CenterPoint Energy, Inc.
CenterPoint Energy's reported net income for the first quarter of 2003 was $168 million, or $0.56 per diluted share, compared to $32 million, or $0.11 per diluted share, for the same period of 2002. During the first quarter of 2003 the company recorded a benefit of $80 million relating to the implementation of SFAS No. 143, "Accounting for Asset Retirement Obligations" and $7 million in discontinued operations related to the company's Latin America operations. As previously reported, the company distributed its investment in Reliant Resources, Inc. (RRI) to CenterPoint Energy shareholders on September 30, 2002, and RRI's historical results are reported as discontinued operations in 2002.
"I'm encouraged by the progress of our businesses and their performance in the first quarter of this year," said David McClanahan, president and chief executive officer of CenterPoint Energy. "However, this improved business performance only partially offset higher interest costs and increased pension and insurance expenses.
"There were some very positive developments for our company in the quarter, including successfully amending our $3.85 billion bank credit facility," said McClanahan. "It enabled us to access the capital markets on reasonable terms and has lifted the cloud of financial uncertainty under which we had been operating. We are now able to focus on doing what we do best -- delivering electricity and natural gas safely and reliably."
FIRST QUARTER HIGHLIGHTS
The company's operating performance and cash flow for the first quarter of 2003 compared to the same period of 2002 benefited from the following:
-- continued customer growth with the addition of more than 91,000 metered
electric and gas customers since March of 2002, or an annualized
2 percent growth
-- increased revenues of $11 million from rate increases in the natural
gas distribution operations
-- colder than normal weather compared to milder than normal weather in
2002, primarily in Minnesota, impacting the quarter by $7 million
-- improved performance by our subsidiary, Texas Genco Holdings, Inc.
The company's operating performance and cash flow for the first quarter of 2003 compared to the same period of 2002 were negatively impacted by the following:
-- an increase in interest expense of $107 million
-- higher pension and insurance expenses of $24 million
-- non-recurring transition earnings of $14 million realized in 2002
related to the opening of the Texas electric market to retail
competition
Other significant events for CenterPoint Energy since the beginning of the year include:
-- Successfully amended the company's existing $3.85 billion credit
facility, extending the term of the facility to June 30, 2005 and
eliminating $1.2 billion in mandatory payments this year
-- Successfully accessed the capital markets for almost $1.7 billion
including:
-- $762 million in general mortgage bonds at the electric transmission
& distribution subsidiary, CenterPoint Energy Houston Electric LLC,
with the proceeds used to repay existing third party and
intercompany debt
-- $762 million in senior unsecured notes at the natural gas
distribution and pipeline and gathering subsidiary, CenterPoint
Energy Resources Corp. (CERC), with the proceeds used to repay an
expiring bank credit facility and to refinance $360 million of a
$500 million November 2003 maturity ($112 million closed in
April 2003)
-- $175 million of pollution control bonds remarketed at CenterPoint
Energy, Inc. (April 2003)
-- Permanently reduced the company's $3.85 billion credit facility by
$50 million which also eliminated approximately 12.5 percent of
warrants due to vest on May 28, 2003
-- Established a $200 million one-year revolving credit facility at CERC
-- Distributed approximately 19 percent of Texas Genco's common stock to
CenterPoint Energy shareholders, paving the way for determining the
market value of Texas Genco's generating assets. The market value of
this stock will be used in calculating the stranded costs that
CenterPoint Energy will recover in the 2004 true-up proceeding at the
Public Utility Commission of Texas (Texas PUC)
-- Completed the company's exit from Latin America with sales of its
investments in Argentina:
-- Argener, a cogeneration facility
-- the company's 90 percent interest in Edese, an electric utility
distribution company (April 2003)
EARNINGS BEFORE INTEREST AND TAXES (EBIT) BY SEGMENT DETAILED (for a reconciliation of the non-GAAP financial measure "EBIT" to the comparable GAAP financial measures, see "Reconciliation of Operating Income to EBIT and EBIT to Net Income" in the attached financial statements)
Electric Transmission & Distribution
The electric transmission & distribution segment reported EBIT of $214 million in the first quarter of 2003 consisting of $82 million for the regulated electric transmission & distribution utility and non-cash EBIT of $132 million associated with generation-related regulatory assets, or Excess Cost Over Market (ECOM), as described below. For the first quarter of 2002, EBIT was $259 million, consisting of $104 million for the regulated electric transmission & distribution utility, non-cash EBIT of $141 associated with ECOM, and $14 million related to the transition to the deregulated electric market.
