CenterPoint Energy Earnings Call Insights: Guidance Reduction and IPO Timeline

CenterPoint Energy (NYSE:CNP) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Guidance Reduction

Ali Agha – SunTrust Robinson Humphrey: I wanted to be clear. The $0.05 reduction in guidance for this year; is that primarily almost due to the near-term dilution from the MLP formation? Is that the way we should think about it? Is the $0.05 essentially coming from there?

David M. McClanahan – President and CEO: I think that’s the right way to think about it, yes, Ali.

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Ali Agha – SunTrust Robinson Humphrey: And then, should we think – I mean given Gary’s remarks that we should see this kind of a similar impact perhaps in ’14 before the accretion comes into play in ’15? Is that the profile roughly we should think about?

David M. McClanahan – President and CEO: I think you’re going to – this dilution will decline next year and then it’ll be accretive in 2015 based on our assumptions today. We have some things and hopefully we’ll be able to win some additional business. That will actually change that profile and make it a lot quicker than the base case we’re looking at. But it’s going to – the dilutive effect is going to be less next year and then it’ll be – (we think) it’ll be accretive in 2015.

Ali Agha – SunTrust Robinson Humphrey: My second question, David, previously you had highlighted, I think, about $500 million of excess cash at CenterPoint. I just wanted to get a sense of what that number would be right now. And given this MLP formation I’m assuming that cash is now available for CenterPoint to use for different areas and just building out its midstream operations. So, I was wondering what your priority would be for that excess cash now.

Gary L. Whitlock – EVP and CFO: Yeah, I’ll take that Ali. Look, as I said in my comments, as you know, we have paid down some debt. So, we have used substantially all the cash that we had, although we were in an invested position at the end of March. So, we have used that cash and then this year until we do the IPO we may have some additional cash that we inject into the joint venture depending on the timing of the CapEx there in the IPO. So I want you to think of the cash is effectively that we’ve had historically over the last couple of years or 18 months or so, we’ve applied that cash mainly to invest in some debt pay-down.

IPO Timeline

Matt Tucker – KeyBanc Capital Markets: Just a clarification on the timeframe you gave for the IPO. I heard 6 to 12 months. Was that for a completion of the IPO process and if so, do you have an expected timeframe for the S-1 filing?

David M. McClanahan – President and CEO: Yeah, it is for a completion. We’re working hard at that as we speak. We’re going to try to get the S-1 on file later on this year. We’d like to shoot for the September timeframe or later summer. It takes time to get all this through the SEC review and then make sure the markets are right as well. But we’re going to do that as quickly as we can to make sure we get the right value for it as well.

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Matt Tucker – KeyBanc Capital Markets: And then on the Electric side, you’ve called out some expenses that you expect to kind of reverse as the year progresses. Could you elaborate a little bit on that?

Scott M. Prochazka – EVP and COO: Matt, this is Scott. I’ll take that one. The delta we saw in performance quarter-over-quarter was driven by a couple of major things, one of which was the timing of the right-of-way, that was almost half of that delta. And the cause of that is last year in the first quarter about half of the right-of-way revenue we received in the year came in the first quarter whereas this year the right-of-way revenue is going to be skewed more towards the middle to the back end. So the quarter-over-quarter comparison was different by about half of that delta you saw. And on the other side of it, we saw some expenses are going to reverse as we go through the year. Some of it has to do with the fact that we’ve spent a little bit less capital than we had planned in this first quarter and as we spend more capital to make our full budget, we will make up some of that expense delta.

A Closer Look: Center Point Earnings Cheat Sheet>>