Good morning, and welcome to CenterPoint Energy Third Quarter 2016 Earnings Conference Call with Senior Management. During the company’s prepared remarks, all participants will be in a listen-only mode. There will be a question-and-answer session after management’s remarks. [Operator Instructions] I will now turn the call over to David Mordy, Director of Investor Relations. Mr. Mordy.

Thank you, Sophia. Good morning, everyone. Welcome to our third quarter 2016 earnings conference call. We recognize this is a busy day for earnings calls, so we especially appreciate your interest in CenterPoint. 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 CFO will discuss our third quarter 2016 results and provide highlights on other key areas. In conjunction with the call today, we will be using slides which can be found under the Investor section on our website CenterPointEnergy.com. For a reconciliation of the non-GAAP measures used in providing earnings guidance in today’s call, please refer to our earnings press release and our slides, which, along with our Form 10-Q, have been posted on our website. Please note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and posts 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 actions, economic conditions and growth, commodity prices, changes in our service territories and other risk factors noted in our SEC filings. We will also discuss our guidance for 2016. The guidance range considers utility operations performance to date and significant variables that may impact earnings such as weather, regulatory and judicial proceedings, throughput, commodity prices, effective tax rates and financing activities. In providing this guidance, the company uses a non-GAAP measure of adjusted diluted earnings per share that does not include other potential impacts such as changes in accounting standards or unusual items, earnings or losses from the change in the value of zero premium exchangeable subordinated notes or ZENS securities and the related stocks or the timing effects of mark-to-market accounting in the company’s Energy Service business. The guidance range also considers such factors as Enable’s most recent public forecast and effective tax rates. The company does not include other potential impacts such as any changes in accounting standards or Enable Midstream’s unusual items. Before Scott begins, I would like to mention that that this call is being recorded. Information on how to access the replay can be found on our website. And with that, I will 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. We will begin on Slide 4. This morning we reported third-quarter 2016 net income of $179 million or $0.41 per diluted share compared with a loss of $391 million or a loss of $0.91 per diluted share in the same quarter of last year. The 2015 loss is inclusive of impairment charges related to Midstream Investments. On a guidance basis third quarter 2016 adjusted earnings were $177 million or $0.41 per diluted share compared with adjusted earnings of $146 million or $0.34 per diluted share in the same quarter of last year. Utility operations and Midstream Investments both performed well this quarter. We had strong contribution from Houston Electric during their peak season as well as solid results from gas distribution and energy services. On a guidance basis, utility operations contributed $0.31 per diluted share in the third quarter of 2016, compared to $0.24 per diluted share in the same quarter of last year, improving $0.07 per share. Our strong third-quarter utility performance was driven by a number of factors. We continue to see solid customer growth in both our electric and gas utilities. Combined, our utilities added over 86,000 metered customers during the last 12 months. Capital expenditures remained strong as we invest to meet growth, safety and reliability needs within our service territories. Rate relief driven by capital investment continues to be an important contributor to earnings growth. Tracy and Joe will provide additional regulatory updates for their business segments later in the call. Slide 5 provides some of the highlights from Enable's third quarter results. Midstream investments contributed $0.10 per diluted share for both the third quarter of 2016 and the same period…

Thank you, Scott. I am pleased with Houston Electric's operational and financial results this quarter. Starting on Slide 8, core operating income in the third quarter of 2016 was $234 million compared with $219 million for the same period last year. The business benefited from rate relief, customer growth and higher equity return, primarily related to true-up proceeds. These benefits were partially offset by higher depreciation and other taxes. By the time, we have our next earnings call, Houston will have posted Super Bowl 51. It's great to see Houston getting ready with enhancements throughout the City. Houston's growing economy continues to require substantial electric infrastructure improvements and capital investment. Through the end of the third quarter, we've invested $638 million in capital and our meter count is up 2% from the third quarter of 2015. As a reminder 2% customer growth equates to approximately $25 million to $30 million of incremental revenue annually. O&M expense in the third quarter 2016 was 1.7% higher than the same period last year, excluding certain expenses that have revenue offsets. We continue to focus on keeping annual O&M growth under 2%. Slide 9 provides an overview of regulatory developments year-to-date. Our regulatory strategy remains on track, since the last earnings call, we received approval for our July transmission cost of service or TCost filing, adjusted rates from our TCost filing as well as our April distribution cost recovery factor or DCRF filing went into effect in September. Additionally, we recently received approval for our $10.6 million energy efficiency performance incentive and we will recognize those earnings in the fourth quarter. Joe will now update you on the results for natural gas operations.