The regulated electric transmission & distribution utility, excluding ECOM and transition related-EBIT, continues to benefit from solid customer growth. Reduced revenues from industrial customers and higher benefit and insurance costs more than offset increased revenues from the addition of over 50,000 metered customers since March 2002.
Under the Texas electric restructuring law, a regulated utility may recover, in its 2004 stranded cost true-up proceeding, the difference between market prices received by its affiliated power generation company and the prices used in the ECOM model established by the Texas PUC. During 2002 and 2003, this difference, referred to as ECOM, produces non-cash EBIT and is recorded as a regulatory asset. The reduction in ECOM of $9 million from 2002 to 2003 resulted from an increase in capacity auction prices at Texas Genco.
Electric Generation
Texas Genco owns 14,175 MW of electric generation in Texas and sells capacity, energy, and ancillary services in the Texas electric market, primarily through capacity auctions. It reported a loss before interest and taxes of $17 million for the first quarter of 2003 compared to a loss before interest and taxes of $52 million for the same period of 2002.
Wholesale electricity prices were much higher in early 2003 due to substantially higher natural gas prices which led to increased capacity auction revenues in the first quarter, particularly for Texas Genco's solid fuel baseload products. As a result, the first quarter loss in 2003 was much less than the same quarter last year. The first quarter is typically Texas Genco's lowest performing quarter due to seasonal revenue effects and the scheduling of planned maintenance on its generating units. In addition, the first quarter 2003 reflected a forced outage of Unit 2 of the South Texas Project Electric Generating Station (STP), a nuclear generating plant consisting of two 1,250 MW units. The company owns a 30.8 percent interest in STP. Unit 2 was taken out of service in December 2002 as a result of non- safety related mechanical failures and was returned to service on March 14, 2003. The added cost of replacement energy negatively impacted gross margin by approximately $23 million for the quarter and the outage was also a major contributor to a $10 million increase in operation and maintenance expense.
Natural Gas Distribution
The natural gas distribution segment reported EBIT of $134 million for the first quarter of 2003, an increase of $24 million compared to the prior year's first quarter EBIT of $110 million.
The reported 22 percent increase in EBIT resulted from continued customer growth, higher revenues from rate increases implemented late last year, colder weather and improved margins from our unregulated commercial and industrial sales. These improvements more than offset increased expenses including approximately $8 million associated with higher employee benefits and bad debts. The costs associated with a receivables facility, which was modified in November 2002, reduced EBIT by $4 million, whereas prior to the amendment, these costs were recorded as interest expense.
Pipelines and Gathering
The pipelines and gathering segment reported EBIT of $45 million in the first quarter of 2003 compared to $38 million for the same period of 2002. The EBIT improvement was primarily related to higher revenues from increased throughput and ancillary revenues. The business continues to produce consistent EBIT and stable cash flows.
Other Operations
The company's other operations reported a loss before interest and taxes for the first quarter of 2003 of $5 million compared to a loss before interest and taxes of $8 million for the same period of 2002.
Discontinued Operations
During the first quarter of 2003, the company recorded earnings of $7 million from discontinued operations related to the company's Latin American operations, primarily as a result of the sale of Argener, a cogeneration facility in Argentina. In early April, the company sold its remaining investment in Argentina, a 90 percent interest in Edese, an electric utility distribution company. Through these sales, the company completed its strategy of exiting Latin America.
As previously reported, the company distributed its investment in RRI to CenterPoint Energy shareholders in September 2002. Consequently, for 2002 the company reported a loss from discontinued operations of $113 million reflecting RRI's historical results.
2003 OUTLOOK
CenterPoint Energy confirms its 2003 earnings guidance of $0.85 to $1.00 per diluted share. This reflects the company's outlook for continued solid operational performance by its business segments. In addition, Texas Genco, the company's 81 percent owned subsidiary, maintained its earnings guidance of $1.10 to $1.30 per diluted share.
WEBCAST OF EARNINGS CONFERENCE CALL
CenterPoint Energy's management will host an earnings conference call on Thursday, April 24, 2003, at 10:30 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call in the investor section of CenterPoint Energy's web site, www.CenterPointEnergy.com . A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for 14 days.
