Centerpoint Energy, Inc (holding Co) · NYSE:CNP
Centerpoint Energy, Inc (holding Co) — Q4 2015 Earnings Presentation
37 slides from Centerpoint Energy, Inc (holding Co)'s earnings presentation, Feb 26, 2016
Slide 1: 4th Quarter 2015 Earnings Call
Achieved top end of revised guidance range of $1.05 - $1.10 Utility operations delivered $0.79 EPS and midstream investments delivered $0.31 EPS on a guidance basis Company reiterates 2016 full year guidance of $1.12 - $1.20 4th Quarter 2015 Earnings Call February 26, 2016 Exhibit 99.2
Slide 2: Forward-looking statements disclaimer
This presentation contains statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance or underlying assumptions (including future regulatory filings, earnings, capital investments, and rate base or customer growth) and other statements that ar
Slide 3: Earnings Call Highlights
Earnings Call Highlights 2015 Highlights Earnings Guidance & Growth Drivers Midstream Investments Update Strategic Update 2015 Industry Recognition Scott Prochazka – President and CEO
Slide 4: 2015 Highlights
Strong customer growth - nearly 80,000 new utility customers 2% electric metered customer growth 1% natural gas utilities customer growth Received nearly $90 million in annualized rate relief from 2015 filings, excluding interim rates ROEs near authorized levels at both electric and gas utilities O&
Slide 5: Steady Utility Growth Anticipated to Compensate for Midstream Challenges in 2016
One-time $0.07 tax benefit and $0.06 of other baseline adjustments 2016 Guidance ($1.12 - $1.20) 2015 EPS (Guidance Basis) 2014 EPS (Guidance Basis) Earnings from Utility Operations were 65% of overall earnings in 2014 and are expected to represent 75% - 80% in 2016 We anticipate 2016 Utility Operat
Slide 6: Midstream Investments
Activity Increased both full-year 2015 processed volumes and intrastate transported volumes by 14% compared to 2014 Bear Den crude gathering system volumes increased by 6,500 barrels per day (Bbl/d) in fourth quarter of 2015 compared to third quarter 2015 Total of 28 rigs are currently drilling well
Slide 7: Strategic Update
Core strategy is to invest organically to grow and strengthen our current utility service territories In January, announced two investments that are expected to be EPS accretive: $363 million investment in Enable Midstream Partners’ 10% perpetual preferred securities; closed on February 18, 2016 Acq
Slide 8: 2015 Industry Recognition
1st in Midwest in Operational Satisfaction in Utility Trusted Brand & Engagement Residential Study Environmental Champion Award Customer Champion in Electric Utility Trusted Brand & Engagement Residential Study 2nd in J.D. Power 2015 Gas Utility Residential Customer Satisfaction Study (South Region)
Slide 9: Earnings Call Highlights: Electric
Earnings Call Highlights Electric Results Customer Growth Capital Investment Outlook Rate Base Outlook Construction of a new permanent 345kV double circuit tower in between temporary bypasses to safely reenergize circuits damaged by tornadoes in April 2015. Tracy Bridge – EVP & President, Electric D
Slide 10: Electric Transmission and Distribution Operating Income Drivers
(1) Houston Electric’s customer count increased from 2,299,247 as of December 31, 2014, to 2,348,517 as of December 31, 2015 (2) Weather in 2015 was close to the 10-year average; 2015 cooling degree days and heating degree days were 101% and 102% of the 10-year averages, respectively, compared to 91
Slide 11: Electric T&D Steady Customer Growth Continues
2.4% 2.1% 2.0% Electric Transmission and Distribution Steady Customer Growth Continues
Slide 12: Electric T&D Capital Investment Growth
