Centerpoint Energy, Inc (holding Co) · NYSE:CNP
Centerpoint Energy, Inc (holding Co) — Q4 2019 Earnings Presentation
51 slides from Centerpoint Energy, Inc (holding Co)'s earnings presentation, Feb 27, 2020
Slide 1: 4th Quarter 2019 Earnings Call
4TH QUARTER 2019 EARNINGS CALL FEBRUARY 27, 2020
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: Use of Non-GAAP Financial Measures
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, CenterPoint Energy also prov
Slide 4: Agenda
AGENDA Xia Liu John Somerhalder EVP and CFO Interim President and CEO • • • • • • • • • • • • • 2019 Guidance Basis Basis EPS Drivers 2019 Guidance Value Investor Proposition Strategy Utility Focused Highlights Regulatory 2019 Highlights Highlights ESG Overview CenterPoint Commitment to Dividend to
Slide 5: CenterPoint Utilities at a Glance
CENTERPOINT UTILITIES AT A GLANCE ND 8 States MN of Operation SD WI MI IA (1) NE ~96% IN OH IL T&D / Gas LDC WV Rate Base KS MO KY VA OK AR TN NC 7.5% Rate base SC MS AL GA 5 year Growth (2) TX LA CAGR FL >7 Million Customers(3) CenterPoint Energy Utilities Service Territory Company HQ Note: Map doe
Slide 6: ESG Recognition
ESG RECOGNITION ✓ 15th EEI Emergency ✓ Multi-year recipient of ✓ Top Corporation for Assistance Award for ENERGY STAR’s Partner of Women’s Business outstanding power the Year Sustained Enterprise(3) restoration efforts(4) Excellence Award ✓ Culture Transformation ✓ 3-peat winner of J.D. Power ✓ News
Slide 7: ESG Environmental Stewardship Leader
ESG ENVIRONMENTAL STEWARDSHIP LEADER (1) REDUCING GAS DISTRIBUTION ~96% REGULATED GAS LDC / T&D GHG EMISSIONS Generation 4% ~30% reduction Gas LDC 45% T&D 51% 2012 2019 ✓ Generation represents ~4% of rate base(1) ✓ Elimination of cast iron pipelines across all legacy CNP gas jurisdictions by YE 2018
Slide 8: ESG Carbon Reduction Goal
ESG CARBON REDUCTION GOAL CENTERPOINT IS COMMITTED TO A CLEAN ENERGY FUTURE NEW GOALS TO REDUCE CARBON EMISSIONS from 2005 levels 70% 20–30% reduction from our operations reduction from gas customer usage by 2035 by 2040 ➢ Offering customers affordable conservation and energy-efficiency programs ➢ C
Slide 9: 2019 Performance
2019 PERFORMANCE Q4 YTD 2018 2019 2018 2019 GAAP Diluted EPS $0.18 $0.25 $0.74 $1.33 Vectren merger impacts(1) 0.12 0.03 0.24 0.35 CNP’s share of Enable’s goodwill impairment ― 0.07 ― 0.07 Energy Services goodwill impairment ― 0.09 ― 0.09 Energy Services mark-to-market (gains) losses 0.06 0.01 0.18
Slide 10: 2019 Highlights
2019 HIGHLIGHTS ✓ Exceeded earnings guidance expectations • Delivered $1.79 guidance basis diluted EPS(1), or $0.19 above 2018 guidance basis diluted EPS(1) of $1.60 • $0.09 above the top end of the guidance range of $1.60 - $1.70 ✓ Growth driven by our utility businesses • Approximately $2.5 billio
Slide 11: Regulatory Highlights
REGULATORY HIGHLIGHTS Accomplishments ✓ Houston Electric rate case(1) Rate base by state(2) ― 9.4% ROE and 42.5% equity ratio ✓ Bailey to Jones Creek Other(3) ― ~$483 million capital spend expected 8% MN ― Estimated construction timeline ~ early 2021 to 2022 8% ✓ Ohio rate case OH ― 7.48% overall ra
Slide 12: Sale of Infrastructure Services & Energy Services for $1.25B