Thank you, Tracy. Our natural gas operations, which includes both our natural gas distribution business and our non-regulated energy services business had strong third quarter. Turning to Slide 11 natural gas distribution's third quarter operating income was $22 million compared to $11 million for the same period in 2015. Operating income was higher due to several factors including rate relief, revenue from decoupling mechanisms, lower bad debt expense and lower sales and use tax. These increases were partially offset by higher depreciation and labor and benefits expense. We continue to see solid natural gas distribution customer growth of approximately 1% having added nearly 35,000 customers since the third quarter of 2015. O&M expenses were approximately 1.5% higher in the third quarter of 2016 compared to the same period last year, excluding certain expenses that have revenue offsets. Despite the quarter-to-quarter variability that can occur, O&M expense discipline remains a priority. We continue to benefit from our long-standing regulatory strategy of utilizing constructive rate mechanisms like decoupling mechanisms in Arkansas and Minnesota that contributed to our earnings this quarter. For a complete overview of regulatory developments this year, please see Slides 12 and 13. I'll speak to few of the highlights. In September, we received a final order for our Arkansas rate case, which provided for an annual increase of $14.2 million. This increase implemented in September reflects a 9.5% ROE. It also established a formula rate tariff, which allows rates to be adjusted based on a plus or minus 50 basis points banded ROE approach in a projected test year. In Minnesota, the $12.7 million conservation improvement program incentive, which we filed in May 2016 was approved by the Minnesota Commission and recognized in the third quarter this year. Later this month we plan to file a Houston in Texas…

Thank you, Joe and good morning, everyone. I will begin on Slide 16. Today we reported third quarter 2016 earnings of $0.41 per diluted share. On a guidance basis, earnings were also $0.41 per diluted share versus $0.34 for third quarter 2015. Guidance basis earnings per share increased $0.07 for our utility operations segment compared to last year. Our Midstream Investments segment was $0.10 per share for this quarter and for third quarter 2015. As Tracy and Joe discussed, combined core operating income improved $31 million excluding mark-to-market adjustments. Year-to-date, we have delivered $0.90 in guidance basis EPS, consisting of $0.68 in utility operations earnings and $0.22 in Midstream Investment earnings. We are updating our full-year 2016 EPS guidance range to a $1.16 to a $1. 20. Based on the strength of our combined performance year-to-date our expectations for the fourth quarter and Enable’s recent confirmation of its 2016 guidance. We are also confirming our year-over-year EPS growth target of 4% to 6% in 2017 and 2018. Dividend increases will come with earnings growth at a rate that allows us to gradually move our payout ratio lower. As Scott and Joe have mentioned we announced an agreement to purchase Atmos Energy Marketing on Monday. We plan to finance this through internally generated cash flow and/or debt financing. We expect this acquisition to be modestly accretive in 2017 after costs associated with the acquisition and integration into CES. As Joe reviewed in our second quarter call we are forecasting that are CES business will provide $45 million to $55 million in operating income in 2017. We expect AEM to be additive to this forecast. As previously disclosed in 2017 we expect to benefit of approximately $12 million in net income from a full year of our investment Enable preferred securities and…

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. Sophia?

At this time we will begin taking questions. [Operator Instructions] Thank you. Please hold for the first question. The first question will come from Greg Gordon with ISI.

Hey good morning guys. It is actually Durgesh [Ph] on for Greg. Can you hear me?

Yes good morning, Greg. We can hear you.

Hey good morning. Just the question was related to...

Durgesh, I have got it. Thanks. Sorry.

So our question is given the significant improvement in the outlook at Enable, why are you not reassessing the consolidated 4% to 6% growth rate in the context of a no transaction scenario? It seems that your expectations that underpinned four to six would be a scenario where Enable would be range bound in terms of its earnings and cash flow contribution and it appears that they're poised to see significant potential growth in earnings and distributions?

Yes Greg I would say the answer to this is more of a timing issue than anything. We are going through now the process of finalizing our own plan for the utilities as we speak. Our board approves our financial plan in December as we get near the end of the year. Our time for providing updated forecast will be at our fourth quarter call but I think your observations are valid certainly and what we've seen from Enable as well as the work we're doing with our utilities will be reflective in the new guidance that we provide on the fourth quarter call.

Thank you very much. Have a great day.

The next question will come from Insoo Kim with RBC Capital.

Hey good morning, everyone.