$3.7 Billion 2016 – 2020 Capital Plan (1) $ Millions Brazos Valley Connection ($270-$310 million from 2016 into 2018) Reliability and resiliency Customer growth Infrastructure improvements Technology improvements Capital plan addresses: (1) Includes AFUDC Electric Transmission and Distribution Capit
Slide 13: Electric T&D Projected Average Rate Base
$ Millions Projected Average Rate Base Electric Transmission and Distribution $5.8 Billion Projected 2020 Rate Base Rate Base Capital Structure: 55% debt / 45% equity Rate Base Growth: 5.2% CAGR 2015-2020
Slide 14: Earnings Call Highlights: Gas Operations
2015 Minnesota Beltline Replacement Project in downtown Minneapolis Earnings Call Highlights Gas Operations Results Capital Investment Outlook Rate Base Outlook Energy Services Update Joe McGoldrick – EVP & President, Gas Division
Slide 15: Natural Gas Utilities Operating Income Drivers 2014 vs 2015
1% YoY Customer Growth (1) $ Millions (1) Natural Gas Utilities’ customer count increased from 3,373,814 on December 31, 2014, to 3,403,766 on December 31, 2015 (2) Weather in 2015 was close to the 10-year average; heating degree days were 95% of the 10-year average compared to 120% in 2014 (3) Incl
Slide 16: Natural Gas Utilities Capital Investment Growth
Natural Gas Utilities Capital Investment Growth $ Millions Capital plan addresses: Aging infrastructure Minnesota Belt Line Project Customer growth Public improvement requirements $2.3 Billion 2016 – 2020 Capital Plan
Slide 17: Natural Gas Utilities Projected Average Rate Base
Natural Gas Utilities $3.3 Billion Projected 2020 Rate Base $ Millions Projected Average Rate Base Rate Base Growth: 6.2% CAGR 2015-2020 Rate Base Capital Structure: 48.5% debt / 51.5% equity
Slide 18: Energy Services Operating Income Drivers 2014 vs 2015
(1) (3) (1) Operating income as reported in 2014 was $52 million. Chart excludes mark-to-market gain of $29 million. (2) Includes a $4 million benefit related to a lower inventory write-down in 2015. (3) Operating income as reported in 2015 was $42 million. Chart excludes mark-to-market gain of $4 m
Slide 19: CNP Signs Agreement to Acquire Continuum's Retail Energy Services Business
CNP Signs Agreement to Acquire Continuum’s Retail Energy Services Business Acquisition includes Continuum’s retail business, Choice customers, and origination & logistics assets Aggregate purchase price for the acquisition is $77.5 million plus working capital Acquisition complements overall natural
Slide 20: Earnings Call Highlights: Guidance, Impairment, Financing
Bill Rogers – EVP & CFO Earnings Call Highlights Guidance Parameters Impairment Discussion Financing Activities
Slide 21: Guidance Parameters
Guidance Parameters Reiterate 2016 full year guidance of $1.12 - $1.20 per diluted share $0.88 - $0.92 expected from utility operations $0.24 - $0.28 expected from midstream investments CenterPoint’s targeted 4 - 6% annual EPS growth through 2018 is based off of 2015 EPS on a guidance basis of $1.10
Slide 22: Non-Cash Impairment Charges Related to Midstream Investments
Non-Cash Impairment Charges Related to Midstream Investments Recorded pre-tax, non-cash impairments on equity investment in Enable Midstream totaling $984 million ($620 million after-tax) in the fourth quarter of 2015, inclusive of CenterPoint’s share ($9 million) of impairment charges recorded by E
Slide 23: Liquidity and Capital Resources
2015 Record year with $1.6 billion total capital investment Cash flow covered all capital expenditures in 2015 Borrowing(1) increased ~$330 million 2016 Anticipate strong balance sheet and cash flow No external sources or cash from operations were needed to finance $363 million investment in Enable’
Slide 24: Interest Expense and Annual Tax Rates
Interest Expense and Annual Tax Rates Interest Expense 2015 full-year interest expense was lower than 2014 (1) Partial year impact of financing activities in 2015, including retirement of $270 million of CNP Inc. debt 2016 full-year interest expense is projected to be lower than 2015 Full year impac
