CenterPoint Energy Inc (CNP) 2015 Q2 法說會逐字稿

Good morning and welcome to CenterPoint Energy's second-quarter 2015 earnings conference call with senior management.

(Operator Instructions).

I will now turn the call over to David Mordy, Director of Investor Relations.

Mr. Mordy?

Thank you, Ginger.

Good morning, everyone.

Welcome to our second-quarter 2015 earnings conference call.

Thank you for joining us today.

Scott Prochazka, President and CEO; Tracy Bridge, Executive Vice President and President of our Electric Division; Joe McGoldrick, Executive Vice President and President of our Gas Division; and Bill Rogers, Executive Vice President and Chief Financial Officer, will discuss our second-quarter 2015 results and provide highlights on other key areas.

We also have with us other members of management who may assist in answering questions following the prepared remarks.

In conjunction with the call today we will be using slides which can be found under the Investors section on our website, CenterPointEnergy.com.

For a reconciliation of the earnings guidance provided in today's call, please refer to our earnings press release which, along with our Form 10-Q, has been posted on our website.

Please note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and post to the Investors section of our website.

In the future we will continue to use these channels to communicate important information and encourage you to review the information on our website.

Today management is going to discuss certain topics that will contain projections and forward-looking information that are based on management's beliefs, assumptions and information currently available to management.

These forward-looking statements are subject to risks or uncertainties.

Actual results could differ materially based upon factors including weather variations, regulatory action, economic conditions, commodity prices, changes in our service territories, and other risk factors noted in our SEC filings.

We will also discuss our guidance for 2015.

The utility operations guidance range considers performance to date and certain significant variables that may impact earnings such as weather, regulatory and judicial proceedings, volumes, commodity prices, ancillary services, tax rates, interest rates and financing activities.

In providing this guidance the Company does not include other potential impacts such as changes in accounting standards, the value of ZEN securities and the related stocks or the timing effects of mark-to-market and inventory.

In providing midstream investment guidance the Company takes into account such factors as Enable's most recent public forecasts, effective tax rate, the amortization of our basis difference in Enable and other factors.

The Company does not include other potential impacts such as the impact of any changes in accounting standards or Enable's unusual items.

Before Scott begins I would like to mention that this call is being recorded.

Information on how to access that replay can be found on our website.

And with that I will now turn the call over to Scott.

Thank you, David, and good morning, ladies and gentlemen.

Thank you for joining us today and thank you for your interest in CenterPoint Energy.

This morning, as noted on slide 4, we reported second-quarter 2015 earnings of $77 million, or $0.18 per diluted share, compared with $107 million, or $0.25 per diluted share, in the same quarter of last year.

Using the same basis that we use when providing guidance, second-quarter 2015 adjusted earnings would have been $0.19 per diluted share compared with $0.21 for 2014.

On a guidance basis utility operations contributed $0.13 per diluted share versus $0.10 in 2014.

Midstream investments contributed $0.06 per diluted share compared to $0.11 in 2014.

Bill will discuss these results in more detail later in the call.

Our utility operations continue to perform well.

We have added over 85,000 metered customers during the last 12 months.

Growth along with system improvements remain key drivers behind our robust capital spending.

We are carefully managing costs as O&M expenses, net of revenue offsets, are up 1% versus the second quarter of 2014.

We continue to execute our regulatory strategy, filing rate increases and annual recovery mechanisms as needed, in pursuit of earning our allowed returns.

Our growing service territories and capital plan, coupled with constructive regulatory environments and disciplined O&M spending, continue to support strong performance by our utility operations.

Next let me turn to Enable Midstream, which we highlight on slide 5. As many of you know, Enable recently shared its growth outlook of 3% to 7% per unit annual distribution growth in 2016 and 2017.

This includes a forecast for high-single-digit growth in natural gas gathering volumes, 25% growth in natural gas processing volumes, and a doubling of Crude Oil Gathering volumes.

