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CenterPoint Energy Announces Full Exit from Midstream Interest and Receives Improved Credit Thresholds from Moody’s
Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Very Positive)
Tags
Rhea-AI Summary
CenterPoint Energy, Inc. (NYSE: CNP) has completed its exit from midstream interests by selling its Energy Transfer holdings, realizing a 20% premium compared to the ET common unit price at the time of the Enable merger announcement on February 12, 2021. The proceeds will be used to reduce debt. Moody's revised CNP's cash flow to debt ratio downgrade threshold to 13%, reflecting improved business risk. CenterPoint aims for over $40 billion in capital investments and targets 8% non-GAAP EPS growth through 2024, with long-term plans of 6-8% growth through 2030.
Positive
Completed exit from midstream interests, improving focus on regulated utility business.
Realized approximately 20% premium on ET common unit sales.
Moody's revised cash flow to debt ratio downgrade threshold to 13%, indicating improved financial stability.
Plans for over $40 billion in capital investments over the next 10 years.
Negative
None.
HOUSTON--(BUSINESS WIRE)--
CenterPoint Energy, Inc. (NYSE: CNP) or “CenterPoint” continues to execute on its long-term strategic plan of becoming a pure-play regulated utility, with an improved business risk profile and strengthened balance sheet, to benefit both its customers and investors.
The company today announced it has entirely exited its midstream interest with the sale of its Energy Transfer (“ET”) holdings, including its remaining 51 million ET common units and all its ET Series G preferred units.
Including the previously announced transactions, CenterPoint monetized its ownership in ET common units at an approximate 20% premium on an aggregated basis to the ET common unit price when the merger between ET and Enable Midstream Partners, LP (“Enable”) was announced on February 12, 2021. The company fully exited the stake within four months of merger close. The net proceeds will be used to pay down associated debt and taxes from the transaction.
Additionally, Moody’s Investors Service, Inc. recently revised the CenterPoint Energy, Inc. downgrade threshold of cash flow from operations (pre-working capital) to debt ratio to 13% from 14%. The agency noted the company’s recent credit strengths, including improving business risk profile with the exit of the midstream business, its characterization of the company as diverse group of regulated utilities operating in credit supportive regulatory environments, and good economic and regulatory diversity across the company’s service territories.
“As committed, we have taken decisive actions to align our interests more closely with those of our customers and our investors, including refocusing on our core regulated utility businesses. We are committed to delivering on our strategic plan, which includes more than $40 billion of capital investments in our utility footprint over our 10-year financial plan, as well as 8% non-GAAP EPS growth annually through 2024 and the mid-to-high end of 6-8% annual growth of non-GAAP EPS thereafter through 2030. As we extend our track record of meeting and exceeding expectations, we believe our accelerated exit from midstream well ahead of our goal of year-end 2022 demonstrates that we are a management team that is committed to becoming a premium utility with industry-leading growth,” said President and CEO Dave Lesar.
Lesar continued, “We believe that these actions to improve our business risk profile and strengthen our balance sheet, coupled with investments in our pure-play regulated business and efficient recycling of capital, position us firmly on that path. Our long-term strategy also supports a transition to a cleaner energy future that will benefit our customers and our investors.”
About CenterPoint Energy, Inc.
As the only investor owned electric and gas utility based in Texas, CenterPoint Energy, Inc. (NYSE: CNP) is an energy delivery company with electric transmission and distribution, power generation and natural gas distribution operations that serve more than 7 million metered customers in Indiana, Louisiana, Minnesota, Mississippi, Ohio and Texas. As of December 31, 2021, the company owned approximately $38 billion in assets. With approximately 9,400 employees, CenterPoint Energy and its predecessor companies have been in business for more than 150 years. For more information, visit CenterPointEnergy.com.
Earnings Outlook
As included in this press release, non-GAAP diluted earnings per share (“non-GAAP EPS”) is not a generally accepted accounting principles (“GAAP”) financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance that excludes or includes amounts that are not normally excluded or included in the most directly comparable GAAP financial measure.
Non-GAAP EPS includes net income from the company’s Electric and Natural Gas segments, as well as after tax Corporate and Other operating income and an allocation of corporate overhead based upon Electric’s and Natural Gas’s relative earnings contribution. Corporate overhead consists primarily of interest expense, preferred stock dividend requirements, and other items directly attributable to the parent along with the associated income taxes.
