CenterPoint Energy, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This annual filing also presents separate financial statements for Houston Electric and CenterPoint Energy Resources Corp. (CERC). The filing does not provide standalone fourth-quarter results clearly.
Business context
CenterPoint is a regulated utility holding company operating electric transmission and distribution, Indiana electric generation, and natural gas distribution businesses across six states. Management said more than 95% of earnings were derived from regulated utility operations after the Enable-related transactions. In 2022, CERC completed the sale of its Arkansas and Oklahoma natural gas businesses, and CenterPoint transferred Indiana Gas and VEDO to CERC in a common-control restructuring.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $9.321 billion | $8.352 billion |
| Operating income | $1.566 billion | $1.363 billion |
| Income from continuing operations | $1.057 billion | $668 million |
| Income available to common shareholders | $1.008 billion | $1.391 billion |
| Basic EPS | $1.60 | $2.35 |
| Cash from operating activities | $1.810 billion | $22 million |
| Capital expenditures | $4.419 billion | $3.164 billion |
- Operating margin was approximately 16.8% (operating income divided by revenue), compared with approximately 16.3% in 2021.
- Cash from operations less capital expenditures was approximately negative $2.6 billion. Cash generation improved markedly year over year, while capital investment also increased.
- Consolidated indebtedness was approximately $17 billion at year-end. The balance sheet reported $74 million of cash and cash equivalents; cash, cash equivalents and restricted cash totaled $91 million.
- Four revolving facilities provided $4.0 billion of total commitments; at December 31, $2.575 billion was utilized by commercial paper and $11 million by letters of credit. The company reported compliance with debt covenants.
- CenterPoint’s total assets were $38.546 billion and shareholders’ equity was $10.042 billion at year-end. The filing reports no single consolidated liquidity ratio as a headline measure.
Changes versus the prior year
- Continuing-operations earnings improved, with Electric segment net income rising to $603 million from $475 million and Natural Gas segment net income rising to $492 million from $403 million.
- Common-shareholder income and total EPS declined versus 2021, primarily because 2021 included $818 million of income from discontinued operations. The 2022 continuing-operations result also included a $303 million gain on the Arkansas and Oklahoma sale.
- Revenue rose $969 million, reflecting utility growth, rates, weather and higher commodity costs passed through to customers. Natural Gas revenue included a $610 million increase, while related natural gas costs also rose substantially.
- Operating cash flow increased from $22 million to $1.810 billion, partly reflecting changes in regulatory assets and liabilities and working capital. Capital expenditures increased by $1.255 billion.
Outlook, risks and unusual items
- Planned 2023 capital expenditures are $3.639 billion. The company increased its ten-year capital plan to nearly $43 billion through 2030, including more than $3 billion in clean-energy investments and enablement.
- Management expects to fund 2023 needs through operating cash flow, debt and commercial paper, credit facilities, and securitization proceeds. Approximately $1.1 billion of Texas customer rate-relief bond proceeds related to 2021 winter-storm gas costs was expected in the first half of 2023; delay or non-issuance could pressure liquidity.
- CenterPoint, Houston Electric and CERC planned rate cases for 2023. Regulatory approval and timely recovery of capital and operating costs are uncertain, especially amid inflation and higher interest rates.
- Houston Electric’s TEEEF mobile-generation costs are a significant unresolved issue. It recorded $182 million of related regulatory assets at year-end and sought recovery; administrative law judges recommended denying all recovery, with the PUCT expected to consider the recommendation in March 2023. The filing estimates a potential $335–$354 million financial loss under specified disallowance and lease-termination assumptions.
- Natural-gas storm costs remained subject to regulatory review. Minnesota regulators disallowed approximately $36 million of CERC’s requested recovery; CenterPoint and CERC reported $1.175 billion of current and $202 million of non-current regulatory assets associated with the 2021 winter-storm event.
- Winter Storm Elliott caused outages at Indiana Electric’s A.B. Brown units and required higher-cost market power purchases. Other material risks include severe weather, fuel and supplier concentration, solar-panel supply constraints and tariffs, environmental compliance and coal-ash closure costs, cybersecurity, and regulatory or legal proceedings.
- Litigation related to the February 2021 winter storm includes numerous claims against CenterPoint, Houston Electric and CERC. The company said the proceedings were too preliminary to estimate outcomes or a range of potential losses.
- Unusual items included $47 million of CenterPoint debt-extinguishment losses and a $47 million pension settlement charge associated with the annuity lift-out. CenterPoint’s $303 million sale gain and CERC’s $557 million sale gain are entity-level presentations of the same disposition and should not be added together as separate consolidated gains.
Most important facts for investors to verify
- PUCT outcome and any ultimate cost exposure for Houston Electric’s TEEEF leases and related regulatory assets.
- Timing and amount of Texas rate-relief bond proceeds, and recovery of remaining winter-storm costs.
- 2023 debt maturities, refinancing terms and access to liquidity amid the substantial capital program.
- Regulatory outcomes of planned rate cases and the recoverability of ongoing capital investments.
- Whether generation-transition and solar projects remain on schedule and within revised budgets, and the effect of supply constraints and regulatory approvals.
- Potential financial effects of storm-related litigation, environmental obligations and other contingencies that the filing says cannot currently be estimated.
Audit: Deloitte issued an unqualified opinion on CenterPoint’s, Houston Electric’s and CERC’s financial statements. CenterPoint’s internal control over financial reporting was reported effective as of December 31, 2022.