The operator introduces the CenterPoint Energy's Fourth Quarter and Full Year 2023 Earnings Conference Call with Senior Management. Jackie Richert, Vice-President of Corporate Planning, Investor Relations and Treasurer, will moderate the call. CEO Jason Wells and CFO Chris Foster will discuss the company's fourth quarter and full year 2023 results. The discussion will include forward-looking statements and non-GAAP measures. The call is being recorded and a replay will be available on the company's website.

The CEO begins by expressing gratitude to the Board for entrusting him to lead the company and discusses the strong performance in 2023 and 2024. He outlines four key topics to be covered, including his commitment to strategic objectives, financial results, the sale of LDCs, and updates on the company's capital investment plan and regulatory calendar. He believes the company is well-positioned for growth and will continue to execute its plan for the benefit of stakeholders. The company's premium value proposition includes consistent growth in EPS and dividends, customer-driven capital investments, rate-based growth, affordable service, and a strong balance sheet.

The company's strategic objectives include consistent and sustainable growth for stakeholders, demonstrated by a 9% non-GAAP EPS CAGR and high dividend growth rate over the past three years. They are also focused on providing outstanding service to customers and communities while maintaining affordability. The company plans to invest in customer-driven capital in their regulated businesses, with a $44.5 billion capital increase and a 10% rate-based growth CAGR through 2030. This will serve as a strong foundation for long-term non-GAAP EPS growth targets.

The company is committed to providing affordable service to customers and has a target of reducing O&M costs by 1-2% annually through 2030. They are also focused on achieving their Net Zero goal for emissions by 2035, which will result in long-term customer savings. The company aims to fund their 10-year capital investment plan without relying on external equity issuances, but has introduced a modest ATM program to support growth opportunities. They have also pursued strategic transactions to recycle capital and reinvest in regulated operations. The company will need $250 million per year of equity or equity-like funding through 2030 for additional financing needs.

The speaker discusses the fourth quarter and full year 2023 financial results, including a 9% growth in non-GAAP EPS and reaffirmation of long-term growth targets. They also announce the sale of Louisiana and Mississippi gas LDCs, which is expected to result in after-tax cash proceeds of $1 billion. The decision to sell was driven by three reasons, although it is hard to part with the assets and team.

The sale of Louisiana and Mississippi natural gas LDCs will bring in $1 billion in cash proceeds, which will be used to support capital investment programs. This sale is cost-effective and shows a strong market demand for gas LDCs. The company plans to reallocate $1 billion in capital expenditures to other jurisdictions, which will enhance earnings power. The sale will also help the company achieve its non-GAAP EPS growth target and maintain a strong balance sheet. The company has also increased its capital investment plan to $44.5 billion through 2030.

In 2023, the company increased its capital investments by $100 million, bringing the total to $4.3 billion. This was primarily to improve resiliency and reliability in their Houston Electric Service Territory. The increase in capital spend will also help offset the loss of rate base from the sale of their Louisiana and Mississippi gas LDCs. The focus of the capital increase will be on resiliency investments at Houston Electric, including modernization, hardening, and enhancement of their transmission and distribution system. The company plans to file a multi-year resiliency plan in the second quarter of the year and will provide more details in their next earnings call. They also mention a pivot in their long-term financing plans, which will be discussed in more detail later.

The company plans to incorporate $250 million of annual equity or equity-like funding into its long-term financing plans. This will allow them to fund their growing capital plans, maintain a strong balance sheet, and address cash needs. The company also discusses their upcoming rate cases, stating that most of their investments have already been through regulatory review and that they anticipate a relatively flat revenue requirement increase in their largest jurisdiction, Houston Electric. Additionally, the PUCT finalized a rulemaking for the Resiliency Bill at a recent open meeting.

The Resiliency Bill allows Texas TDUs to file a multi-year plan for recovery of certain costs through riders or regulatory assets. Houston Electric plans to invest in upgrading distribution lines, substations, and the transmission system to reduce unplanned outages and improve restoration times. The final rule allows for deferral of certain costs associated with these investments, reducing regulatory lag. The filing for this plan will likely be submitted in the second quarter. Additionally, the company has filed a rate case in Indiana for a revenue requirement increase of $119 million over the next three years, mainly for investments in a generation transition plan to move away from coal. The company plans to fully exit coal generation by 2027 and is committed to keeping customer bills affordable.

