CenterPoint Energy, Inc.
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The net loss for the third quarter of 2004 included an $894 million extraordinary charge to earnings for the write-down of generation-related regulatory assets resulting from the Public Utility Commission of Texas' (Texas PUC) deliberations in the company's stranded cost proceeding, and a $259 million net loss from discontinued operations related to the sale of Texas Genco Holdings, Inc.
Income from continuing operations before extraordinary item for the third quarter of 2005 was $50 million, or $0.15 per diluted share, compared to $17 million, or $0.05 per diluted share, for the third quarter of 2004. The third quarter of 2005 included after-tax income of $23 million, or $0.07 per diluted share, related to interest on the company's authorized true-up balance.
"I am pleased with the company's overall performance in the quarter despite the challenges brought on by two major hurricanes along our Gulf Coast service territories," said David M. McClanahan, president and chief executive officer of CenterPoint Energy. "We were fortunate to have avoided significant damage to our natural gas or electric delivery systems. And I'm extremely proud of our employees' extraordinary efforts in working to secure our systems and restoring power and natural gas service to our customers, as well as assisting other neighboring utilities.
"Additionally, I am pleased that we've started to recover a portion of our stranded cost true-up balance through a competition transition charge, and we expect to recover the remainder of our authorized true-up balance by the end of the year through the issuance of transition bonds."
For the nine months ended September 30, 2005, net income was $171 million, or $0.51 per diluted share, compared to a net loss of $1 billion, or $3.25 per diluted share, for the same period of 2004. Net income for the nine months ended September 30, 2005, included an extraordinary gain of $30 million related to an adjustment to the extraordinary loss recorded in the second half of 2004 as a result of actions taken by the Texas PUC. The net loss for the nine months ended September 30, 2004, included the $894 million extraordinary charge to earnings discussed above and a $154 million net loss from discontinued operations related to the sale of Texas Genco Holdings, Inc.
Income from continuing operations before extraordinary item for the nine months ended September 30, 2005, was $144 million, or $0.43 per diluted share, compared to $43 million, or $0.14 per diluted share, for the same period of 2004. The nine months ended September 30, 2005, included after-tax income of $68 million, or $0.19 per diluted share, related to interest on the company's authorized true-up balance.
OPERATING INCOME BY SEGMENT DETAILED Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $183 million in the third quarter of 2005, consisting of $174 million for the regulated electric transmission & distribution utility (TDU) and $9 million for the transition bond company, which is an amount sufficient to pay interest on the transition bonds. Operating income for the third quarter of 2004 totaled $178 million, consisting of $169 million for the TDU and $9 million for the transition bond company.
The TDU's revenues continued to benefit from solid customer growth, with nearly 53,000 metered customers added since September 30, 2004. Revenues also increased due to favorable weather, the implementation of a competition transition charge (CTC) to begin recovery of a portion of the company's true- up balance and higher transmission cost recovery. Operation and maintenance expenses increased primarily due to higher transmission costs and the absence of a gain on a land sale recorded in the third quarter of 2004. Depreciation and amortization expense increased primarily as a result of the amortization of the regulatory asset and rate case expenses being recovered through the CTC.
In September, the TDU's service area in Texas felt the impact of hurricane Rita. Although damage to its electric facilities was limited, over 700,000 customers lost power at the height of the storm. The utility restored power to over a half million customers within 36 hours and all power was restored in less than five days. Revenues lost as a result of the storm were more than offset by warmer than normal weather during the quarter. Restoration costs in the TDU's service area are estimated to be in the range of $20 - $30 million and will be deferred for future recovery.
Operating income for the nine months ended September 30, 2005, was $385 million, consisting of $358 million for the TDU and $27 million for the transition bond company. Operating income for the same period of 2004 totaled $390 million, consisting of $361 million for the TDU and $29 million for the transition bond company.
