CenterPoint Energy, Inc. (CNP)

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Call Start: 10:30

Call End: 11:23

CenterPoint Energy, Inc. (CNP)

Q3 2009 Earnings Call

October 28, 2009 10:30 am ET


Marianne Paulsen - Director of Investor Relations

David M. McClanahan – President, CEO

Gary L. Whitlock - Executive Vice President, CFO


Lasan Johong - RBC Capital Markets

Faisel Khan - Citigroup

Scott Engstrom - Bynum Capital Management

Steven Gambuzza - Longbow Capital

Mark Rogers - Gagnon Security

Steven Wong - Carlson Capital



Good morning and welcome to CenterPoint Energy’s third quarter 2009 earnings conference call with senior management. During the company’s prepared remarks all participants will be in a listen only mode. There will a question and answer session – management’s remark. (Operator’s instructions) I will now turn the call over to Ms. Marianne Paulsen, Director of Investor Relations. Ms. Paulsen?

Marianne Paulsen

Thank you very much, Tina. Good morning everyone. This is Marianne Paulsen, Director of Investor Relations for CenterPoint Energy. I’d like to welcome you to our third 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 third quarter 2009 results and will also provide highlights and 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 is subject to the cautionary statements on forward-looking information in the company’s filings with the SEC.

Before Mr. McClanahan begins I would like to mention that a replay of this call will be available until 6 PM, Central Time through Wednesday, November 4, 2009. To access the replay, please call 1-800-642-1687 or 706-645-9291 and enter the conference ID number 32554354. You can also listen to an online replay of the call through the website that I just mentioned. We will archive the call on the CenterPoint Energy website for at least one year.

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

David M. 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 $114 million for the third quarter, or $0.31 per diluted share. This compares to net income of $136 million or $0.39 per diluted share for the same period of 2008.

Operating income for the third quarter of 2009 was $287 million compared to $337 million for the same period of 2008.

Our electric and gas distribution utilities and our interstate pipelines, which are our core regulated businesses achieved solid results this quarter, dispute the challenging economic climate. Lower natural gas and liquids prices negatively impacted our field services business. But we continue to position this unit for the future. With the addition of several new contracts in the Haynesville Shale Place. Due to reduced basis differentials operating income at our energy services business was also negatively impacted.

Let me give you a little bit 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 $187 million an $18 million increase from the $169 million reported for the third quarter of 2008.

Last year’s third quarter operating income, you may remember was negatively impacted by $12 million as a result of Hurricane Ike. After adjusting for this impact, Houston Electric achieved growth of over 3% in operating income.

This improvement was principally the result of increase electricity usage due to warmer than normal weather throughout most of the quarter. The addition of over 26,000 customers since the third quarter of last year and the benefits of a transmission rate increase implemented last November.

Our service territory continues to grow at a 1%- 1.5% annual rate, which is somewhat below our recent growth rate of 2%. We don’t expect to return to that level for at least 12 months or so.

As we’ve discussed in the past, Houston Electric is in the process of installing an advanced metering system. And we’re pleased to report that the implementation in (inaudible) system is going well. We’ve installed over 100,000 smart meters so far. And we’re on target to install approximately 145,000 smart meters by the end of this year.

Under our current plan we will deploy more than 2 million smart meters across our service territory over the next five years.

In early August, Houston Electric filed an application with the Department of Energy for $200 million in Federal Stimulus Funds available to the American Recovery and Reinvestment Act of 2009. In our application we requested $150 million to accelerate the implementation of our advance metering system, and $50 million to support our intelligent grid initiative.

Yesterday, the DOE notified us that we had been (inaudible) associations. Assuming that the project is funded in accordance with our application, we will accelerate our AMS deployment 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 (inaudible) their cash flow or earnings.

In a few moments Gary will report on our storm cost recovery bonds we expect to issue later this year to recover our costs related to Hurricane Ike.

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