The company has filed for rate increases in their gas businesses in various states, including Texas, Minnesota, and Ohio. They have had success in keeping customer charges low in comparison to their peers, and are working towards settlements in these cases. They have also implemented a multiyear rate case in Minnesota for smoother revenue increases in the future. They plan to file for another rate increase in Ohio in 2024.

In the upcoming year, the company plans to file a rate case and work with stakeholders to reach resolutions. They are confident in their strategy and long-term growth targets. The CEO thanks employees for their hard work during challenging situations and hands over to the CFO for a financial update.

The dedication and focus of the company have contributed to strong financial results and operational performance. The fourth quarter and annual results were discussed, along with updates on the sale of Louisiana and Mississippi LDCs, a revised capital plan, and the company's balance sheet and credit metrics. The company reported a GAAP EPS of $0.30 for the fourth quarter and a non-GAAP EPS of $0.32. Growth and rate recovery contributed to the results, while weather and usage were slightly unfavorable.

O&M was slightly unfavorable in the fourth quarter but overall favorable for the full year due to increased vegetation management and targeted gas and electric projects. There was also a one-time income tax benefit due to changes in the company's state income tax footprint, resulting in future cash tax savings. However, there was a $0.05 increase in interest expense due to recent debt issuances, partially offset by the redemption of preferred stock. The company will discuss their long-term financing plan and balance sheet in more detail.

The company has announced the sale of its Louisiana and Mississippi natural gas LDCs, which will result in approximately $1 billion in after-tax cash proceeds. This will provide greater financing flexibility for their capital investments and they do not anticipate a change in their earnings guidance or capital investment targets. Despite serving two fewer jurisdictions, they are increasing their 10-year capital plan target by $600 million and have already made investments to backfill the rate base that will be lost in the transaction. This includes investments in resiliency and reliability.

The company's temporary reliance on the balance sheet was necessary for a recent transaction, but it did not affect their long-term earnings targets. The company also invested $900 million in capital in the fourth quarter of 2023, bringing their total capital deployment for the year to $4.3 billion. Despite economic impacts on customers, the company is committed to keeping customer delivery charges at or below the historic inflation rate of 2% through 2030. They plan to achieve this by reducing O&M costs and using lean methodology to improve efficiency. So far, they have successfully reduced O&M by an average of 2% per year and expect to see even more results from implementing lean practices.

The company has identified and addressed an internal standard that was causing multiple truck rolls for the same issue in their electric business, resulting in improved customer outcomes and efficiency. They are proud of their flat charges for the past 10 years and are looking to use the proceeds from the sale of their LDCs and reallocate capital. They also anticipate potential pressure from evolving tax policy, specifically the alternative minimum tax.

The company anticipates being subject to AMT in the future, but expects to offset this with credits generated from paying AMT. They also plan to prepay cash tax liabilities associated with their ZENS instrument. Their funding strategy remains the same and they plan to issue $250 million of equity in 2024 and 2025 to fund their expanding capital needs. They will provide more information on their future capital and financing plans after their rate case filings. Their balance sheet and credit strength are strong, with a calculated FFO to debt of 14%.

The company is experiencing a temporary increase in debt due to investments in resiliency and reliability, but remains confident in their ability to reach their target FFO to debt ratio by 2030. They have reduced their exposure to floating rate debt and are focused on maintaining a strong balance sheet. The company is also planning for the long term and focusing on jurisdictions with strong regulatory recovery and growing customer bases.

The company's plan to sell assets will help strengthen their growth plan and benefit customers and investors. The CEO is confident in the team's ability to execute the plan and is looking to use the proceeds to fund their industry-leading growth plan. The company has a preference for states where they have a dual fuel presence, but they are also satisfied with their current states of operation.

