35 slides from Centerpoint Energy, Inc (holding Co)'s earnings presentation, Feb 28, 2019
Slide 1: 4th Quarter 2018 Earnings Call
4TH QUARTER 2018 EARNINGS CALL FEBRUARY 28, 2019
Slide 2: Cautionary Statement
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 f
Slide 3: Additional Information
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 available to common shareholders and diluted earnings per share, the Company also provides
Slide 4: Agenda
AGENDA • Full Year 2018 Performance President and CEO • Scott Prochazka 2018 Financial and Operational Highlights • 2019 Key Regulatory Activities • Electric Operations Capital Investment Outlook • Natural Gas Distribution Capital Investment Outlook • Rate Base Growth Outlook • Guidance Basis EPS Ou
Slide 5: Full-Year 2018 Performance
FULL-YEAR 2018 PERFORMANCE GAAP Diluted EPS 2018 vs. 2017 Drivers(2) Full-year 2018 diluted EPS of $0.74, compared with diluted EPS of $4.13 in h Rate Relief i O&M h Income Tax Rate (TCJA) i Depreciation and 2017, inclusive of $2.56 per share of h Midstream Investments Amortization deferred tax re-m
Slide 6: 2018 Financial Highlights
2018 FINANCIAL HIGHLIGHTS • Delivered guidance-basis EPS, excluding impacts associated with the merger, of $1.60(1); finished at the top end of our guidance basis EPS range • Invested nearly $1.6 billion in capital in our regulated utilities • Increased regulated utilities’ incremental annual revenu
Slide 7: 2018 Operational Highlights
2018 OPERATIONAL HIGHLIGHTS • Added more than 77,000 new gas and electric utility customers • Completed Brazos Valley Connection electric transmission line project • Substantially completed cast iron replacements(1) • Higher Energy Services core operating income(2) due to increased volumes and margi
Slide 8: 2019 Key Regulatory Activities
2019 KEY REGULATORY ACTIVITIES Electric Operations • Expect a ruling from the PUCT in late 2019 for the Bailey to Jones Creek 345kV transmission line(1) • Anticipate filing Houston Electric general rate case on or before April 30th • Expect final order from IURC in the first half of the year approvi
Slide 9: Electric Operations Capital Investment Outlook
ELECTRIC OPERATIONS CAPITAL INVESTMENT OUTLOOK(1) Houston Electric and Indiana Electric: $6.8 Billion Five Year Capital Plan $1,600 $1,515 $1,457 $212 $1,361 $1,400 $1,304 $1,194 $354 $151 $106 $268 $1,200 $86 $47 $165 $145 $120 $122 $1,000 $13 $50 $55 $58 $ Millions $800 $764 $489 $577 $485 $466 $6
Slide 10: Natural Gas Distribution Capital Investment Outlook
NATURAL GAS DISTRIBUTION CAPITAL INVESTMENT OUTLOOK(1) Regulated Gas Utility Operations in AR, IN, LA, MN, MS, OH, OK and TX $5.3 Billion Five Year Capital Plan $1,200 $1,107 $1,127 $1,098 $64 $1,015 $80 $12 $57 $992 $17 $1,000 $13 $101 $152 $76 $146 $164 $38 $14 $137 $145 $800 $ Millions $600 $867
Slide 11: Rate Base Growth Outlook
RATE BASE GROWTH OUTLOOK (1)(2) Projected Year-End Rate Base $25,000 $19,951 $20,000 $18,728 $17,109 $15,950 $14,693 $15,000 $13,484 55% 56% $ Millions $11,047 55% $10,498 56% $9,474 56% $8,972 $10,000 57% $8,269 $7,681 $5,000 44% 45% 44% 45% 43% 44% $8,230 $8,904 $6,978 $7,635 $5,803 $6,424 $0 (3)
Slide 12: Guidance Basis EPS Outlook
GUIDANCE BASIS EPS OUTLOOK(1) • 2019 Guidance Basis EPS of $1.60 - $1.70(2) – Includes both utility and non-utility anticipated cost savings resulting from the merger, exclusive of costs to achieve those savings – Excludes certain integration and transaction-related fees and expenses – Excludes merg
Slide 13: 2015-2020 Guidance Basis EPS Ranges
2015 – 2020 GUIDANCE BASIS EPS RANGES(1) $2.00 $1.90 $1.80 $1.75 $1.70 $1.60 $1.60 $1.60 $1.60 $1.50 $1.37 $1.40 $1.33 $1.16 $1.25 $1.20 $1.20 $1.10 $1.10 $1.12 $1.00 $1.00 2015 2016 2017 2018 2019 2020 Low-end of guidance basis EPS High-end of guidance basis EPS Actual EPS on a Guidance Basis 2015:
