CenterPoint Energy Inc. saw its net income for the second quarter of 2003 reach only $63 million, or $0.21 per diluted share, compared to $236 million, or $0.79 per diluted share, for the same period of 2002. The large gap was mainly attributable to the company recording income from discontinued operations in 2Q2002 of $150 million primarily related to Reliant Resources Inc.’s (RRI) results.

As previously reported, the company distributed its investment in RRI to CenterPoint Energy shareholders on September 30, 2002, and RRI’s historical results are reported as discontinued operations.

Despite the profit decline, the company saw revenue increase 16% to $2.09 billion from $1.8 billion a year earlier, led by strong results from the electric generation segment. CenterPoint reported income from continuing operations of $83 million, or $0.27 per diluted share for the quarter ended June 30, compared to income from continuing operations of $86 million, or $0.29 per diluted share for the second quarter of 2002.

Part of the discrepancy between quarters comes from the company recording a 2Q2003 $20 million loss from discontinued operations primarily related to the company’s planned sale of its energy management services business.

“I’m very pleased with the financial results of the second quarter, especially in light of much higher interest costs this year,” said David McClanahan, CEO of CenterPoint Energy. “Each of our business segments reported improved operating performance even after taking into account a significant increase in pension and insurance costs.

“In addition, we have made substantial progress in improving our financial stability and liquidity,” added McClanahan. “We continued to access the capital markets during the second quarter, and so far this year we have raised over $3 billion. We used these proceeds to pre-fund maturing debt, to refinance higher coupon debt, to pay down the company’s bank facility and enhance our liquidity.”

Segment results were led heavily by CenterPoint’s electric generation segment — Texas Genco — which the company holds an 81% stake in. Texas Genco owns 14,175 MW of electric generation in Texas and sells capacity, energy, and ancillary services in the Texas electric market, primarily through capacity auctions. It reported operating income of $50 million for the second quarter of 2003 compared to an operating loss of $29 million for the same period of 2002. The spike was mainly attributed to much higher wholesale electricity prices due to substantially higher natural gas prices.

The electric transmission & distribution segment reported operating income of $235 million in the second quarter of 2003 consisting of $134 million for the regulated electric transmission & distribution utility and non-cash operating income of $101 million associated with generation-related regulatory assets. The results mark a decline from year ago levels, when the company posted operating income of $275 million, consisting of $105 million for the regulated electric transmission & distribution utility and non-cash operating income of $170 million associated with generation-related regulatory assets.

The natural gas distribution segment reported operating income of $21 million for the second quarter of 2003 compared to the prior year’s second quarter operating income of $11 million. CenterPoint said the increase was attributable to continued customer growth, higher revenues from rate increases implemented late last year and improved margins from commercial and industrial sales. The pipelines and gathering segment reported operating income of $42 million in the second quarter of 2003 compared to $39 million for the same period of 2002.

Looking ahead, CenterPoint confirmed its 2003 earnings guidance of $0.85 to $1.00 per diluted share from continuing operations. “This reflects the company’s outlook for continued solid operational performance by its business segments,” the company said.

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