The management of Texas Genco, the company's 81 percent owned subsidiary, will host an earnings conference call on Thursday, April 24, 2003, at 9:00 a.m. Central time. Interested parties may listen to a live, audio broadcast of the conference call in the investor relations section of Texas Genco's web site, www.txgenco.com . A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for 14 days.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations, and more than 14,000 megawatts of power generation in Texas. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Missouri, Oklahoma, and Texas. Assets total more than $19 billion. CenterPoint Energy became the new holding company for the regulated operations of the former Reliant Energy, Incorporated in August 2002. With more than 11,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years.
This news release includes forward-looking statements. Actual events and results may differ materially from those projected. Factors that could affect actual results include the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or Texas Genco's business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas and other factors discussed in CenterPoint Energy's and Texas Genco's filings with the Securities and Exchange Commission.
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Thousands of Dollars)
(Unaudited)
Quarter Ended March 31,
------------------------------
2003 2002
----------- -----------
Revenues:
Electric Transmission & Distribution $ 447,403 $ 568,053
Electric Generation 358,587 325,647
Natural Gas Distribution 2,044,751 1,179,873
Pipelines and Gathering 109,108 91,943
Other Operations 11,064 8,738
Eliminations (68,611) (95,117)
Total 2,902,302 2,079,137
Expenses:
Fuel and cost of gas sold 1,859,145 1,042,562
Purchased power 11,994 48,469
Operation and maintenance 415,264 389,843
Taxes other than income taxes 103,209 98,502
Depreciation and amortization 152,652 148,768
Total 2,542,264 1,728,144
Operating Income 360,038 350,993
Other Income (Expense) :
Loss on AOL Time Warner investment (48,474) (217,597)
Gain on indexed debt securities 42,703 203,233
Interest (224,424) (117,752)
Distribution on trust preferred securities (13,898) (13,899)
Other - net 3,187 7,135
Total (240,906) (138,880)
Income from Continuing Operations Before
Income Taxes, Minority Interest and
Cumulative Effect of Accounting Change 119,132 212,113
Income Tax Expense (40,260) (67,718)
Minority Interest 2,066 241
Income from Continuing Operations Before
Cumulative Effect of Accounting Change 80,938 144,636
Discontinued Operations, net of tax 7,422 (113,031)
Cumulative Effect of Accounting Change,
net of minority interest and tax 80,072 ---
Net Income Attributable to Common
Stockholders $ 168,432 $ 31,605
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
Quarter Ended
March 31,
------------------------------
2003 2002
------------ -----------
Basic Earnings Per Common Share
Income from continuing operations before
cumulative effect of accounting change $ 0.27 $ 0.49
Discontinued operations, net of tax 0.02 (0.38)
Cumulative effect of accounting change,
net of minority interest and tax 0.27 ---
Net Income Attributable to Common
Stockholders $ 0.56 $ 0.11
Diluted Earnings Per Common Share
Income from continuing operations before
cumulative effect of accounting change $ 0.27 $ 0.49
Discontinued operations, net of tax 0.02 (0.38)
Cumulative effect of accounting change,
net of minority interest and tax 0.27 ---
Net Income Attributable to Common
Stockholders $ 0.56 $ 0.11
Dividends per Common Share $ 0.10 $ 0.375
Weighted Average Common Shares
Outstanding (000):
- Basic 301,664 296,222
- Diluted 303,278 297,166
EBIT by Segment
Electric Transmission & Distribution $ 214,021 $ 258,970
Electric Generation (16,916) (51,754)
Natural Gas Distribution 133,914 109,675
Pipelines and Gathering 45,270 37,694
Other Operations (4,723) (7,629)
Eliminations/other (14,112) (3,192)
Total $ 357,454 $ 343,764
Reconciliation of Operating Income to
EBIT and EBIT to Net Income
Operating income $ 360,038 $ 350,993
Loss on AOL Time Warner investment (48,474) (217,597)
Gain on indexed debt securities 42,703 203,233
Other income, net 3,187 7,135
EBIT 357,454 343,764
Interest expense and other charges (238,322) (131,651)
Income tax expense (40,260) (67,718)
Minority interest 2,066 241
Income from Continuing Operations
