guidance basis is as follows: Q1 2019 - $0.41; Q2 - $0.23; Q3 - $0.39; Q4 - $0.28 (1) Refer to slide 3 for information on non-GAAP measures and slides 19 and 20 for reconciliation to GAAP measures (2) Includes Houston Electric, Indiana Electric Integrated and Natural Gas Distribution and the associated allocation of Corporate & Other based upon relative earnings contribution. See slide 18 for details (3) Reference Enable’s Q2 2020 Form 10-Q and second quarter 2020 earnings materials dated August 5, 2020. Includes the associated allocation of Corporate & Other based upon relative earnings 6 contribution. See slide 18 for details
COVID-19 PANDEMIC UPDATE OPERATIONS & REGULATORY • Safety and well-being of CenterPoint’s customers, employees, contractors and the communities we serve remain our top priorities • No material impact on field operations or customer service • Capital projects remain on target – no significant construction impacts or delays experienced or anticipated as a result of the pandemic • Internal online COVID-19 resource center and dashboard providing transparent and continuous communication to employees • With several months remaining in hurricane season, we have adapted our Emergency Operations Plan to support storm restoration efforts in the event of a major service disruption – Workforce separation protocols to limit exposure – Ability to support virtual command centers – Virtual check-in and safety training for mutual assistance crews to minimize exposure • 100% of regulated footprint has addressed recovery of certain COVID-19 expenses allowing the deferral or recovery of incremental expenses, which includes bad debt expense, at this time 7 Note: Refer to slide 2 for information on forward-looking statements
COVID-19 PANDEMIC UPDATE Q2 DEMAND SENSITIVITIES & FY GUIDANCE ASSUMPTIONS Q2 2020 Impacts Q2 2020 Estimated Demand Impact(1) • “Stay-at-home” practices yielding negative demand impacts Houston Indiana Natural Gas associated with electric commercial and small industrial customer Electric Electric Distribution classes Residential 3 – 5% 5 – 7% Flat • Negative C&I electric demand impacts partially offset by increased Commercial 15 – 20% 17 – 19% 20 – 25% residential electric usage with more individuals staying at home (2) • Natural gas C&I demand reduction influenced primarily by Industrial 10 – 15% 12 – 14% 20 – 25% restaurant, retail and manufacturing closures • Decline in other revenues and associated fees in Indiana Electric and Natural Gas Distribution Q2 2020 Utility EPS on a guidance • Continued strong, organic customer growth in Texas, more favorable than modeled impacts from rate cases, disciplined O&M basis reduced by ~$0.06 management and interest savings are expected to mitigate the resulting from COVID-19 impacts prolonged period of anticipated lower demand Full Year 2020 COVID-19 Scenario Range Assumptions ― Gradual re-opening of economy ― Reflects anticipated deferral and recovery of certain incremental expenses including bad debt ― Anticipate second quarter to be peak of reduced demand levels and miscellaneous revenues ― Assumes normal weather conditions ― Anticipate reduced demand and lower miscellaneous ― Estimated full year utility EPS on a guidance basis revenues over the remainder of 2020 COVID-19 impact of $0.10 - $0.15 (3) Note: Refer to slide 2 for information on forward-looking statements and slide 3 for a full list of, and information on, 2020 Utility EPS guidance assumptions and non-GAAP measures; C&I – Commercial and Industrial 8 (1) Decline in demand not completely indicative of lost revenues due to fixed charges and minimum volume commitments which help to support revenues (2) Small industrial only (3) Represents estimated impacts based upon data available as of the date of this presentation.
