CenterPoint Energy, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2022. The combined filing also includes separate financial statements for Houston Electric and CenterPoint Energy Resources Corp. (CERC). Figures below are for CenterPoint Energy unless noted; amounts are in millions except per-share data.
Business context and key financial metrics
CenterPoint is a regulated utility holding company with electric operations in Texas and Indiana and natural gas operations across several states. In June 2022, it transferred Indiana Gas and VEDO to CERC in a common-control restructuring. CERC sold its Arkansas and Oklahoma natural gas businesses in January 2022.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $1,903 | $1,749 | $6,610 | $6,038 |
| Operating income | $384 | $278 | $1,212 | $1,027 |
| Income from continuing operations | $202 | $150 | $923 | $630 |
| Net income | $202 | $218 | $923 | $832 |
| Income available to common shareholders | $189 | $195 | $886 | $750 |
| Diluted EPS | $0.30 | $0.32 | $1.40 | $1.25 |
For the nine months, operating cash flow was $1,325 versus cash used of $517 in 2021; capital expenditures were $3,079 versus $2,148. Investing cash flow used $229, including $2,075 of divestiture proceeds. Financing cash flow used $1,220. Cash and cash equivalents were $114 at September 30; cash, cash equivalents and restricted cash totaled $130.
At September 30, total assets were $36,719 and shareholders’ equity was $9,989. Debt-related balance-sheet items included $514 short-term borrowings, $1,478 current maturities of other long-term debt, and $13,435 long-term debt, plus securitization and indexed debt items. The filing reports $3.6 billion of revolving credit facilities; at September 30, commercial paper usage was $1,029 and letters of credit were $11, with no facility loans outstanding. Registrants reported compliance with debt covenants.
Material changes versus comparable periods
- Q3 operating income rose $106 and continuing-operations income rose $52 year over year, but common earnings fell $6. Nine-month common earnings increased $136.
- Q3 results included $206 of losses on equity securities, largely offset by a $210 gain on indexed debt securities. These fair-value movements were volatile and affected reported earnings.
- Nine-month results included a $303 gain on the Arkansas and Oklahoma sale at CenterPoint and a $557 gain at CERC. 2021 comparisons included Enable discontinued-operations income of $68 for Q3 and $202 for nine months; there was no corresponding 2022 income.
- Electric segment earnings increased $49 in Q3 and $104 year to date, supported by higher transmission revenues, usage and customer growth. Natural Gas segment earnings declined $15 in Q3 but increased $108 year to date, with the sale gain materially affecting the latter comparison.
- Utility natural gas and purchased-power costs increased substantially, generally alongside related revenue recovery. CERC reported a Q3 net loss of $7, including $17 of income tax expense on $10 of pretax income.
Outlook, risks and unusual items
- Management said expected cash requirements for the final three months of 2022 included capital expenditures of $1,088 at CenterPoint, $552 at Houston Electric and $413 at CERC, plus $271 of TEEEF finance-lease payments at CenterPoint/Houston Electric. Planned funding sources included operating cash, debt and commercial paper, credit facilities, and expected Texas customer rate-relief bond proceeds.
- In November 2022, after quarter-end, CenterPoint announced a $2.3 billion increase to its 10-year capital plan, bringing it to nearly $43 billion through 2030.
- Houston Electric is seeking recovery of mobile-generation (TEEEF) costs. The filing says a full disallowance could create exposure exceeding $805, including lease payments and related costs; a lease termination provision may be available in specified circumstances. The company had deferred costs as regulatory assets and considered recovery probable at September 30. A PUCT decision was expected in March or April 2023.
- CenterPoint and CERC had $1.4 billion of February 2021 storm natural-gas-cost regulatory assets at September 30 ($1,175 current and $225 non-current). Minnesota regulators disallowed approximately $36 of CERC costs; other recovery remains subject to regulatory review. Texas securitization approval had been obtained, with bond issuance expected in 2022.
- Approximately 190 Winter Storm Uri-related lawsuits remained pending, and the company said it could not estimate a loss range. The filing also describes regulatory and governmental inquiries. The company intends to defend itself and notes insurance coverage for certain third-party claims.
- Solar project schedules and costs are exposed to supply-chain constraints, commodity inflation, labor availability and potential trade duties. The Posey project was being downsized from 300 MW to about 200 MW, subject to further review. Management also cited inflation, higher interest rates, severe weather, regulatory cost-recovery outcomes, customer/REP credit risk and climate-related regulation as risks.
- CenterPoint’s stated emissions goals are net zero Scope 1 and 2 by 2035 and a 20%–30% reduction in Scope 3 emissions by 2035. It said the Inflation Reduction Act was not expected to materially affect 2022 results, while continuing to assess future effects.
Important facts for investors to verify
- Progress and final recoverability of Houston Electric’s TEEEF costs, including potential disallowances, lease termination rights and resulting financial exposure.
- Final regulatory recovery of Winter Storm Uri natural-gas costs, particularly the Minnesota order and the timing and terms of Texas securitization bonds.
- Cash generation and funding needs against the expanded nearly $43 billion capital plan, including the pace of capital spending and access to debt and commercial-paper markets.
- How much reported earnings depend on divestiture gains, equity-security marks and indexed-debt fair-value changes, versus recurring utility operations.
- Developments in Uri litigation and investigations, for which the filing provides no estimable loss range, and solar-project costs and schedules affected by supply and trade risks.