CenterPoint Energy, Inc. (CNP)

CNP 
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CenterPoint Energy, Inc. (CNP)

Q4 2009 Earnings Call

February 25, 2010 11:30 am ET

Executives

Marianne Paulsen - Director of IR

David McClanahan - President & CEO

Gary Whitlock - EVP & CFO

Analysts

Carl Kirst - BMO Capital

Faisel Khan - Citigroup

Ali Agha - SunTrust Robinson

Steven Gambuzza - Longbow Capital

Daniele Seitz - Dudack Research

Vedula Murti - CDP

Lasan Johong - RBC Capital markets

Raymond Leung - Goldman Sachs

Debra Bromberg - Jefferies and Company

Presentation

Operator

Good morning and welcome to CenterPoint Energy's fourth 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 be a question-and-answer session after management's remarks. (Operator Instructions). I will now turn the call over to 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 would like to welcome you to the fourth quarter and full year 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 fourth quarter and full year 2009 results and will also provide highlights on other key activity.

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-K filed earlier today are posted on our website which is www.centerpointenergy.com under the investors section. This quarter we have created supplemental materials which are also posted under the investor section of our website. These materials are for informational purposes and we will not be referring to them during prepared remarks.

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 would like to mention that a replay of this call will be available until 6 p.m. central time through Friday, March 5, 2010.

To access the replay please call 1800-642-1687 or 706-645-9291 and enter the conference id number 498-30541. You can also listen to an 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 and with that I will now turn the call over to David McClanahan.

David McClanahan

Thank you, Marianne. Good morning ladies and gentlemen, thanks for joining us today and thank you for your interest in CenterPoint Energy. In view of the weak economy and some very challenging energy markets I believe our company performed pretty well in 2009. That took hard work and dedication on the part of our employees and I would like to begin by acknowledging their accomplishments. We improved the efficiency and the effectiveness of our operations, strengthen business relationships, capture new business opportunities and continue to strengthen our balance sheet, improving our overall financial flexibility and strength.

As a result of these collective efforts, I believe the company is well positioned to face the uncertainties in the economy and the energy markets and emerged even stronger. This morning I will discuss our 2009 financial results as well as the described plans and prospects for each our business units as we head in 2010.

Let me begin with an overview of our fourth quarter 2009 results. This morning we reported net income of $105 million for the fourth quarter or $0.27 per diluted share, this compares to net income of $87 million or $0.25 per diluted share for the same period of 2008.

Operating income from the fourth quarter of 2009 was $299 million compared to $303 million for the same period of 2008. Our regulated electric and Natural Gas Distribution utilities achieved solid results this quarter. Houston Electric's operating income increased $6 million primarily due to customer growth, higher transmission related revenues and earnings related to our advanced metering investment partially offset by reduced energy demand and higher labor cost.

Our Natural Gas Distribution segment reported the $3 million increase in operating income primarily from rate increases and lower bad debt expense partially offset by an $11 million increase in pension expense. The energy markets had a greater effect on our other business units our Interstate Pipeline and Field Services segment were each down $4 million, our pipelines were impacted by reduced ancillary revenues primarily as a result of lower offsets in sales.

Field Services revenues were down as natural gas and liquids prices we received dropped from 2008 levels. Due to reduced basis differentials, operating income and our energy services business declined by $5 million. Overall, however, this was a solid quarter which again demonstrates the benefit of our balanced portfolio.

Let me now turn to our full year 2009 performance. Our reported net income for 2009 was $372 million or $1.01 per diluted share compared to $446 million or $1.30 per diluted share for 2008. Operating income was $1,124 million in 2009 compared to 1,273 million in 2008. While operating and net income were down from what was a banner year in 2008 I believe that there is much about 2009 to make us optimistic about the future.

Let me give you a little more detail regarding the full year performance of each of our business segments. Our regulated transmission and distribution utility Houston Electric reported operating income of $414 million compared to $407 million for 2008, this increase was primarily the result of higher transmission related revenue customer growth and income from our investment in advanced metering system offset in part by reduced energy demand and higher operating expenses. Operating income for 2008 was negatively impacted about $7 million as a result of hurricane Ike but included a gain of $9 million for a land sale and $5 million from a state franchise tax refund. If 2008 were adjusted for these items, and 2009 operating income would have been up $14 million or approximately 3.5% it is worth noting that even in a weak economy we added over 29000 customers in 2009, a growth rate of almost 1.5%.

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