INDIANA IRP UPDATE PREFERRED PORTFOLIO (1) Proposed replacement of 730 MWs of Coal with approximately 700 – 1,000 MWs of Solar & Solar + Storage, 300 MWs of Wind, 460 MWs of natural gas CTs and 30 MWs of demand response Natural Gas Expected Key Characteristics of Proposed IRP 12% Sustainability Cost-effective Renewables Expected to reduce CO2 Among the lowest NPV Coal 10% emissions nearly 75% by portfolios, potentially saving up 78% 2035 over 2005 levels to $320M over next 20 years 2020E Resource Mix 2020E Resource Reliability Flexibility Diversity Dispatchable Ability to meet Capacity & energy Coal capacity & energy future load needs from a blend of 12% would be available energy sources on demand Renewables 64% Natural Gas Timely 24% Anticipate CTs online in 2024 shortly after coal plants retire at end of 2023 2025E Resource Mix 2025E Resource 9 Note: Refer to slide 2 for information on forward-looking statements. IRP – Integrated Resource Plan; MW – Megawatt; CT – Combustion Turbine; NPV – Net present value; CO2 – Carbon dioxide (1) Subject to change based on availability and approval
INDIANA IRP UPDATE PREFERRED PORTFOLIO TIMELINE(1) 10 Note: Refer to slide 2 for information on forward-looking statements. IRP – Integrated Resource Plan; ELG – Effluent Limitation Guidelines; MW – Megawatt (1) Subject to change based on availability and approval
EXECUTION OF CORE UTILITY STRATEGY COMPLETION OF SALE OF NON-UTILITY ASSETS Transaction Details Strategic Rationale Infrastructure Services(1) Improves Business Risk Profile(4) ― Sale closed April 9, 2020 Strengthens Balance Sheet and ― Sales price $850 million; net-after tax Credit Quality(5) proceeds ~$670 million ― Proceeds repaid outstanding debt Increases Earnings Contribution Energy Services(2) from Core Utility ― Sale closed June 1, 2020 Reduces Earnings Volatility ― Sales price $400 million; proceeds received at closing ~$286 million(3) Focuses on Robust Utility Capital ― Proceeds repaid outstanding debt Investment Program Note: Refer to slide 2 for information on forward-looking statements (1) For additional detail, refer to press release and Form 8-K filed on both February 3, 2020 and April 9, 2020 (2) For additional detail, refer to press release and Form 8-K filed on both February 24, 2020 and June 1, 2020 (3) As of June 30, 2020, CenterPoint Energy recorded a $75 million receivable for working capital and other adjustments set forth in the Equity Purchase Agreement. See note 3 to the unaudited condensed consolidated financial statements in the second quarter 2020 Form 10-Q for additional detail 11 (4) As determined by rating agencies (5) Specifically CenterPoint Energy (regarding Infrastructure Services and Energy Services) and CERC (regarding Energy Services)
STRENGTHENING CREDIT QUALITY COMMITTED TO INVESTMENT-GRADE CREDIT CenterPoint has successfully executed a utility-focused strategy designed to improve its business risk profile and strengthen the balance sheet Diversified regulated utility asset base across the mid-continent region Target a strong balance sheet to capture the Divestiture of non-utility assets Energy Services robust utility capital investment opportunity and Infrastructure Services to pay down debt across diversified jurisdictions Issued $1.4 billion of mandatory convertible with favorable regulatory constructs preferred stock and common stock in May 2020 (1) (2) Adjusted Parent-level Debt/Total Debt Adjusted FFO/Debt 28.0% 25.4% 15.0% Target ~ 14 - 14.5% 13.6% 12/31/19 3/31/20 6/30/20 FY 2019 2020E - 2024E Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures 12 (1) Reference slide 21 for reconciliation (2) Reference slides 22 and 23 for reconciliation