Slide 14: Closing Comments
CLOSING COMMENTS • Thank you to the various employees directly and indirectly involved in completing the transaction related financing and the integration planning • Overall safety performance exceeded targets • Leveraged technology in our systems and operations (advanced leak detection, drones, sma
Slide 15: Agenda
AGENDA • Full Year 2018 Performance President and CEO • Scott Prochazka 2018 Financial and Operational Highlights • 2019 Key Regulatory Activities • Electric Operations Capital Investment Outlook • Natural Gas Distribution Capital Investment Outlook • Rate Base Growth Outlook • Guidance Basis EPS Ou
Slide 16: Electric T&D Core Operating Income Drivers 2017 v. 2018
ELECTRIC TRANSMISSION AND DISTRIBUTION CORE OPERATING INCOME DRIVERS 2017 V. 2018 $700 $31 $105 $600 $561 $568 $33 $42 $17 $74 $500 $79 $ Millions $400 Federal income tax expense is also decreased $300 $519 $494 $200 $100 $0 2017 TDU Core TCJA Revenue Rate Change (3) Customer growth Other (4) Deprec
Slide 17: Natural Gas Distribution Operating Income Drivers 2017 v. 2018
NATURAL GAS DISTRIBUTION OPERATING INCOME DRIVERS 2017 V. 2018 $400 $10 $350 $46 $300 $47 $72 $250 $19 $ Millions Federal income tax expense is also decreased $200 $348 $150 $266 $100 $50 $0 (2) (3) 2017 Natural Gas TCJA Revenue Rate relief Customer growth Other Depreciation and 2018 Natural Gas Dis
Slide 18: Utility Operations Adjusted Diluted EPS Drivers
UTILITY OPERATIONS ADJUSTED DILUTED EPS DRIVERS 2017 V. 2018 (GUIDANCE BASIS)(5) $1.12 $0.02 $1.08 $0.05 $0.05 $1.04 $0.02 (5) $1.00 $1.09 Net of TCJA revenue reductions shown on slides $0.96 $0.99 16 and 17 $0.92 (4) (1) (2)(5) (3) 2017 Utility Core Operating Interest Equity Return Other 2018 Utili
Slide 19: Consolidated Adjusted Diluted EPS Drivers
CONSOLIDATED ADJUSTED DILUTED EPS DRIVERS 2017 V. 2018 (GUIDANCE BASIS)(1) $1.80 $0.13 $1.60 $1.60 $0.10 $1.37 $1.40 $0.51 Midstream $1.20 $0.38 Investments Midstream $0.09 EPS improvement Investments as a result of tax reform $1.00 $0.80 $0.60 $1.09 $0.99 Utility $0.40 Utility Operations Operations
Slide 20: 2019 EPS Considerations
2019 EPS CONSIDERATIONS • Houston Electric Impacts – DCRF provided $36 million in annual incremental revenue in 2018; no filing applicable in 2019 – TCOS filings provided $51 million in annual incremental revenue in 2018; not anticipated in 2019 – Equity amortization provided $74 million in pre-tax
Slide 21: 2019 EPS Considerations – Midstream Investments
2019 EPS CONSIDERATIONS – MIDSTREAM INVESTMENTS (in millions, except for 2018 2019(1) percentages) (pre-tax amounts) Enable Net Income $485 $435 - $505(2) attributable to common units CNP common unit 54.0% 54.0%(3) ownership percentage Basis Difference $47(4) $47 Amortization Interest (CNP Midstream
Slide 22: 2020 EPS Considerations
2020 EPS CONSIDERATIONS • Regulatory Filings – Anticipate TCOS filing(s) incorporating 2019 and part of 2020 capital investment – Expect DCRF filing reflecting 2019 capital investment – Minnesota interim rates in effect post filing of general rate case application • Anticipated merger O&M savings of
Slide 23: CenterPoint Businesses – Historical
CENTERPOINT BUSINESSES HISTORICAL • Prior to the merger, CenterPoint had five segments for SEC reporting. For Investor Relations reporting, we grouped four segments together: – Houston Electric – T&D(1) – Natural Gas Distribution Utility Operations – CenterPoint Energy Services Included certain non-
Slide 24: CenterPoint Businesses – Post Merger
