CenterPoint Energy, Inc. (CNP) Q4 2013 Earnings Report, Transcript and Summary

Good morning, and welcome to CenterPoint Energy's Fourth Quarter and Full Year 2013 Conference Call with Senior Management. [Operator Instructions] I will now turn the call over to Carla Kneipp, Vice President of Investor Relations. Ms. Kneipp?

Thank you very much, Thea. Good morning, everyone. Welcome to our fourth quarter and full year 2013 earnings conference call. Thank you for joining us today. Scott Prochazka, President and CEO; Tracy Bridge, Executive Vice President and President Electric Division; Joe McGoldrick, Electric Vice President and President Gas Division; and Gary Whitlock, Executive Vice President and CFO, will discuss our fourth quarter and full year 2013 results and provide highlights on other key activities. We also have other members of management who may assist in answering questions following the prepared remarks. Our earnings press release, Form 10-K and supplemental materials are posted on our website, centerpointenergy.com, under the Investor section. The supplemental materials are for informational purposes, and we will not be referring to them during the 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 Scott begins, I'd like to mention that a replay of this call will be available through Wednesday, March 5. To access the replay, please call (855) 859-2056 or (404) 537-3406 and enter the conference ID number 29333655. You can also listen to an online replay on our website and we will archive the call for at least one year. And with that, I will now turn the call over to Scott.

Thank you, Carla, and good morning, ladies and gentlemen. Thank you for joining us today and thank you for your interest in CenterPoint Energy. This morning, we reported full earnings -- full year earnings of $311 million or $0.72 per diluted share, as compared to $417 million or $0.97 per diluted share in 2012. I'd like to remind you of the unusual items that occurred during each year. As you may recall, effective May 1 of 2013, our midstream assets became part of Enable Midstream Partners. As a result, in 2013, we recorded a noncash deferred tax charge, as well as certain partnership formation expenses. In the third quarter of 2012, we recorded a noncash goodwill impairment charge, as well as a noncash pretax gain from an acquisition. Excluding the effects of these unusual items, net income for 2013 would have been $544 million or $1.26 per diluted share, compared to $581 million or $1.35 per diluted share in 2012. Using the same basis that we use when providing guidance, full year adjusted earnings would have been $1.20 per diluted share in 2013, compared to $1.25 for 2012. As a result of the formation of Enable Midstream Partners, the way we present our financial results has changed. We will point out these changes in the course of our call today to help you better understand CenterPoint's overall financial performance, both [ph] for 2013 and for the future. In discussing our financial results, we will refer to our equity investment in midstream as midstream investments, and to the remainder of our businesses as utility operations. The benefit of our diversified utility portfolio was again seen in 2013. Our natural gas utilities had a record year, which helped offset a modest decline in our electric utility, resulting primarily from a return to more normal weather. In 2013, we invested nearly $1.2 billion in our utility operations, up 22% from the prior year, to address increasing demands associated with growth, reliability and ongoing maintenance. Overall, we experienced solid financial and operational performances from our utilities. With the changes in company leadership and the formation of Enable, the time is right to refresh our vision and strategy. CenterPoint Energy's new corporate vision is to lead the nation in delivering energy, service and value. Compared to our prior vision, this version emphasizes our desire to serve evolving customer needs while creating value for our shareholders, employees and communities. This vision also reflects a focus on effectively operating and investing in our utility operations, as well as taking an active role in governing our investment in Enable. We are committed to providing both stability and growth from our utility operations, while capturing the growth associated with midstream investments. Our new corporate strategy is simply stated: operate, serve and grow. This updated strategy incorporates the company's competitive advantages in technology implementation, process innovation, customer service and regulatory relationships. First, we operate billions of dollars of assets that people rely on every day to serve their energy needs. These energy delivery systems must work reliably and safely. Second, we serve over 5.6 million customers, who expect efficient and effective interactions as we address their needs. And third, we continue to grow our investments to address customer growth, system hardening and replacement of aging infrastructure. The effective execution of this strategy over the next 5 years will allow us to target a normalized compound utility annual earnings growth rate of 4% to 6%. Recently, I announced that Tracy Bridge and Joe McGoldrick were named executive vice presidents and members of the company's executive committee. While both have been given additional responsibilities, Tracy will continue to lead our electric business and Joe will continue his leadership role over our natural gas businesses. During this call, you will hear from Tracy and Joe as they discuss their businesses' 2013 performance and provide an outlook for 2014. I'll now turn the call over to Tracy.