REITERATE 2020 – 2024 GUIDANCE BASIS UTILITY EPS OUTLOOK Robust regulated utility growth plan drives expected 5-7% utility growth 5 – 7% Guidance Basis Utility EPS CAGR ~$13 billion 5-year capital investment plan through 2024 7.5% rate base CAGR from 2019 – 2024 $1.10 – $1.20(1) Top quartile customer growth Electric(2) and gas rates below peer average Continued disciplined O&M management Premium utility portfolio targeting allowed ROEs 2020 Guidance range considerations: 2020 Guidance Basis Utility EPS Range Strong YTD results through Q2 Full-year 2020 anticipated COVID- Constructive COVID-19 19 impact Regulatory Treatment Pull-Forward of Future Equity Targeted reduced O&M Dilution to 2020 Deleveraging Additional Corporate and Other Tax benefit from CARES Act Allocation(1) Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on 2020 Utility EPS guidance assumptions and non-GAAP measures. Full-year 2020 COVID-19 guidance scenario range assumptions consider the following: a gradual re-opening of economy in Company’s service territories; anticipate second quarter of 2020 to be peak of reduced demand levels and miscellaneous revenues; anticipate reduced demand and miscellaneous revenues over the remainder of 2020; reflects anticipated deferral and recovery of certain incremental expenses including bad debt; assumes normal weather conditions; and other assumptions as described on slide 3 13 (1) Refer to slide 18 for additional detail (2) Houston Electric service territory
APPENDIX 14
ELECTRIC OPERATIONS Q2 2020 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and Houston Electric (PUCT) The requested amount is comprised primarily of the following: 2021 Program and EECRF (1) $12 Jun-20 Mar-21 TBD Evaluation, Measurement and Verification costs of $39 million, 2019 over recovery of ($1) million and 2019 earned bonus of $12 million. For full disclosure on Houston Electric rate case, refer to "Regulatory Matters" in Item 2 Rate Case 13 Apr-19 Apr-20 Mar-20 of CenterPoint Energy’s Second Quarter 2020 Form 10-Q. TCOS 17 Mar-20 May-20 May-20 Reflects an increase of $204 million to rate base. TCOS (1) 16 Jul-20 TBD TBD Request an increase of $140 million to rate base. CenterPoint Energy - Indiana Electric (IURC) Requested an increase of $34 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested TDSIC 4 Feb-20 May-20 May-20 rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance of $2 million annually. Requested an increase of $49 million to rate base, which reflects a $10 million annual increase in current revenues. 80% of the revenue requirement is included in requested ECA (1) 10 May-20 Aug-20 TBD rate increase and 20% is deferred until next rate case. The mechanism also included a change in (over)/under-recovery variance of $4 million annually. Requested an increase of $36 million to rate base, which reflects a $3 million annual increase in current revenues. 80% of the revenue requirement is included in requested TDSIC (1) 3 Aug-20 Nov-20 TBD rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance of $(1) million. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) EECRF – Energy Efficiency Cost Recovery Factor; TCOS – Transmission Cost of Service; TDSIC – Transmission, Distribution, and Storage System Improvement Charge; ECA - Federal Mandate under 15 Indiana Senate Bills 251 and 29 (or Environmental Cost Adjustment) (1) Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates
NATURAL GAS DISTRIBUTION Q2 2020 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and CERC - Beaumont/East Texas (Railroad Commission) Unanimous settlement agreement approved by the Railroad Commission in June 2020 provides for a $4 million annual increase in current revenues, a refund for an Unprotected EDIT Rider amortized over three years of which $2 million is refunded in Rate Case $4 Nov-19 Nov-20 Jun-20 the first year and establishes a 9.65% ROE and a 56.95% equity ratio for future GRIP filings for the Beaumont/East Texas jurisdiction. New rates will be effective with October 2020 usage and will be reflected starting with November 2020 bills. CenterPoint Energy and CERC - South Texas, Houston and Texas Coast (Railroad Commission) GRIP 18 Mar-20 Jun-20 Jun-20 Based on net change in invested capital of $143 million. CenterPoint Energy and CERC - Arkansas (APSC) Based on ROE of 9.5% with 50 basis point (+/-) earnings band. Revenue reduction