Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - CENTERPOINT ENERGY INC | exhibit992.htm |
| 8-K - 8-K - CENTERPOINT ENERGY INC | a8-k201viscoclosing.htm |
Exhibit 99.1
CENTERPOINT ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On April 9, 2020, Vectren Utility Services, Inc., an Indiana corporation (the “Seller”) and wholly-owned subsidiary of CenterPoint Energy, Inc. (the “Company”), completed the sale (the “Disposition”) contemplated by the Securities Purchase Agreement (the “Purchase Agreement”) dated as of February 3, 2020, by and among the Company, PowerTeam Services, LLC, a Delaware limited liability company (the “Buyer”), and, solely for purposes of Section 10.17 of the Purchase Agreement, Vectren Corporation (“Vectren”), an Indiana Corporation, pursuant to which the Company sold all of the membership interests in Vectren Infrastructure Services Corp. (“VISCO”), consisting of its infrastructure services reportable segment (the “Businesses”) to the Buyer for $850 million, subject to customary adjustments set forth in the Purchase Agreement, including adjustments based on net working capital at closing, indebtedness, cash and cash equivalents and transaction expenses. In accordance with the Purchase Agreement, VISCO was converted from a corporation to a limited liability company that was disregarded for federal income tax purposes immediately prior to the closing. The Disposition was considered an asset sale for tax purposes requiring the net deferred tax liabilities of approximately $123 million as of December 31, 2019 to be recognized; therefore, any deferred tax assets and liabilities within VISCO were not included in the carrying amount of the assets and liabilities purchased by the Buyer.
The Disposition constitutes a significant disposition for purposes of Item 2.01 of Current Report on Form 8-K. The Company acquired the Businesses on February 1, 2019 as part of its acquisition of Vectren. As a result, the following unaudited pro forma consolidated statement of operations for the year ended December 31, 2019 is presented as if the Disposition and related events had occurred on January 1, 2019. The following unaudited pro forma consolidated balance sheet as of December 31, 2019 is presented as if the Disposition and related events had occurred on December 31, 2019. The Disposition represents a strategic shift that will have a major effect on the Company’s operations and financial results. Accordingly, the Company expects to apply the discontinued operations treatment for the Disposition in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
The unaudited consolidated pro forma financial statements have been derived from historical financial statements prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and are presented based on information currently available. They are intended for informational purposes only and are not intended to represent the Company’s financial position or results of operations had the Disposition and related events occurred on the dates indicated, or to project the Company’s financial performance for any future period. Pro forma adjustments have been made for events that are directly attributable to the Disposition, factually supportable and, with respect to the unaudited pro forma consolidated statements of operations, expected to have a continuing impact on the Company’s consolidated operating results.
The unaudited pro forma consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and should be read in conjunction with the following: (i) the accompanying notes to the unaudited pro forma consolidated financial statements; and (ii) the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
CENTERPOINT ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
December 31, 2019
CenterPoint Energy Historical | Pro Forma Adjustments | CenterPoint Energy Pro Forma | |||||||||||
(In Millions) | |||||||||||||
Current Assets: | |||||||||||||
Cash and cash equivalents | $ | 241 | $ | 883 | a | $ | 1,124 | ||||||