Natural Gas Distribution
The natural gas distribution segment reported an operating loss of $12 million for the third quarter of 2005, compared to an operating loss of $2 million for the same period of 2004. Due to seasonal impacts, the third quarter for this segment is typically one of the weakest of the year. Higher margins in the company's natural gas distribution business from rate increases and customer growth were more than offset by increased bad debt expense associated with high natural gas prices, an increase in depreciation and amortization expense and higher taxes other than income taxes. Increased margins from our non-rate regulated natural gas sales business were substantially offset by the effects of mark-to-market accounting related to non-trading financial derivatives used to lock in economic margins of certain forward gas sales.
During the quarter, the company's east Texas, Louisiana and Mississippi natural gas service areas were affected by hurricanes Katrina and Rita. Damage to the company's facilities was limited, but approximately 10,000 homes and businesses were damaged to such an extent that they will not be taking service for some time. The storm restoration costs and the impact on the company's operating income are expected to be limited.
Operating income for the nine months ended September 30, 2005, was $146 million compared to $137 million for the same period of 2004.
Pipelines and Gathering
The pipelines and gathering segment reported operating income of $52 million for the third quarter of 2005 compared to $35 million for the same period of 2004. The pipeline business achieved higher operating income driven by increased demand for transportation and ancillary services. The gas gathering operations benefited from increased throughput and demand for its services.
Operating income for the nine months ended September 30, 2005, was $168 million compared to $123 million for the same period of 2004.
Other Operations
The company's other operations reported operating income of $2 million for the third quarter of 2005 compared to an operating loss of $4 million for the same period of 2004.
The operating loss for the nine months ended September 30, 2005, was $12 million compared to an operating loss of $17 million for the same period of 2004.
RECOVERY OF TRUE-UP BALANCE
On September 13, 2005, the company started recovering a portion of its true-up balance approved by the Texas PUC when it implemented a CTC to collect $600 million over 14 years, plus interest at an annual rate of 11.075 percent. The company has also begun to collect approximately $24 million of approved rate case expenses over three years. In addition, the company expects to issue over $1.8 billion in transition bonds before the end of the year to recover the remaining authorized true-up balance.
WEBCAST OF EARNINGS CONFERENCE CALL
CenterPoint Energy's management will host an earnings conference call on Thursday, November 3, 2005, at 10:30 a.m. Central time or 11:30 a.m. Eastern time. Interested parties may listen to a live, audio broadcast of the conference call at http://www.centerpointenergy.com/investors/events. 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 at least one year.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, and interstate pipeline and gathering operations. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. Assets total approximately $16 billion. With more than 9,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. For more information, visit the Web site at http://www.centerpointenergy.com/.
This news release includes forward-looking statements. Actual events and results may differ materially from those projected. The statements in this news release regarding future financial performance and results of operations and other statements that are not historical facts are forward-looking statements. Factors that could affect actual results include the timing and outcome of the true-up proceeding and any legal proceedings related thereto, the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or its subsidiaries' business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas, the impact of unplanned facility outages and other factors discussed in CenterPoint Energy's and its subsidiaries' Form 10-Ks for the period ended December 31, 2004, Form 10-Qs for the periods ended March 31, 2005, June 30, 2005 and September 30, 2005, and other filings with the Securities and Exchange Commission.