Thank you, Scott. Our Houston Electric service territory is located in one of the most economically vibrant metro areas in the country, and benefits from a 5.5% unemployment rate, the lowest since 2008. We have experienced strong and consistent customer growth, both residential and commercial, since our inception as CenterPoint Energy in 2002. This growth is occurring not only from increasing housing starts, but also from the expansion of the Port of Houston and new commercial developments in our service territory. Forecasts indicate we can expect these trends to continue. We have made significant investments in advanced meter systems and intelligent grid technology, which not only make our operations more efficient, they make our customer interactions more productive. Through these technologies, we can more easily identify and resolve problems. We can proactively communicate with our customers about the status of their electric service during an outage. Further, we are able to remotely start, stop and transfer service through our advanced meter system, usually eliminating the need to dispatch a truck to the customer's premise. We are proud to be a leader in grid automation. Houston Electric's 2013 financial performance was strong and in line with our expectations. Core operating income was $474 million, compared to $492 million in 2012. The addition of nearly 45,000 customers in 2013 contributed $26 million of incremental revenue. We also benefited from approximately $30 million of right-of-way revenue, which was slightly more than the prior record set in 2012 and almost 10x more than our historic norms. These increases were more than offset by a return to more normal weather, as well as higher operation and maintenance expense, depreciation and taxes. To better serve this growing service territory, Houston Electric invested $759 million of capital, which was up 27% from the prior year. We expect 2014 to be another solid year. Houston Electric will continue to benefit from 2% customer growth, and we expect to invest $780 million of capital. Our 5-year capital plan is expected to exceed $3.6 billion and will be used to improve service reliability and system resiliency, enhance our customer service systems and support normal load growth and system maintenance. As a reminder, this capital plan does not include any investment in the transmission import project proposal we mentioned on our previous call. Should ERCOT recommend one of CenterPoint's proposed projects, we would initiate an approval proceeding with the Texas PUC later this year. We expect increases in operating expenses to be slightly higher than normal in 2014 as we implement specific initiatives focused on grid reliability and safety. We also expect a reduction in right-of-way revenue from approximately $30 million in 2013, down to $10 million to $20 million this year. This range remains well above historic norms, although we anticipate a trend toward more normal levels over the next several years. Joe McGoldrick will now update you on gas operations.

