CenterPoint Energy, Inc. (CNP)

CNP 
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CenterPoint Energy (CNP)

Q4 2012 Earnings Call

February 27, 2013 11:30 am ET

Executives

Carla Kneipp

David M. McClanahan - Chief Executive Officer, President and Director

Scott Prochazka - Chief Operating Officer and Executive Vice President

Gary L. Whitlock - Chief Financial Officer and Executive Vice President

C. Gregory Harper - Senior Vice President and Group President of Pipelines & Field Services

Analysts

Carl L. Kirst - BMO Capital Markets U.S.

Charles J. Fishman - Morningstar Inc., Research Division

Ali Agha - SunTrust Robinson Humphrey, Inc., Research Division

John Edwards - Crédit Suisse AG, Research Division

Faisel Khan - Citigroup Inc, Research Division

Andrew M. Weisel - Macquarie Research

Presentation

Operator

Good morning, and welcome to CenterPoint Energy's Fourth Quarter and Full Year 2012 Earnings Conference Call with senior management. [Operator Instructions] I will now turn the call over to Carla Kneipp, Vice President of Investor Relations. Ms. Kneipp?

Carla Kneipp

Thank you, very much, Sarah. Good morning, everyone. This is Carla Kneipp, Vice President of Investor Relations. Welcome you to our Fourth Quarter and Full Year 2012 Earnings Conference Call. Thank you for joining us today.

David McClanahan, President and CEO; Scott Prochazka, Executive Vice President and Chief Operating Officer; and Gary Whitlock, Executive Vice President and CFO, will discuss our fourth quarter and full year 2012 results, and provide highlights on other key activities. We also have other members of management who may assist in answering questions following the prepared remarks.

Our earnings press release, Form 10-K and supplemental materials are posted on our website, centerpointenergy.com, under the Investors section. Supplemental materials are for informational purposes and we will not be referring to them during the prepared remarks. I 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 David begins, I would like to mention that a replay of this call will be available through Wednesday, March 6. To access the replay, please call (855) 859-2056 or (404) 537-3406, and enter the conference ID number 71670374. You can also listen to an online replay on our website and we will archive the call for at least 1 year.

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

David M. McClanahan

Thank you, Carla. And good morning, ladies and gentlemen. Thank you for joining us today and thank you for your interest in CenterPoint Energy.

This morning, we reported full year earnings of $417 million or $0.97 per diluted share as compared to $1.36 billion or $3.17 per diluted share in 2011.

I'd like to remind you of the unusual items that occurred during each year.

In 2012, we recorded a non-cash goodwill impairment charge, as well as a non-cash pretax gain from an acquisition. In 2011, we recorded the results of the final resolution of our true-up appeal. Excluding the effects of these unusual items, net income for 2012 would have been $581 million or $1.35 per diluted share, compared to $546 million or $1.27 per diluted share in 2011. Using the same basis that we use when providing guidance, full year adjusted earnings would have been $1.25 per diluted share in 2012, compared to $1.20 for 2011.

Our regulated electric and gas utilities benefited from strong service territories, timely rate recovery mechanisms and effective expense management. Our Midstream and Energy Services businesses performed well, given the current market environment of low natural gas prices and minimal geographic price differentials.

Our financial results once again highlight the strength of our balanced energy delivery portfolio.

We are looking forward to another good year in 2013. We are stronger financially than we've ever been and have good investment opportunities across all of our businesses.

Last year, we celebrated our 10th anniversary as a standalone independent public company. When we first became CenterPoint Energy, we indicated we would focus on domestic energy delivery with a balanced portfolio of electric and natural gas businesses. Further, we committed to building a company that provides a competitive dividend with growth. 10 years later, we are proud of our accomplishments and remain committed to these objectives.

I would like to take this opportunity to thank the employees who have made the past 10 years a success. I am very proud that our employees stayed focused on and believed in the vision, values and strategy that have come to define us. Without their hard work and dedication, we would not be where we are today.

Now I'll ask Scott Prochazka, our Chief Operating Officer, to update you on our business unit performance and our expectations for 2013.

Scott Prochazka

Thank you, David, and good morning to everyone.

I will start with our largest business, Houston Electric, which had a good year. Core operating income was $492 million compared to $496 million in 2011. The modest decline was due to more normal weather when compared to the extreme heat we experienced in the prior year, as well as the adverse effects from new rates implemented in September of 2011. These impacts were almost entirely offset by a number of positive factors, including a continued strong Houston economy marked by the addition of more than 44,000 new metered customers, ongoing recognition of deferred equity returns associated with the company's true-up proceeds and decreased labor and benefit costs.

Right-of-way revenues approached $27 million, which is substantially above historical levels of $2 million to $3 million per year. The increased interest in our right-of-way easements is another sign of the strong economic activity in Houston.

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