Centerpoint Energy, Inc (holding Co) · NYSE:CNP
Centerpoint Energy, Inc (holding Co) — Q4 2017 Earnings Presentation
38 slides from Centerpoint Energy, Inc (holding Co)'s earnings presentation, Feb 22, 2018
Slide 1: 4th Quarter 2017 Earnings Call
4th Quarter 2017 Earnings Call February 22, 2018 Exhibit 99.2
Slide 2: Forward-looking statements
This presentation and the oral statements made in connection herewith contain statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future operations, events, financial position, earnings, growth, costs, prospects, capital investments or performance or underlying ass
Slide 3: Agenda
Agenda Scott Prochazka – President and CEO 2017 Performance and Highlights Segment Review Houston Electric Natural Gas Distribution Energy Services Midstream Investments Puerto Rico Mutual Assistance 2018-2020 Earnings Outlook Bill Rogers – Executive Vice President and CFO 2017 GAAP and Guidance Ear
Slide 4: 2017 Performance
2017 Performance (1) Refer to slides 35 – 37 for reconciliation to GAAP measures and slide 2 for information on non-GAAP measures (2) Excluding ZENS, CES mark-to-market adjustments and tax reform (3) Primarily due to the annual true-up of transition charges correcting for over-collections that occur
Slide 5: 2017 Highlights
2017 Highlights Added more than 70,000 new utility customers Capital expenditures of ~$1.5 billion invested on behalf of our customers Rate relief of ~$90 million Earned near our allowed ROEs Expect to energize the Brazos Valley Connection early in the second quarter of 2018, ahead of the original e
Slide 6: Electric Transmission and Distribution Operating Income Drivers 2016 v. 2017
Electric Transmission and Distribution Operating Income Drivers 2016 v. 2017 (1) Excludes transition and system restoration bonds; please refer to slide 34 for more detail on core operating income (2) Includes lower equity return of $22 million, primarily related to the annual true-up of transition
Slide 7: Electric Transmission and Distribution Capital Investment Outlook
Electric Transmission and Distribution Capital Investment Outlook 2017A 2018E 2019E 2020E 2021E 2022E Transmission 49% 43% 44% 49% 43% 36% Distribution 46% 49% 52% 48% 52% 57% (1) (1) Includes AFUDC $4.8 Billion 2018 – 2022 Capital Plan $924 $949 $958 $1,004 $959 $900
Slide 8: Natural Gas Distribution Operating Income Drivers 2016 v. 17
Natural Gas Distribution Operating Income Drivers 2016 v. 2017 (1) Rate increases of $38 million, primarily from Texas rate filings of $14 million, Arkansas rate case and formula rate plan filings of $9 million, Minnesota interim rates of $7 million and Mississippi RRA of $4 million (2) Includes hig
Slide 9: Natural Gas Distribution Capital Investment Outlook
Capital Recovery Method 2017A 2018E 2019E 2020E 2021E 2022E Annual Mechanisms 58% 65% 58% 66% 67% 67% Rate Cases 42% 35% 42% 34% 33% 33% (1) Includes AFUDC $3.2 Billion 2018 – 2022 Capital Plan $523 $635 $612 $637 $664 $687 Natural Gas Distribution Capital Investment Outlook (1)
Slide 10: Rate base growth from capital investment outlook
Capital rate base projected to grow primarily as a result of capital investment outlook (1) The average annual rate base is subject to change due to actual capital investment and deferred taxes, the time frame over which excess deferred taxes are returned to customers, and the actual rate base autho
Slide 11: Houston Electric Regulatory Update
Houston Electric Regulatory Update Houston Electric intends to file a base rate application no later than April 30, 2019 Previous rate case was filed in June of 2010 Houston Electric reported for 2016 an earned overall ROE of 9.6%, with an allowed ROE of 10.0% Houston Electric will utilize TCOS and
Slide 12: Energy Services Highlights and Outlook
Energy Services Highlights and Outlook Energy Services contributed operating income of $46 million in 2017 compared to $41 million in 2016, excluding a mark-to-market gain of $79 million and loss of $21 million, respectively Increased margin associated with throughput was primary driver of operating
Slide 13: Midstream Investments 2017 Highlights
Midstream Investments 2017 Highlights (1) Full-year operational performance since Enable’s formation in 2013. Source: Per Enable’s 4th Quarter and Full Year 2017 presentation dated Feb 20, 2018 (2) Source: Per Enable’s 4th quarter and full-year 2017 presentation dated Feb 20, 2018 and per Drillingin
Slide 14: Puerto Rico Mutual Assistance
Puerto Rico Mutual Assistance Joined peer utilities, FEMA, PREPA and EEI to help restore power to Puerto Rico Trucks and supplies shipped on two-week, 1,700 mile journey Approximately 150 CenterPoint line workers and support personnel assisting in Puerto Rico since January 19th Joined more than 1,50
Slide 15: 2018 – 2020 Earnings Outlook
2018 – 2020 Earnings Outlook The $1.55 guidance midpoint for 2018 represents 6% growth from $1.37 plus approximately $0.10 from the TCJA 2019 and 2020 year-over-year growth rate target of 5 – 7% Capital investment anticipated to be a primary driver of growth trajectory (1) Refer to slides 35 – 37 fo
Slide 16: Agenda
Scott Prochazka – President and CEO 2017 Performance and Highlights Segment Review Houston Electric Natural Gas Distribution Energy Services Midstream Investments Puerto Rico Mutual Assistance 2018-2020 Earnings Outlook Bill Rogers – Executive Vice President and CFO 2017 GAAP and Guidance Earnings 2
Slide 17: Reconciliation: Diluted EPS to Adjusted Diluted EPS
Reconciliation: Diluted EPS to Adjusted Diluted EPS Used in Providing Annual Earnings Guidance(1) 2017 2016 2017 2016 Diluted EPS as reported $2.99 $0.23 $4.13 $1.00 Timing effects impacting CES (related to mark-to-market accounting) ($0.09) $0.01 ($0.12) $0.03 ZENS-related mark-to-market adjustment