As Enable said on their earnings call, they are well positioned for growth with assets in some of the best shale plays including the SCOOP, the STACK, Cana-Woodford and Cleveland Sands plays.

Enable has connected more wells year to date through July of 2015 than year to date through July of 2014.

For 2016 and 2017 combined Enable's expansion capital outlook ranges from $1.6 billion to $2.5 billion.

We continue to believe in the value of our Enable Midstream investment and remain focused on providing governance in support of enhancing Enable's performance.

Overall I am pleased with our second-quarter results.

Utility operations experienced strong ongoing growth and Enable performed as anticipated in a challenging commodity market.

Today we are updating our dialogue regarding how we think about returning capital to our investors.

After consideration of the current market environment, input from the investment community and discussions with our Board, we believe an earnings-based approach to our dividend practice will help provide clarity, simplicity and consistency.

Our objective will simply be to grow our dividend in line with our consolidated earnings growth, which Bill will discuss in more detail later in the call.

I want to express my appreciation to our employees who, after a series of severe storms in April, May and June, worked countless hours to restore power safely and efficiently.

You may have seen some of the images of flooding in Houston on national news.

More than 25 inches of rain fell over two concentrated periods of time and our collective utility systems performed well.

The gas system was essentially not impacted by the rains and the customer effects of outages on our electric system were reduced by distribution automation.

Proactive communications to those customers enrolled in our new Power Alert service provided them with timely outage and restoration information.

I am extremely proud of our employees and their commitment to ensuring that every day our customers receive energy from safe, reliable energy delivery systems.

I will now ask Tracey and Joe to discuss quarter-over-quarter operating income as well as provide updates on their respective businesses.

Bill will follow by bridging operating income to EPS and contrasting our performance with last year's baseline number.

Tracy.

Thank you, Scott.

Houston Electric had a solid quarter consistent with our expectations.

As you can see on slide 8, second-quarter 2015 core operating income was $131 million compared with $115 million for the same period last year.

The business benefited from higher net transmission-related revenue, continued strong customer growth and a return to more normal weather.

These benefits were partially offset by an expected reduction in the equity return primarily related to true-up proceeds.

Houston Electric's customer growth remains strong.

Through the first half of the year we have added nearly 23,000 metered customers which equates to an annualized growth rate of 2%.

As we have mentioned in the past, our forecasted 2% customer growth equates to approximately $25 million to $30 million of incremental revenue annually.

Houston's 4.5% unemployment rate in June remains below the national average of 5.3% and our housing market remains tight at three-months supply versus a balanced supply of six months.

As the chart on slide 9 shows, employment growth may slow at times, but over the past 24 years our residential customer compound annual growth rate has slightly exceeded 2%.

Houston Electric continues to manage costs effectively.

During the second quarter of 2015 O&M expenses increased approximately 2% over the second quarter of 2014.

This growth rate excludes certain expenses that have revenue offsets.

We will strive to continue operating the business as efficiently as possible while maintaining a safe and reliable system to serve our growing customer base.

As you will see on slide 10, we have had a busy quarter on the regulatory front and we are pleased with the results.

During the quarter we filed our first distribution cost recovery factor filing, or DCRF, which allows for rate adjustments associated with recovery of distribution capital invested since our last general rate case.

A settlement was reached and approved for an annual revenue increase of $13 million which will go into effect on September 1. Additionally, in December -- excuse me, additionally in June the DCRF Sunset extension legislation was enacted which extends the mechanism's Sunset until September 2019 allowing us to utilize the mechanism up to three additional times before a general rate case is required.

We also filed two other cost recovery mechanisms which include our first of two planned transmission cost of service, or TCOS, filings this year and our annual Energy Efficiency Cost Recovery Factor filing.

Our TCOS filing was submitted on June 26 and seeks an annual revenue increase of $13.7 million.

We anticipate a decision on this filing during the third quarter of this year.

Our Energy Efficiency Cost Recovery Factor filing seeks to recover next year's estimated expenses associated with our energy efficiency program, as well as a $7 million incentive related to the program's performance in 2014.

