CenterPoint Energy, Inc. (CNP)

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CenterPoint Energy, Inc. (CNP)

Q2 2009 Earnings Call

August 05, 2009; 11:30 am ET


David McClanahan - President & Chief Executive Officer

Gary Whitlock - Executive Vice President & Chief Financial Officer

Marianne Paulsen - Director of Investor Relations


Carl Kirst - BMO Capital

Lasan Johong - RBC Capital Markets

Faisel Khan - Citi

Tom O’Neal - Green Arrow

Steven Gambuzza - Longbow Capital

Nathan Judge - Atlantic Equities

Debra Bromberg - Jefferies & Co.

Daniele Seitz - Dudack



Good morning and welcome to CenterPoint Energy’s second quarter 2009 earnings conference call with Senior Management. During the companies prepared remarks, all participants will be in a listen-only mode. There will be a question-and-answer session after Management’s remarks. (Operator Instructions)

I will now like to turn the call over to Marianne Paulsen, Director of Investor Relations. Ms. Paulson.

Marianne Paulsen

Thank you very much, Tina. Good morning everyone, this Marianne Paulsen, Director of Investor Relations for CenterPoint Energy. I’d like to welcome you to our second quarter 2009 earnings conference call. Thank you for joining us today.

David McClanahan, President and CEO, and Gary Whitlock, Executive Vice President and Chief Financial Officer, will discuss our second quarter 2009 results and will also provide highlights on other key activities.

In addition to Mr. McClanahan and Mr. Whitlock, we have other members of management with us who may assist in answering questions following their prepared remarks. Our earnings press release and Form 10-Q filed earlier today are posted on our website which is under the investor’s section.

I would like to remind you that any projections or forward-looking statements made during this call are subject to the cautionary statements on forward-looking information in the company’s filings with the SEC.

Before Mr. McClanahan begins I’d like to mention that a replay of this call will be available until 6:00 p.m. Central Time through Wednesday, August 12, 2009. To access the replay please call 1-800-642-1687 or 706-645-9291 and enter the conference ID number 17749079. You can also listen to the online replay of the call through the website that I just mentioned. We will archive the call on CenterPoint Energy’s website for at least one year.

With that I will now turn the call over to David McClanahan.

David McClanahan

Thank you, Marianne. Good morning, ladies and gentlemen. Thank you for joining us today and thank you for your interest in CenterPoint Energy. This morning we reported net income of $86 million for the second quarter or $0.24 per diluted share. This compares to net income of $101 million or $0.30 per diluted share for the same period of 2008.

Operating income for the second quarter of 2009 was $253 million, compared to $297 million for the same period of 2008. In this challenging economic environment I believe we had a solid quarter and I am please with the company’ overall performance.

Let me give you a little more detail regarding the performance of each of our business segments this quarter, beginning with Houston Electric. Our regulated transmission and distribution utility Houston Electric reported operating income of $129 million unchanged from 2008.

Last year second quarter included a $9 million gain from a land sale, an unusually large item for this business unit. Excluding this gain, Houston Electric achieved a 7.5% increase in operating income. This is excellent performance and reflects the continuing measures we are taking to improve its financial results.

Customer usage this quarter was down only slightly. Much milder weather experienced in April and May was almost entirely offset by the very warm weather in June and we didn’t see a repeat of the first quarters reduced customer usage. We’ll continue to monitor this, but for now, we believe the first quarter was not indicative of a significant new downward trend in customer usage.

Our service territory continued to grow with the addition of over 28,000 customers since the second quarter of last year. We also benefited from increased transmission revenues, primarily from a tariff change implemented last fall.

As a result of the storm restoration legislation enacted in April of this year, Houston Electric recorded a regulatory asset of $41 million for carrying cost associated with the system restoration cost that we incurred following Hurricane Ike. Of that amount, $14 million was related to the debt component and was reflected in second quarter results.

The equity component of $27 million will be recognized over the life of the storm cost recovery bonds, we expect to issue later this year. In a few movements Gary will report on this storm cost recovery settlement that we announced last Friday.

This week Houston Electric filed an application with the Department of Energy for $200 million in Federal stimulus funds available through the American Recovery and Reinvestment Act of 2009. In our application we requested $150 million to accelerate the implementation of an advanced metering system and $50 million to support our Smart Grid Initiative.

As we have discussed in the past, Houston Electric is in the process of installing an advanced metering system. Since March the 1, we have put in 45,000 smart meters and are on target to install approximately 145,000 smart meters by the end of the year. Under our current plan, we will deploy more than two million smart meters across our service territory over the next five years.

If our request for the DOE stimulus funds is approved, we will accelerate our deployment plan to substantially complete the project by 2012. Because the DOE funds require matching expenditures, there will be some acceleration of company funding, but we don’t expect it to be material to either cash flow or earnings.

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