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Operations
(Millions of Dollars)
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2005 2004 2005
Revenues:
Electric Transmission & Distribution $447 $484 $1,153 $1,243
Natural Gas Distribution 1,149 1,651 4,525 5,411
Pipelines and Gathering 108 116 324 362
Other Operations 2 4 8 15
Eliminations (37) (37) (113) (119)
Total 1,669 2,218 5,897 6,912
Expenses:
Natural gas 928 1,422 3,701 4,563
Operation and maintenance 319 336 932 974
Depreciation and amortization 126 145 362 411
Taxes other than income taxes 89 90 269 277
Total 1,462 1,993 5,264 6,225
Operating Income 207 225 633 687
Other Income (Expense):
Gain (loss) on Time Warner investment (31) 30 (40) (29)
Gain (loss) on indexed debt securities 34 (29) 43 34
Interest and other finance charges (183) (168) (554) (521)
Interest on transition bonds (9) (9) (29) (27)
Return on true-up balance --- 35 --- 104
Other - net 1 7 15 18
Total (188) (134) (565) (421)
Income from Continuing Operations Before
Income Taxes and Extraordinary Item 19 91 68 266
Income Tax Expense (2) (41) (25) (122)
Income from Continuing Operations Before
Extraordinary Item 17 50 43 144
Discontinued Operations:
Income from Texas Genco, net of tax 109 --- 241 11
Minority Interest related to Texas
Genco, net of tax (22) --- (49) ---
Loss on Disposal of Texas Genco, net
of tax (346) --- (346) (14)
Total (259) --- (154) (3)
Income (Loss) Before Extraordinary Item (242) 50 (111) 141
Extraordinary Item, net of tax (894) --- (894) 30
Net Income (Loss) $(1,136) $50 $(1,005) $171
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 Operations
(Millions of Dollars, Except Share and Per Share Amounts)
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2005 2004 2005
Basic Earnings Per Common Share:
Income from Continuing Operations $0.05 $0.16 $0.14 $0.46
Loss from Discontinued Operations (0.84) --- (0.50) (0.01)
Extraordinary Item, net of tax (2.90) --- (2.91) 0.10
Net Income (Loss) $(3.69) $0.16 $(3.27) $0.55
Diluted Earnings Per Common Share:
Income from Continuing Operations $0.05 $0.15 $0.14 $0.43
Loss from Discontinued Operations (0.83) --- (0.50) (0.01)
Extraordinary Item, net of tax (2.88) --- (2.89) 0.09
Net Income (Loss) $(3.66) $0.15 $(3.25) $0.51
Dividends Declared per Common Share $0.10 $0.07(A) $0.30 $0.34 (A)
Weighted Average Common
Shares Outstanding (000):
- Basic 307,592 309,657 306,954 309,080
- Diluted 310,165 346,503 309,482 355,022
Operating Income (Loss) by
Segment
Electric Transmission &
Distribution:
Transmission & Distribution
Operations $169 $174 $361 $358
Transition Bond Company 9 9 29 27
Total Electric Transmission &
Distribution 178 183 390 385
Natural Gas Distribution (2) (12) 137 146
Pipelines and Gathering 35 52 123 168
Other Operations (4) 2 (17) (12)
Total $207 $225 $633 $687
(A) On January 26, 2005, the Company's board of directors declared a
dividend of $0.10 per share of common stock payable on March 10, 2005
to shareholders of record as of the close of business on
February 16, 2005. On March 3, 2005, the Company's board of directors
declared a dividend of $0.10 per share of common stock payable on
March 31, 2005 to shareholders of record as of the close of business
on March 16, 2005. This additional first quarter dividend was
declared in lieu of the regular second quarter dividend to address
technical restrictions that might limit the Company's ability to pay a
regular dividend during the second quarter of this year. On
June 2, 2005, the Company's board of directors declared a dividend of
$0.07 per share of common stock payable on June 30, 2005 to
shareholders of record as of the close of business on June 15, 2005.
On August 31, 2005, the Company's board of directors declared a
dividend of $0.07 per common share of common stock payable on
September 30, 2005 to shareholders of record as of the close of
business on September 12, 2005.