SALE OF INFRASTRUCTURE SERVICES & ENERGY SERVICES FOR $1.25B Transaction Details Strategic Rationale • Infrastructure Services(1) ✓ Improves(3) Business Risk Profile ― Sales price $850 million ✓ Strengthens Balance Sheet and ― Net after-tax proceeds ~$670 million Credit Quality(4) used to repay outs
Slide 13: CenterPoint's Continued Transition to More Utility Focused Strategy
CENTERPOINT’S CONTINUED TRANSITION TO MORE UTILITY FOCUSED STRATEGY 2018A(1) 2020E(2) 2024E(2) Announced Vectren utilities acquisition of and sale of Energy Services / Core utility focus Vectren Infrastructure Services 70% 82% 86% Utility(1) Utility(2) Utility(2) ❑ Regulated utility ❑ Pure play gas
Slide 14: Enable's Strong Cash Flow Supports Our Robust Utility Growth
ENABLE’S STRONG CASH FLOW SUPPORTS OUR ROBUST UTILITY GROWTH Cumulative cash provided by Enable common units to CenterPoint 2013 2015 2017 2019 2021E 2024E $1.0 billion $2.0 billion $3.0 billion(1) > than $300 million ✓ Consistent cash distribution recycled into robust utility Capital capital invest
Slide 15: Our Investor Value Proposition
OUR INVESTOR VALUE PROPOSITION Largely pure-play regulated gas LDC and T&D utility across 8 states Regulatory Strategy 8-10% Capital investment Total Shareholder Return Pure-play regulated utility ~$13B 5-year(2) capital with diversified portfolio investment plan to provide and favorable mechanisms
Slide 16: 2019 Guidance Basis EPS Drivers
2019 GUIDANCE BASIS EPS(1) DRIVERS $0.19 $0.63 $0.06 Primary Drivers: $1.79 Enable performance $1.60 Primary Drivers: $0.23 Businesses $0.57 Acquired in the Merger $0.04 Energy Services Primary Drivers: $0.23 Effective tax rate $0.67 Merger Financing $0.13 Interest and Other Primary Driv
Slide 17: Initiating 2020 Utility EPS Guidance
INITIATING 2020 UTILITY EPS GUIDANCE Utility EPS on a Guidance (non-GAAP) Basis of $1.10 - $1.20(2) Non-Utility Operations $0.50 (1) $0.06 - $0.16 (2) $0.05 $1.10–$1.20 $0.05 $0.15 Utility Operations (1) $1.19 $1.29 2019 Consolidated Utility Weather One-time items: 2019 Normalized Houston Electric C
Slide 18: 2020-2024 Utility Guidance Basis EPS Outlook
2020 – 2024 UTILITY GUIDANCE BASIS EPS OUTLOOK Robust regulated utility growth plan drives 5-7% utility growth 5 – 7% Utility EPS CAGR through ➢ $13 billion 5-year capital investment plan 2024 $1.10 – $1.20(1) ➢ 7.5% rate base CAGR from 2019 – 2024 ➢ Top quartile customer growth ➢ Electric(2) and ga
Slide 19: Achieving Our 5-7% Utility Growth Target
ACHIEVING OUR 5-7% UTILITY GROWTH TARGET Top Quartile Customer Growth Lower-risk T&D and Gas LDC and Low Customer Rates ◼ 96%(1) of rate base from lower-risk Gas ◼ Electric customer growth of 2.0%(2) and LDC and electric T&D utility asset bases gas of 1.2%(3), both above the national ◼ Premium utili
Slide 20: Robust Utility Capital Investment
ROBUST UTILITY CAPITAL INVESTMENT… ~$13B capital to be deployed over next 5 years $2.8 $2.6 $2.6 $0.1 $2.7 $2.5 $0.1 $0.2 $0.1 $0.1 $1.4 $1.3 $1.1 $1.0 $1.3 $0.3 $0.3 $0.4 $ in billions in $ $0.3 $0.4 $1.0 $1.1 $0.9 $0.9 $0.9 2020E 2021E 2022E 2023E 2024E Houston Electric Indiana Electric Integrated
Slide 21: Supports Strong Rate Base Growth