FRP (1) (8) Apr-20 TBD TBD of $8 million based on prior test year true-up earned return on equity of 11.75% combined with projected test year return on equity of 8.40%. CenterPoint Energy and CERC - Minnesota (MPUC) CIP Financial 9 May-20 TBD TBD CIP Financial Incentive based on 2019 activity. Incentive(1) Reflects a proposed 10.15% ROE on a 51.39% equity ratio. Interim rates reflecting Rate Case (1) 62 Oct-19 TBD TBD an annual increase of $53 million were implemented on January 1, 2020. CenterPoint Energy and CERC - Oklahoma (OCC) Based on ROE of 10% with 50 basis point (+/-) earnings band. Revenue credit of approximately $2 million based on 2019 test year adjusted earned ROE of 15.37%. PBRC (2) Mar-20 Jul-20 Jul-20 The OCC approved a unanimous settlement agreement that provides for a revenue credit to customers of $2 million, paid out monthly for the next twelve months. CenterPoint Energy and CERC – Mississippi (MPSC) Based on ROE of 9.292% with 100 basis point (+/-) earnings band. Revenue RRA (1) 2 May-20 TBD TBD increase of $2 million based on 2019 test year adjusted earned ROE of 7.45%. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) GRIP – Gas Reliability Infrastructure Program; EDIT – Excess Deferred Income Taxes; FRP – Formula Rate Plan; CIP – Conservation Improvement Program; PBRC – Performance Based Rate Change Plan; 16 RRA – Rate Regulation Adjustment (1) Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates
NATURAL GAS DISTRIBUTION Q2 2020 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy - Indiana South - Gas (IURC) Requested an increase of $13 million to rate base, which reflects a $1 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The CSIA $1 Apr-20 Jul-20 Jul-20 mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $1 million annually. CenterPoint Energy - Indiana North - Gas (IURC) Requested an increase of $35 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The CSIA 4 Apr-20 Jul-20 Jul-20 mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $14 million annually. CenterPoint Energy - Ohio (PUCO) Application to flow back to customers certain benefits from the TCJA. Initial impact reflects credits for 2018 of $(10) million and 2019 of $(9) million, and 2020 of $(7) TSCR (26) Jan-19 Jul-20 Jul-20 million, with mechanism to begin upon approval from the PUCO effective July 1, 2020. Requested an increase of $67 million to rate base for investments made in 2019, DRR (1) 10 May-20 Sep-20 TBD which reflects a $10 million annual increase in current revenues. A change in (over)/under-recovery variance of $2 million annually is also included in rates. Note: Please see slides posted under regulatory information for additional detail (http://investors.centerpointenergy.com/regulatory-information) 17 CSIA – Compliance and System Improvement Adjustment; TSCR – Tax Savings Credit Rider; DRR – Distribution Replacement Rider (1) Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates
2020 EPS GUIDANCE BASIS CONSIDERATIONS Translating Enable Guidance to CenterPoint’s Portion (in millions, except percentages and per share items) Guidance basis EPS before allocation of Corporate & Other Enable Net Income Attributable $195 - $235(2) to Common Units Midstream Utility Operations Corporate & Other Investments CNP Common Unit ownership percentage 53.7%(3) $1.32 - $1.42 $0.18 - $0.21 ($0.25) Basis difference amortization $85(4) (1) (1) ~88% ~12% Interest 4.5% on $1,200 (CNP Midstream internal note) Marginal effective tax rate 24% Guidance basis EPS Estimated 2020 CNP Share Count 560 after allocation of Corporate & Other Midstream Investments EPS Utility Operations Midstream Investments $0.18 - $0.21 before allocation of Corporate & Other(5) Proportion share of $1.10 - $1.20 $0.15 - $0.18 ($0.03) Corporate & Other allocation (12%) ~88% ~12% Midstream Investments EPS $0.15 – $0.18 after allocation of Corporate & Other(5) Note: Refer to slide 2 for information on forward-looking statements and slide 3 for information on non-GAAP measures and for additional detail