ALE Allete Inc

CenterPoint Energy Inc. (CNP), a domestic energy delivery company, reported first quarter 2013 results with adjusted earnings of 34 cents per share missing the Zacks Consensus Estimate of 37 cents. However, earnings were flat year over year.

The company’s regulated gas distribution unit and competitive natural gas sales and services unit performed well. Also, the field services unit at the midstream business continued to benefit from its contracting strategy.

Operational Results

CenterPoint Energy’s total revenue for the reported quarter increased 14.6% year over year to $2,388 million. The figure also easily surpassed the Zacks Consensus Estimate of $2,150 million.

Natural gas expenses were up 26.3% year over year to $1,224 million. Operation and maintenance expense were up 6.4% year over year to $484 million. Overall, operating income declined 1.8% year over year to $332 million.

Segment Results

Electric Transmission & Distribution

During the quarter, the segment generated operating income of $84 million, down 21.5% year over year. Operating income included $49 million from the regulated electric transmission & distribution utility operations (“TDU”) and $35 million from Transition and System Restoration Bonds.

Operating income at TDU was down 30% year over year due to lower revenues, higher expenses, and increased depreciation and other taxes.

Natural Gas Distribution

Segment operating income was $139 million, up from $121 million in the year-ago quarter. The upside reflects return to normal winter weather, rate changes and customer growth. However, these positives were partially offset by an increase in depreciation.

Competitive Natural Gas Sales and Services

Segment operating income was $7 million versus an operating income of $1 million in the year-ago quarter.

Interstate Pipelines

The segment generated operating income of $52 million during the quarter, down 13.3% from the prior-year quarter. The decline reflects decline in off system transportation revenue, reduction in pricing and volumes on some contract renewals and declines in ancillary services.

Field Services

The Field Services segment reported an operating income of $53 million in the quarter, up 12.7% year over year. The results were driven by acquisitions completed in 2012, the timing of revenue from contracts with throughput commitments and higher natural gas prices on the sale of retained gas.  However, these positives were partially offset by reduced gathering volumes and lower liquids pricing.

Other Operations

Operating loss at the segment amounted to $3 million versus a profit of $2 million in the year-ago quarter.

Financial Condition

As of Mar 31, 2013, CenterPoint Energy reported cash and cash equivalents of $245 million, down from $646 million at the end of Dec 31, 2012. Total long-term debt was $8,130 million, down from $8,357 million at the end of Dec 31, 2012.

Capital expenditure during the quarter was $250 million, up from $242 million in first quarter of 2012.

Guidance

The company expects earnings in the range of $1.17 to $1.25 for full-year 2013. This guidance reflects the company’s performance and the closing of midstream partnership on May 1, 2013.  Yesterday, CenterPoint Energy, OGE Energy Corp. (OGE) and ArcLight Capital Partners, LLC declared the closing of a previously announced partnership that includes CenterPoint Energy's interstate pipelines and field services businesses and the midstream business of Enogex LLC. The partnership will be managed by a general partner whose governance will be shared by CenterPoint Energy and OGE on an equal basis.

At the Peer

Last month, CMS Energy Corporation (CMS) announced first-quarter 2013 earnings per share of 53 cents on both adjusted and GAAP basis, beating the Zacks Consensus Estimate of 46 cents. Earnings were 43.2% higher than 37 cents earned in the year-ago quarter.

Zacks Rank

CNP Energy presently retains a short-term Zacks #3 Rank (Hold). In the near term, we would advise investors to accumulate its short-term Zacks Rank #2 (Buy) peer ALLETE, Inc. (ALE).

 
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