Centerpoint Energy, Inc (holding Co) · NYSE:CNP
Centerpoint Energy, Inc (holding Co) — Q3 2019 Earnings Presentation
38 slides from Centerpoint Energy, Inc (holding Co)'s earnings presentation, Nov 7, 2019
Slide 1: 3rd Quarter 2019 Earnings Call
Exhibit 99.2 3RD QUARTER 2019 EARNINGS CALL NOVEMBER 7, 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: 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, the Company also provides
Slide 4: Agenda
AGENDA Xia Liu Scott Prochazka Appendix EVP and CFO President and CEO • • • • • • • • • • • • • • • 2019 Guidance Basis Basis EPS Forecast 2019 Guidance Utility Highlights EPS Drivers Consolidated Quarter Third Objective Strategic Update Midstream Business Highlights Unit andRegulatory Performance Q
Slide 5: Third Quarter 2019 Performance
THIRD QUARTER 2019 PERFORMANCE Q3 YTD 2019 2018 2019 2018 GAAP Diluted EPS $0.47 $0.35 $1.08 $0.56 Vectren merger impacts(1) 0.05 0.04 0.32 0.10 Energy Services mark-to-market (gains) losses 0.00 0.00 (0.08) 0.13 ZENS-related mark-to-market (gains) losses: Marketable securities(2) (0.09) (0.08) (0.3
Slide 6: Houston Electric Performance Metrics
HOUSTON ELECTRIC PERFORMANCE METRICS Over 20% customer growth Approaching $8 billion capital deployed over past decade over past decade to serve growing 2.6 customer base $1,000 2.5 2.4 (in (in millions) $800 2.3 Numberofcustomers $ in millions in $ 2.2 $600 2.1 2.0 $400 2010 2011 2012 2013 2014 201
Slide 7: Houston Electric Rate Case PFD Financial Implications
HOUSTON ELECTRIC RATE CASE PFD FINANCIAL IMPLICATIONS • Operating income reduction: – ~$138 million(1) compared to request – ~$27 million(1) compared to current rates • FFO reduction from request to PFD of ~$130 million(1)(2)(3) • A pre-tax write-off of ~$120 million and a one-time refund(3) resulti
Slide 8: Houston Electric Rate Case Timeline
HOUSTON ELECTRIC RATE CASE TIMELINE ✓ ALJs at State Office of Administrative Hearings issue PFD on September 16th, returning case to PUCT PFD ✓ Houston Electric and parties exceptions to PFD filed on October 10th Exceptions th & ✓ Houston Electric and parties filed replies to exceptions on October 2
Slide 9: Natural Gas Distribution Performance Metrics
NATURAL GAS DISTRIBUTION PERFORMANCE METRICS Approaching 10% customer growth(1) Over $5 billion capital deployed over past over past decade. Addition of over 1 decade to serve growing customer base million customers from merger $1,000 3.6 $800 3.5 $600 3.4 millions in $ $400 (in (in millions) 3.3 $2
Slide 10: Natural Gas Distribution Regulatory Updates
NATURAL GAS DISTRIBUTION REGULATORY UPDATES ✓ Ohio rate case – $23 million(1) ✓ Ohio DRR – $11 million(1) ✓ Arkansas FRP – $7 million(1) ✓ Minnesota CIP – $11 million(2) • Indiana CSIA – requesting $7 million(1) • Louisiana RSP – requesting $3 million(1) • Minnesota general rate case – requesting $6
Slide 11: Indiana Electric Generation Timeline
INDIANA ELECTRIC GENERATION TIMELINE Anticipated New Generation Timeline: 2019 2020 2021+ • Q3: Received all source RFP • Q2: Anticipate IRP filing • Anticipate decision on and began initial evaluation (does not require approval) proposed solutions • RFP evaluation to be shared • Q3/Q4: Potential fi
Slide 12: Enable Earnings Call Highlights
ENABLE EARNINGS CALL HIGHLIGHTS • Focus on securing and executing growth projects including Gulf Run and MASS(1) • Rig efficiencies helping to support volumes despite decline in rig count • Anticipate strong distribution coverage for 2020, with the ability to self-fund the majority of 2020 expansion
Slide 13: Enable: Stable Cash Distribution Supporting Utility Growth
ENABLE: STABLE CASH DISTRIBUTION SUPPORTING UTILITY GROWTH Anticipated cumulative cash provided by Enable stake(1) $3.0 $2.5 $2.0 $1.5 $ Billions $ $1.0 $0.5 $0.0 2019E 2020E 2021E 2022E 2023E On November 5, 2019, Enable declared a quarterly cash distribution of $0.3305 per unit on all outstanding c
Slide 14: Strategic Objective: Increase Utility Earnings Contribution