on the 2020 Utility EPS guidance range assumptions and 2020 Midstream Investments EPS expected range assumptions (1) Calculated as the relative contribution of each reporting area based off the guidance basis EPS for Utility Operations and Midstream Investments EPS expected range attributable to CenterPoint’s share of Enable’s Net Income Attributable to Common Units guidance range. The guidance basis earnings (loss) per share related to Corporate & Other is then proportionally allocated based on each reporting range’s relative contribution. Corporate & Other consists of interest expense, preferred stock dividend requirements, income on Enable preferred units and other items directly attributable to the parent along with the associated income taxes. (2) Source: Enable’s second quarter 2020 earnings presentation dated August 5, 2020 (3) Enable ownership position as of June 30, 2020 (4) Estimated full year 2020 basis difference accretion following company’s impairment of its investment in Enable in the first quarter of 2020. Does not consider any potential loss on dilution, net of 18 proportional basis difference recognition (5) Earnings on a guidance basis would exclude potential impacts such as any changes in accounting standards, impairments or Enable’s unusual items
RECONCILIATION: INCOME (LOSS) AND DILUTED EARNINGS (LOSS) PER SHARE TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended June 30, 2020 Midstream Corporate and CES (1) & CIS (2) Utility Operations Investments Other (6) (Disc. Operations) Consolidated Dollars in Diluted Dollars in Diluted Dollars in Diluted Dollars in Diluted Dollars in Diluted millions EPS (3) millions EPS (3) millions EPS (3) millions EPS (3) millions EPS (3) Consolidated income available to common shareholders and diluted EPS $ 139 $ 0.26 $ 24 $ 0.04 $ (74) $ (0.13) $ (30) $ (0.06) $ 59 $ 0.11 Timing effects impacting CES (1): Mark-to-market (gains) losses (net of taxes of $8) (4) - - - - - - 25 0.05 25 0.05 ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $15) (4)(5) - - - - (60) (0.12) - - (60) (0.12) Indexed debt securities (net of taxes of $15) (4) - - - - 61 0.12 - - 61 0.12 Impacts associated with the Vectren merger (net of taxes of $1, $1) (4) 3 - - - 4 0.01 - - 7 0.01 Severance costs (net of taxes of $0, $0) (4) 1 - - - 1 - - - 2 - Impacts associated with the sales of CES (1) and CIS (2) (net of taxes of $38) (4) - - - - - - 4 0.01 4 0.01 Impacts associated with Series C preferred stock Preferred stock dividend requirement and amortization of beneficial conversion feature - - - - 16 0.03 - - 16 0.03 Impact of increased share count on EPS if issued as common stock - (0.01) - - - - - - - (0.01) Total Series C preferred stock impacts - (0.01) - - 16 0.03 - - 16 0.02 Consolidated on a guidance basis 143 0.25 24 0.04 (52) (0.09) (1) - 114 0.20 Corporate and Other Allocation (41) (0.07) (9) (0.01) 52 0.09 (2) (0.01) - - Consolidated on a guidance basis, with allocation of Corporate and Other $ 102 $ 0.18 $ 15 $ 0.03 $ - $ - $ (3) $ (0.01) $ 114 $ 0.20 Note: Refer to slide 3 for information on non-GAAP measures (1) Energy Services segment (2) Infrastructure Services segment (3) Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares of common stock outstanding during the quarter, and the sum of the quarters may not equal year-to-date diluted EPS (4) Taxes are computed based on the impact removing such item would have on tax expense (5) Comprised of common stock of AT&T Inc. and Charter Communications, Inc. 19 (6) Corporate and Other segment plus income allocated to preferred shareholders (7) Results related to discontinued operations are excluded from the company’s guidance basis results
