CenterPoint Energy, Inc. (CNP) Q4 2011 Earnings Report, Transcript and Summary

Good morning and welcome to CenterPoint Energy's Fourth Quarter And Full Year 2011 Earnings Conference Call with Senior Management. [Operator Instructions] I will now turn the call over to Marianne Paulsen, Director of Investor Relations. Ms. Paulsen?

Thank you very much, Thea. Good morning, everyone. This is Marianne Paulsen, Director of Investor Relations for CenterPoint Energy. I'd like to welcome you to our fourth quarter and full year 2011 earnings conference call. Thank you for joining us today. David McClanahan, President and CEO; and Gary Whitlock, Executive Vice President and Chief Financial Officer, will discuss our fourth quarter and full year 2011 results and we'll also provide highlights on other key activities. In addition to David and Gary, we have other members of management with us, who may assist in answering questions following their prepared remarks. Our earnings press release and Form 10-K filed earlier today are posted on our website, which is www.centerpointenergy.com, under the Investors section. This quarter we have created supplemental materials which are also posted under the Investors section of our website. These materials are for informational purposes and we will not be referring to them during prepared remarks. I remind you that any projections or forward-looking statements made during this call are subject to the cautionary statements on forward-looking information in the company's filings with the SEC. Before David begins, I would like to mention that a replay of this call will be available until 6:00 p.m. Central Time through Wednesday, March 7, 2012. To access the replay, please call 1 (855) 859-2056 or (404) 537-3406 and enter the conference ID number 01632104. You can also listen to an online replay of the call through the website that I just mentioned. We will archive the call on CenterPoint Energy's website for at least 1 year. And with that, I will now turn the call over to David.

