Centerpoint Energy, Inc (holding Co) · NYSE:CNP
Centerpoint Energy, Inc (holding Co) — Merrill Lynch Power and Gas Leaders Conference 2003
38 slides from Centerpoint Energy, Inc (holding Co)'s conference presentation, Sep 18, 2003
Slide 1: Merrill Lynch Power and Gas Leaders Conference
David M. McClanahan President and Chief Executive Officer ' Merrill Lynch Power and Gas Leaders Conference New York, NY September 18, 2003 www.CenterPointEnergy.com CenterPoint.. Energy
Slide 2: Cautionary Statement Regarding Forward-Looking Information
Cautionary Statement Regarding Forward-Looking Information From time to time we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are
Slide 3: A Diversified and Stable Energy Delivery Company
CenterPoint Energy, Inc. A Diversified and Stable Energy Delivery Company Agenda z Company Overview z Electric Restructuring and Managing through the Transition z Vision and Strategy z Financial Objectives September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 2
Slide 4: Company Overview
Company Overview September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 3
Slide 5: Who is CenterPoint Energy?
Who is CenterPoint Energy? z A new company with 130-year heritage z One of the largest combined gas and electric utility companies in the nation, serving almost 5 million metered customers z Owner of a balanced mix of electric and gas distribution, interstate pipeline and field services businesses
Slide 6: Four segments focused primarily on regulated domestic energy delivery
Four segments focused primarily on regulated domestic energy delivery (NYSE: CNP) (81%) Electric Natural Gas Pipelines & Electric Transmission & Distribution (TDU) Distribution Field Services Generation CenterPoint Energy Houston 3 local distribution companies CenterPoint Energy Gas Texas Genco Hold
Slide 7: CenterPoint Energy Houston Electric
CenterPoint Energy Houston Electric Electric Transmission & Distribution Utility z Focused strictly on energy delivery 5,000 square mile service area in and around Houston Approximately 1.8 million metered customers added over 51,000 metered customers in 12 months ended June 2003, a 3% increas
Slide 8: CenterPoint Energy Resources Corp. Natural Gas Distribution
CenterPoint Energy Resources Corp. Natural Gas Distribution z Three LDCs serving 3 million customers in 6 states One of U.S.’s largest natural gas distribution operations in terms of number of customers served z Attractive service territories Added almost 38,000 customers in 12 months ended June
Slide 9: CenterPoint Energy Resources Corp. Natural Gas Pipelines and Gathering
CenterPoint Energy Resources Corp. Natural Gas Pipelines and Gathering z Two FERC-regulated pipelines: Current system at or near capacity at peak Potential growth in cross haul transportation services Potential expansion opportunity driven by U.S. supply shifts z An unregulated gas gathering s
Slide 10: Texas Genco
Texas Genco Electric Generation z Net generating capacity of 14,175 MW located CAPACITY BY DISPATCH TYPE (MW) in the ERCOT market z Attractive, low-cost, solid fuel baseload portfolio 855 4,852 Peaking (4,852 MW) Baseload 2,617 z Flexible, load following gas fleet (9,323 MW) Cyclic 5,851 z Fuel oil
Slide 11: Electric Reliability Council of Texas (ERCOT)
Electric Reliability Council of Texas (ERCOT) z ERCOT is unique compared to other regions It is located entirely within one state It has very limited interconnections with other power pools Such interconnections are solely through direct current (DC) ties that electrically isolate utilities in
Slide 12: Electric Restructuring and Managing through the Transition
Electric Restructuring and Managing through the Transition September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 11
Slide 13: Electric restructuring in Texas
Electric restructuring in Texas z Texas Electric Restructuring Law passed in 1999 Retail competition implemented on January 1, 2002 z Required the functional unbundling of integrated electric utilities into: Power generation Transmission and distribution Retail electric provider activities z
Slide 14: CNP evolution
CNP evolution (NYSE: CNP) Texas Texas Adopts Adopts 19% 19% Public Public Distribution Distribution Restructuring Restructuring of $749MM $749MM of Texas Texas Genco Genco Legislation Legislation (NYSE: RRI RRI Securitization Securitization of (NYSE: TGN) TGN) IPO of Expect Expect to to securitize s
Slide 15: Remaining transition steps - Texas Genco option purchase agreement
Remaining transition steps - Texas Genco option purchase agreement z Reliant Resources, Inc. (RRI) has the option to purchase CenterPoint Energy’s 81% ownership interest RRI’s option exercise period is from January 10, 2004 through January 24, 2004 Purchase price is calculated using the highest
Slide 16: Remaining transition steps - Recovery of stranded investment
Remaining transition steps - Recovery of stranded investment z Defined mechanism for recovery and securitization of stranded costs and regulatory assets provided for in Texas restructuring law z First round of securitization provided for recovery of a portion of our generation-related regulatory ass
Slide 17: Transition timeline
Transition timeline Reduce Reduce debt debt Reduce Reduce debt debt RRI RRI Option: Option: Return Return RRI RRI Option: Option: RRI RRI Option: Option: expected expected on on true-up true-up Issue Issue valuation valuation period period exercise exercise close close amount amount Securitization S
Slide 18: Vision and Strategy
Vision and Strategy September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 17
Slide 19: Our corporate vision is simple and focused
Our corporate vision is simple and focused: To Be Recognized As America’s Our Vision Leading Energy Delivery Company…and More z Focused on domestic energy delivery “…America’s… businesses Energy Delivery…” Focus on continental, U.S. market Focus on regulated energy delivery z Will pursue careful
Slide 20: One Company, Get It Right and Grow
Our strategy is reflected in three simple phrases: One Company, Get It Right and Grow 2002 2003 2004 2005 2006 Grow Get It Right z Focus on domestic energy delivery z Expand existing core businesses One Company z Use best practices to achieve top quartile efficiency and operating performance z Build
Slide 21: Financial Objectives
Financial Objectives September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 20
Slide 22: Recent transactions provide stability and liquidity
Recent transactions provide stability and liquidity z Raised over $3.5 billion through the capital markets since March, 2003 $1.5 billion issued at CenterPoint Energy, Inc. used primarily to reduce parent credit facility, enhance liquidity and refinance higher coupon debt $1.3 billion issued at
Slide 23: Near-term financial objectives
Near-term financial objectives z Maximize returns Ensure gas LDCs are earning allowed rates of return Capture growth in existing service territories Implement productivity improvements company-wide z Optimize cash flow Prioritize and defer discretionary capital expenditures through disciplin
Slide 24: Post transition financial objectives: 2006 and beyond
Post transition financial objectives: 2006 and beyond z Earn at or above current EPS levels CNP believes it can replace ECOM and Texas Genco earnings by: reducing interest expense achieving allowed returns at LDCs through rate relief and efficiency improvements capturing organic growth in co
Slide 25: Why CenterPoint Energy?
