The operator welcomes participants to CenterPoint Energy's first quarter 2024 earnings conference call and explains the format of the call. Senior management will give prepared remarks, followed by a question-and-answer session. The Senior Vice President of Corporate Planning, Investor Relations and Trustees introduces the CEO and CFO, who will discuss the company's first quarter results. The management will also address forward-looking statements and non-GAAP measures. The call is being recorded and information on accessing the replay can be found on the company's website. The CEO then begins his remarks.

The company has had a strong start to 2024, despite challenges in the industry. They have a solid long-term growth plan and are committed to delivering value for stakeholders. The financial results for the first quarter were announced, with non-GAAP EPS of $0.55, representing a third of their full year earnings guidance. They are also focused on making investments in Resiliency and have pending rate cases and a Texas Gas rate case settlement in progress. The company reaffirms their guidance for non-GAAP EPS and dividend per share growth through 2030.

The company's CFO will provide more details about their financial results and earnings guidance, and then the CEO will discuss the recent announcement about Houston Electric's Resiliency Plan filing. The company has been collaborating with the public and private sector to improve grid resiliency in Texas, and they applaud the state for its support. The legislation will allow for faster investments in resiliency while accommodating load growth. The company has already been working on enhancing their electric transmission system and related substations, and they plan to continue this work in the next three years. By 2027, they expect to have completed the majority of the work associated with these programs.

The company is expanding its targeted investments to improve customer outcomes during extreme weather events. This includes 24 individual resiliency measures focused on improving the system's response to wind, flood, temperature changes, and wildfires. Examples of these solutions include composite poles, trip-saver devices, and intelligent grid switching automation technology. The company has already saved customers over 300 million minutes of interruptions in the last five years and aims to triple that figure in the next few years with the new investments. The company plans to invest $2.2-$2.7 billion over the next three years, which would increase their total capital expenditures to $45 billion by 2030. The additional capital will be incorporated into their plan once they can efficiently execute, finance, and recover the investments, and the execution will be aligned with the feedback and final resolution of the Resiliency Plan proceeding, expected to be completed by the end of the year.

The company has factored in most of the resiliency investment in their updated CapEx and financing plans, but they are still looking for ways to efficiently fund the remaining $500 million. They have recently announced an all-party settlement for their Texas Gas rate case, which is pending approval and will result in a very modest increase for customers. The case includes $500 million in new capital investments and an increase in the authorized cost of capital. The company has invested $1.4 billion in CapEx since the last rate case to improve system safety and reliability. These investments have resulted in 1,800 miles of pipe replacement and 300,000 advanced meter upgrades.

The company has proposed a $5 million settled revenue requirement that includes an increase in authorized capital structure and return on equity. This is important for the company to compete for capital and make necessary investments. The settlement will also combine the four historic Texas Gas jurisdictions into one for future capital recovery mechanisms. In addition, the company has filed a rate case for Minnesota Gas, requesting a revenue increase of $85 million and $52 million for 2024 and 2025, respectively. Interim rates for 2024 have been approved and hearings for 2025 are expected to occur in December, with settlement discussions planned before then. The company has settled its previous three rate cases in this jurisdiction.

The paragraph discusses three rate cases in different jurisdictions, including Indiana Electric, where a settlement is being sought, and Houston Electric, where a modest revenue requirement increase of 2.6% has been requested. The increase is driven by a focus on reducing O&M costs, prior securitization charges rolling off, and the growth of the Houston Electric business.

Houston Electric's rate base has almost doubled since their last rate case in 2019, while average residential charges have remained the same since 2014. The management team is aware of the responsibility that comes with serving a growing economy like Houston's. The recent $6 billion in Department of Energy grants awarded to the region is just one example of the potential for explosive load growth. The company plans to file another rate case for their Ohio Gas business in August 2024. They are confident in their investments and efforts to reduce costs for their customers. The management team is optimistic about meeting or exceeding expectations in 2024.