Thank you, Tracy. For the past several years, our natural gas utilities have worked diligently to build an efficient and effective business model while growing earnings. We have implemented a number of regulatory mechanisms that are now producing a predictable amount of annual incremental revenue with reduced regulatory lag. We've also continued an expense management effort that has resulted in, essentially, no change in our O&M expenses over the past 5 years when pass-through expenses associated with energy efficiency programs are excluded. And our credit and collection processes continue to effectively limit bad debt expenses. Collectively, these efforts to manage business performances have paid off as evidenced by the doubling of operating income in 7 years and record operating income reported today for our natural gas utilities in 2013. None of these improvements were made at the expense of operations. In fact, reliability, safety and customer service have all improved over that time. Operating income in 2013 was $263 million, as compared to $226 million in 2012. Rate relief, growth, cost management efforts and a return to normal weather, compared to an extremely mild 2012, resulted in a strong operational performance. Moreover, as a result of our weather hedging strategy and weather normalization adjustments in some jurisdictions, we saw only a small net benefit from increased usage due to weather in 2013. An important point is that structural changes, coupled with innovative rate mechanisms, resulted in record financial performance without relying on significantly increased weather-related usage. Like Houston Electric, our natural gas utilities had a significant capital program in 2013, investing $430 million, a 20% increase over 2012. The customer count in our service area grew at an average of 1% in 2013, driven by robust growth in our largest service areas of Houston and Minneapolis. These benefits were partially offset by an expected increase in bad debt expenses associated with colder weather, as well as higher depreciation and tax expense. In 2014, our natural gas utilities expect to add more than 30,000 new customers. Moreover, we expect to invest $520 million this year, an additional 20% increase over last year's investment. Our 5-year capital plan is expected to exceed $2.2 billion and will target safety and reliability-related infrastructure, growth and system modernization. On the regulatory front, there are 3 items I would like to mention. First, our Minnesota rate case was heard by an administrative law judge in January 2014, and we expect a final decision by the Public Utilities Commission by mid-summer. Second, in December, we resolved a rate inquiry by the City of Houston without a need for further proceedings. And third, the Texas Supreme Court has confirmed that the Texas Railroad Commission had the authority to approve a Cost of Service Adjustment rider or, COSA, which we utilized from 2009 to 2011. We expect this decision will eliminate the potential to refund amounts collected under that rider. Our Energy Services business reported 2013 operating income of $13 million, as compared to $2 million in 2012 after excluding the 2012 goodwill impairment charge. After adjusting for annual mark-to-market changes and onetime items, primarily, the 2012 sale of a nonstrategic asset, Energy Services operating income grew by $4 million in 2013. The increased customer count and sales volumes in 2013 were partially offset by lower unit margins in more competitive markets. As part of our gas operations group, this business supports customer needs through tailored commodity solutions. We expect this business to provide between $15 million and $25 million of annual operating income during the planning horizon. I'll now turn the call back to Scott, who will discuss our investment in Enable.

Thank you, Joe. Once Enable Midstream Partners becomes a publicly traded company, it's our expectation that they will publicly provide their financial and operational results. Accordingly, in the future, we will generally limit the discussion in our earnings releases and calls to our portion of Enable's equity earnings and the cash distributions we receive from the partnership. However, in this call, we will provide a high-level discussion of Enable's performance, although as you know we are limited in what we can say due to their pending S-1 filing. For the 8-month period from May 1 of 2013 when Enable was formed through December 31 of 2013, CenterPoint Energy recognized $173 million of equity earnings from our investment in Enable, and an additional $8 million from our remaining ownership in SESH. We also received cash distributions of approximately $106 million from Enable and $23 million from SESH during 2013. In February of this year, we received a cash distribution of approximately $67 million associated with Enable's fourth quarter results. In total, our cash distribution related to Enable's 2013 performance is $173 million for the 8 months of May to December. During the past year, Enable's transportation and storage segment continued to be challenged by ongoing low seasonal and geographic price differentials, which reduced the demand for ancillary services and adversely impacted certain contract renewals. Enable's gathering and processing segment had a solid year despite relatively low commodity prices for most of the year and reduced gathering activity in the dry gas basins. Processing volumes, however, have continued to increase as a result of system expansions in its wet gas regions. As you know, Lynn Bourdon became Enable's CEO at the beginning of February. We're excited to have Lynn in place and believe the strength of his broad industry experience and his high-energy leadership style are well-suited to ensure Enable reaches its full potential. Through the efforts of Lynn and his team, good progress is being made toward the planned IPO. I'll now turn the call over to Gary, who can provide an update on financial activities.