Good morning.

Just first given your comment on the spin option, are you currently awaiting a response from the IRS? And if so, do you have any expectation on a timeframe as to whether you will get a confirmation that will be largely a tax-free transaction?

Insoo good morning it's Bill. We have not shared whether or not we have filed or will file with the IRS but we have shared in my comments on the call is what we must confirm that we have minimal tax leakage associated with the spend should we continue down that path.

Understood. And then the third option of keeping Enable and I think you have mentioned reducing the volatility associated with that, would that just involve Enable or working with Enable to increase their fee-based contracts structures?

Yes, it is working with Enable. The dialogue between governance and management is a constructive one and management is focused on this as evidenced by the renegotiation of some contracts that they've been working on to accomplish that. So that comment about trying to reduce commodity exposure is with what management will do at Enable.

Understood. And finally, just regarding the Atmos Energy Marketing acquisition, is the strategy for the energy services business to continue to make ongoing acquisitions to grow that business.

Yes, let me characterize the strategy this way. We see it as an important part of our business mix it's a great complement to our gas utilities and we continue to -- we will continue to look for opportunities organically through the management team for growing that business just as we're growing our utilities. I would characterize any thoughts around M&A is opportunistic as opposed to a stated strategy in that direction. Our goal though is to continue to grow that business just as we're growing our utilities.

Got it. Thank you and I will see you in a few days.

Yes.

The next question is from Abe Azar with Deutsche Bank.

Good morning.

Good morning.

Is your new 2016 guidance, is that the new base for the 4% to 6% growth from here?

Yes it is.

Okay. And can you comment a little bit more on the dividend growth. You already mentioned the goal to decrease the payout ratio, is there any targets for dividend growth from here?

There are no specific targets with respect to dividend growth and of course at the end of day its Board of Director's responsibility to review a number of factors prior to their declaration of a dividend. Having said that, we do intend to grow the dividend. It just may not be at the same robust pace of our earnings growth and this will allow us to grow the dividend and bring down the payout ratio at the same time.

Okay, that’s it.

The next question is from Ali Agha with SunTrust.

Thank you. Good morning.

Good morning.

Scott, just wanted to clarify, in the past you had mentioned that your plans for what you want to do with Enable would firm them up and communicate to us in the second half of this year. Am I hearing it right that the time has slipped given some of these things playing out and maybe it is more early next year we will hear from you or is that still by the end of this year we should definitively hear from you.

Yes, as Bill said, the process is taking a little bit longer than originally anticipated. I can't tell you when the process will specifically end. As Bill said we still are in conversations with third parties and should those dialogues continue past the end of the year than I guess it's technically possible that it goes on into the following year but as long as we're having these dialogues, the process will continue.

I see. And second question, just so that we are clear on the conversion from the Enable numbers to yours, I know there is basis differential, etc. but if you just took their 2017 net income guidance, what does that translate into for CenterPoint just taking their numbers as they publicly stated those?

Ali this is Bill. They confirm it around the midpoint of their guidance and that number would translate into $0.21 per share for us on an annual basis was another $0.07 due to the accretion and for a total of $0.28. That's why in our prepared remarks we said we should be at the high-end of the guidance that we have provided.

Right. But they have also put out their '17 net income number as well. I was more focused on that.

So they've put out their '17 net income number, we have not translated what that might mean into earnings per unit and from that earnings per share of CenterPoint.

But the basis differential will be roughly the same as it is for '16?

That will be unchanged.

Okay. Thank you.

The next question will come from Neel Mitra with Tudor, Pickering.

Hi good morning.

Good morning, Neel.

How do we look at the sale auction for Enable after the 120-day period is passed since you rejected OGE or its partner's offer? At that point would you preclude the option of a sale or would you restart the process and how would that work?

Neel good morning, it's Bill. I think to be clear, we haven't commented on OG&E offer, what we said in our prepared remarks is we remain in discussions with other parties and should those discussions continue past mid-January then per our partnership agreement, we would need to give OG&E another right of first offer or ROFO.

Got it. Okay. And it seems like you are evaluating the possibility of a spin more and it seems that you are getting a little bit more comfortable with that if I'm reading right. How do you consider the possibility of that trading as a standalone CCORP versus the MLP aspects that OG&E and the public float would own?

Right. When we announced the strategic review process, we said we would be on concurrent path of thinking about either a sale or a spend. So I wouldn't want to imply that we're waiting one or of those more heavily than the other. We are attentive to what I refer to is capital markets considerations including how that CCORP would trade and how portfolios managers would think of it as a security.