Thank you, Marianne. Good morning, ladies and gentlemen. Thank you for joining us today and thank you for your interest in CenterPoint Energy. 2011 was a very good year for the company, 4 of our 5 business units had strong years both operationally and financially. We resolved the long standing issues associated with our 2004 true-up proceeding. And last month, we covered almost $1.7 billion of additional true-up cost through the issuance of securitization bonds. We're pleased this matter is finally behind us and we can now focus our full attention on the future. This morning, we reported full year earnings of $1.36 billion or $3.17 per diluted share. Excluding the impacts of the true-up proceeding, net income would have been $546 million or $1.27 per diluted share, compared to $442 million or $1.7 per diluted share in 2010. So this was an outstanding year either way you look at it. Our fourth quarter results were also solid. Net income was $117 million or $0.27 per diluted share compared to $124 million or $0.29 per diluted share for the fourth quarter of 2010. Fourth quarter earnings for 2011, on the same basis as we provide earnings guidance, would have been $0.26 per diluted share. This was above our expectations due principally to a lower effective tax rate associated with state income taxes. Our press release and 10-K provide the details around our financial results this past year. So I won't repeat the specifics. I will however, summarize the performance of each unit and describe their prospects for 2012 and beyond. Houston Electric had its best year financially. Core operating income was $496 million compared to $427 million in 2010. Fourth quarter income was $62 million, up $6 million from 2010. Last summer's record heat was the biggest driver of Houston Electric's increased income. In addition, we saw strong growth in Houston with over 45,000 new customers added last year. Our gas LDCs also had a good year. Operating income for the full year was $226 million or about $5 million below the record level of 2010. Fourth quarter income was $73 million compared to $86 million in 2010. While margin growth was modest last year, we were successful in our expense management efforts. As a result, on an overall basis, we earned at or near our authorized rate of return for the second consecutive year. Our Interstate Pipelines achieved operating income of $248 million last year down from the $270 million in 2010. Income in the fourth quarter was $52 million compared to $63 million in the previous year. The decline in earnings for the full year and fourth quarter were almost completely attributable to the exploration of a backhaul contract on our Carthage to Perryville line. Our Field Services unit had a very strong year. As a result of the investments we've made to gather and treat gas in several developing shale plays. Full year operating income was $189 million, compared to $151 million the previous year. Fourth quarter earnings were $53 million compared to $57 million in the fourth quarter of 2010. It is worth noting that operating income for 2010 reflected a gain of $21 million from the sale of some nonstrategic assets. Excluding that onetime gain, last year's fourth quarter earnings were up over 45% from 2010. Our Competitive Gas Sales and Services business continued to struggle in 2011. Full year earnings were $6 million compared to $16 million in 2010. Fourth quarter earnings were $3 million compared to no operating income in the previous year. For the past 2 years, this unit has been burdened with uneconomic pipeline capacity contracts. However, we were able to accelerate the termination of some of those contracts last year, and most of the remaining uneconomic contracts will expire over the next 12 months. Now let me turn to the future and give you some insight into each business units' prospects. Year in, year out, Houston Electric has been able to earn its regulated rate of return since we formed CenterPoint Energy in 2002. I expect that it will perform well this year. It has a solid and growing service territory. The Houston metropolitan area was the first area in the nation to replace the jobs lost during the economic downturn, and more than 80,000 jobs are expected to be created this year. We estimate that customer growth will equal or exceed the growth we experienced last year, which should add approximately $25 million in base revenues. However, Houston Electric is unlikely to equal its 2011 financial performance, which I -- as I indicated earlier was driven by record heat. This unusual weather added approximately $60 million to base revenues last year. In addition, the negative impact of the rates implemented in September of last year will be experienced for the full year in 2012. We expect this to be approximately -- estimate this to be approximately $35 million. Over the longer term, Houston Electric should experience significant rate base growth. Annual capital expenditures are forecast to average between $500 million and $550 million over the next 5 years, resulting in annual rate base growth of over 4%. Because of the recently approved distribution cost recovery factor, together with the long-standing transmission cost recovery mechanism, we don't anticipate the need for a major Houston Electric rate case for the next several years. We anticipate rate-based growth at our gas LDCs as well. Over the next 5 years, capital expenditures are expected to exceed $350 million a year, compared to an historical run rate of about $200 million a year. These increased expenditures are primarily related to new pipeline integrity and safety requirements, and will result in an annual rate base growth of over 6%. Although we have rate adjustment mechanisms in most jurisdictions, we will likely need to file a number of rate cases over the next 12 to 18 months. While the current low natural gas prices are positive for both Houston Electric and our gas LDCs, they can negatively affect our Midstream business. This is particularly true for our Field Services unit. As we've indicated in the past, we retained over 1.5% of all gas we gather. While the majority of our revenue stream is fee based, we do earn revenues from the sale of this retained gas. We estimate that each $1 change in natural gas prices will have about a $20 million impact on operating income this year. In addition, as gas prices have fallen, rig activity in dry gas basins has also declined. This is most significant in our traditional gathering area, where we've seen some gathering volumes decline over 10% since 2010. Increasing gathering volumes in the shale plays however, have more than offset this decline. Overall, gathering volumes increased almost 30% last year and by year end we were gathering about 2.6 billion cubic feet per day. We expect total gathering volumes under our current contracts will increase about 15% to 20% this year. Low natural gas prices in compressed basis differentials are also expected to impact our Interstate Pipelines. It is unlikely any significant new pipelines will be needed in the near term in our current Mid-Continent footprint, and there will be increased competition for new and existing customers. In addition, the exploration of a backhaul agreement last year, will reduce operating income by approximately $10 million this year. However we believe there are continuing opportunities to serve customers on or near our pipelines particularly power generation customers. Over the last few years our Energy Services business has suffered like many others in the industry. As I indicated earlier, the principal drag on earnings has been related to uneconomic pipeline capacity agreements. We've taken actions to reduce our exposure to such agreements by an estimated $15 million this year. Our retail business continues to do well and we expect 2012 will be a year of significant improvement for this business. Of course, we also expect to realize earnings benefits from the $1.7 billion of additional true-up costs we recovered last month. Earlier this year, we called or tendered for our $375 million of debt at the parent company. Gary will provide the details and earnings impact from this debt reduction in a few minutes. As we indicated in our third quarter earnings call, we expect to invest the remaining proceeds in our existing businesses and to acquire similar assets. While we are not in a position to make any announcements today, I feel confident we will be successful in deploying a portion of these proceeds to expand our present businesses, and we are currently evaluating several possibilities particularly in the Field Services sector. As I indicated earlier, we will also be required to make significant new capital investments in our existing regulated businesses to satisfy both growth and regulatory requirements. I'd like to remind you of the $20.25 per share quarterly dividend declared by our Board of Directors on January 19. This marks the 7th consecutive year that we have raised our dividend. We believe our dividend actions continues to demonstrate a strong commitment to our shareholders and the confidence the Board of Directors has in our ability to deliver sustainable earnings and cash flow. Let me conclude by expressing my gratitude to our employees, through whose hard work we achieved not only an outstanding 2011, but excellent operating and financial performance since our inception in 2002. As many of you know, we face some significant challenges in our early years. But I think we are stronger today because of our success in overcoming them and I'm convinced our future is even brighter. We have terrific employees, well-positioned assets and business units and a balanced and diversified portfolio, which can excel under a variety of market conditions. Thank you again for your interest in the company. I will now turn the call over to Gary.