Thank you, Scott, and good morning to everyone. Before discussing various CenterPoint financial items, I would like to mention that Enable Midstream Partners recently filed a second amendment to its S-1 registration statement and is continuing to progress towards an initial public offering. Our goal remains to have an interest in a publicly traded master limited partnership. Given applicable SEC requirements, we are limited in what we can discuss regarding Enable and its IPO. Now let me update you on the recent CenterPoint Energy-related activity. As you know, the company has benefited from a number of favorable actions by the rating agencies in 2013. In January of this year, Moody's more favorable view of the relative credit supportiveness of the U.S. regulatory environment was reflected in its upgrade of the debt of CenterPoint Energy Inc. and Houston Electric. CenterPoint Energy's senior unsecured debt is now rated BAA1 and the mortgage bonds of Houston Electric are now rated A1. Now I would like to discuss our earnings guidance range for 2014, which takes into consideration a number of economic and operational variables that may impact the actual earnings performance. Effective with the formation of Enable Midstream Partners, we recorded our portion of the midstream partnership's earnings using the equity method of accounting. Therefore, our earnings per diluted share for 2014 represents the booked after-tax earnings we record from our utility operation and the booked after-tax earnings we record from midstream investments. We estimate earnings from our utility operations, inclusive of the parent company, to be in the range of $0.68 to $0.72 per diluted share for 2014. The utility operations guidance range considers significant variables that may impact earnings, such as weather, regulatory and judicial proceedings, volumes, commodity prices, ancillary services, effective tax rate and financing activity. We estimate earnings -- equity earnings from our midstream investment to be in the range of approximately $280 million and $315 million or $0.40 to $0.45 per diluted share for 2014. This guidance includes our 58.3% ownership interest in Enable Midstream; our retained 25.05% interest in SESH; and the amortization of our basis difference in Enable. This guidance does not include any gains or losses that result from Enable's selling unit or dilution associated with Enable's issuance of limited partnership units and its planned initial public offering. The midstream investment's guidance range considers significant variables that may impact earnings such as commodity prices, volume throughput, ancillary services, weather, regulatory proceedings, effective tax rate, financing activity and potential net synergies realized once the partnership operations are fully integrated. Our consolidated estimate of earnings on a guidance basis for the full year 2014 is in the range of $1.08 to $1.17 per diluted share. We have assumed a consolidated effective tax rate of approximately 36%, including a 38% tax rate for Enable's earnings, an average share count of approximately 431 million shares and lower interest expense. In addition, the company does not include the impact of any changes in accounting standards, any impact to earnings from the change in the value of the Time Warner stocks and the related [indiscernible] securities or the timing effects of mark-to-market and inventory accounting in the company's Energy Services business. As the year progresses, we will keep you updated on our earnings expectations. In closing, I would like to remind you of our revised dividend policy and the $0.2375 per share quarterly dividend declared by our Board of Directors on January 20. This represented a 14.5% increase from our 2013 quarterly dividend. Our objective is to provide a quarterly cash dividend that is supported by the long-term stability and growth of our utility operation, combined with the growth in the distributable cash flow from Enable. Our intention is to target a payout ratio of 60% to 70% of sustainable earnings from our utility operation, and 90% to 100% of the net after-tax cash distributions we receive from Enable. We believe this revised policy represents our strong commitment to shareholders and the confidence we have in the underlying growth prospects for our utility operations and cash distributions from Enable. Thank you for your continued interest in CenterPoint Energy, and now I'll turn the call back over to Carla.

Thank you, Gary. In answering your questions, I'd like to remind you that since Enable is in the process of pursuing an IPO, we are restricted by SEC regulations in what we can discuss regarding the partnership. We will now open the call to questions. [Operator Instructions] Thea?

[Operator Instructions] The first question will come from Matt Tucker with KeyBanc Capital Markets.

First question, the amortization of the basis difference, could you give us that number for 2013 and what you expect it to be for 2014?

For 2013, it was a partial year, so it was about $5 million. Going forward, Matt, it's going to be $7 million, and you'll see that described in our 10-K as well. So it's going to be amortized over 30 years and approximately $7 million per year.

Great. And then I probably missed this, but did the guidance assume normal weather and I guess normal weather for the full year or kind of actual weather year-to-date and normal weather going forward?

Matt, the guidance we gave was inclusive of what we've experienced to date. So we do have some feel for the relative favorability that we've seen so far. So that has been factored in.

But we still have the summer in front of us, Matt, which you know has its implications.

So it's worth noting the balance of the year is assumed to be at normal.

Got it. And just last one, could you provide a little more of an update on your transmission proposals and kind of the timeline for that this year?

Tracy, do you want to take this?

I will. Matt, as you may know, we've submitted several proposals to ERCOT for consideration. We're expecting a decision in the second quarter of this year, and if we are fortunate enough to receive ERCOT's recommendation, we will then proceed to the Public Utilities Commission of Texas for authorization to build that line. So we're in a watch-and-wait mode right now and we're optimistic that one of our proposals may be included in ERCOT's recommendation.

