The operator welcomes participants to CenterPoint Energy's Third Quarter 2023 Earnings Conference Call and explains that there will be a question-and-answer session after management's remarks. Vice-President Jackie Richert discusses the company's projections and forward-looking statements and mentions the use of non-GAAP measures. She also announces the recording of the call and the leadership transition that will take place in January 2024, with Jason Wells becoming the new CEO.

The writer expresses their pride in working with the executive team and their accomplishments in the past three and a half years. They have full confidence in the incoming CEO, Jason, and believe that now is the right time for him to take the helm. The company has strong momentum and a solid foundation, and the transition will have no impact on their financial plans or opportunities. Jason, the new CEO, is honored and excited for the opportunity and is confident in the company's ability to continue to outperform. He plans to work closely with the management team to execute their long-term growth plan and put customers at the heart of their actions.

The speaker expresses excitement for the company's future and thanks the current leader for his guidance. The third quarter of 2023 marks the 14th consecutive quarter of meeting or exceeding expectations, despite industry challenges. The quarter's headlines include strong financial results, increased guidance for non-GAAP EPS, and a 10% increase in dividends. The company has shown consistent growth and execution over the past three years.

The company has announced outstanding results and has initiated a non-GAAP EPS guidance for 2024. They have also revised their capital plan, adding an additional $500 million and increasing their 2023 plan by 17%. The company continues to focus on reducing O&M costs by 1-2% per year.

The company has been successful in reducing overall O&M on an annual basis, even when pulling forward O&M from future years. This benefits all stakeholders and the company plans to pull more O&M into 2023. The company has upcoming rate case filings that remain on track, with a slight modification to the timing of the Houston Electric rate case. Houston continues to experience rapid growth, supporting the company's 1-2% annual organic customer growth and keeping customer charges at a consistent level. The company is still targeting keeping customer charges in line with historical inflation rates.

The company's goal is to limit customer charge increases to 2% or below inflation levels while investing in safety and reliability. Despite economic challenges, the management team has a strong track record of execution and a tangible growth plan. The call is now handed over to Jason, who expresses gratitude to employees for their hard work during extreme weather conditions. He also provides an update on the timing of four upcoming rate case filings, starting with the Texas gas rate case, which will be combined into a single filing for the first time.

The company expects to see reduced monthly bills for rural Texas gas customers and increased bills for urban customers due to a combined filing. The company is also planning to simplify future filings and target a new filing date for Houston Electric. The company also plans to file for rate increases in Minnesota and Indiana, with a change in structure for the Minnesota filing. This change will allow for smooth revenue increases for customers.

During the quarter, the company began recovering interim mechanisms at Houston Electric, resulting in a $70 million increase in annual revenue. Recent legislation allows for more frequent filings, reducing regulatory lag and enabling customer-driven investments. The company also settled an emergency generation filing, providing customers with power resiliency during severe weather events. Despite these investments, the company is mindful of customer charges, with average monthly delivery charges at $49 a month 10 years ago.

The average monthly delivery charge for customers in the Houston area has remained at $49 despite inflation, due to organic customer growth and effective management. There have been updates regarding the generation transition in Indiana, including cost increases and delays in two renewable projects. The company is working to minimize any impact on earnings and acknowledges the efforts of the Indiana commission in balancing stakeholder input. Despite extreme weather, operational execution has been successful and the company has taken steps to mitigate generation congestion and promote customer energy conservation.

In the third quarter, the company was able to keep the power on for customers while managing operation and maintenance costs, which will benefit future customer rates. The company's efficient capital deployment, strong organic growth, and reduction opportunities outweigh the challenges facing the sector. The financial update for the quarter includes a positive revision to 2023 non-GAAP EPS guidance and the initiation of 2024 non-GAAP EPS guidance. The company also has a positively revised capital plan and corresponding financing plan, and a strong balance sheet.

In the third quarter of 2022, growth in rate recovery contributed $0.09, driven by the recovery of interim mechanisms and strong organic growth in the Houston area. Favorable weather and usage also had a positive impact, partially offsetting the unfavorable weather impact in the previous quarters. O&M remained flat for the quarter and was $0.02 favorable year-to-date. The company remains focused on reducing O&M by 1% to 2% per year while increasing spending on certain activities for the benefit of customers. Over the past few years, the company has been able to use hotter summers to increase O&M spending, resulting in a 12% reduction in controllable O&M since 2021. These results are beneficial for both customers and investors.

In the third quarter, we saw a decrease in earnings due to higher interest expense, but we are actively working to reduce our short-term debt exposure. Our 2023 capital plan is on track, with $3.4 billion invested so far and an additional $200 million in customer-focused investments added. This is due to operational factors and our ability to be flexible in our investments. We are also looking ahead to our 2024 non-GAAP earnings guidance.

The company is confident in their ability to deliver strong results for the rest of 2023 and has already started looking into 2024. They are initiating a non-GAAP EPS guidance range of $1.61 to $1.63 per share for 2024, representing an 8% earnings growth. They also plan to continue targeting 6-8% non-GAAP EPS growth through 2030 and increasing dividends in line with earnings. The company has revised their capital plan for 2024, targeting $3.7 billion of customer-driven capital to support growth, resiliency, and safety. This includes an additional $300 million to be deployed in 2024 and 2025, taking the total 10-year capital plan to $43.9 billion. This increase in capital is due to the recent resiliency legislation passed in the Texas Legislature.