Finally, in April we filed an application for a certificate of convenience and necessity for our Brazos Valley connection transmission line.

This transmission line is the largest capital project in our five-year plan.

32 alternative routes were submitted to the PUC and the final route they select will determine the estimated capital cost of the project.

We anticipate a commission decision on both the route of and needs for the transmission line during the fourth quarter of 2015 with construction of the project being completed by mid-2018.

The critical status granted to this project highlights the load growth in our service territory -- excuse me, highlights the load growth our service territory is experiencing.

As an example of that load growth, during the last week in July Houston Electric hit four consecutive July peak loads.

I am pleased with Houston Electric's second-quarter performance.

Growth remains strong and we will continue to focus on delivering safe, reliable and efficient service.

Joe will now update you on the results for gas operations.

Thank you, Tracy.

Our natural gas operations, which include both our gas utilities and our non-regulated Energy Services business, performed in line with our expectations during the second quarter as more normal weather returned to all our jurisdictions.

As you can see on slide 12, Natural Gas Utilities second-quarter 2015 operating income was $19 million compared with $30 million for the same period last year.

This decline is attributable to a return to more normal weather in addition to higher depreciation expense.

As I mentioned on the first-quarter call, we exceeded our weather hedged cap in January 2014 and benefited from the subsequent extreme cold weather that persisted well into April and May that year, particularly in Minnesota.

As a result our Natural Gas Utilities experienced a decline in operating income in the first half of this year, but we expect year-over-year improvements in operating income through the remainder of the year.

The economies continue to be strong in our service territories and we added approximately 36,000 new customers year over year.

Excluding expenses that have a revenue offset, we were successful in managing O&M expenses to an increase of under 1% compared to the second quarter of last year.

Moving on to slide 13, I would like to highlight a number of items that advance our long-term strategy, specifically regulatory developments and capital investments to meet growth needs and ensure system reliability and safety.

Recent regulatory filings represent a combination of rate cases and the annual recovery mechanisms which are intended to help recover the substantial investments we may to better serve our growing customer base.

On August 3 we filed a general rate case in Minnesota to increase overall rates by $54 million annually.

Our filing is based on a forward test year and a rate base of $913 million which reflects the significant capital expenditures we are making across our Minnesota service territory.

We have requested an ROE of 10.3% and a 53% equity capital structure.

Interim rates are expected to go into effect in October with a final decision around mid-2016.

We reached a settlement agreement in our Texas coast rate case and are all waiting approval by the Texas Railroad Commission.

The settlement provides a $4.9 million annual increase and a 10% ROE.

With the Texas coast case finalized we expect to utilize GRIP, the annual infrastructure recovery mechanism, as early as March 2016 to recover incremental capital investment.

In Arkansas we continue to anticipate filing a rate case in the fourth quarter of 2015 and are evaluating for the case possible usage of Act 725, Arkansas's recently enacted law related to formula rate plans.

Slide 14 highlights a portion of our capital spending in Minnesota.

Our Belt Line replacement project began in 2012 and is expected to be completed in 2023.

This project is replacing pipe that was put in service over 60 years ago and entails replacing bare steel pipe, upgrading cathodic protection systems and installing remote control valves.

Investing capital to improve safety and reliability while reducing O&M is a win for all our stakeholders.

I will next turn to slide 15 and our Energy Services business, which primarily provides competitive natural gas supply services to commercial, industrial, institutional and transportation customers.

This business' second-quarter results reflect another solid performance.

Operating income was $7 million for the second quarter of 2015 compared with $5 million for the same period of 2014 excluding mark-to-market gains of $2 million and $6 million respectively.

Volumes were nearly flat as economic growth in certain regions has slowed somewhat.

But overall customer count increased 1.8% year over year.

Additionally, O&M expenses were slightly lower, consistent with the Company's focus on holding down operating costs.

This was a solid quarter for natural gas operations despite the impact of a return to more normal weather.