Before Cumulative Effect of
Accounting Change 80,938 144,636
Discontinued operations, net of tax 7,422 (113,031)
Cumulative effect of accounting change,
net of minority interest and tax 80,072 ---
Net Income Attributable to Common
Stockholders $ 168,432 $ 31,605
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Electric Transmission & Distribution
------------------------------------
Quarter Ended March 31, % Diff
-----------------------
2003 2002 Fav/(Unfav)
----------------------- ------------
Results of Operations:
Operating Revenues:
Electric revenues $ 316 $ 427 (26%)
ECOM true-up 132 141 (6%)
Total Revenues 448 568 (21%)
Operating Expenses:
Fuel and purchased power --- 60 100%
Operation and maintenance 133 141 6%
Depreciation and amortization 65 63 (3%)
Taxes other than income 44 50 12%
Total 242 314 23%
Operating Income 206 254 (19%)
Non-operating Income 8 5 60%
Earnings Before Interest and Taxes $ 214 $ 259 (17%)
Electric Transmission & Distribution
Operating Data: Quarter Ended March 31,
-------------------------
Actual MWH Delivered 2003 2002
----------- -----------
Residential 4,558,195 4,473,465 2%
Commercial 4,008,242 3,975,248 1%
Industrial 6,185,981 6,337,603 (2%)
Other 35,558 42,149 (16%)
Total 14,787,976 14,828,465 ---
Weather (average for service area):
Percentage of normal:
Heating degree days 112% 108% 4%
Average number of metered customers:
Residential 1,577,114 1,531,806 3%
Commercial 219,249 209,424 5%
Industrial 1,860 1,860 ---
Total 1,798,223 1,743,090 3%
Electric Generation
---------------------------------------
Quarter Ended March 31, % Diff
---------------------------
2003 2002 Fav/(Unfav)
--------------------------- -----------
Results of Operations:
Operating Revenues $ 359 $ 326 10%
Operating Expenses:
Fuel and purchased power 220 229 4%
Operation and maintenance 106 96 (10%)
Depreciation and amortization 39 40 3%
Taxes other than income 11 13 15%
Total 376 378 1%
Operating Loss (17) (52) 67%
Non-operating Income --- --- ---
Loss Before Interest and Taxes $ (17) $ (52) 67%
Physical Electric Generation Power
Sales (MWH) 9,267,364 12,634,635 (27%)
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Natural Gas Distribution
------------------------------------
Quarter Ended March 31, % Diff
-------------------------
2003 2002 Fav/(Unfav)
------------------------- -----------
Results of Operations:
Operating Revenues $ 2,045 $ 1,180 73%
Operating Expenses:
Natural gas 1,694 885 (91%)
Operation and maintenance 147 131 (12%)
Depreciation and amortization 33 30 (10%)
Taxes other than income 41 28 (46%)
Total 1,915 1,074 (78%)
Operating Income 130 106 23%
Non-operating Income 4 4 ---
Earnings Before Interest and Taxes $ 134 $ 110 22%
Natural Gas Distribution Operating
Data:
Throughput data in BCF
Residential and Commercial 148 132 12%
Industrial 14 11 27%
Transportation 14 15 (7%)
Non-rate regulated commercial and
industrial 135 121 12%
Total Throughput 311 279 11%
Weather (average for service area)
Percentage of normal:
Heating degree days 106% 98% 8%
Average number of customers:
Residential 2,770,060 2,729,517 1%
Commercial and Industrial 252,675 250,818 1%
Total 3,022,735 2,980,335 1%
Pipelines and Gathering
---------------------------------------
Quarter Ended March 31, % Diff
--------------------------
2003 2002 Fav/(Unfav)
-------------------------- -----------
Results of Operations:
Operating Revenues $ 109 $ 92 18%
Operating Expenses:
Natural gas 21 7 (200%)
Operation and maintenance 30 34 12%
Depreciation and amortization 11 10 (10%)
Taxes other than income 4 4 ---
Total 66 55 (20%)
Operating Income 43 37 16%
Non-operating Income 2 1 100%
Earnings Before Interest and Taxes $ 45 $ 38 18%
Pipelines and Gathering Operating
Data:
Throughput data in BCF
Natural Gas Sales 4 5 (20%)
Transportation 268 238 13%
Gathering 72 71 1%
Elimination (2) --- ---
Total Throughput 342 314 9%
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Other Operations
---------------------------------------
Quarter Ended March 31, % Diff
---------------------------
2003 2002 Fav/(Unfav)
--------------------------- -----------
Results of Operations:
Operating Revenues $ 11 $ 9 22%
Operating Expenses 12 4 (200%)
Operating Income (Loss) (1) 5 (120%)
Non-operating Expense (4) (13) 69%
Loss Before Interest and Taxes $ (5) $ (8) 38%
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