…SUPPORTS STRONG RATE BASE GROWTH $21.6 $20.5 $19.0 $17.5 $16.2 $10.2 $15.1 $9.5 $8.6 CAGR: $8.0 8.8% $7.3 $6.7 $2.2 $2.3 CAGR: $2.1 $ in billions in $ $2.0 6.2% $1.8 $1.7 CAGR: $8.3 $8.8 $9.1 $6.7 $7.1 $7.5 6.4% 2019E 2020E 2021E 2022E 2023E 2024E Houston Electric Indiana Electric Integrated Natura
Slide 22: Leading Utility Customer Growth and Rates
LEADING UTILITY CUSTOMER GROWTH AND RATES Customer Growth Customer Rates Below average T&D rate(2) across +67% utility peers in Texas ~2.0(1)% $0.060 $0.055 ~1.2% Top quartile of $0.050 national electric $0.045 $/kWh Electric utility customer $0.040 growth $0.035 $0.030 National Electric Utility Hou
Slide 23: Disciplined O&M Management
DISCIPLINED O&M MANAGEMENT Utility O&M Management(1) Key O&M Management Initiatives ➢ Continued systematic review of operating areas to reduce O&M by aligning work activities with core utilities 5-year 1.6 cumulative and optimizing organizational design savings of (2) 1.5 ~$450M ➢ Drive O&M savings
Slide 24: Committed to Maintaining Solid, Investment-Grade Credit Quality
COMMITTED TO MAINTAINING SOLID, INVESTMENT-GRADE CREDIT QUALITY ✓ Balance sheet strength provides base to capture the robust capital investment Consolidated Adjusted FFO/Debt opportunity in our regulated utility portfolio Low to mid-14% (1) 13.6% ✓ Improved business risk profile from sale of Energy
Slide 25: Anticipated Equity Issuance 2020E-2022E
ANTICIPATED EQUITY ISSUANCE 2020E – 2022E Projected annual sources of equity funding ~$0.1 - $0.2 $0.5 - $0.7 Strengthen balance sheet $0.8 $ $ in billions $0.3 - $0.5 $0.3 - $0.5 $0.1 - $0.3 Fund growth 2020 Equity to address: 2021 ATM/DRIP (1) 2022 ATM/DRIP(1) - Houston Electric rate case outcome
Slide 26: Ongoing Commitment to the Common Stock Dividend
ONGOING COMMITMENT TO THE COMMON STOCK DIVIDEND Payout ratio over time: 2020E Post Long-term 2019A 2009A CIS/CES target (1) 72% 10 years of DPS increases 64% 83% Mid-70s Going forward: +1-3% per year $1.15 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E Common Stock Dividend
Slide 27: Our Investor Value Proposition
OUR INVESTOR VALUE PROPOSITION Largely pure-play regulated gas LDC and T&D utility across 8 states Regulatory Strategy 8-10% Capital investment Total Shareholder Return Pure-play regulated utility ~$13B 5-year(2) capital with diversified portfolio investment plan to provide and favorable mechanisms
Slide 28: Appendix
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Slide 29: 2019 Guidance Basis Earnings Presented According to 2020 Methodology
2019 GUIDANCE BASIS EARNINGS PRESENTED ACCORDING TO 2020 EARNINGS GUIDANCE METHODOLOGY Twelve Months Ended December 31, 2019 Dollars in millions Diluted EPS Guidance basis (non-GAAP) income and diluted EPS (1) Utility (2) $ 741 $ 1.48 Non-utility (3) 285 0.57 Corporate (4) (131) (0.26) Consolidated
Slide 30: 2020 EPS Guidance Basis Considerations
2020 EPS GUIDANCE BASIS CONSIDERATIONS Translating Enable Guidance to CenterPoint’s Portion (in millions, except percentages) Guidance basis EPS before allocation of Corporate & Other Enable Net Income Attributable $385 - $445(2) to Common Units Midstream Utility Operations Corporate & Other Investm