The speaker is happy with the company's portfolio and plans to fund growth efficiently. They apologize for their weak tax accounting skills and discuss the potential impact of the recent sale announcement on the company's tax bill. They mention the possibility of reducing their tax exposure over time and highlight the increased CapEx as a factor in their forecasted impacts. A question is asked about the estimated amount of cash tax to be paid in the future.

The company is projecting to invest roughly $150 million a year from 2024 to 2030. This includes $250 million per year from equity, which is less than 15% of their market cap. The projected uses include $1 billion for alternative minimum tax impact and $500 million for growth CapEx. The company is planning conservatively in case there are changes to the alternative minimum tax in the industry.

Steve Fleishman is discussing the potential impact of repairs on the Corp alt-min tax. Jason Wells shares his thoughts on the new share of the Texas PUC and mentions their history of working with Chairman Gleeson. He also provides context on how they are positioning their rate cases and emphasizes the importance of maintaining strong relationships with commissioners and working constructively with all parties involved. The next question comes from Constantine Lednev, who is asking on behalf of Shar Pourreza.

Jason Wells and Constantine Lednev are discussing the recent sale announcement and how it will affect the company's future investments and financials. Wells explains that the proceeds from the sale will be used to pay off prefunded investments and strengthen the balance sheet. Lednev asks about future updates and Wells states that the company will continue to provide consistent updates throughout the year and will not wait for an annual cycle. He also mentions that the company is constantly looking to enhance their plan and will have more updates after the rate cases in 2025.

In the paragraph, the speaker discusses their plans for CenterPoint's Investor Day, where they will present a new 10-year plan reflecting their long-term confidence in the company's growth. They also mention periodic updates leading up to the event and a more comprehensive update after the rate cases. The speaker then mentions that the Houston Electric rate case will have the smallest revenue requirement increase in the company's history and there is a possibility of settling it mid-summer. The focus is on filing a compelling case and working constructively through the process.

During a conference call, a participant asks for clarification on the rate base number for two gas LDCs that were being sold. The CEO responds that the rate base invested in Louisiana and Mississippi is roughly $800 million, while the $700 million increase in capital expenditure plan is for prefunding the anticipated rate base from the sale. The participant then asks about the potential for future capital raises and the CFO explains that they will continue to fund growth opportunities in line with their regulated cash structure, with a 50-50 split between equity and other sources. They also mention the potential for growth in the Houston area, particularly in the industrial sector with the development of a hydrogen hub that could bring in over 30,000 jobs.

The speaker thanks the others and apologizes for one last question. They ask if the $115 million in cash taxes mentioned earlier is incremental or the total amount. Chris Foster responds that it should be thought of as incremental and Jason Wells adds that it is related to the company's shift from being a federal cash taxpayer to being subject to the mid tax. The next question is about the impact of the new resiliency filing in Texas, and the speaker asks if it will affect the company's capital expenditures. Jason Wells responds that it will not change the mechanism of recovery and they will continue to pursue constructive distribution and transmission capital trackers.

The speaker discusses the financial benefits of their three-year plan and how it will help minimize regulatory lag associated with investments. They estimate that every $300 million of eligible distribution capital will result in $0.01 of savings in regulatory lag. The incremental $4 billion in the capital plan increase will be fairly ratable over the remainder of the plan, with a few exceptions in Indiana. The company is not making any big bets in their plan.

The speaker is clarifying the details of the upcoming multiyear resiliency filing and how it will be funded. They mention the $250 million from the ATM and asset sales as well as the $700 million already invested in improving resiliency. They also mention the $1 billion in after-tax proceeds and the additional $1 billion earmarked for investment in Louisiana and Mississippi in the previous 10-year capital plan.

The company plans to invest $1 billion into Houston Electric for resiliency programs after the sale of Louisiana and Mississippi assets. This will enhance their long-term EPS growth and help support prefunding and increases. The gas rate case in Texas is expected to settle by mid-summer, and the company is optimistic about finding a settlement agreement.

Jason, Julien, and Jackie end their Q&A session and thank each other for their contributions. The operator concludes the call and everyone disconnects.

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