Okay. Thank you.

The next question will come from Nick Raza with Citigroup.

Thank you, guys. Just a couple of quick cleanup questions on the Atmos acquisition, are we to assume that is a similar multiple as the prior acquisition, the Continuum acquisition?

So while we take a look at the internal rate of return and the return on equity from the total investment, so that's why we evaluate them. With respect to multiple, we haven't disclosed that but it's $40 million for their business plus working capital.

Okay. And then in terms of just going back to your response on Enable about managing the commodity volatility and sort of working with Enable to essentially to fix some of their contracts, is there sort of an appetite to get rid of some of that volatility by doing more preferred issuances.

Well I think that's probably a question better set for Enable than for us or you asking about it from our perspective?

Yes.

Yes, the preferred investment we made was essentially taking an amount of money that we had invested as debt and investing it is preferred at a time when that would be helpful for Enable. Our stated objective is we have stated for quite some time is that we see Enable as a source of cash rather than a use of cash and I think that general theme still holds.

Okay, fair enough. Thanks guys.

The next question will come from Charles Fishman with Morningstar.

Hi good morning. Good morning. Tracy, unless I missed it, I didn't hear you mentioned right-of-way revenue which was always a nice little earnings stream in your segment. Can you update that

Good morning, Charles. We anticipate for 2016 that our miscellaneous revenue including right-of-way would be in the range of $10 million.

So it is continuing to have that lower trajectory as you stated in the past, correct.

That is correct.

Okay. And then the second question I had on the Atmos acquisition, I assume just because Atmos it is based up in Dallas that maybe their concentration of customers was heavier in the Dallas and North Texas area then your existing business. Is that what made it such a good fit?

This is Joe. Actually they are based in Houston for this business and they have two primary offices Houston, Texas and Franklin, Tennessee. So we have some overlapping service territories but in this acquisition, we would pick up six additional states with new customers and they have a pretty heavy concentration in the Tennessee, Kentucky area. So that's a nice complement to our existing portfolio.

So it's almost non-Texas stuff that maybe with the benefit on this.

That's clearly part of it yes.

Okay, thank you. That's all I had.

[Operator Instructions] The next question will come from Lason Johong with Auvila Research.

Thank you. On the acquisition, could you talk about the differences in margin, unit margins between your existing retail business and the Atmos acquisition?

This is Joe again. We don't give comments on unit margins by type of customer, but I will say that they definitely have a bigger mix of industrial, large industrial customers it's almost 400 Bcf of throughput on approximately 1,000 customers. So that's much higher used customers than we currently have in our portfolio. So we actually like that aspect of it but we don't -- we don't comment on specific unit margins by customer type.

Okay, then given your comments just now, is there a preference of which way CenterPoint is leaning more towards the small commercial and residential or to the larger customers.

We like the addition that this gives us, but we'll concentrate on all of our customer segments and make sure we provide them with great service, but we think this complements our portfolio nicely and it gets us into as I mentioned earlier some additional markets where we didn't have a presence.

Got it. And one follow-up on Enable. What is the point of trying to convert -- and I'm not saying one is better than the other -- but trying to convert a racehorse into a farm horse when you are talking about pulling back on the commodity volatility. Maybe the whole point of owning something like Enable is to gain that upside in the commodities.

I think the way to think about it is there is a -- the actions we were talking about earlier about reducing volatility, have to do with the structure of the contract not the pace at which Enable may pursue opportunities and grow. So, it has to do with reducing volatility not taking away from the growth possibilities of that segment.

I think I understand. Okay. Thank you very much.

The final question will come from Noah Hauser.

Hi, thanks guys.

Good morning.

During the September conference season, you gave some drivers for 2017 for utility net income. Are those drivers still intact or how should we be thinking about that now?

Nova this is Bill and those drivers are intact and we will be updating all of that in our year-end conference call after we have a Board approval for our budgets and our capital expenditures for the 2017 year.

Is there anything else aside from the Atmos acquisition that would presumably be additive to that or is there anything else we should be focused on that we could've changed?

I would say only on the margin.

Okay. Thank you.

Thank you, everyone for your interest in CenterPoint Energy. We look forward to seeing you at EEI. We will now conclude our third quarter 2016 earnings call and have a nice day.

This concludes CenterPoint Energy's Third Quarter 2016 Earnings Conference Call. Thank you for your participation. You may now disconnect.