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 Nine Months
Ended % Diff Ended % Diff
Sept. 30, Fav/ Sept. 30, Fav/
2004 2005 (Unfav) 2004 2005 (Unfav)
Results of Operations:
Electric transmission
and distribution
revenues $427 $453 6% $1,099 $1,164 6%
Electric transmission
and distribution
expenses:
Operation and
maintenance 136 155 (14%) 394 446 (13%)
Depreciation and
amortization 63 69 (10%) 186 197 (6%)
Taxes other than
income taxes 59 55 7% 158 163 (3%)
Total electric
transmission
and distribution
expenses 258 279 (8%) 738 806 (9%)
Operating Income -
Electric transmission
and distribution
utility 169 174 3% 361 358 (1%)
Operating Income -
Transition bond
company 9 9 --- 29 27 (7%)
Total Segment
Operating Income $178 $183 3% $390 $385 (1%)
Electric Transmission
& Distribution Quarter Ended Nine Months Ended
Operating Data: September 30, September 30,
Actual MWH
Delivered 2004 2005 2004 2005
Residential 8,511,639 8,871,356 4% 18,714,422 19,606,915 5%
Total 22,568,431 22,351,407 (1%) 56,633,719 57,134,034 1%
Weather (average
for service area):
Percentage of normal:
Cooling degree days 103% 113% 10% 102% 110% 8%
Heating degree days --- --- --- 86% 76% (10%)
Average number
of metered
customers:
Residential 1,645,523 1,690,819 3% 1,633,890 1,675,904 3%
Total 1,870,128 1,921,594 3% 1,856,551 1,904,235 3%
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 Nine Months
Ended % Diff Ended % Diff
Sept. 30, Fav/ Sept. 30, Fav/
2004 2005 (Unfav) 2004 2005 (Unfav)
Results of Operations:
Revenues $1,149 $1,651 44% $4,525 $5,411 20%
Expenses:
Natural gas 959 1,456 (52%) 3,776 4,644 (23%)
Operation
and maintenance 133 141 (6%) 416 414 ---
Depreciation
and amortization 36 39 (8%) 106 116 (9%)
Taxes other than
income taxes 23 27 (17%) 90 91 (1%)
Total 1,151 1,663 (44%) 4,388 5,265 (20%)
Operating Income (Loss) $(2) $(12) (500%) $137 $146 7%
Natural Gas Distribution
Operating Data:
Throughput data in BCF
Residential 15 9 (40%) 121 107 (12%)
Commercial and Industrial 39 38 (3%) 171 158 (8%)
Non-rate regulated 113 160 42% 419 491 17%
Elimination (32) (26) 19% (105) (104) 1%
Total Throughput 135 181 34% 606 652 8%
Weather (average
for service area)
Percentage of normal:
Heating degree days 61% 34% (27%) 95% 89% (6%)
Average number
of customers:
Residential 2,777,212 2,820,629 2% 2,791,722 2,835,306 2%
Commercial
and Industrial 242,111 244,249 1% 245,895 246,370 ---
Non-rate regulated 6,249 6,515 4% 6,234 6,520 5%
Total 3,025,572 3,071,393 2% 3,043,851 3,088,196 1%
Pipelines and Gathering
Quarter Nine Months
Ended Ended
Sept. 30, % Diff Sept. 30, % Diff
Fav/ Fav/
2004 2005 (Unfav) 2004 2005 (Unfav)
Results of Operations:
Revenues $108 $116 7% $324 $362 12%
Expenses:
Natural gas 6 --- 100% 33 25 24%
Operation and maintenance 52 47 10% 122 121 1%
Depreciation and amortization 11 12 (9%) 33 34 (3%)
Taxes other than income taxes 4 5 (25%) 13 14 (8%)
Total 73 64 12% 201 194 3%
Operating Income $35 $52 49% $123 $168 37%
Pipelines and Gathering Operating
Data:
Throughput data in BCF
Natural Gas Sales 1 --- (100%) 8 4 (50%)
Transportation 181 199 10% 658 700 6%
Gathering 79 92 16% 233 262 12%
Elimination --- (1) --- (5) (4) 20%
Total Throughput 261 290 11% 894 962 8%
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 Nine Months
Ended % Diff Ended % Diff
Sept. 30, Fav/ Sept. 30, Fav/
2004 2005 (Unfav) 2004 2005 (Unfav)
Results of Operations:
Revenues $2 $4 100% $8 $15 88%
Expenses 6 2 67% 25 27 (8%)
Operating Income (Loss) $(4) $2 150% $(17) $(12) 29%
Capital Expenditures by Segment
(Millions of Dollars)
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2005 2004 2005
Capital Expenditures by Segment
Electric Transmission & Distribution $79 $57 $173 $199
Natural Gas Distribution 52 77 132 173
Pipelines and Gathering 14 55 38 108
Other Operations 4 7 16 17
Total $149 $196 $359 $497
Interest Expense Detail
(Millions of Dollars)
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
2004 2005 2004 2005
Interest Expense Detail
Amortization of Deferred Financing
Cost $19 $20 $63 $59
Capitalization of Interest Cost (1) (1) (3) (3)
Transition Bond Interest Expense 9 8 28 26