Thank you, David, and good morning to everyone. Today, I would like to discuss a few items with you. First, since the formation of our company in October of 2002, we have significantly improved our balance sheet. As you know, subsequent to the favorable resolution of the true-up case last year, the rating agencies have taken positive actions to upgrade the long-term ratings of the debt of CenterPoint Energy, CE and CERC. Each company now has solid investment grade credit ratings and the ratings outlook for each company is either stable or positive. In addition, our business has generated solid cash flows and when combined with the benefits of bonus depreciation, essentially funded our capital program and dividend in 2011. We ended 2011 with net debt of approximately $6.7 billion and a debt to total capitalization ratio of 61.2%. In January of this year, we closed on the sale of approximately $1.7 billion in transition bonds with an effective annual weighted average interest rate of approximately 2.5%. We were very pleased with this offering, which resulted in one of the lowest rates of any utility securitization. The company received proceeds of approximately $1.7 billion from the offering. Our solid balance sheet, cash on hand, internally generated cash and other liquidity provide the company with the financial flexibility to effectively execute our business plan. I know you are all interested in how we are currently using the cash we received from the sale of the transition bond. First, we used a portion of the cash to payoff outstanding commercial paper. In addition, as we continue to evaluate a number of opportunities to invest the cash in long-term accretive projects, we made the decision to reacquire cash exempt debt at the parent company having an aggregate principal amount of $375 million with a weighted average interest rate of 5.4%. As this clearly enhances earnings and cash flow relative to the alternative of maintaining cash and money market fund earning approximately 20 basis points. The result will be a reduction in Interest Expense in 2012 of approximately $18 million or $0.03 per diluted share. This action supports our long-standing objective of deleveraging the parent company. As David pointed out, we have a significant capital plan for 2012. We estimate our 2012 capital expenditures to be approximately $1.3 billion, an increase of approximately $100 million from 2011. About 86% or a little more than $1.1 billion of CapEx will be spent by our regulated businesses this year compared to 78% in 2011. Let me give you a breakdown by business. In our Electric business, we expect to spend $575 million, an increase of $37 million or 7% from 2011. CapEx will be used primarily to support our investments in infrastructure to serve new load and enhance reliability. We expect to spend $354 million in our natural gas distribution business reflecting a 20% increase or $59 million from 2011. This increased level of spending will be used primarily for infrastructure related to pipeline safety and integrity. Our pipeline capital budget is $181 million, which is significantly more than our 2011 spend of $98 million. This increase will be used primarily for routine maintenance, major line replacements related to pipeline safety and integrity, as well as spending associated with meeting anticipated new regulatory requirement. For the completion of our Magnolia and Olympia systems, our 2012 capital budget for Field Services is $139 million. However, this estimate does not include any new capital which may be required if we were to have significant new opportunities. To the extent we need financing in connection with future growth opportunity, we expect we can finance them at attractive interest rates at the operating company level. However, we are often asked about our financing strategy for our Midstream business especially whether or not we are considering the formation of an MLP. We continue to think the formation of an MLP can be an efficient structure to finance significant new growth and thus remains a viable option for our company as we evaluate various Midstream projects. Now let me turn to my final topic, our 2012 earnings guidance. This morning in our earnings release, we announced 2012 earnings guidance in the range of $1.8 to $1.20 per diluted share. This is a somewhat broader guidance range, this somewhat broader guidance range takes into consideration a number of economic and operational variables that may impact our actual earnings performance. Although the strength of the U.S. economy in general and the Texas economy in particular, can have a significant impact to earnings. The most important variables are commodity prices, volume throughput, weather, regulatory proceedings and our effective tax rate. We have developed our guidance range by using combinations of these variables. We have also taken into account the benefit of the $375 million debt reduction at the parent, and we are using an average share count of approximately 430 million shares. In addition, we have not assumed any additional use of the remaining true-up proceed in developing this range. As the year progresses, we will keep you updated on our earnings expectations. Now I'd like to turn the call back to Marianne.