The team has made significant progress in executing their capital plan since the last Analyst Day in 2021. The new $43.9 billion plan is almost 10% higher than the previous plan, and they have already deployed over $12.5 billion since the beginning of 2021. The five-year capital target has also increased by over 16% since the prior Analyst Day. While they initially did not need equity to fund their plan, as it grows, they may need to consider equity or equity-like funding. In order to efficiently fund $500 million of incremental capital opportunities, they plan to initiate a modest ATM program of $250 million in 2024.

The company's capital and ATM program will provide flexibility for future plans and will not affect their earnings growth targets through 2030. They remain focused on delivering affordable services and have a strong track record of keeping customer charges manageable. The FFO-to-debt ratio is expected to increase in the third quarter due to the recovery of investments.

The company expects continued acceleration in Q4 due to recovery in their investments. They aim for a FFO-to-debt ratio of 14% to 15% through 2030, providing a cushion to their downgrade threshold. They have reduced their exposure to floating-rate debt by 60% and plan to further reduce it. They issued $1 billion in convertible bonds, allowing them to redeem $800 million in preferred shares and pay down commercial paper. They also issued $450 million in private placement notes for SIGECO, reducing parent level debt and completing the Vectren financing integration.

The company is focused on maintaining a strong balance sheet and has built in additional conservatism in their long-term plan. They have had 14 straight quarters of meeting or exceeding expectations and are confident in their ability to continue executing their plan despite headwinds. They have raised their guidance for 2024 and have rate cases in Texas, Indiana, and Minnesota that could affect their performance. The company is confident in their ability to handle these challenges and is looking forward to celebrating the promotion of Jason at the EEI conference.

The speaker discusses three factors that give them confidence in the company's future success. These include thoughtful capital planning, O&M discipline, and exploring opportunities for savings. They also mention the passing of Texas legislation that will help reduce regulatory lag and the potential for tax savings due to divesting non-regulated entities. The speaker then hands it over to Jason for more information on regulatory cases.

The speaker, Jason Wells, is responding to a question about the extension of the filing date for Houston Electric and clarifies that it will not create any additional regulatory lag. He mentions their access to cost recovery mechanisms and believes the extension will not cause any issues. The questioner, Shar Pourreza, then asks about the company's CapEx increase and equity. Jason explains that there is no reason to continue tracking their original plan as the pipeline of opportunities is deep and they will continue to pull in new projects. Shar congratulates Jason on Phase-II and Dave on his next phase.

During a conference call, Dave Lesar and Jason Wells of a utility company discuss their plans for equity and capital expenditures. They express gratitude for the company's success and condolences for the Houston Astros. They also mention the potential for asset sales but state that they will focus on rate cases first before discussing longer-term plans.

Julien Dumoulin-Smith asks about the potential for incremental resiliency spending in Texas and how it relates to the $2.6 billion already planned. He also asks about the timeline for this opportunity and how it aligns with the Texas electric case. He also asks about the merits of further LDC asset sales versus using an ATM for funding.

Chris Foster, a representative from the company, responds to a question about the company's plans for future capital expenditures. He mentions that the company has a significant pipeline of opportunities outside of their current plans, with a focus on resiliency and growth in their gas business. The company is currently preparing a filing to propose plans for enhancing resiliency in their Houston Electric business, which they are excited about. The filing is expected to be submitted in the first quarter.

The company plans to file a rate case for Houston Electric in the first quarter of next year, along with a resiliency filing shortly after. They constantly receive interest in their assets and are confident in their ability to finance future growth. There have been some shifts in capital timing in Indiana due to a renewable project, but the company has a track record of successfully re-sequencing capital and has already begun executing the capital plan.

Jason Wells, the new CEO of CenterPoint Energy, is taking over for Dave Lesar, who was a well-known figure in the City of Houston. Jason has been working to build relationships with local community stakeholders and is deeply involved in the community. He believes that Houston is a welcoming and civic-focused city and has been able to tap into that to build a broad network. His focus extends beyond just Houston, as he is involved in a variety of organizations.

In paragraph 25, the speaker, Jason Wells, emphasizes the importance of being involved in the community and mentions his recent meetings with elected officials in Minnesota. He also mentions his commitment to being active in all of the six states that CenterPoint serves. The other speaker, Dave Lesar, praises Wells for his work in the Houston community and reassures that there should be no concerns about his departure. In regards to Minnesota, the speaker mentions the potential for a two-year forward looking rate case instead of the current one-year structure, which could benefit CenterPoint's outlook.

In Minnesota, the company operates under a forward-looking test year, which allows for revenue increases every other year instead of just in even years. They are filing a two-year test year which will help reduce regulatory lag and administrative burden for customers. There is time for one more question from a caller. The company is also filing a rate case for Houston Electric, but the extension does not allow for any changes in expectations for revenue or cost.

The company has the opportunity to recover capital through various mechanisms, but the extension does not change the overall plans for the rate case. The company is expecting a flat or potentially modest decrease in revenue, but plans to advocate for a higher cost of capital. The company has made progress in reducing its floating rate debt and plans to continue reducing it in the near future.

The speaker believes that the current situation is manageable and they may take advantage of opportunities in the near future. They have a plan for the next couple of years and believe it can be achieved despite the current macro theme. The speaker thanks shareholders and analysts for their support and believes that the company's best is yet to come. The conference call concludes.

This summary was generated with AI and may contain some inaccuracies.