Other Interest Expense 165 150 495 466
Total Interest Expense 192 177 583 548
Amortization of Deferred Financing
Cost
Reclassified to Discontinued
Operations 1 --- 3 ---
Other Interest Reclassified to
Discontinued Operations 13 --- 35 ---
Total Interest Reclassified to
Discontinued Operations (A) 14 --- 38 ---
Interest Expense Incurred by
Discontinued Operations --- --- --- 1
Total Expense in Discontinued
Operations 14 --- 38 1
Total Interest Expense Incurred $206 $177 $621 $549
(A) In accordance with Emerging Issues Task Force Issue No. 87-24
Allocation of Interest to Discontinued Operations", in 2004, we have
reclassified interest to discontinued operations of Texas Genco based
on net proceeds received from the sale of Texas Genco of
$2.5 billion, and have applied the proceeds to the amount of debt
assumed to be paid down in 2004 according to the terms of the
respective credit facilities in effect for that period. In periods
where only the term loan was assumed to be repaid, the actual
interest paid was reclassified. In periods where a portion of the
revolver was assumed to be repaid, the percentage of that portion of
the revolver to the total outstanding balance was calculated, and
that percentage was applied to the actual interest paid in those
periods to compute the amount of interest reclassified.
Total interest expense was $206 million and $177 million for the
three months ended September 30, 2004 and 2005, respectively, and
$621 million and $549 million for the nine months ended
September 30, 2004 and 2005, respectively. Interest expense of
$14 million for the three months ended September 30, 2004, and
$38 million for the nine months ended September 30, 2004, was
reclassified to discontinued operations of Texas Genco.
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
Condensed Consolidated Balance Sheets
(Millions of Dollars)
(Unaudited)
December 31, September 30,
2004 2005
ASSETS
Current Assets:
Cash and cash equivalents $165 $162
Other current assets 2,158 2,300
Current assets of discontinued operations 514 ---
Total current assets 2,837 2,462
Property, Plant and Equipment, net 8,186 8,361
Other Assets:
Goodwill, net 1,741 1,744
Regulatory assets 3,350 2,943
Other non-current assets 997 1,002
Non-current assets of discontinued operations 1,051 ---
Total other assets 7,139 5,689
Total Assets $18,162 $16,512
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of transition bond
long-term debt $47 $54
Current portion of other long-term debt 1,789 2,004
Other current liabilities 2,902 2,616
Current liabilities of discontinued operations 449 ---
Total current liabilities 5,187 4,674
Other Liabilities:
Accumulated deferred income taxes,
net and investment tax credit 2,469 2,528
Regulatory liabilities 1,082 749
Other non-current liabilities 705 849
Non-current liabilities of
discontinued operations 420 ---
Total other liabilities 4,676 4,126
Long-term Debt:
Transition bond 629 575
Other 6,564 5,919
Total long-term debt 7,193 6,494
Shareholders' Equity 1,106 1,218
Total Liabilities and
Shareholders' Equity $18,162 $16,512
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
Condensed Statements of Consolidated Cash Flows
(Millions of Dollars)
(Unaudited)
Nine Months Ended September 30,
2004 2005
Cash Flows from Operating Activities:
Net income (loss) $(1,005) $171
Discontinued operations, net of tax 154 3
Extraordinary item, net of tax 894 (30)
Income from continuing operations 43 144
Adjustments to reconcile income
from continuing operations to net
cash provided by operating activities:
Depreciation and amortization 425 470
Deferred income taxes and
investment tax credit 99 156
Changes in net regulatory assets
and liabilities (253) (166)
Changes in other assets and liabilities 21 (247)
Other, net 19 7
Net Cash Provided by Operating Activities 354 364
Net Cash Provided by (Used in)
Investing Activities (304) 204
Net Cash Used in Financing Activities (117) (571)
Net Decrease in Cash and Cash Equivalents (67) (3)
Cash and Cash Equivalents at Beginning of Period 87 165
Cash and Cash Equivalents at End of Period $20 $162
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