Matt, it's also probably safe to note the PUC process take upwards of a year after we make our submission. So the submission to the commission would be later this year and they can take up to a year to decide.

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

Actually, maybe just chewing off that last question, could you -- I know you said you all submitted a range of several proposals, could you refresh my memory of what the range of invested capital would be for those proposals?

Yes. Carl, roughly, the range is somewhere between $300 million and $600 million, given the options involved. And keep in mind that some of those options would have us sharing some of the investment with, potentially, with other parties who are involved in the project.

Fair enough. But that is -- but just to be clear, that is outside right now of the current 5-year budget?

That is correct. That's not included, at all, in our budget.

A couple questions then. The first is, just to try and clarify, because of the dividend policy with respect to the payout on utility, and the 90% to 100% of the after-tax cash distributions from Enable, Gary, what should we be using as a cash tax rate for Enable, from your all's standpoint?

That's a good question, Carl. I think you should use around 15% to 17%, and let me describe why. In the early years, I'm going to look in sort of a 5 year horizon, these cash taxes are lower in the early part and they then rise to a higher rate. So I think if you use 15% to 17%, that's sort of a sweet spot. We have to think about it as we think setting our dividend policy over a little longer horizon than just the current cash tax. Is that helpful?

Understood. Very helpful. And then maybe last question, if I could. And, certainly, Joe, you addressed the outlook for Energy Services within the planning horizon and maybe no more needs to be said. But I think back few years, we were looking at a little bit higher number for what the potential run rate of Energy Services could be once we removed some of the volatility of the wholesale and sort of left it to the retail marketing. And is that just a function, essentially, of a more competitive market or is there something else going on that should we should be aware of?

Carl, I think you answered part of the question. And clearly, the market is more competitive, so that is impacting our margins somewhat. But also, we don't look like we did, say, 4 or 5 years ago. We had some assets back then that we were able to take advantage of when you had the sort of volatility that, frankly, we're seeing again this winter, but we don't have the ability to capture those margins any longer because, as you recall, our intent was to de-risk this business and make it a true retail sales business.

The next question will come from Andrew Weisel with Macquarie Capital.

Another question on the dividend growth here. You said, from Enable, it will be 90% to 100% of after-tax cash proceeds. Does that include only proceeds relative to the LP units or would that also include cash from the General Partner IDRs?

No. Those are the -- the cash from the general partnership IDR is yet to be determined further down the road. At this point, I think you think of it as our LP interest, the 58.3%, yes.

And any potential cash from the GP would be -- to be determined what you'd do with that cash [indiscernible] CenterPoint fund?

I think that's -- yes. I think that's right, Andrew, to be determined. But I think of it -- look, our dividend policy is very clear. Cash flows from Enable will be on a 90% to 100% on an after-tax basis to our shareholders. I'm just saying, in the near term, the GP, obviously, we don't have the benefit of those IDRs, we will, eventually. So I think, dramatically, and the board will make those determinations at that time. I think Enable cash flows fundamentally will go to our shareholders.

Okay. Great. And then gas utilities, can you just remind us which ones have some form of weather decoupling or normalization and which have benefited from weather year-to-date?

Sure. We now have weather normalization adjustments in our Arkansas, Louisiana, Oklahoma and Mississippi jurisdictions. And those operate through the performance-based mechanisms that exist in those states. Now, as you know, those are our smallest jurisdictions of our states. So Minnesota is clearly our most weather-dependent LDC that we have and has the most volumetric rates as well. So that's why we continue to hedge weather in both Minnesota and, primarily, in Texas where we also do not have a WNA.

Okay. Great. And then the last question is, any commentary on the gas retail marketing business year-to-date through these cold stretches?

Well, we're seeing, obviously, this -- the volatility that's been discussed already and some very high peak prices. We've been able to take advantage of some of that, but also there are times when those are costs to you as well. So net-net, I wouldn't say it has had a material impact on our sales businesses in the year-to-date.

One. Great. And then, sorry, one last one if I can squeeze it in. The electric utility in Houston. Clearly, very strong account growth and usage trends. But you're also investing a lot of money based on the CapEx. So any high-level thoughts on when the next rate case might be necessary? And will the earnings grow between now and then, or will it just be a function of the ROE falling?