Slide 25: Appendix
Appendix
Slide 26: Houston Electric rate relief mechanisms
DCRF – Distribution Cost Recovery Factor; TCOS – Transmission Cost of Service; EECRF – Energy Efficiency Cost Recovery Factor (1) Performance incentive approved and recognized in Q4 2014 was $16.2 million Mechanism Effective Date Annual Revenue Increase - $MM Comments Docket # TCOS February 2015 $23
Slide 27: Electric Transmission and Distribution Capital Expenditures
2015A 2016E 2017E 2018E 2019E 2020E Transmission 38% 48% 43% 30% 32% 25% Distribution 61% 49% 52% 64% 64% 69% $ Millions Electric Transmission and Distribution Capital Expenditures
Slide 28: Houston Electric Right of Way Revenues
$4 million $29 million $2 million $27 million $21 million $14 million Revenues attributable to allowing third-party use of transmission ROWs Third-party needs result in uncertain project/revenue timing 2016 ROW revenue range of $10 to $20 million estimated Houston Electric Right of Way Revenues Righ
Slide 29: Natural Gas Utilities approved rate relief
Jurisdiction Effective Date Annual Revenue Increase - $MM Comments Docket # Arkansas June 2015 $1.5 Act 310 – final order issued Jan 12, 2016(2) 10-108-U South Texas July 2015 $4.0 Fourth annual GRIP filing; approved by the TX RRC GUD 10435 Beaumont/East Texas July 2015 $5.9 Second annual GRIP filin
Slide 30: Natural Gas Utilities pending rate filings
PBRC – Performance Based Rate Change; RSP – Rate Stabilization Plan; RRA – Rate Regulation Adjustment; SGR – Supplemental Growth Rider (1) Interim rates begin the recognition of revenue, subject to refund (pending issuance of a final order) Jurisdiction Expected Effective Date Annual Revenue Increas
Slide 31: Natural Gas Utilities energy efficiency incentives
BDA – Billing Determinant Rate Adjustment; RSP – Rate Stabilization Plan; GSR – Gas Supply Rate; APSC – Arkansas Public Service Commission; MPUC – Minnesota Public Utilities Commission; CIP – Conservation Improvement Program (1) Interim rates begin the recognition of revenue for mechanisms except Ar
Slide 32: Natural Gas Utilities Capital Expenditures by Recovery Method
Capital Recovery Method 2015A 2016E 2017E 2018E 2019E 2020E Annual Mechanisms 47% 39% 59% 63% 59% 63% Rate Cases 53% 61% 41% 37% 41% 37% $ Millions Natural Gas Utilities Capital Expenditures
Slide 33: Estimated Rate Filing Timelines
Estimated Rate Filing Timelines as of December 31, 2015 Houston Electric (1) Natural Gas Utilities (1) (1) Rate filings and timelines are subject to change and may be impacted by factors such as regulatory, legislative and economic factors (2) Rate case required to continue filing DCRF. No requireme
Slide 34: Near Term Debt Maturities
Excludes transition and system restoration bonds Near Term Debt Maturities Issuer Amount Outstanding ($MM) Coupon Maturity CERC 325 6.150% 05/01/2016 CNP 250 5.950% 02/01/2017 CERC 250 6.125% 11/01/2017 CNP 300 6.500% 05/01/2018 CERC 300 6.000% 05/15/2018 CNP 50 5.050% 11/01/2018 $ Millions
Slide 35: Reconciliation: Net Income and Diluted EPS to Guidance Basis
Note: Refer to slide 2 for information on non-GAAP measures Reconciliation: Net Income and diluted EPS to the Basis Used in Providing 2015 Earnings Guidance
Slide 36: 2014 EPS Reconciliation to Baseline
2014 EPS Reconciliation to Baseline 2014 Fully Diluted EPS $ 1.42 On an adjusted guidance basis: ZENS-related mark to market gains (0.12) CES MTM gain (0.04) Pension Curtailment loss 0.01 2014 Consolidated EPS on a guidance basis $ 1.27 Deferred Tax Benefit (0.07) 2014 Fully Adjusted EPS $ 1.20 Mids
Slide 37: 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 2015 related to CenterP