And the regulatory filings I discussed should a position as well to continue growing this business.

I will now turn the call over to Bill who will cover financial activities.

Thank you, Joe, and good morning to everyone.

Tracy and Joe have reviewed their respective operating income on a quarter-to-quarter basis.

I will now provide a review of our earnings per share on a guidance basis.

Following that I will review utility operations for the second quarter 2015 versus the baseline for second quarter 2014 with a focus on those items that are below the operating income line.

Our earnings per share on a guidance basis were $0.19 in the second quarter of 2015 compared with $0.21 for the second quarter of 2014.

As a reminder, our EPS on a guidance basis excludes the impacts of items such as mark-to-market adjustments in our energy service business and our ZEN securities and related reference shares.

At Midstream Investments, as previously mentioned by Scott, lower equity income from Enable Midstream Partners impacted EPS at CenterPoint by $0.05 per diluted share.

For utility operations we have provided two waterfall charts to help illustrate our normalized operational performance quarter over quarter.

The first of these charts is on page 17 and shows utility operation second-quarter 2014 EPS on a guidance basis of $0.10 per diluted share.

Houston Electric experienced cooler than normal weather in the second quarter of 2014, therefore we normalized up $0.01.

We normalized down $0.01 to account for 2014's higher equity return, primarily associated with the timing issues around Houston Electric's equity true-up proceeds.

As a result we landed on a baseline of $0.10 per diluted share for second quarter 2014.

This is the baseline from which we feel operational performance should be measured.

These adjustments are consistent with the baseline adjustments we highlighted in our year-end 2014 call.

We have included a slide from that call in the appendix along with a breakdown of adjustments by quarter.

The second chart on slide 18, takes you from the second-quarter 2014 utility operations baseline of $0.10 to utility operations EPS on a guidance basis of $0.13 for this quarter.

As Tracy and Joe discussed, their combined core operating income on a guidance basis improved from $150 million to $157 million in the quarter.

This $7 million improvement, along with an increase of $4 million in other income, resulted in a favorable earnings per share of $0.02 for the quarter.

Through debt management, interest expense was flat on a period-to-period basis.

For all of 2015 we expect interest expense to be lower when compared to all of 2014.

We had a lower effective tax rate of 32% in the quarter.

This was due to a lower Texas tax rate and to some permanent differences.

For the full year we expect an effective tax rate of 35%.

Altogether the second quarter with stronger than anticipated for utility operations.

Now with respect to earnings and dividends, you will see on slide 19 we are targeting annual earnings per share growth of 4% to 6% on a guidance basis through 2018, inclusive of our Midstream Investments.

We anticipate dividend growth will follow EPS growth.

We do recognize that our overall payout ratio for 2015 will likely be above 90%.

We are comfortable with that payout ratio and related earnings retention due to the sources of cash and earnings supporting the dividend.

We anticipate the overall payout ratio will result in a retention of 30% to 40% of our utility operations earnings.

These retained earning support needed capital investment without having to consider a secondary offering of common equity.

In addition to these considerations, our Board of Directors takes into account the current state of the capital markets, our financial liquidity, capital strength and our financial forecasts when reviewing and declaring our dividends.

On slide 20 I review our anticipated financing plans for 2015 and 2016.

As stated earlier, retaining 30% to 40% of our utility operation's earnings will allow us to finance our investment and rate base with minimal need for additional equity.

We have strong financial liquidity and plan to use our retained earnings and balance sheet strength to source much of our financing needs.

This year we expect to have incremental borrowings of $400 million.

These increased borrowings are primarily through our commercial paper program.

If appropriate we will consider fixed-rate longer-term maturity debt.

Looking forward to 2016 we expect to have a similar incremental financing need as 2015.

However, the ultimate amount will depend upon our capital investment, our ability to manage working capital and bonus depreciation amongst other factors.

We expect to finance 2016 via fixed-rate debt and commercial paper borrowings.

If appropriate we may consider equity financing through limited use of our DRIP and benefit plans.