Slide 31: Houston Electric Capital Investment Outlook
HOUSTON ELECTRIC CAPITAL INVESTMENT OUTLOOK $4.9B Five Year Capital Plan $1,082 $1,031 $54 $83 $934 $934 $156 $876 $107 $108 $196 $109 $281 $182 $189 $134 $163 $37 $214 $215 $178 $204 $197 $ Millions $ $403 $413 $404 $423 $407 2020E 2021E 2022E 2023E 2024E Load Growth Reliability & Modernization Bai
Slide 32: Natural Gas Distribution Capital Investment Outlook (by type)
NATURAL GAS DISTRIBUTION CAPITAL INVESTMENT OUTLOOK $6.1B Five Year Capital Plan (by type of spend) $1,373 $1,331 $1,261 $93 $92 $97 $1,124 $218 $178 $121 $1,037 $154 $91 $157 $144 $ Millions $ $1,010 $1,062 $1,061 $846 $802 2020E 2021E 2022E 2023E 2024E System Modernization Growth Other 32 Note: Am
Slide 33: Natural Gas Distribution Capital Investment Outlook (by state)
NATURAL GAS DISTRIBUTION CAPITAL INVESTMENT OUTLOOK $6.1B Five Year Capital Plan (by state) $1,373 $1,331 $1,261 $1,124 $367 $269 $374 $1,037 $174 $57 $126 $135 $132 $140 $158 $254 $279 $330 $286 $282 $ Millions $ $232 $225 $231 $228 $223 $359 $356 $296 $319 $294 2020E 2021E 2022E 2023E 2024E TX MN
Slide 34: Financing Robust Utility Growth
FINANCING ROBUST UTILITY GROWTH 2021E and 2022E Illustrative annual sources / uses of funding Funds ~15% -20% of annual capital investment supporting utility growth ~($0.7) ~$2.2 ~($2.5) $ $ in billions Funding utility growth & ~$0.5 - $0.7 reliability ~$0.3 - $0.5 (1) (2) FFO Dividends Annual capex
Slide 35: Financing Robust Utility Growth: Long-Term Debt Issuance
FINANCING ROBUST UTILITY GROWTH LONG-TERM DEBT(1) ISSUANCE 2020 Estimated Scheduled Debt Net Long-term Debt (2) ($ in millions) Issuance Range Maturities Issuances Corporate $ ― $ ― $ ― Houston Electric(3) $ 300 ̶ $500 $ ― $ 300 ̶ $500 CERC $ ― $ ― $ ― VUHI(4) $ 400 ̶ $500 $ 400 $ 0 ̶ $100 Total $ 7
Slide 36: Principal Amounts of Maturing External Debt
PRINCIPAL AMOUNTS OF MATURING EXTERNAL DEBT DEBT AS OF DECEMBER 31, 2019 CenterPoint Energy, Inc. Principal Amounts of Maturing External Debt As of December 31, 2019 ($ in millions) Transition & System CenterPoint Restoration Year Energy (1) CEHE CERC VUHI IGC SIGECO VCC Sub-total Bonds (2) Total 20
Slide 37: Electric Operations Q4 2019 Regulatory Update
ELECTRIC OPERATIONS Q4 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and Houston Electric (PUCT) For full disclosure on Houston Electric rate case, refer to "Regulatory Matters" in Item
Slide 38: Natural Gas Distribution Q4 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q4 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and CERC - Beaumont/East Texas, South Texas, Houston and Texas Coast (Railroad Commission) GRIP 20 Mar-19 Jul-1
Slide 39: Natural Gas Distribution Q4 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q4 2019 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 $16 million to rate base, which reflects a $3 million ann
Slide 40: Natural Gas Distribution Q4 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q4 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy - Ohio (PUCO) Requested an increase of $78 million to rate base for investments made in 2018, which reflects a
Slide 41: Regulatory Estimated Filing Timeline: Electric Operations