RECONCILIATION: INCOME (LOSS) AND DILUTED EARNINGS (LOSS) PER SHARE TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended June 30, 2019 Midstream Corporate and CES (1) & CIS (2) Utility Operations Investments Other (6) (Disc. Operations) Consolidated Dollars in Diluted Dollars in Diluted Dollars in Diluted Dollars in Diluted Dollars in Diluted millions EPS (3) millions EPS (3) millions EPS (3) millions EPS (3) millions EPS (3) Consolidated income available to common shareholders and diluted EPS $ 139 $ 0.28 $ 50 $ 0.10 $ (68) $ (0.14) $ 44 $ 0.09 $ 165 $ 0.33 Timing effects impacting CES (1): Mark-to-market (gains) losses (net of taxes of $7) (4) - - - - - - (23) (0.05) (23) (0.05) ZENS-related mark-to-market (gains) losses: Marketable securities (net of taxes of $14) (4)(5) - - - - (50) (0.10) - - (50) (0.10) Indexed debt securities (net of taxes of $15) (4) - - - - 53 0.11 - - 53 0.11 Consolidated on a guidance basis 139 0.28 50 0.10 (65) (0.13) 21 0.04 145 0.29 Impacts associated with the Vectren merger (net of taxes of $8, $2) (4) - - - - 27 0.05 5 0.01 32 0.06 Consolidated on a guidance basis, excluding impacts associated with the Vectren merger 139 0.28 50 0.10 (38) (0.08) 26 0.05 177 0.35 Corporate and Other Allocation (22) (0.05) (6) (0.01) 38 0.08 (10) (0.02) - - Consolidated on a guidance basis, excluding impacts associated with the Vectren merger and with allocation of Corporate and Other $ 117 $ 0.23 $ 44 $ 0.09 $ - $ - $ 16 $ 0.03 $ 177 $ 0.35 Note: Refer to slide 3 for information on non-GAAP measures (1) Energy Services segment (2) Infrastructure Services segment (3) Quarterly diluted EPS on both a GAAP and guidance basis are based on the weighted average number of shares of common stock outstanding during the quarter, and the sum of the quarters may not equal year-to-date diluted EPS (4) Taxes are computed based on the impact removing such item would have on tax expense 20 (5) Comprised of common stock of AT&T Inc. and Charter Communications, Inc. (6) Corporate and Other segment plus income allocated to preferred shareholders
CENTERPOINT ENERGY ADJUSTED PARENT DEBT AS A PERCENTAGE OF TOTAL DEBT 12/31/2019 3/31/2020 6/30/2020 ($ in millions) Short-term Debt: Short-term borrowings $ - $ - $ 19 Current portion of transition and system restoration bonds 231 204 206 Indexed debt (ZENS)** 19 18 17 Current portion of other long-term debt 618 1,204 1,707 Long-term Debt: Transition and system restoration bonds, net* 746 710 639 Other, net 13,498 13,120 10,298 Total Debt, net $ 15,112 $ 15,256 $ 12,886 Short-term Debt: Short-term borrowings $ - $ - $ - Indexed debt (ZENS)** 19 18 17 Current portion of other long-term debt - - - Long-term Debt: CNP Inc. Commercial Paper 1,633 1,169 316 CNP Inc. Credit Facility Borrowings - 900 - CNP Inc. Term Loan 1,000 1,000 700 Pollution Control Bonds 68 68 68 CNP Inc. Senior Notes 3,200 3,200 3,200 Total Parent Debt 5,920 6,355 4,301 Less: Intercompany Promissory Notes CNP Midstream Intercompany Promissory Note 1,200 1,200 1,200 VUHI Intecompany Promissory Notes 693 693 1,168 VCC Intercompany Promissory Notes 191 191 - Adjusted Total Parent Debt $ 3,836 $ 4,271 $ 1,933 Adjusted Total Parent Debt to Adjusted Total Debt, net 25.4% 28.0% 15.0% Note: Refer to slide 3 for information on non-GAAP measures. Parent debt calculated as a function of principal amounts of external debt at CNP Inc. adjusted for the internal note with Midstream Investments and other internal notes associated with affiliates. VUHI – Vectren Utility Holdings Inc.; VCC – Vectren Capital Corporation *The transition and system restoration bonds are serviced with dedicated revenue streams, and the bonds are non-recourse to CenterPoint Energy and CenterPoint Energy Houston Electric. **The debt component reflected on the financial statements was $17 million, $18 million, and $19 million as of June 30, 2020, March 31, 2020 and December 31, 2019. The principal amount on which 2% interest is paid was $828 million on each of June 30, 2020, March 31, 2020 and December 31, 2019. The contingent principal amount was $66 million, $70 million and $75 million as of June 30, 2020, 21 March 31, 2020 and December 31, 2019, respectively. At maturity or upon redemption, holders of ZENS will receive cash at the higher of the contingent principal amount or the value of the reference shares of AT&T and Charter Communications, Inc.