Non-GAAP EPS guidance excludes:
Earnings or losses from the change in value of CenterPoint Energy’s 2.0% Zero-Premium Exchangeable Subordinated Notes due 2029 (“ZENS”) and related securities;
Gain and impact, including related expenses, associated with Arkansas and Oklahoma gas LDC sales; and
Income and expense related to ownership and disposal of ET common and Series G preferred units, and a corresponding amount of debt related to the units.
In providing this guidance, CenterPoint Energy does not consider the items noted above and other potential impacts such as changes in accounting standards, impairments or other unusual items, which could have a material impact on GAAP reported results for the applicable guidance period. The non-GAAP EPS guidance range also considers assumptions for certain significant variables that may impact earnings, such as customer growth and usage including normal weather, throughput, recovery of capital invested, effective tax rates, financing activities and related interest rates, and regulatory and judicial proceedings. To the extent actual results deviate from these assumptions, the non-GAAP EPS guidance range may not be met or the projected annual non-GAAP EPS growth rate may change. CenterPoint Energy is unable to present a quantitative reconciliation of forward-looking non-GAAP diluted earnings per share because changes in the value of ZENS and related securities, future impairments, and other unusual items are not estimable and are difficult to predict due to various factors outside of management’s control. Management evaluates CenterPoint Energy’s financial performance in part based on non-GAAP earnings per share. Management believes that presenting this non-GAAP financial measure enhances an investor’s understanding of CenterPoint Energy’s overall financial performance by providing them with an additional meaningful and relevant comparison of current and anticipated future results across periods. The adjustments made in this non-GAAP financial measure excludes items that Management believes do not most accurately reflect the company’s fundamental business performance. CenterPoint Energy’s non-GAAP diluted earnings per share measures should be considered as a supplement to, and not as a substitute for, or superior to, diluted earnings per share, which respectively are the most directly comparable GAAP financial measure. This non-GAAP financial measure also may be different than non-GAAP financial measures used by other companies.
Forward-looking Statements
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this news release, the words "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "may," "objective," "plan," "potential," "predict," "projection," "should," "target," "will" or other similar words are intended to identify forward-looking statements. These forward-looking statements are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual events and results may differ materially from those expressed or implied by these forward-looking statements. Any statements in this news release regarding capital investments, future earnings and guidance, including long-term growth rate, future financial performance and results of operations, including with respect to regulatory actions and recoverability of capital investments, and any other statements that are not historical facts are forward-looking statements. Each forward-looking statement contained in this news release speaks only as of the date of this release.
Important factors that could cause actual results to differ materially from those indicated by the provided forward-looking information include, but are not limited to, risks and uncertainties relating to: (1) CenterPoint Energy’s potential business strategies and strategic initiatives, restructurings, joint ventures and acquisitions or dispositions of assets or businesses, including the completed sale of our Natural Gas businesses in Arkansas and Oklahoma and the exit from midstream, which we cannot assure you will have the anticipated benefits to us; (2) industrial, commercial and residential growth in CenterPoint Energy’s service territories and changes in market demand; (3) CenterPoint Energy's ability to fund and invest planned capital, and timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment, including those related to Indiana Electric’s generation transition plan as part of its more recent IRP; (4) financial market and general economic conditions, including access to debt and equity capital and the effect on sales, prices and costs; (5) continued disruptions to the global supply chain; (6) actions by credit rating agencies, including any potential downgrades to credit ratings; (7) the timing and impact of regulatory proceedings and actions and legal proceedings, including those related to Houston Electric’s mobile generation leases; (8) legislative decisions, including tax and developments related to the environment such as global climate change, air emissions, carbon, waste water discharges and the handling of coal combustion residuals, among others, and CenterPoint Energy’s Net Zero targets; (9) the impact of the COVID-19 pandemic; (10) the recording of impairment charges; (11) weather variations and CenterPoint Energy’s ability to mitigate weather impacts, including impacts from the February 2021 winter storm event; (12) changes in business plans; (13) CenterPoint Energy’s ability to execute on its initiatives, targets and goals, including its Net Zero emission goals and operations and maintenance goals; and (14) other factors discussed CenterPoint Energy’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, including in the “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Information” sections of such report, and other reports CenterPoint Energy or its subsidiaries may file from time to time with the Securities and Exchange Commission.
