CenterPoint Energy Exec Insights: Field Services, Opps

On Thursday, CenterPoint Energy Inc (NYSE:CNP) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite revealed.

Field Services

Carl Kirst – BMO Capital Markets: Couple of quick questions on Field Services if I could and last call, we were targeting the Mississippi Lime just because of the lack of infrastructure and it was sort of early days. I didn’t know as that area kind of continues to crop up on several competitors radar screen. How you’re currently seeing progress in that area, if there is any further color you can add there.

C. Gregory Harper – SVP and Group President Pipelines and Field Services: This is Greg. We announced a project in that area for the White Eagle a couple months ago to garner some traction. We continue to discuss with several producers about that project. We’re finding some of the larger producers that have more acreage have deferred their RFP processes to midyear to end of the year and so we’re kind of still in sync with what’s going on, on the timing there , but we’re very actively pursuing that Mississippi Lime area.

A Closer Look: CenterPoint Energy Earnings Cheat Sheet>>

Carl Kirst – BMO Capital Markets: Just a follow-up on Field Service if I could, I just want to make sure I understand if there are any nuances to be aware of sequentially as we look from fourth quarter of ’11 to first quarter, the volume seem to be very much intact, the EBIT is obviously down one of the easy pings as they retained field in the lower gas prices. That didn’t seem to me that that would be the whole of it and I just want to make sure there isn’t anything else there going on to be aware of?

Gary L. Whitlock – EVP and CFO: I think for the top line definitely fuel – the $0.50 difference from fourth quarter to first quarter on same amount of retained gas is going to drive some (indiscernible) in and of itself. The other is these expenses are where we had brought in some projects at the very end of last year, so we’ll have a little bit higher expenses and even at the EBIT level, not EBITDA but we kick-in depreciation at the beginning of the year as well on 1.29 assets.

Carl Kirst – BMO Capital Markets: Just actually one other question if I could. Are you guys okay with breaking out on CES sort of the retail and wholesale components going forward for the first quarter I should say?

David M. McClanahan – President and CEO: Carl, this is David. We really don’t look at that business now as retail versus wholesale. We have some wholesale assets, these transportation assets and storage assets, but they’re really designed to serve our retail customer base. So we really look at this as a pure retail business that – we do optimize around those assets and have made money in the past, but we don’t really now think about that as a separate division or line of business within CES.

Opportunities

Ali Agha – SunTrust: David, in the past, you had mentioned to us, as you were thinking about the use of cash and that you would look for opportunity, be disciplined, but as summer rolled around, and you had not seen opportunities, you would reassess what the plans were going to be. So just wanted to get a little more insight on that thinking. The debt paydown, I see that, but the kind of returns, 5% or thereabouts. I am assuming you are expecting a higher return from the remaining $1.1 billion or so of cash. So we are getting close to the middle of the year. Can you just tell us what is the opportunity out there, if it’s not Field Services, is it more regulated utility. What should we be looking for?

David M. McClanahan – President and CEO: Ali, we did talk about midyear this year we’d give you an update about the opportunities we see, and we still plan to do that on our next call. But we are pursuing a number of opportunities, particularly in the midstream area right now. We are seeing a lot of things pop up, whether it’s opportunity to buy some existing assets from producers, whether it’s to respond to RFPs, to put a new infrastructure, I would expect by the next call, we are going to have insight around our opportunities there, and whether or not we are going to think we are going to be successful. As Greg mentioned, we don’t control the timing of a lot of these things and then a producer, if they pull an RFP and push it off until the fourth quarter, we can’t control that. But I think we will have more insight the next time we talk and we intend to give you more color on that.

Ali Agha – SunTrust: One follow-up excluding that use of that cash, if you just look at your existing portfolio, both the regulated, non-regulated and opportunities and the growth embedded in there, what kind of EPS growth rate do you believe this portfolio can generate for you off this 2012 base you have given us?

Gary L. Whitlock – EVP and CFO: Our internal target is we want to grow EPS about 4% to 6% annually. It can be a little lumpy in there but we think this we have the kind of opportunities to do that. You heard both Scott and Tracy talk about rate base growth at the electric side, its 4% on the Gas Distribution side it’s 6%. In and of itself I think on the pure regulated businesses, we are going to have some good growth there. But we’ll need to have some growth in the midstream business to achieve the upper end of that growth range.

Ali Agha – SunTrust: Just to be clear, not factoring in anything from that extra $1 billion in cash or is that also incorporated in there?

David M. McClanahan – President and CEO: We are going to be using probably some of that $1 billion in these regulated businesses, because we are spending between just Houston Electric and the Gas Distribution business, we’ll spend almost $900 million in 2012. So there is a lot of growth there, but on top of — and either we used the money that we have now and if we use that on something else, we’ll have to probably finance part of that in the future. But I think we have plenty of opportunities on our pure regulated businesses to grow earnings.