Thank you, Gary. And with that, we will now open the call to questions. In the interest of time, I would ask you to please limit yourself to 1 question and a follow-up. Thea, would you please give the instructions on how to ask a question.

[Operator Instructions] The first question will come from David Frank with Catapult.

Gary, you kind of mentioned there at the end that some of the factors that drive the earnings within the range you've given for '12 include commodity prices and Midstream volumes. Can you give us a sense of how much of the range is dictated by commodities? And could you give us a sense of maybe the range in gas prices that you have embedded in that range?

David, let me take a shot at that. We've tested against a series of our range of natural gas prices anywhere from $2.50 at the low end up to a little less than $4 at the high-end. Obviously, the gas prices have been coming down since we started putting together our plans last fall. And our current thinking is that the gas prices are going to be covering at the low end of that range. But we clearly looked at those and tested those and we also looked at natural gas liquids prices as well. We're not as sensitive but we have some processing on both our pipes and our Field Services business and we tested liquidity -- liquids prices as well.

Great. And David, you made a comment that you're interested, it sounded like you're interested in making complementary asset acquisitions in the Midstream area. Can we infer that corporate acquisition or M&A has been off the table?

I don't think you should draw that conclusion, David. I think clearly, there's -- it's -- some asset acquisition are perhaps easier to do and there is more opportunities there but we continue to look at on all fronts. So I don't want you to draw that. But I will say that the most active opportunities we're looking at are in this Field Services sector.

Our next question will come from Carl Kirst with BMO Capital.

Actually, maybe just leveraging off of David's Question there, and I just wanted to be clear when you were just sort of answering that, as well as the opportunities that you're seeing in Field Services and Midstream. Are you talking about actual Field Services Midstream M&A or are you talking more about the organic, like the Mississippi-line proposal, or I guess is it a combination?

Carl, it really is a combination. We have opportunities on all fronts. We have a number of proposals out to producers. But we're also looking at some assets that we might purchase outright from either existing gatherers or producers.

Okay. That's helpful. And just staying on Field Services, can you help us give a breakdown between sort of the -- in the fourth quarter, which looks like there was a very good throughput in Midstream. What was traditional? What was shale? And if you had any color for maybe how that's changed here in the first quarter, if it's changed?

Yes. Let me kind of give you a December kind of look for a minute or maybe fourth quarter. But we were gathering in total about $2.6 billion at the end of last year. I would say out of our traditional basins, that's more like 750 to 775, something of that nature. We've seen that the traditional basins declined in the fourth quarter more than it did in any other time during the year. As you might recall, the first 3 quarters were pretty flat, but we saw a decline in the fourth quarter. I'm not sure that's going to be sustainable, but there's not a lot of rig activity in those dry gas basins at these gas prices. So year-to-year in our traditional basins, we saw about a 10% maybe a little bit more drop in traditional basins gathering. Of course, offsetting all that is the Haynesville gathering we're doing in Magnolia and Olympia. Fayetteville gathering continues to increase. We've got some wet gas in our traditional basins and that's kind of helping us too because there are -- there is some drilling in these basins that -- where there's wet gas. So it turns out, we had an excellent year from a gathering standpoint ending at $2.6 billion a day, which was up, I don't know, 25%, up 30% from 2010. You have to attribute that to all of this, I mean, substantial shale plays and the new investments we made.

Sure, and I appreciate that. And then with respect to first quarter and I guess maybe just to narrow the question, have you seen any roll over or decline in the Haynesville, I guess, specifically?

I think the way we would answer that is if it appears to us that the producers are maintaining their production levels from what we saw at the end of last year and they've got enough rig activity to continue to do that. And I think that's kind of our expectation for a while until we see exactly where natural gas prices -- or they see where natural gas prices are going to go. But our producers are telling us they're going to try to maintain their volumes, but they're not talking about any substantial increase in volumes at this stage.

Fair enough, very much appreciate that. Maybe last question if I could. Just because on the marketing it sort of alluded to 2012 maybe being a significant improvement. And I didn't know if maybe you could parse that into what your expectations are between retail and wholesale?