REGULATORY ESTIMATED FILING TIMELINE ELECTRIC OPERATIONS 2020 2021 2022 2023 2024 Jurisdiction Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 TCOS TCOS TCOS TCOS TCOS TCOS TCOS TCOS DCRF DCRF DCRF T&D GRC Houston Electric Houston TDSIC-6 TDSIC-7 TDSIC-8 TDSIC-9 TDSIC-10 TDSIC-11 TDSIC-1
Slide 42: Regulatory Estimated Filing Timeline: Natural Gas Distribution
REGULATORY ESTIMATED FILING TIMELINE NATURAL GAS DISTRIBUTION 2020 2021 2022 2023 2024 Jurisdiction Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 GRIP GRIP GRIP GRIP Houston Gas GRC GRIP GRIP GRIP GRIP Texas Coast GRC GRIP GRIP GRIP GRIP South Texas GRIP GRC GRIP GRIP GRIP GRIP Beaumon
Slide 43: Regulatory Estimated Filing Timeline: Natural Gas Distribution
REGULATORY ESTIMATED FILING TIMELINE NATURAL GAS DISTRIBUTION 2020 2021 2022 2023 2024 Jurisdiction Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 CSIA-11 CSIA-12 CSIA-13 CSIA-14 CSIA-1 (Phs. II) CSIA-2 (Phs. II) CSIA-3 (Phs. II) CSIA-4 (Phs. II) CSIA-5 (Phs. II) CSIA-6 (Phs. II) CSIA P
Slide 44: Summary of Merger-Related Expenses
SUMMARY OF MERGER-RELATED EXPENSES(1) Quarter Ended December 31, 2019 Year Ended December 31, 2019 O&M Amortization of Total O&M Amortization of Total ($ in millions) Expense Intangibles(3) Impact Expense(2) Intangibles(3) Impact Houston Electric - T&D $ - $ - $ - $ 10 $ - $ 10 Indiana Electric - In
Slide 45: Reconciliation: Income and Diluted EPS to Adjusted (Quarter)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended December 31, 2019 December 31, 2018 Dollars Dollars in millions Diluted EPS (1) in millions Diluted EPS (1) Consolidated income available to common shareholders
Slide 46: Reconciliation: Income and Diluted EPS to Adjusted (Twelve Months)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Twelve Months Ended December 31, 2019 December 31, 2018 Dollars Dollars in millions Diluted EPS (1) in millions Diluted EPS (1) Consolidated income available to common shareh
Slide 47: Consolidated Adjusted Cash From Operations Pre-Working Capital
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 receiva
Slide 48: Ratio of Adjusted Cash From Operations to Adjusted Total Debt
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
Slide 49: Houston Electric - TDU: Core Operating Income Drivers 2019 v. 2018
HOUSTON ELECTRIC – TDU: CORE OPERATING INCOME DRIVERS 2019 V. 2018 $28 $8 $37 $26 $10 $45 $74 $15 Federal income tax expense is also decreased $ Millions $ $545 $494 (2) 2018 Houston TCJA revenue Rate relief Customer growth Other (3) Depreciation and Merger-related 2019 Houston Electric - T&D reduct
Slide 50: Natural Gas Distribution: Core Operating Income Drivers 2019 v. 2018
NATURAL GAS DISTRIBUTION: CORE OPERATING INCOME DRIVERS 2019 V. 2018 $136 Federal income tax expense is also increased $55 $29 $14 $12 $6 $ Millions $ $408 $266 (1) (2) 2018 Natural Gas TCJA revenue Rate relief Customer growth Other Jurisdictions Merger-related 2019 Natural Gas Distribution reductio
Slide 51: 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, 2019 ** The table provides TBC II TBC III TBC IV SRBC Total 1) the pre-tax equity return recognized by CenterPoint Energy, Inc. (CenterPoint Energy) dur