STRATEGIC OBJECTIVE: INCREASE UTILITY EARNINGS CONTRIBUTION • Execute on merger integration 2019 Estimated Earnings(1) Contribution • Optimize regulatory outcomes 25% Non-Utility • Manage O&M 75% Utility • Invest in utilities Note: Refer to slide 2 for information on forward-looking statements and s
Slide 15: Agenda
AGENDA Xia Liu Scott Prochazka Appendix EVP and CFO President and CEO • • • • • • • • • • • • • • • 2019 Guidance Basis Basis EPS Forecast 2019 Guidance Utility Highlights EPS Drivers Consolidated Quarter Third Objective Strategic Update Midstream Business Highlights Unit andRegulatory Performance Q
Slide 16: Q3 2019 Guidance Basis EPS
Q3 2019 GUIDANCE BASIS EPS(1) $0.11 $0.01 $0.23 Primary Drivers: Enable performance $0.19 Primary Drivers: $0.08 Businesses Acquired in the Merger $0.03 Energy Services Primary Drivers: $0.03 Effective tax rate $0.19 Merger Financing $0.03 Interest and other Primary Drivers: $0.10 Busi
Slide 17: Strong Utility Customer Growth
STRONG UTILITY CUSTOMER GROWTH 4,539 1,031 3,461 3,508 3,508 2,475 2,523 Number of customers (‘000s) of customers Number Q3 2018 Q3 2019 Q3 2018 Q3 2019 Total including jurisdictions Houston Electric Natural Gas Distribution acquired through the merger Note: 17 (1) Exclusive of jurisdictions acquire
Slide 18: Strong Utility Performance
STRONG UTILITY PERFORMANCE Utility O&M Management(1) Utility Capital Investments(2) 0.1 2.4 ~2.6 ~$100 million Anticipated YOY 2.3 decline(1) (6% reduction) $ Billions $ 1.6 $ Billions $ 1.5 2018 2019E 2019 capital (3) Anticipated 2019 2019 capital Anticipated average incremental capital forecast an
Slide 19: 2019 Guidance Basis EPS Near Top End of Guidance Range
2019 GUIDANCE BASIS EPS (1) NEAR TOP END OF GUIDANCE RANGE First Nine Months $0.10(5) Three Months Remaining $0.08 $0.01 $0.49 $0.05 $0.16 $1.69 $1.60 $0.07 $1.70 $0.48 $0.15 $1.60 $0.36 Q4 $1.24 $1.34 Sept Sept YTD YTD $1.83 2018 Guidance Utility Energy Midstream Other (4) Utility Energy Midstream
Slide 20: 2020 Guidance Basis EPS to Be Provided on Q4 Earnings Call
2020 GUIDANCE BASIS EPS TO BE PROVIDED ON Q4 EARNINGS CALL Nov 2019 Jan 2020 ✓ Enable 2020 • Finalize capital and guidance financial planning process Q4 2019 Feb 2020 • Expected timing Q4 CNP earnings call for Houston • 2020 guidance Electric rate (excluding Enable) case order • 5-year utility EPS g
Slide 21: Agenda
AGENDA • Third Quarter Performance • Business Unit and Regulatory Highlights - Houston Electric – T&D - Natural Gas Distribution - Indiana Electric Scott Prochazka Scott • Midstream Update President and CEO and President • Strategic Objective • Third Quarter Consolidated EPS Drivers • Utility Highli
Slide 22: Houston Electric – T&D: Core Operating Income Drivers
HOUSTON ELECTRIC – T&D: CORE OPERATING INCOME DRIVERS Q3 2019 V. Q3 2018 $41 $261 $9 $14 $9 $214 $9 $17 $3 Federal income tax expense is also decreased $ Millions $ $247 $197 (2) (3) Q3 2018 Houston TCJA revenue Rate relief Customer growth Other Depreciation and Q3 2019 Houston Electric - T&D Core r
Slide 23: Natural Gas Distribution: Operating Income Drivers
NATURAL GAS DISTRIBUTION: OPERATING INCOME DRIVERS Q3 2019 V. Q3 2018 $7 $7 $ Millions $ Federal income tax $3 $27 expense is also decreased $9 $3 $2 Q3 2018 Natural TCJA revenue Rate relief (1) Customer growth Other (2) Jurisdictions Q3 2019 Natural Gas Distribution reduction acquired in merger Gas
Slide 24: First Nine Months 2019 v. 2018 Guidance Basis EPS
FIRST NINE MONTHS 2019 V. FIRST NINE MONTHS 2018 GUIDANCE BASIS EPS(1) $0.08 $0.01 $0.49 Primary Drivers: Primary Drivers: Enable performance $0.14 Businesses Acquired in the Merger $0.06 Energy Services $0.48 Primary Drivers: Primary Drivers: $0.29 Businesses $0.08 Effective tax rate Acqu
Slide 25: Energy Services and Infrastructure Services Adjusted Operating Income
ENERGY SERVICES AND INFRASTRUCTURE SERVICES ADJUSTED OPERATING INCOME(1) Energy Services Infrastructure Services $84 - $94 Three Months Remaining $63 $66 $66 $56 $42 $47 $35 - $45 Three Months YTD Remaining YTD (2) 2016A 2017A 2018A 2019E (2) 2016A 2017A 2018A 2019E $60 $60 $ Millions $ $50 $50 $40