CENTERPOINT ENERGY CONSOLIDATED ADJUSTED CASH FROM OPERATIONS PRE-WORKING CAPITAL Year Ended December 31, 2019 ($ in millions) Net cash provided by operating activities 1,638 Less: Changes in other assets and liabilities Accounts receivable and unbilled revenues, net (226) Inventory 52 Taxes receivable 106 Accounts payable 455 Fuel cost recovery (92) Margin deposits, net 56 Interest and taxes accrued (54) Other current assets 22 Other current liabilities 107 Cash From Operations, Pre-working Capital 2,064 Amounts included in Cash Flows from Investing Activities Distributions from unconsolidated affiliates in excess of cumulative earnings 42 Cash From Operations, Pre-working Capital, including Distributions 2,106 Plus: Other Adjustments Defined Benefit Plan Contribution Less Service Cost 69 Operating Leases Rent Expense 19 Adjusted Cash From Operations Pre-Working Capital 2,194 Note: Refer to slide 3 for information on non-GAAP measures. This slide includes adjusted cash from operations pre-working capital which is net cash provided by operating activities excluding 22 certain changes in other assets and liabilities, and including (i) distributions from unconsolidated affiliates in excess of cumulative earnings included in cash flow from investing activities, as applicable and (ii) other adjustment for defined benefit plans and operating leases.
CENTERPOINT ENERGY CONSOLIDATED RATIO OF ADJUSTED CASH FROM OPERATIONS PRE-WORKING CAPITAL/ADJUSTED TOTAL DEBT Year Ended December 31, 2019 ($ in millions) Short-term Debt: Short-term borrowings - Current portion of transition and system restoration bonds 231 Indexed debt (ZENS)** 19 Current portion of other long-term debt 618 Long-term Debt: Transition and system restoration bonds, net* 746 Other, net 13,498 Total Debt, net 15,112 Plus: Other Adjustments 50% of Series A Preferred Stock Aggregate Liquidation Value 400 Benefit obligations 448 Present Value of Operating Lease Liabilities 63 Unamortized debt issuance costs and unamortized discount and premium, net 95 Adjusted Total Debt 16,118 Adjusted Cash From Operations Pre-Working Capital/Adjusted Total Debt (Adjusted FFO/Debt) 13.6% Note: Refer to slide 3 for information on non-GAAP measures and slide 23 for CenterPoint Energy's adjusted cash from operations pre-working capital calculation. This slide includes adjusted cash from operations pre-working capital which is net cash provided by operating activities excluding certain changes in other assets and liabilities, and including (i) distributions from unconsolidated affiliates in excess of cumulative earnings included in cash flow from investing activities, as applicable, and (ii) other adjustment for defined benefit plans and operating leases *The transition and system restoration bonds are serviced with dedicated revenue streams, and the bonds are non-recourse to CenterPoint Energy and CenterPoint Energy Houston Electric. **The debt component reflected on the financial statements was $19 million as of December 31, 2019. The principal amount on which 2% interest is paid was $828 million on each of December 31, 2019. The contingent principal amount was $75 million as of December 31, 2019. At maturity or upon redemption, holders of ZENS will receive cash at the higher of the contingent principal amount or 23 the value of the reference shares of AT&T and Charter Communications, Inc.