Slide 18: Utility Operations Adjusted Diluted EPS Drivers 2016 v. 2017
Utility Operations Adjusted Diluted EPS Drivers 2016 v. 2017 (Guidance Basis, Excluding Tax Reform) (1) Excludes equity return; please refer to slide 34 for more detail on core operating income (2) Includes interest expense reductions of $25 million, primarily due to refinancing and balance sheet ma
Slide 19: Consolidated Adjusted Diluted EPS Drivers 2016 v. 2017
Consolidated Adjusted Diluted EPS Drivers 2016 v. 2017 (Guidance Basis, Excluding Tax Reform) (1) See previous slide (2) Midstream Investments components adjusted for the effective tax rate, excluding tax reform Note: Refer to slides 35 – 37 for reconciliation to GAAP measures and slide 2 for inform
Slide 20: Tax Cuts and Jobs Act Impact
Tax Cuts and Jobs Act Impact Lower Effective Tax Rate The reduction in rates is expected to provide approximately a $0.10 increase in 2018 diluted EPS, primarily associated with our unregulated businesses CenterPoint’s consolidated effective tax rate, including state taxes, was approximately 36% in
Slide 21: Tax Cuts and Jobs Act Impact
Tax Cuts and Jobs Act Impact (1) See slide 28 (2) See slides 29 (3) See slide 30 (4) See slide 31 (5) See slides 32-33 Reduced Customer Rates Regulatory liability of approximately $1.3 billion is expected to be returned to customers over time Reduced federal tax rate from 35% to 21% is expected to b
Slide 22: 2018 Investment and Financing
2018 Investment and Financing 2018 Investment and Financing Planned capital investment of approximately $1.7 billion Equity issuance not anticipated Current ratings and outlook Enable Midstream Units Intend to reduce our exposure to commodity prices through unit sales over a multi year period Timing
Slide 23: Agenda
Agenda Scott Prochazka – President and CEO 2017 Performance and Highlights Segment Review Houston Electric Natural Gas Distribution Energy Services Midstream Investments Puerto Rico Mutual Assistance 2018-2020 Earnings Outlook Bill Rogers – Executive Vice President and CFO 2017 GAAP and Guidance Ear
Slide 24: Electric Transmission and Distribution Q4 2017 Regulatory Update
Electric Transmission and Distribution Q4 2017 Regulatory Update Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information AMS 47364 N/A Jun-17 Sep-17 Dec-17 Final reconciliation of AMS surcharge for a $29.2 million refund of AMS revenue i
Slide 25: Natural Gas Distribution Q4 2017 Regulatory Update
Natural Gas Distribution Q4 2017 Regulatory Update Jurisdiction Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information Beaumont/East Texas/South Texas (RRC) GRIP 10618, 10619 7.6 Mar-17 Jul-17 Jun-17 Based on net change in invested capi
Slide 26: Natural Gas Distribution Q4 2017 Regulatory Update
Natural Gas Distribution Q4 2017 Regulatory Update Jurisdiction Mechanism Docket # Annual Increase (1) ($ in millions) Filing Date Effective Date Approval Date Additional Information Minnesota (MPUC) Rate Case G008/GR-17-285 56.5 Aug-17 TBD TBD Reflects a proposed 10.0% ROE on a 52.18% equity ratio.
Slide 27: Estimated Rate Filing Timelines as of December 31, 2017
Estimated Rate Filing Timelines as of December 31, 2017 Natural Gas Distribution (1) Houston Electric (1) (1) Rate filings and timelines are subject to change and may be impacted by factors such as regulatory, legislative and economic factors Houston Electric regulatory calendar will be refreshed up
Slide 28: Consolidated Equity and Capitalization Ratios
Consolidated Equity and Capitalization Ratios
Slide 29: Houston Electric Equity and Capitalization Ratios
Houston Electric Equity and Capitalization Ratios
Slide 30: CERC Equity and Capitalization Ratios
CERC Equity and Capitalization Ratios
Slide 31: Holding Company Debt
Holding Company Debt € en 7 (Sin millions) As of December 31, CenterPoint Energy, Inc. Consolidated Balance Sheet Short-term borrowing $ 39 $ 3 $ Current portion of indexed debt 12 14 Current portion of other long-term debt 50 500 Other Long-Term Debt (2) 6,761 5,665 Total Consolidated Debt (2) 6972
Slide 32: CenterPoint Energy Consolidated Adjusted Funds From Operations (FFO)
CenterPoint Energy Consolidated Adjusted Funds From Operations (FFO) This slide includes adjusted funds from operations (“FFO”) which is net cash provided by operating activities: Excluding (I) changes in other assets and liabilities, (II) other, net and (III) amounts related to transition and syste
Slide 33: Consolidated Ratio of Adjusted FFO/Total Debt
CenterPoint Energy Consolidated Ratio of Adjusted FFO/Total Debt Excluding Transition and System Restoration Bonds * 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.
Slide 34: Reconciliation: Operating Income to Core Operating Income on a Guidance Basis
Reconciliation: Operating Income to Core Operating Income on a Guidance (Non-GAAP) Basis
Slide 35: Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and EPS
Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance
Slide 36: Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and EPS
Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance
Slide 37: Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and EPS
Reconciliation: Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS Used in Providing Annual Earnings Guidance
Slide 38: 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 The table provides the pre-tax equity return recognized by CenterPoint Energy, Inc. (CenterPoint Energy) during each of the years 2005 through 2017 related to CenterP