Slide 26: Infrastructure Services Overview
INFRASTRUCTURE SERVICES OVERVIEW • Long-term relationships with customers averages approximately 35 years with top 10 distribution customers • Building on history and reputation with addition of several significant new customers over the past few years • Three construction divisions: Distribution Tr
Slide 27: Infrastructure Services Backlog
INFRASTRUCTURE SERVICES BACKLOG • Backlog represents the amount of revenue CIS expects to realize from work to be performed on uncompleted contracts in the next twelve months • CIS primarily operates under two types of contracts, both of which are generally less than 1 year and consist of fixed pric
Slide 28: Electric Operations Q3 2019 Regulatory Update
ELECTRIC OPERATIONS Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism Additional Information (Decrease) (1) Date Date Date (in millions) CenterPoint Energy - Houston Electric (PUCT) On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Housto
Slide 29: Electric Operations Q3 2019 Regulatory Update
ELECTRIC OPERATIONS Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism Additional Information (Decrease) (1) Date Date Date (in millions) CenterPoint Energy - Houston Electric (PUCT) The PUCT issued a final order in October 2019 approving recovery of 2020 EECRF of $35 mill
Slide 30: Natural Gas Distribution Q3 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q3 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-
Slide 31: Natural Gas Distribution Q3 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and CERC - Mississippi (MPSC) RRA (1) $2 May-19 TBD TBD Based on ROE of 9.26%. CenterPoint Energy and CERC - Ok
Slide 32: Natural Gas Distribution Q3 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q3 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy - Indiana North - Gas (IURC) Requested an increase of $54 million to rate base, which reflects a $3 million ann
Slide 33: Summary of Merger-Related Expenses
SUMMARY OF MERGER-RELATED EXPENSES(1) Quarter Ended September 30, 2019 Nine Months Ended September 30, 2019 O&M Amortization of Total O&M Amortization of Total ($ in millions) Expense Intangibles(3) Impact Expense(2) Intangibles(3) Impact Houston Electric - T&D $ - $ - $ - $ 10 $ - $ 10 Indiana Elec
Slide 34: Reconciliation: Income and Diluted EPS to Adjusted (Q3)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended September 30, 2019 September 30, 2018 Dollars Dollars in millions Diluted EPS (1) in millions Diluted EPS (1) Consolidated income available to common shareholde
Slide 35: Reconciliation: Income and Diluted EPS to Adjusted (Nine Months)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Nine Months Ended September 30, 2019 September 30, 2018 Dollars Dollars in millions Diluted EPS (1) in millions Diluted EPS (1) Consolidated income available to common shareh
Slide 36: Reconciliation: Income and Diluted EPS to Adjusted (Q4 2018)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended December 31, 2018 Dollars in millions Diluted EPS Consolidated income available to common shareholders and diluted EPS $ 90 $ 0.18 Timing effects impacting CES(
Slide 37: Reconciliation: Income and Diluted EPS to Adjusted (Full Year 2018)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Twelve Months Ended December 31, 2018 Dollars in millions Diluted EPS Consolidated income available to common shareholders and diluted EPS $ 333 $ 0.74 Midstream Investments
Slide 38: Reconciliation: Operating Income to Adjusted Operating Income for CES and CIS
RECONCILIATION: OPERATING INCOME TO ADJUSTED OPERATING INCOME FOR CES AND CIS CES CIS Year Ended Year Ended 2016 2017 2018 2019E(1)(4) 2016 2017 2018 2019E(1)(4) (Dollars in Millions) Operating Income on GAAP Basis $ 21 $ 126 $ (47) $ 87 $ 56 $ 66 $ 66 $ 61 CES mark-to-market (gains) losses(2) 21 (7