CenterPoint Energy, Inc. — 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. This filing reports annual results, not standalone fourth-quarter results. It is a combined filing for CenterPoint Energy, Houston Electric and CERC; figures below are primarily for CenterPoint Energy on a consolidated basis unless noted.
Business context
CenterPoint is a regulated utility holding company focused on electric transmission and distribution, natural gas distribution, and Indiana electric generation. Its utility businesses generated more than 95% of earnings in 2023. The company serves more than seven million metered customers across six jurisdictions.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $8.696 billion | $9.321 billion | Down $625 million |
| Operating income | $1.760 billion | $1.566 billion | Up $194 million |
| Net income | $917 million | $1.057 billion | Down $140 million |
| Income available to common shareholders | $867 million | $1.008 billion | Down $141 million |
| Basic and diluted EPS | $1.37 | $1.60 basic; $1.59 diluted | Lower |
| Cash from operating activities | $3.877 billion | $1.810 billion | Up $2.067 billion |
| Capital expenditures | $4.401 billion | $4.419 billion | Down $18 million |
Operating margin, calculated as operating income divided by revenue, was approximately 20.2%, versus 16.8% in 2022. Net margin was approximately 10.5%, versus 11.3%. Operating cash flow less capital expenditures was negative approximately $524 million.
At year-end, cash and cash equivalents were $90 million. Balance-sheet long-term debt, net, was $17.559 billion, with $1.059 billion of current debt and short-term borrowings; the company described consolidated outstanding indebtedness as approximately $19 billion. Revolving credit facilities totaled $4.0 billion; as of February 12, 2024, $1.631 billion was used for commercial paper and $1 million for letters of credit. Ratings were investment grade with stable outlooks, as reported by the agencies cited in the filing.
Material changes versus 2022
- Electric segment net income increased $51 million to $654 million, supported by rate changes, transmission revenues and customer growth. Electric revenues rose $182 million.
- Natural Gas segment net income increased $41 million to $533 million, while revenues fell $667 million. Lower natural gas commodity costs and lower residential throughput were significant factors; gas throughput declined 7% and heating degree days were 86% of the 10-year average.
- Consolidated net income declined despite higher utility-segment earnings, largely because 2022 included a $303 million gain on sale of Energy Transfer securities in Corporate and Other, while 2023 included costs related to the Energy Systems Group sale and higher borrowing costs.
- Operating cash flow rose substantially, reflecting working-capital changes and regulatory-asset/liability movements, among other factors. These timing-sensitive items mean the increase should not be assumed to recur.
- CenterPoint redeemed all $800 million of its Series A Preferred Stock in September 2023. It issued or borrowed approximately $6.0 billion of debt during 2023 and repaid or redeemed approximately $3.0 billion.
Outlook, commentary and significant items
- Capital program: Management’s 10-year capital plan through 2030 is approximately $44.5 billion, with more than $3 billion anticipated for cleaner-energy investments and enablement. Planned 2024 capital expenditures are $3.669 billion. Management expects residential meter growth of about 2% for Houston Electric and about 1% for CERC.
- Rate recovery: More than 80% of projected consolidated investments are expected to be recovered through interim trackers or forward-test-year rate cases, according to management. Recovery, timing and allowed returns remain subject to regulatory decisions. Houston Electric planned a base rate filing in early 2024; CERC filed Texas and Minnesota rate cases in 2023, and Indiana Electric filed a rate case in December 2023.
- Generation transition: Indiana Electric is pursuing solar, wind and natural-gas resources and plans to exit coal generation by the end of 2027. Project timing and economics face regulatory, interconnection, supply-chain and cost-overrun risks. Pike County solar costs exceeded agreed levels, and its timing or continuation remained uncertain.
- Winter Storm Uri recovery: CenterPoint and CERC received approximately $1.1 billion in March 2023 from Texas customer rate-relief bonds. The proceeds were recognized as a reduction of natural-gas costs in 2023. Recovery of remaining storm-related costs in Louisiana and Minnesota continues; Minnesota regulators disallowed approximately $36 million of CERC’s requested recovery.
- Other transactions: CenterPoint sold Energy Systems Group in June 2023 for $154 million cash and recorded a $13 million loss on sale and $32 million current tax expense. In February 2024, CERC agreed to sell its Louisiana and Mississippi gas distribution businesses for $1.2 billion, subject to adjustments and approvals; closing is expected by the end of first-quarter 2025. CenterPoint also established a stock-sale program of up to $500 million; no shares had been issued under it as of February 20, 2024.
- Legal and environmental exposures: Litigation related to Winter Storm Uri remains pending, including proceedings involving Houston Electric and CERC. The company said it could not estimate a range of potential losses. Indiana coal-ash groundwater monitoring indicates potential impacts, with further analysis ongoing; additional requirements could result from proposed CCR rules.
- Other risks: Key exposures include severe weather and Texas Gulf Coast storm damage, Houston Electric’s concentrated REP receivables, regulatory cost-recovery delays or disallowances, high interest rates and financing needs, supply-chain constraints, natural-gas supply and price volatility, cybersecurity, and climate regulation and transition costs. The filing provides no clear quantitative earnings guidance for 2024.
Most important facts for investors to verify
- Whether pending rate cases and cost trackers deliver the requested recovery and returns, especially Houston Electric’s rate case and the Texas, Minnesota and Indiana proceedings.
- How much of 2023 operating cash flow came from nonrecurring working-capital and regulatory-balance movements, and whether cash generation covers the capital plan and dividends.
- Debt refinancing requirements, financing costs and any use of the $500 million at-the-market equity program amid substantial planned capital spending.
- Final costs, schedule and regulatory recovery for Indiana Electric’s generation projects, particularly Pike County solar, and progress toward the planned coal exit.
- Developments in Winter Storm Uri litigation and recovery of remaining storm costs, including any material change to the company’s inability to estimate potential losses.
- Approval, purchase-price adjustments and closing of the proposed Louisiana and Mississippi gas-business sale, and the effects of the divestiture on future earnings and cash flows.