We've been saying for some time that if you just take our retail business alone, we think it ought to produce $30 million to $35 million worth of operating income. But because of some uneconomic contracts, we haven't been able to achieve that. These contracts are starting to roll off. Certainly, we can see $15 million worth of improvement in 2012 around those contracts rolling off versus what we incurred in 2011. And who knows what's going to happen with some of the other ones maybe things will improve a little bit. So we see improvement and we think we'll get it all revealed in 2012. No, it will probably be 2013 before all these contracts have rolled off and we can start really focusing everybody on our retail business and what it will produce. But we still feel good about the retail business but as you know, these bases collapsed and storage spreads have gone down and where we're making a fair amount of money, 3 or 4 years ago, we're not, we're losing money there.

Our next question will come from Ali Agha with SunTrust.

I wanted to come back to the '12 guidance, David or Gary for that matter. If I heard you correctly, so Houston Electric you are assuming a down year given the trends you mentioned? But can you give a sense of what the other segments should -- I think pipelines had some headwinds. You mentioned resources had headwinds as well. Should we assume them to be flat to down as well just given those trends? And also, the tax rate that you alluded to, can you remind us the -- what effective tax rate we should assume for '12?

Go ahead, Gary.

On the tax rate, maybe let me describe it like this, if you have a normal blend of our federal rate and our state rate, or state tax rates, you should have about 37.5%. This year, we came in about 34.4%, there's really kind of 2 issues in the lower state blended tax rate in terms of the allocation of those sort apportioned factors for the income. And then we had the resolution of the normalization issues. So we picked up some benefits this year. Going forward, I gave you a range of 34.5% to 37.5% and the reason for that is again, I think we have to look at these apportionment factors and see how that plays out in terms of the state tax blended rate. And then we continue to look on a -- look at a number of tax reserves that we have related to various outstanding issues with our -- so I'd like to give you a midpoint of that, but I'm going to say, we do have a range of 34.5% to 37.5% on our tax rate. And of course, like any company, we're working diligently to have that as low as possible. But I think, we have to sort of stay with the range on that at the moment.

And as to your other questions, first just on Houston Electric. Because of the hot weather in 2011, it's going to be hard to repeat that. I will tell you that current weather forecasts are suggesting it's going to be hot and dry again. So it's not out of the question. But our model suggests we got almost $60 million from normal weather at -- in 2011. So we'll just have to wait to see what happens there. Our growth in customers should add at least $25 million. We've got transmission revenues of another $10 million that should benefit 2012. And we've -- we saw some customer actual usage growth in 2011. We're not sure whether that was real usage or whether it was weather. It was so hot it was hard to distinguish yet. So it could be a little upside there as well. And then we have the full year of the rate case, which might kind of offset some of the things I've talked about. So we think we are going to have a good year. We think we can earn our regulator rate of return next year. But unless we get this hot weather, we probably won't set the same kind of records we did in 2011. I would also say pipelines, it does have a little bit of headwind there because we have that -- the tail end of that backhaul agreement that we didn't feel in the first 4, 5 months of last year, we're going to feel it this year and we estimate that's about a $10 million impact. As you might -- I'm sure you know, there's lots of pipes in the Midcontinent area that are going to be competing with us as we -- as contracts roll off. And we tend to believe that, that could put a little pressure on rates. But having said that, each year we've been able to overcome a lot of these things. So I'm not ready to say that pipeline is not going to have a good year. But they have a little headwind in front of them that's for sure. Our Field Services, it really depends on gas prices. I think that they should have a good year whether -- it's not going to be the 30% to 40% increase we saw in 2011, no.

And one other question if I could. On the usual proceeds in the past, I think you've also alluded to the fact that after Field Services, there may be interest in electric utility acquisitions. Just from your comments, should I -- should we infer that you're not seeing any good opportunities in that area and that the focus is really Field Services? And to the extent that's the case, just conceptually what kind of return are you targeting or we should be thinking about in terms of thinking about the earnings potential of that cash could give to CenterPoint?

First, I think, David, after that first question, I think we don't see a lot of properties on the market. There are some, I think, gas LDCs that may be coming on the market and we'll clearly take a look and see if we have any interest there. But on the Field Services side, we look at a range from the low-teens to the mid-teens on unleveraged basis. And it really depends on the contract terms and how much, if we get throughput guarantees or guaranteed rate of returns. If we do it will be on the lower end of that if we don't, it would be -- it'd be 14%, 15% probably.

On a pretax or after-tax?

That's after-tax unlevered.