Andrew, we will see earnings grow between now and the end of the period. The need for a formal rate proceeding is really pushed out because of the mechanisms that we have, coupled with just the growth that we're experiencing. So we get $25 million to $30 million of new revenue each year just off of growth. And then using the capital covering mechanisms we have in electric around the transmission and the distribution side, we can pursue timely recovery for 90 -- over 90% of our capital that we spend there. So we've got those mechanisms that are going to keep us out of needing to file a formal rate case during this window of our plan.

Meaning 5 years?

Yes, correct.

[Operator Instructions] The next question will come from Faisel Khan with Citigroup.

I don't know if you had this in your prepared remarks or not. But given the spending plans you have at the utilities over the next few years, what kind of growth rate do you expect out of this sort of $0.68 to $0.72 number that you gave out for '14? So what's sort of the long-term growth trajectory of these earnings, given the spending plans you have in the electric and gas utilities?

I did comment, but I'll just reiterate those -- my remarks. We see that with the plan we have in place that we would grow that utility earnings by about 4% to 6% over the planned period.

Okay. Okay. Got it. And in the 2014 guidance, do you have any right of easement grants in that number as well? What is that number?

We have assumed that it would fall to somewhere between 10 to 20, is what we had commented on. If you take a midpoint, it probably gives you a pretty good feel for what we think it may be. But I can tell you, as we've told you in the past, this can be very, very uncertain in terms of both the timing and the amounts. Hence, the reason we gave a range. So it's very difficult to target a point value, but we think it's going to be dropping off, although it is going to stay above what we had seen on a historic basis.

And can you remind us what drives this sort of revenue out of this particular sort of source of income?

There are a number of companies and pipelines that are trying to put infrastructure in from the shale plays, which are outside of the Houston territory, and they're generally trying to get commodity over to the Houston Ship Channel. And the only way to get to the Houston Ship Channel through pipelines is to go through the city, and our right-of-ways present a great opportunity for them to get their pipes in.

The next question will come from Ali Agha with SunTrust.

Could you remind us, corresponding to the equity income or earnings that you budgeted from Enable for 2014, what's the distributed cash flow that comes from that?

With the pending offering, I don't think it's appropriate to discuss the distributed cash flow.

Okay. Because the S-1 gives numbers, I think, on a 12-month basis from March to March, so I was wondering is there a calendar '14 update or how we should think of that?

Well, I think, when you think of our earnings guidance, I mean, Ali, we have taken into consideration what I would call the full year '14. As you just described, the S-1 is following normal protocol it has 9 months of '14 and then 3 months of '15. So we've made our assumptions and we've made our assumptions around those variables, of course, in including -- in determining our guidance.

Okay. And then, Scott, to you, from your vantage point, from the CEO position, what's the current appetite for CenterPoint for additional regulated utility M&A at this point?

Ali, I think the story you'll hear will be consistent with what you heard in the past, and that is we are interested in opportunities to make an acquisition if the opportunity presents itself. Now, we know it's tough in this space to do this, but we also know that we're going to be very discerning in terms of doing the analytics and making sure that what we would pursue is strategically aligned. And it would be done at a value that would be accretive to our shareholders. So we remain interested in it, but it's difficult to do in this space.

My last question, Scott, again to you. I mean, as you talked about you're looking at 4% to 6% EPS growth for the regulated business, presumably Enable will add to that as well. Corresponding to that, how should we think about dividend growth for you? The investment grade that you've made to us on the investment side would be what in terms of earnings and dividend right now?

The way we think about that, we obviously didn't give you a dividend growth rate and pretty simple. There are a number of moving parts here that's going to be, throughout this year, going to have significant more transparency around them. So we've tried to provide a policy that's very clear to investors. If you can see then the -- what I would call the significant inherent growth in the dividend, as Enable grows and the clear policy around the distribution of cash and then the investment we make in the utility and the ability to grow the utility earnings. So we think our policy really speaks to -- what we think will be really terrific, frankly going forward, dividend growth. But we're not committed to an exact percentage around this. So I really think you look at the policy and then focus on the growth in the utility, and then what we expect is -- will be strong performance by Enable as they execute their business plan over the longer term.