Finally, based on our utility operations results and forecast and the most recent public outlet provided by Enable, CenterPoint is pleased to reaffirm our 2015 consolidated earnings estimate of $1.00 to $1.10 per diluted share.

We believe utility operations will be on the high side of the $0.71 to $0.75 range and Midstream Investments will be on the low side of the $0.29 to $0.35 range.

As I conclude I would like to remind you of the $0.2475 per share quarterly dividend declared by our Board on July 24.

With that I will now to the call back over to David.

Thank you, Bill.

We will now open the call to questions.

In the interest of time I will ask you to limit yourself to one question and a follow-up.

Ginger.

(Operator Instructions).

Neel Mitra, Tudor Pickering.

By questions are around the dividend policy.

Is the 4% to 6% something that you intend to sustain regardless of kind of where earnings are?

Or is it the dividend is going to move with the earnings growth?

And if the second case is true, how is that really different from I guess the policy part of this?

Neel, the intent is that earnings -- or dividends will follow earnings.

So what we have done on this call is we firmed up our earnings target over the next three years of 4% to 6% growth and that is inclusive of both the utility and the equity investment in our midstream business.

Got it.

So is it -- are you still kind of sticking to the policy of 60% to 70% of the utility earnings and paying out almost all of the Enable cash distributions out?

I think those numbers may work out fairly close.

It is certainly our intent to have the utility operate such that we are retaining 30% to 40% of their earnings for reinvestment.

Given the fact that we are at a relatively high payout ratio, a good amount of all of the cash coming in from Enable is being paid out through the dividend.

But the policy we went to really emphasize is -- now that we are at this elevated payout ratio the policy is -- or the approach I should say, is that we will target dividend growth of our earnings growth.

Great.

And one last quick follow up.

With the 2% customer growth, what has the trend been for usage, I guess for customers?

So has that come down or has it stayed fairly constant?

It has been very constant, Neel.

We see a little bit of what I will call noise on usage, but it has to do with imperfect calculation of making weather adjustments.

But as we look over the longer period we are essentially seeing a very flat usage profile on a weather adjusted basis.

Got it.

Thank you very much.

Matt Tucker, KeyBanc Capital Markets.

Hoping you could just talk a little bit more about what is driving the utility operations toward the higher end of your guidance range for the year.

Well, a couple things and I will let my colleagues add to it if they would like to.

But first of all, we have got good expense management that is occurring.

We are benefiting from maintaining a very strong focus on expense management.

We are also experiencing -- as we sit here today and we look forward we can see that the weather continues to be warm here in Houston.

And we know that that will have some impacts in third quarter as we look forward.

So that is impacting us as well.

Bill, do want to add anything about --?

I think, Matt, that I would add that through what we will refer to as debt management within our balance sheet we will be able lower interest expense in 2015.

If you had a chance to take a look at our 10-Q you will see we are free cash flow positive for the first six months of the year, that is to say the cash from operations exceeded dividends and capital investment.

So we feel good about that.

And then finally, the last element would be a lower effective tax rate for the 2015 year.

Great, thanks, guys.

As a follow-up to that, I didn't see right of way revenues mentioned.

It is been a nice tailwind for Houston Electric over the past several quarters.

Where are you on that year to date and kind of where do you expect to end up for the year?

Yes, Matt, I'm going to ask Tracy to answer that for us.

For the second quarter, Matt, we had about $1 million of right-of-way revenue.

So through the first half of the year we are at about $9 million, we continue to estimate that our range at year end will be somewhere between $10 million and $20 million of right-of-way revenue.

Thanks.

And if I could ask one more.

You expressed interest in the past in potentially acquiring Oncor, it looks like [Hunt] is going to end up buying that.

Just curious if you could comment on how that process played out for you guys, how involved were you?

Matt, I will just respond by saying I think you know we don't -- we are not commenting on specific transactions.

That is the position that we have taken here.

And we, like you and the rest of the industry, have kind of been watching this event unfold as EFH with works through their bankruptcy process.