Our next question will come from Faisel Khan with Citigroup.

David on the Pipeline segment, I'm trying to figure out what the opportunity is on the power generation side? So we've seen, I guess, the headwind from backhaul contracts and restructuring of contracts but what kind of opportunity do you guys have kind in your kind of territory to sign up more power generators to firm capacity?

I think -- Greg, you might want to weigh in on this as well. But what we see is we have 20 or 30 coal power plants near our pipe or within reach of our pipe and some of those will be converted. But let me get Greg to give you a little bit more color around that.

On the power generation side, we're currently connected with about 800 million a day of load contracted on power generation. With those existing customers, we've looked to kind of high-grade their services. We put together a new tariff last year that provides, kind of, shaping to meet, their low-profile which is different than a gas-based profile and we've been able to do that and do it successfully last year, kind of, on a limited basis but I think we'll be able to do more of that. As David mentioned, there's several coal generation facilities. There's also -- around our footprint plus other utilities just talking about new gas generation around our footprint in Midcontinent. So we'll be chasing those, the competition form but I'd say, it's under 1,000 to 2,000 megawatts around our footprint that we can go after.

Okay. Got you. And then on the T&D side, electric T&D side, see he -- looking at the year-over-year sort of O&M fleet, kind of 9% in the quarter and then 8% year-over-year. Can you guys discuss what's driving that? It seems to be kind of more than inflation.

There's some cats and dogs there but let me see if I can give you any sense of that. Labor and benefits were a fair amount of it, $8 million, $9 million on that front. A big part of that was pension expense. We started reflecting the true pension expense in earnings once we implemented this rate case. Remember we were deferring those before. So part of it is pension. We spent a fair amount of money last year because of the drought. We had to do a lot of insulator washing and stuff like that. And we spent a fair money -- a fair amount of incremental money around taking trees out because we had a lot of dead trees and we're really after our tree trimming budgets. So those just kind of added to what look like some unusual O&M expenditures, but we did that because we had the revenues to spend it. And we felt it was a good investment especially as we went into 2012 and 2013, especially if we have any bad weather come through here.

Understood. And last question for me. And you mentioned in your -- into your remarks that you have exposure to some of the liquids gas plays. Is there any way for you to quantify what percentage of your overall gathering volumes are exposed to kind of liquids plays or liquids-associated plays?

Faisel, it's a fairly small percent. Greg is thinking it's in the 5% to 10% range. But we really haven't done that calculation.

[Operator Instructions] And the next question will come from Yves Siegel with Credit Suisse. Yves Siegel - Crédit Suisse AG, Research Division: If I could, could you elaborate perhaps, Gary, on the -- on your comment on potentially doing MLP? What kind of factors would you be factoring in to -- on that decision?

Well, I think the key one, I think the hurdle we're over, is that the MLPs certainly could be a viable vehicle, financing vehicle for us. So Yves, I think the real key is that we have visibility on the long-term growth opportunities in a midstream area. I think that's the real key -- is that we can see that there is significant growth in front of us and that's a vehicle for them to use and the ability to use it to finance continued growth. I think that's the key one. Yves Siegel - Crédit Suisse AG, Research Division: And as you said today, how do you view that long-term growth? Is it contingent primarily on doing an acquisition or do you think you have the footprint that would allow you to grow at this juncture?

Yes, I don't think there's any one answer to that. Look certainly -- I think if you look historically, we've been able to originate a lot of business. Greg and his team are working very diligently to continue to originate new business. So I don't want you to say that it's going to be money bent that we have a large acquisition. I think if we can see continued growth in our organic growth, it's certainly maybe some acquisition opportunities that there are assets that are complementary to our business. So I don't think there's any one thing, I think it's really again, visibility around the growth, Yves. Yves Siegel - Crédit Suisse AG, Research Division: Okay. Great. And if I could just last 2 questions is when you have these proposals that are out there and if you win them or lose them, what do you think is a major factor that would cause -- allow you to win it or perhaps lose it?

Greg, you probably can speak to that.

Yves, I think we've said before on some of our other calls and at some of our conferences we've been at that a lot of the producers had a leg lease in this past year we saw -- do things themselves. So we're actually bidding in to their projects, design stuff for them and then they elected to go ahead and do it themselves. And we actually had 2 major deals go that way. But we're also starting to see some producers wanting to give back some gathering systems and sell it. So those are going to be some opportunities in our near future we think. Yves Siegel - Crédit Suisse AG, Research Division: Okay. And then last question. Gary, do you have any sense of what the impact of a bonus depreciation could be in 2012 or what deferred taxes might look like in 2012?