Investment in marketable securities | 822 | — | 822 | ||||||||||
Accounts receivable, net | 1,249 | (192 | ) | b | 1,057 | ||||||||
Accrued unbilled revenues | 586 | (109 | ) | b | 477 | ||||||||
Natural gas and fuel inventory | 277 | — | 277 | ||||||||||
Materials and supplies | 269 | (6 | ) | b | 263 | ||||||||
Non-trading derivative assets | 136 | — | 136 | ||||||||||
Taxes receivable | 106 | — | 106 | ||||||||||
Prepaid expenses and other current assets | 161 | (4 | ) | b | 157 | ||||||||
Total current assets | 3,847 | 572 | 4,419 | ||||||||||
Property, Plant and Equipment, net | 20,945 | (295 | ) | 20,650 | |||||||||
Other Assets: | |||||||||||||
Goodwill | 5,164 | (220 | ) | b | 4,944 | ||||||||
Regulatory assets | 2,117 | — | 2,117 | ||||||||||
Non-trading derivative assets | 58 | — | 58 | ||||||||||
Investment in unconsolidated affiliate | 2,408 | — | 2,408 | ||||||||||
Preferred units – unconsolidated affiliate | 363 | — | 363 | ||||||||||
Intangible assets | 321 | (207 | ) | b | 114 | ||||||||
Other | 216 | (26 | ) | b | 190 | ||||||||
Total other assets | 10,647 | (453 | ) | 10,194 | |||||||||
Total Assets | $ | 35,439 | (176 | ) | 35,263 | ||||||||
CENTERPOINT ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET — (continued)
December 31, 2019
CenterPoint Energy Historical | Pro Forma Adjustments | CenterPoint Energy Pro Forma | |||||||||||
(In Millions) | |||||||||||||
Current Liabilities: | |||||||||||||
Current portion of VIE Securitization Bonds long-term debt | $ | 231 | $ | — | $ | 231 | |||||||
Indexed debt, net | 19 | — | 19 | ||||||||||
Current portion of other long-term debt | 618 | — | 618 | ||||||||||
Indexed debt securities derivative | 893 | — | 893 | ||||||||||
Accounts payable | 1,138 | (45 | ) | b | 1,093 | ||||||||
Taxes accrued | 241 | (2 | ) | b | 397 | ||||||||
158 | c | ||||||||||||
Interest accrued | 158 | — | 158 | ||||||||||
Non-trading derivative liabilities | 125 | — | 125 | ||||||||||
Due to ZENS note holders | 51 | — | 51 | ||||||||||
Other | 414 | (40 | ) | b | 374 | ||||||||
Total current liabilities | 3,888 | 71 | 3,959 | ||||||||||
Other Liabilities: | |||||||||||||
Deferred income taxes, net | 3,928 | (123 | ) | d | 3,805 | ||||||||
Non-trading derivative liabilities | 29 | — | 29 | ||||||||||
Benefit obligations | 754 | — | 754 | ||||||||||
Regulatory liabilities | 3,474 | — | 3,474 | ||||||||||
Other | 763 | (16 | ) | b | 747 | ||||||||
Total other liabilities | 8,948 | (139 | ) | 8,809 | |||||||||
Long-term Debt: | |||||||||||||
VIE Securitization Bonds, net | 746 | — | 746 | ||||||||||
Other long-term debt, net | 13,498 | — | 13,498 | ||||||||||
Total long-term debt, net | 14,244 | — | 14,244 | ||||||||||
Shareholders’ Equity: | |||||||||||||
Cumulative preferred stock | 1,740 | — | 1,740 | ||||||||||
Common stock | 5 | — | 5 | ||||||||||
Additional paid-in-capital | 6,080 | — | 6,080 | ||||||||||
Retained earnings | 632 | (108 | ) | e | 524 | ||||||||
Accumulated other comprehensive loss | (98 | ) | — | (98 | ) | ||||||||
Total shareholders’ equity | 8,359 | (108 | ) | 8,251 | |||||||||
Total Liabilities and Shareholders’ Equity | $ | 35,439 | $ | (176 | ) | $ | 35,263 | ||||||
CENTERPOINT ENERGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
For the Year Ended December 31, 2019
CenterPoint Energy Historical | Pro Forma Adjustments | CenterPoint Energy Pro Forma | |||||||||||
(In Millions, Except Per Common Share Amounts) | |||||||||||||
Revenues: | |||||||||||||
Utility revenues | $ | 7,162 | $ | — | $ | 7,162 | |||||||
Non-utility revenues | 5,139 | (1,190 | ) | f | 3,949 | ||||||||
Total | 12,301 | (1,190 | ) | 11,111 | |||||||||
Expenses: | |||||||||||||
Utility natural gas, fuel and purchased power | 1,683 | — | 1,683 | ||||||||||
Non-utility cost of revenues, including natural gas | 4,029 | (309 | ) | f | 3,720 | ||||||||
Operation and maintenance | 3,550 | (714 | ) | f | 2,836 | ||||||||
Depreciation and amortization | 1,287 | (50 | ) | f | 1,237 | ||||||||
Taxes other than income taxes | 478 | (2 | ) | f | 476 | ||||||||