Great, thanks, guys.

Ali Agha, SunTrust.

Scott, coming back to the dividend growth policy, 4% to 6% along with earnings growth.

As you know, that is pretty consistent with what normal regulated utilities are providing and telling investors as well.

So, I am just curious, from your vantage point, given that outlook through 2018, are you feeling that the MLP ownership is providing you that extra value added -- that is it is commensurate with the extra risk and volatility that business brings to the table to you and your share price?

Well, Ali, I would tell you that I still remain very bullish on the investment that is going to be made in this space.

And if you just look at what Enable reported on their call, their investment continues to increase, their volumes are up.

It is apparent -- becoming more apparent to me that producers in the US are able to compete even at these lower commodity prices.

And we are very pleased with many of the plays that we are in.

So I am still very bullish on this space.

Now the growth that we put out from an earnings forecast for the Company is, as you pointed out, consistent with what we have said that would be the utility performance.

And I would say it is there largely because of the near-term forecast associated with these lower commodities.

So I think we all believe will turn around and go back up at some point in the future.

And if Enable's performance improves or increases in the future then that gives us some upside potential to reflect in our own EPS.

Also, Scott or Bill, how stress tested are those numbers, particularly I am thinking from the Enable side, given where we have come from?

If the commodities start to go further south how comfortable would you be in that 4% to 6% number you have laid out for us?

Ali, I would characterize it as we have done our own stress testing and sensitivity analysis beyond what Enable has provided publicly.

So we have done some stress testing of their performance and we have done some stress testing around the utility performance.

And collectively have some confidence or have confidence that in the near-term a 4% to 6% earnings growth target is achievable.

I will say that it is within what I would consider the reasonable implications of commodity sensitivity looks.

If oil gets down to $25 or $30 a barrel for a sustained period of time and gas drops to very low levels, we will have to re-evaluate.

But we have done stress testing beyond what Enable has shared as their ranges.

Okay, and last question, Bill, when at the earliest -- when you look out to this program to 2018, do you see a need for potentially block equity or more equity than smaller DRIP programs or do not see that at all over the 2018 period?

I will ask Bill to answer this one for you.

Certainly.

Ali, we don't see any need for a block offering of equity.

We don't see a need for issuing any equity in 2015, as I said.

We continue to visit both 2016 and 2017 as whether there is a need for any equity in those years earlier.

But there is nowhere in this forecast that we are providing a view with respect to a need for block equity.

Thank you.

Brian Russo, Ladenburg Thalmann.

Just in terms of back to the utility guidance and being at the high end.

Can you talk about some of the drivers you referenced earlier and which one of those drivers would you consider sustainable into 2016 and 2017 versus what looks like to be a positive weather event in July that is obviously not repeatable under normal weather conditions?

Sure, Brian, I will ask Bill to lead this one off.

Sure.

And, Brian, I think I will start with what I will call some below the line factors, give you an update on that, then ask Tracy and Joe to talk about O&M cost discipline in their respective businesses.

With respect to below the line, we have significant I think opportunities to reduce our interest expense on a going forward basis.

And we recognize that on a going forward basis we will have more debt.

But we do have both maturities in 2016 and 2017 as well as those maturities we have had in 2015.

So you will see that come through.

Second item below the line with respect to tax, I mentioned in the prepared remarks that we'll be at 35% this year.

I think we will be somewhere between 36% and 37.5% on a going forward basis in 2016 and 2017.

So those are the below the line items that we would see as recurring at least looking at those few years.

And with that I will ask if Tracy or Joe want to add comments on O&M discipline.

Sure, Brian, this is Joe.

I would just reiterate what I said in my remarks that, obviously, we had a down quarter and a down first half in gas ops.

But that was expected because of the extreme cold weather we had in 2014.

But we expect op income to continue growing again in second half of the year, and that is in large part due to the O&M discipline that both Scott and Bill have mentioned, as well as executing on our regulatory plan.