As you know bonus depreciation in 2012 is 50%. I'll give you a couple of numbers. Last year, 2011 we estimated we'd probably have about a $435 million benefit. I think 2012, we're probably thinking less than $300 million, I think about $275 million. So it still will be a benefit from a cash perspective this year.

Our next question will be a follow up question from Carl Kirst with BMO Capital.

This is, I guess, a question for Gary. I just wanted to make sure I've got all sort of the moving parts right and it's a little bit more perhaps micro on the stranded cost recovery. We do have sort of both earnings and cash flow impacts, there was the I guess the statement in the press release of the roughly $250 million over the -- of future gains to be coming over the life of the bond. Should we basically just take that as kind of that number divided by the 10-year average life and that's what is going to be the EPS impact if you will on an annual basis from that? And where does that show up?

You're talking about where does it show up in Houston and letting the segments...

Yes, I didn't know if that would come under like the transition bond company or I just...

No that will be in Houston Electric. But you take the $258 million, which I believe is an after-tax and an after-tax number, a pretax number is north of $400 million. I think this year, I think we can just give you the 2012 estimate. Of what we think that number will be, about $16 million increase.

And I'm sorry Gary, is that a pretax or after-tax?

That's pretax. So I think that's the schedule we can provide you because this is -- this now we have the bonds. So now, this is going to be shake here. The total, I think, you can expect next year about on a -- about $36 million next year -- or this year 2012.

I'm sorry, $36 million in 2012?

$36 million in 20 -- in -- yes total.

[Operator Instructions] And we do have a follow-up question from David Frank with Catapult.

Just a question on kind of competition you're seeing now in the Field Services, in the midstream, I'm sorry in the liquids-rich regions of gas. Obviously, we hear a lot of talk from the producers moving rigs into the liquids-riched. So you would think there is going to be more opportunities there. But can you give us a sense of what have you seen as far as traditional competition getting into these regions?

You know, David, what I'd say is we're seeing the same level of competition as we've always seen from the same companies. There's lots of folks out there that you're aware of their names just like we are that we compete with. And so I don't think -- I think we're seeing the same cast of companies after this business as we've always seen.

And it's no tighter or it's not greater or less given more or less opportunities that could be out there?

I think there's lots of folks interested in what we're doing but that's not new, that's been there for several years.

Yes. And this is Greg, I would say that in some of these plays, whereas wealth positions anybody, Mississippi line, West Coast line, where there's not really a competitive advantage that we can go in there with maybe a partner and be able to take, capture some business. But again in some of these areas producers like to do their own start up gathering systems as they try to prove out there protection so...

We have a question from Jack Moore with Harpswell Capital.

Most of my questions are answered. Just wondering if you could comment on the virtue of the 2 kind of main separate businesses and the virtue of keeping both of those? And have you considered or reviewed the option of focusing more on one and perhaps selling one to somebody where it would be more strategic for them?

Are you talking about gas versus electric, regulated versus unregulated, Jack? I want to make sure I understand.

Yes. Kind of -- yes, I mean, along those lines, I guess, it's split both thinking gas versus electric and regulated versus unregulated. It seems like you could slice the company in a few different ways and you know you got great assets and I'm not sure how much -- well, management is certainly capable of doing a great job of -- if there is more value to be created by having 2 companies or 2 parties that are focused independently on their specific business.

In the past, we've looked at selling parts of our businesses, there's no -- especially 4 or 5 years ago. We never could make that work from an after-tax basis and we're glad we didn't split it up. I think you have to look at the scale of the remaining 2 businesses if you'd split them up. And I think scale would be questionable if they weren't combined. So do we, from time to time look at that? Yes, we do. But I think at this stage, we're not -- we don't believe that would be the right direction for the company.

At this time, there are no further questions. I would like to turn the call back over to Ms. Paulsen for any closing remarks.

Okay. Thank you very much again. Since we do not have any further questions, we're going to end the call. Thank you very much, everyone, for participating today. We appreciate your support very much. Have a great day.

This concludes CenterPoint Energy's Fourth Quarter and Full Year 2011 Earnings Conference Call. Thank you for your participation. You may now disconnect.