CENTERPOINT BUSINESSES POST MERGER • Going forward, we expect we will have seven segments for SEC reporting. We expect to group them as follows for investor reporting: – Houston Electric – T&D(1) Electric Operations Utility – Indiana Electric – Integrated Operations – Natural Gas Distribution – Cent
Slide 25: Agenda
AGENDA • Full Year 2018 Performance President and CEO • Scott Prochazka 2018 Financial and Operational Highlights • 2019 Key Regulatory Activities • Electric Operations Capital Investment Outlook • Natural Gas Distribution Capital Investment Outlook • Rate Base Growth Outlook • Guidance Basis EPS Ou
Slide 26: Electric T&D Q4 2018 Regulatory Update
ELECTRIC TRANSMISSION AND DISTRIBUTION Q4 2018 REGULATORY UPDATE Annual Mechanism Increase Filing Effective Date Approval Date Additional Information Docket # (Decrease) (1) Date ($ in millions) Revised TCOS annual revenue application approved in November 2017 by a February reduction of $41.6 millio
Slide 27: Natural Gas Distribution Q4 2018 Regulatory Update
NATURAL GAS DISTRIBUTION Q4 2018 REGULATORY UPDATE Annual Mechanism Increase Filing Effective Approval Jurisdiction Additional Information Docket # (Decrease) (1) Date Date Date ($ in millions) Unanimous settlement agreement approved by the Railroad Commission in May 2018 that provides for a $1 mill
Slide 28: Natural Gas Distribution Q4 2018 Regulatory Update
NATURAL GAS DISTRIBUTION Q4 2018 REGULATORY UPDATE Annual Mechanism Increase Filing Effective Approval Jurisdiction Additional Information Docket # (Decrease) (1) Date Date Date ($ in millions) Based on ROE of 9.95% and the 21% federal income tax rate and reflects a $6.1 million annual increase in c
Slide 29: Natural Gas Distribution Q4 2018 Regulatory Update
NATURAL GAS DISTRIBUTION Q4 2018 REGULATORY UPDATE Annual Mechanism Increase Filing Effective Approval Jurisdiction Additional Information Docket # (Decrease) (1) Date Date Date ($ in millions) Annual reconciliation filing for program year 2017 and includes Minnesota September September CIP 12.5 May
Slide 30: Reconciliation: Operating Income to Core Operating Income
RECONCILIATION: OPERATING INCOME TO CORE OPERATING INCOME 30
Slide 31: Reconciliation: Income and Diluted EPS to Adjusted (2018)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended Twelve Months Ended December 31, 2018 December 31, 2018 Dollars Diluted Dollars Diluted in millions EPS in millions EPS Consolidated income available to common
Slide 32: Reconciliation: Net Income and Diluted EPS to Adjusted (2017)
RECONCILIATION: NET INCOME AND DILUTED EPS TO ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended Twelve Months Ended December 31, 2017 December 31, 2017 Dollars Diluted Dollars Diluted in millions EPS in millions EPS Consolidated income available to
Slide 33: Reconciliation: Net Income and Diluted EPS to Adjusted (2016, 2015)
RECONCILIATION: NET INCOME AND DILUTED EPS TO ADJUSTED NET INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Twelve Months Ended December 31, 2016 December 31, 2015 Net Income Net Income (in millions) Diluted EPS (in millions) Diluted EPS Consolidated as reported $ 432 $ 1.0
Slide 34: Credit Ratings and Outlook
CREDIT RATINGS AND OUTLOOK Company/Instrument Moody’s S&P Fitch Rating Outlook(1) Rating CreditWatch(2) Rating Outlook(3) CNP Inc. Senior Unsecured Debt Baa2 Stable BBB Stable BBB Stable Houston Electric Senior Secured A1 Stable A Stable A+ Stable Debt CERC Corp. Senior Unsecured Baa1 Positive BBB+
Slide 35: Estimated Amortization for Pre-Tax Equity Earnings
Estimated Amortization for Pre-Tax Equity Earnings Associated with the Recovery of Certain Qualified Cost and Storm Restoration Costs As of Dec 31, 2018 ** The table provides 1) the pre-tax equity return recognized by TBC II TBC III TBC IV SRBC Total CenterPoint Energy, Inc. (CenterPoint Energy) dur