In the first quarter of 2024, CenterPoint has achieved strong financial results and is on track to meet its non-GAAP EPS guidance target range of 8%. The company is confident in its future and plans to update its 10-year plan after its rate cases next year. Chris Foster, the company's financial officer, provided updates on the first quarter results, capital deployment progress, and financing plan. The company's GAAP EPS and non-GAAP EPS both increased compared to the same period last year, with rate recovery being the main driver of growth.

In addition to other capital recovery mechanisms, interim rates have gone into effect for the Minnesota Gas business, resulting in a 5% average bill increase over the next two years. The company has also seen strong organic growth in the Houston area, with job creation being a key factor. Despite mild weather, there was a favorable variance in the first quarter, but this was offset by increases in O&M and interest expense. The company is on track to reduce O&M expenses by 1-2% per year through 2030 and has made efforts to improve its balance sheet by eliminating a quarterly dividend through the redemption of outstanding shares.

In the first quarter of 2024, the company has executed its capital investment plan, investing $800 billion for the benefit of customers and communities. This represents 20% of their 2024 target of $3.7 billion. The company's approach to incorporating customer-driven capital has resulted in an increased capital plan of $44.5 billion, expected to drive a 10% rate-based CAGR through 2030. The company aims to keep customer charges affordable and has achieved essentially flat average monthly delivery charges since 2014. They also have potential for further incremental revisions due to their resiliency filing in Texas.

The company's System Resiliency Plan filing could potentially generate up to $500 million in customer-driven opportunities. They have been increasing their capital investment plan and are applying for federal dollars through various avenues. They have already applied for $100 million in grant applications through the Department of Energy and have three separate loan applications working through the process for over $2 billion. These funding opportunities could result in significant cost savings for customers, but if they are not successful, the company will continue to fund the initiatives in line with their consolidated capital structure.

The company highlights its strong balance sheet and credit strength, with a calculated FFO-to-debt ratio of 14.6%. This aligns with Moody's methodology and is expected to have a cushion of 100 to 150 basis points. The company has adjusted its calculations for one-time items related to Winter Storm Uri and does not believe it reflects the company's fundamental credit health. The company has also made progress with its equity program and plans to continue carrying over $400 million of debt at the parent company to support CEHE and CERC through rate cases.

The company continues to reaffirm its non-GAAP EPS target for the year and for the next decade, citing factors such as consistent customer growth, a pro-business environment, and a focus on O&M discipline. They also mention progress on the sale of their Louisiana and Mississippi Gas LDCs, with plans to close the sale in late first quarter 2025. The CEO expresses confidence in the company's long-term growth plan and looks forward to enhancing it for the benefit of stakeholders. The call then opens up for Q&A.

Constantine Lednev asks about the $500 million upside in the company's CapEx plan and how it will affect accretion and rate base growth. CEO Jason Wells explains that the company has a strong base plan with 10% rate base growth and has been investing in resiliency efforts. He also mentions opportunities for continued resiliency investment and industrial electrification in the greater Houston area, which will bring in significant jobs and drive residential load growth.

The company is planning to invest in local gas transmission pipeline capacity in the Greater Houston area to help mitigate costs during severe weather events. They have a good track record of executing plans that benefit customers, shareholders, and stakeholders. The funding for this project will come from incorporating it into their capital plan and potentially seeking loans and cost-matching programs.

Chris Foster discusses the company's credit metrics and options for refinancing, including pursuing DOE Loan Program dollars and evaluating hybrid alternatives. He also mentions the company's focus on efficient financing. Constantine Lednev asks about potential issues with cost allocation in Texas and Indiana due to increased demand.

In response to a question about addressing cost allocation issues in the service territories, Jason Wells, the speaker, explains that it is less of an issue in their territories due to the growth in industrial load. He also mentions that the company serves load that is not only growing from a residential standpoint but also from an industrial standpoint, which helps to keep the cost allocation issue less impactful compared to other peers. The next question is about the System Resiliency filing, which outlines plans to spend $2.2 billion to $2.7 billion, almost double the amount spent in previous years. However, the $500 million of incremental capital is in line with the higher end of the filing. The speaker also mentions that if the Public Utility Commission of Texas (PUCT) approves a spending near the bottom or below the range, it could potentially impact the company's plans.