We had the settlement in our Texas coast case, we filed our Minnesota case last week, and we expect to file a case in Arkansas in the fourth quarter of this year.

So all things are looking very positive right now in the gas business.

Brian, I would just -- this is Tracy.

I would just add that our 2% year over year O&M expense growth rate is a sustainable target for us and we are going to work very hard to maintain expenses in that range, even though we are growing considerably here.

So everything is looking on the up and up for the electric business.

Okay, great, thank you very much.

Faisal Khan, Citigroup.

Just a quick question on your ownership position in Enable.

Currently, it doesn't look like the general partnership gets any value at all in the current stock price of CenterPoint.

I was wondering how will you think about that general partnership over time.

I mean, I know the idea is to sort of grow those distributions over time.

But if it gives Enable sort of a shot in the arm and reduces their cost of equity and makes them more competitive in the market, would you think about rolling the general partnership and IDR structure into the limited partner?

Faisal, I would say it is too early to really have those considerations or discussions.

We are a ways from beginning the IDRs.

I believe Enable mentioned they thought there may be some IDR payments as early as the end of next year, which would be very small payments.

So you are out into 2017 or 2018, really before you would have the issue or the consideration of how those IDRs might affect their cost of capital.

Listen, we certainly have an ongoing -- very strong ongoing interest in Enable's success and if appropriate, we would contemplate the right things at the right time.

But it is just far too early to consider doing anything differently with the GP and the IDRs.

Okay, understood.

Thanks for the time, appreciate it.

(Operator Instructions) Charles Fishman, Morningstar Research.

I just had one question.

Bill, you said the lower tax rate, effective tax rate, was because of Texas, I believe.

So I am assuming that was at the utility, not Enable.

Could you maybe provide a little more color?

That is correct.

That is the income tax rate here in Texas that we recognized the lowering of that, and it went through the second quarter.

And then we also had some permanent differences change, which moved the tax rate down to 32% for the quarter.

But for the year, Charles, it should be at 35%.

Okay.

Then what did you say then been next year -- you made some comments about that earlier, about guidance?

Next year and on a forward-looking basis if you were to ask me what the provision should be for the accrual tax rate, I think it will be in the range of 36% to 37.5%.

And if you wanted a point estimate, use 37%.

Okay.

So actually the 37% is really pretty consistent with what you have said in the past, correct?

That's right.

Okay, got it.

Thank you.

Michael Dandurand, Goldman Sachs.

Actually most of my questions have been answered already.

The only one I wanted to touch on was more housekeeping just with the cash taxes on distributions from Enable.

Has the outlook changed at all there given the update in guidance from Enable?

Michael, this is Bill.

First of all we look forward to being at your conference the next couple of days, so thank you for including us.

Yes, look forward to having you.

Look forward to that.

With respect to taxes, we are certainly moving away from that more formulaic view to dividends.

What we are focused on is our target earnings growth of 4% to 6% through 2018, the dividends will follow that.

If you wanted to ask a question about cash taxes, we file a consolidated return at CenterPoint.

There are some years where the Utility's cash or tax characteristics might shield income from Enable.

And there are years where the tax characteristics at Enable might shield the Utility.

So we don't really look there to any specific operations, cash tax rate.

Understood.

I guess I'm just trying to get a feel for the incoming cash net of tax from Enable.

But -- maybe we can follow up off-line a little bit on that with the IR team.

Yes.

It might help just to give you a sense of what we think our cash taxes would be.

On a consolidated basis we were not a taxpayer in 2014 and our cash tax rate, if we did not have bonus depreciation for 2015, will be in the low 30%.

If we have bonus depreciation in 2015 it is unlikely that we would be a cash taxpayer on a consolidated basis.

Okay, that is helpful.

Thank you.

Thank you, everyone, for your interest in CenterPoint Energy.

We will now conclude our second quarter 2015 earnings call.

And have a nice day.

This concludes CenterPoint Energy's second-quarter 2015 earnings conference call.

Thank you for your participation.