Why CenterPoint Energy? Low risk, diversified business with large scale z Large-scale, diversified regulated domestic energy delivery business Mix of electric and natural gas assets z Stable earnings and cash flow z Attractive service territories Diversified economic and regulatory position Ho
Slide 26: September 18, 2003 Merrill Lynch Power and Gas Leaders Conference
September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 25
Slide 27: Appendix
Appendix September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 26
Slide 28: Financial Results
Financial Results September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 27
Slide 29: Six Months Ended June 30, 2003 and 2003 Guidance
Six Months Ended June 30, 2003 and 2003 Guidance ($ in millions, except per share amounts) Six months ended June 30, 2003 June YTD 2003 Operating Income: $707 450 Operating Income $707 425 Other Income 14 400 375 Interest Expense* (467) ECOM 350 Income Taxes (86) 325 Minority Interest (4) 300 275 In
Slide 30: 2002 Performance
2002 Performance ($ in millions, except per share amounts) Total 2002 Operating Income: $1,329 2002 RESULTS 1200 Operating Income $1,329 1000 Other Income 1 ECOM Interest Expense* (765) 800 Income Taxes (197) Income from Continuing $366 600 Operations** 400 Income from Continuing $1.22 Electric Natu
Slide 31: Debt & Maturity Schedules
Debt & Maturity Schedules September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 30
Slide 32: Principal amount of external debt and trust preferred securities
Principal amount of external debt and trust preferred securities As of September 9, 2003 In millions TOTALS CenterPoint Energy, Inc. Debt (excl. Transition Bonds and ZENS) $ 9,449 ZENS $ 105 (1) Transition Bonds 729 Convertible Senior Notes 575 ZENS (linked to AOL stock) 105 Senior Notes 600 Subtota
Slide 33: Principal amount of external debt and trust preferred securities
Principal amount of external debt and trust preferred securities As of September 9, 2003 CenterPoint Energy, Inc. Call Feature Security Outstanding Rate Insurer Maturity Date Price ZENS $840,356,382 (1) 09/15/29 Current 101 Convertible Senior Notes $575,000,000 3.75% 05/15/23 05/15/08 100 Senior Not
Slide 34: Principal amount of external debt and trust preferred securities
Principal amount of external debt and trust preferred securities As of September 9, 2003 CenterPoint Energy Houston Electric, LLC Call Feature Security Outstanding Rate Maturity Date Price First Mortgage Bonds $102,442,000 9.15% 03/15/21 NA NA General Mortgage Bonds $450,000,000 5.70% 03/15/13 Curre
Slide 35: Principal amount of external debt and trust preferred securities
Principal amount of external debt and trust preferred securities As of September 9, 2003 CenterPoint Energy Transition Bond Company, LLC Call Feature Security Outstanding Rate Maturity Date Price Class A-1 2001-1 Transition Bonds $95,528,678 3.84% (1) (5) (5) Class A-2 2001-1 Transition Bonds $118,0
Slide 36: Debt Maturities - CNP
Debt Maturities - CNP In millions Scheduled Maturities of Debt and Trust Preferred Securities as of September 9, 2003 Trust CenterPoint CenterPoint Preferred Transition Year Energy Houston (1) Issuers CERC Sub-total Bonds Total 2003 $ 17 $ $ $ 140 $ 157 $ 12 $ 169 2004 - 41 41 2005 1,822 1,310 367 3
Slide 37: Stranded Cost Illustration
Stranded Cost Illustration September 18, 2003 Merrill Lynch Power and Gas Leaders Conference 36
Slide 38: True-Up reconciliation: Illustrative calculation
True-Up reconciliation: Illustrative calculation (Note: Illustrates calculation methodology only. Actual values will not be determined until time of stranded costs filing in early 2004) ($ in millions) Net regulated book value at 12/31/01 (after mitigation) $3,200 Environmental expenditures (Jan. ’0
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