Goodwill impairment | 48 | — | 48 | ||||||||||
Total | 11,075 | (1,075 | ) | 10,000 | |||||||||
Operating Income | 1,226 | (115 | ) | 1,111 | |||||||||
Other Income (Expense): | |||||||||||||
Gain on marketable securities | 282 | — | 282 | ||||||||||
Loss on indexed debt securities | (292 | ) | — | (292 | ) | ||||||||
Interest and other finance charges | (528 | ) | — | (528 | ) | ||||||||
Interest on Securitization Bonds | (39 | ) | — | (39 | ) | ||||||||
Equity in earnings of unconsolidated affiliates, net | 230 | — | 230 | ||||||||||
Other, net | 50 | (1 | ) | f | 49 | ||||||||
Total | (297 | ) | (1 | ) | (298 | ) | |||||||
Income Before Income Taxes | 929 | (116 | ) | 813 | |||||||||
Income tax expense | 138 | (29 | ) | g | 109 | ||||||||
Net Income | 791 | (87 | ) | 704 | |||||||||
Preferred stock dividend requirement | 117 | — | 117 | ||||||||||
Income available to common shareholders | $ | 674 | $ | (87 | ) | $ | 587 | ||||||
Basic Earnings Per Common Share | $ | 1.34 | $ | 1.17 | |||||||||
Diluted Earnings Per Common Share | $ | 1.33 | $ | 1.16 | |||||||||
Weighted Average Common Shares Outstanding, Basic | 502 | 502 | |||||||||||
Weighted Average Common Shares Outstanding, Diluted | 505 | 505 | |||||||||||
CENTERPOINT ENERGY, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) | Basis of presentation |
The pro forma statements of income for the year ended December 31, 2019, give effect to the Disposition as if it were completed on January 1, 2019. The pro forma balance sheet as of December 31, 2019, gives effect to the Disposition as if it were completed on December 31, 2019.
The pro forma financial statements have been derived from the historical consolidated financial statements of the Company. The historical consolidated financial statements have been adjusted in the pro forma financial statements to give effect to pro forma events that are (i) directly attributable to the Disposition, (ii) factually supportable and (iii) with respect to the pro forma statements of income, expected to have a continuing impact on the Company’s consolidated operating results.
(2) | Pro Forma Adjustments |
The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable.
(a) | Reflects estimated cash proceeds from the Disposition of $883 million, representing the gross sales price of $850 million, plus $48 million proceeds from working capital, less estimated transaction costs of $15 million. These transactions costs have not been reflected on the pro forma statements of income as they will not have an ongoing impact on the Company. |
(b) | Reflects the assets and liabilities purchased by the Buyer in the Disposition. |
(c) | Reflects $158 million of current tax expense due to the recognition of tax gain on the Disposition. |
(d) | Reflects deferred tax benefit of $123 million due to the Disposition being treated as an asset sale for tax purposes. |
(e) | Reflects the estimated after-tax loss on the Disposition of $108 million, which was calculated as follows: |
(in millions) | ||||
Estimated proceeds of the Disposition, net of transaction costs (1) | $ | 883 | ||
Assets of the Businesses | (1,059 | ) | ||
Liabilities of the Businesses | 103 | |||
Pre-tax loss of the Disposition | (73 | ) | ||
Current tax expense as a result of tax gain on the Disposition | (158 | ) | ||
Recognition of deferred tax benefit due to the Disposition | 123 | |||
After-tax loss of the Disposition | $ | (108 | ) | |
(1) Reflects the estimated net proceeds received, inclusive of working capital and other customary adjustments, as if the transaction had closed on December 31, 2019.
(f) | Reflects the elimination of revenues and expenses representing the historical results of the Businesses as a result of the Disposition. |
(g) | Reflects the income tax expense calculated using the statutory income tax rate of 25% for the Company for the year ended December 31, 2019. The assumed statutory tax rates do not take into account any possible future tax events that may impact the Company. |