Business context and reporting period
CenterPoint Energy, Inc. (CNP) and its subsidiaries Houston Electric and CenterPoint Energy Resources Corp. (CERC) report unaudited results for the three months ended March 31, 2024, compared with the same period in 2023. CenterPoint operates regulated electric transmission and distribution, natural gas distribution and pipeline businesses, and Indiana electric generation. Results are seasonal and affected by weather, commodity prices, regulatory decisions, and the timing of cost recovery.
Key financial metrics
| CenterPoint Energy consolidated | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $2.620 billion | $2.779 billion |
| Operating income | $616 million | $541 million |
| Net income | $350 million | $325 million |
| Income available to common shareholders | $350 million | $313 million |
| Diluted EPS | $0.55 | $0.49 |
| Operating margin | 23.5% | 19.5% |
| Cash from operations | $538 million | $1.713 billion |
| Capital expenditures | $845 million | $1.123 billion |
Operating margin is operating income divided by revenue. Net income and EPS increased, while operating cash flow fell sharply. Cash and cash equivalents were $161 million at quarter-end ($179 million including restricted cash). Long-term debt, net, was $18.117 billion; the balance sheet also lists $850 million of current other long-term debt and $178 million of current VIE securitization bonds. Commercial paper outstanding was $1.677 billion. The Registrants reported compliance with debt covenants and access to $4.0 billion of revolving facilities.
Material changes versus the prior comparable period
- Consolidated revenue declined 6%, primarily reflecting lower natural-gas commodity costs passed through to customers and lower natural-gas throughput. Those pass-through costs also reduced reported expenses, supporting higher operating income.
- Natural Gas segment net income increased $49 million to $283 million, despite lower revenue and throughput; customer rates and rate design contributed to results. Electric segment net income was $121 million, down $2 million.
- Houston Electric revenue increased to $901 million from $792 million, but net income declined to $99 million from $108 million as higher operating, depreciation and interest costs largely offset revenue growth.
- Corporate and Other results worsened by $10 million, mainly reflecting $18 million higher borrowing costs, partly offset by the absence of $12 million in preferred dividends paid in Q1 2023.
- Operating cash flow was lower than in Q1 2023, which included approximately $1.1 billion of Texas customer rate-relief securitization proceeds recognized as a government grant. Changes in regulatory assets and liabilities also materially affected year-over-year cash flow.
- Reported earnings included fair-value movements on securities related to ZENS: an $83 million loss on equity securities and an $85 million gain on indexed debt securities in Q1 2024, versus a $38 million gain and $39 million loss, respectively, in Q1 2023.
Outlook, management commentary, risks and unusual items
- No full-year earnings or EPS guidance is provided in the supplied filing text. Management expects remaining 2024 capital expenditures of $2.858 billion for CenterPoint, including $1.442 billion for Houston Electric and $1.093 billion for CERC; these subsidiary figures are included within the consolidated amount. The parent also expects $850 million of senior notes to mature during the remaining nine months of 2024.
- Management expects cash needs to be funded through operating cash flow, debt and commercial-paper issuance, credit facilities, and potentially common-stock issuance. Financing may not be available on acceptable terms.
- On February 19, 2024, CERC agreed to sell its Louisiana and Mississippi natural-gas local distribution businesses for $1.2 billion, subject to adjustments and regulatory and other closing conditions. Closing is expected by the end of Q1 2025. The businesses were classified as held for sale; no gain or loss was recorded on classification. Their Q1 2024 pretax income was $41 million. The sale is not presented as discontinued operations.
- CenterPoint has a $500 million at-the-market equity program. It issued $3 million of shares in Q1; in April, after quarter-end, it issued shares for $182 million net proceeds. The program had $313 million of capacity remaining as of April 30, 2024.
- Rate proceedings are important to future recovery and earnings. Houston Electric filed for a rate increase of approximately $17 million for retail customers and $43 million for wholesale transmission service. CERC requested a $37 million Texas gas rate increase; a settlement agreement was filed in April. Minnesota gas and Indiana Electric rate cases also seek increases, with decisions pending.
- Houston Electric’s PUCT-approved TEEEF recovery agreement is in effect. A separate resiliency plan filed in April seeks approval for an estimated $2.2 billion of capital costs and $86 million of incremental operating costs over three years; a decision is expected in Q4 2024.
- Winter Storm Uri litigation remains unresolved. The company says it cannot estimate a range of potential losses; an insurer denied coverage for intentional-injury allegations in gas-market litigation. Regulatory recovery of remaining Louisiana and Minnesota storm gas costs is also subject to approval.
- Other risks include severe weather and restoration costs, rate-case outcomes and delayed cost recovery, interest rates and credit ratings, supply-chain and project-cost pressures, REP/customer payment risk, environmental regulation, and potential costs associated with legacy coal-ash sites. The filing says there were no material changes to risk factors from the 2023 Form 10-K.
Important facts for investors to verify
- Track regulatory approvals, final purchase-price adjustments, and the expected Q1 2025 closing of the Louisiana and Mississippi business sale.
- Review outcomes of pending rate cases and the recoverability and timing of regulatory assets, including storm costs and TEEEF costs.
- Monitor cash generation against capital spending, debt maturities, commercial-paper balances, and planned financing or equity issuance.
- Assess the potential financial exposure and insurance coverage for Winter Storm Uri litigation; management cannot currently quantify possible losses.
- Distinguish recurring operating performance from commodity-cost pass-throughs and volatile ZENS-related fair-value gains and losses.