Gary, what's the timing of the IPO? Last question.

I can't comment on the -- I can't comment on that. Sorry.

The next question will come from Steve Fleishman with Wolfe Research.

Two questions. First, just to clarify, is the utility 2014 of $0.68 to $0.72, is it clean based for the 4% to 6% growth rate?

Yes, it is a good clean base.

Okay. Good. And then, secondly, just the 15% to 17% cash tax rate on the Enable distribution that CenterPoint has, is that a number that will stay in that range for a number of years or does it go up over time?

Steve, the way I'm providing that is the way we have to look at it because there's timing. The timing, as I mentioned, on an earlier question that the rates actually start less than 10% but they then ratchet up over, I'm going to look at a 5-year timeframe. If you average that, it's a 15% to 17%, and that's kind of the way we have to think about it. So we will distribute the cash, trying to have what I'd describe as a normalized cash rate. But yes, I think that's the way you think about it, certainly, in the foreseeable future, it's 15% to 17%.

Okay. But in 2014, it's more actually more like 10%?

Well, it's less than 15% to 17%. And then in years after this, it increases. And again, I'd just caution you, these are always complex issues around tax and tax laws can change, and it's always going to be a variable. But absolutely, in terms of the policy, what we're shooting for and our objective is to distribute the after-tax cash from Enable to our shareholders.

The next question is from Charles Fishman with Morningstar.

The 20% plus jump in natural gas distribution CapEx, '14 versus '13, is that driven by customer growth or are you accelerating some of your line replacement? What is -- what's going on there?

Joe, do you want to take this?

Sure. We have grown the capital program in our gas LDCs for the last several years. 5, 6 years ago, it only averaged about $200 million, and now we're closer to $400 million. It's really -- there is some growth capital in there, no doubt, but a lot of it is being driven by infrastructure replacement and a pipeline integrity regulation. As you're aware, after San Bruno, a lot of things have ratcheted up and so we are making a major investment, and replacing a transmission pipe that loops the City of Minneapolis. And so there's a lot of safety and reliability-related infrastructure investments that we're making across all of our LDCs.

So the incremental between '14 and '13 it sounds like it's really that transmission line replacement around Minneapolis is being accelerated?

That's a lot of it. In addition too we continue with our automated meter reading program that continues to replace the old meters with new meters so we can read them remotely. And so, there's a number of things, but clearly, the pipeline integrity investment is a large portion of the increase.

And of the $521 million for this year, roughly what portion is covered by rate trackers?

Approximately 50%.

Our final question is from Carl Kirst with BMO Capital.

Actually, I think most have been hit. Gary, let me -- one other, this might be a little arcane, but if Comcast actually buys Time Warner, does that impact [indiscernible] at all?

It does not impact the [indiscernible]. What it does it really substitutes another share. As you know, we started with one reference share, now we have 3 companies, so you'll have -- at this point, we have Time Warner Cable, and now, once they merge, it will be Comcast or whatever. But it's just another reference share.

The final question will come from Andrew Weisel with Macquarie Capital.

Any thoughts or comments on the 2 CFO searches for Enable and CenterPoint?

I don't know what you're up to, Andrew. I'm still here, buddy.

Didn't you say last year that this would be your last year?

No, well, I'm teasing, but I'll let Scott speak to both of those.

Yes. Well, clearly, Gary is still here and he plans to be here for some additional time. So there's nothing underway in terms of finding his replacement at the current -- right now. We will be doing that at some point, but that will be later in the year.

Okay. My mistake, Gary. I wasn't suggesting anything.

With respect to Enable, we are actively working on the CFO. I believe we're getting close. We haven't made an announcement. But we do believe we're getting close with all the activity underway. Lynn is active in that and he's leading that process, and Gary and John [ph] are both involved in that as well. But we're making good progress there and, hopefully, we're fairly close on that.

With that, we will now end the call. Thank you for participating today. We appreciate your support, and have a nice day.