In this paragraph, Jason Wells discusses the potential investment opportunities and how they may affect their financing plan. He mentions that the proposed $2.2 billion investment for resiliency is aligned with the state's goal to keep the grid resilient and support economic growth in Texas. He also highlights that their filing demonstrates that the benefits of the investments outweigh the costs for customers. If there is concern about the proposed measures, they have other opportunities for incremental CapEx, such as gas and electric projects. Chris adds that their financing plan is flexible and can accommodate these potential investments.

Chris Foster and James Thalacker discuss the base plan for the Resiliency filing, which would support $44.5 billion through 2030 with a modest ATM program. They also mention potential incremental opportunities that would align with the existing cap structure. Jason Wells provides an update on the Indiana case, saying that the start of hearings has been pushed back by a day as they explore the potential for settlement. He also mentions that the issues in the case have been seen by stakeholders in previous forums. In response to a question about S&P's negative outlook, Wells clarifies that it usually takes about a year for these things to go through.

The speaker explains that the company's financial metrics will improve as the impact of Uri, a severe winter storm, goes away. They are comfortable with their financial plan for the future, and plan to maintain a cushion of 100-150 basis points. The difference in methodology between S&P and Moody's is discussed, with S&P's methodology excluding a significant cash inflow from the storm. The speaker also mentions the potential for growth in the future, including the development of a hydrogen hub in Texas.

CenterPoint is experiencing strong growth in the Greater Houston area, driven by residential, commercial, and industrial sectors, including data centers and life sciences. This growth is reflected in the first quarter sales numbers, which are up 8% from last year. The company expects this growth to continue through the decade and is pursuing state and federal incentives, including grants and DOE loans, for their expansion plan.

The speaker is discussing the potential benefits of pursuing state programs for financing rather than traditional methods. They mention federal programs and state grants that could contribute to better outcomes for customers. They also mention that these programs will have a small impact on EPS and that they will provide a 10-year plan in the future. They also highlight some recent successes, such as reducing regulatory lag and increasing CapEx, which have contributed to more tailwinds than headwinds for their EPS growth.

The speaker discusses the company's plan to move $800 million of rate base and $1 billion of CapEx into higher-earning jurisdictions. They mention the current higher interest rates and a modest equity program, but believe that the tailwinds outweigh the headwinds. They plan to give a comprehensive update on earnings guidance after the rate cases are settled. The speaker also mentions that the company plans conservatively and incorporates higher-for-longer interest rates into their planning.

Jeremy Tonet from JPMorgan Securities asks about the wildfire mitigation needs and the potential evolution of SRP's capital composition. Jason Wells explains that the $140 million in the SRP filing is not a significant driver of the overall $2.2 billion to $2.7 billion plan, as 60% of their system is already underground and they have lower wildfire risk due to high humidity. He also mentions that they have been addressing the risk with operational changes and that the plan only addresses 1% of overhead miles in high fire risk areas. Wells sees further opportunities for CapEx on the distribution side, as they have been focused on hardening the backbone of their system.

The speaker discusses the real opportunity for growth in the distribution side of the business and plans to create a more resilient and reliable electric system. They are happy to make the first filing and see potential for continued growth in capital expenditures. The speaker also mentions the humid climate in Houston. In response to a question, they provide a timeline for the approval of the Resiliency Plan and mention the potential for regulatory lag as a tailwind opportunity. They state that historically, the Texas business has seen an average of 150 basis points of regulatory lag.

The speaker explains that they have reduced the amount of regulatory lag, but it is difficult to accurately calculate it during the current rate case filing. They assure that steps have been taken to reduce it and a more accurate view will be given after the rate case. The call concludes with thanks to everyone for joining.

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