The paragraph is an introduction to CenterPoint Energy's third quarter 2024 earnings conference call. The operator welcomes participants and hands over to Jackie Richert, who introduces the senior management team. Jason Wells (CEO) and Chris Foster (CFO) will discuss the company's quarterly results, and the call will include forward-looking statements subject to risks and uncertainties. They will also use non-GAAP measures like diluted adjusted earnings per share. The call is being recorded, and replay information is available on their website. Jason Wells extends sympathies to those affected by Hurricanes Helene and Milton, acknowledging the tragic impact of the hurricane season.

The paragraph highlights the collaborative efforts of the utility industry during recent hurricanes, with over 50,000 workers from various regions aiding restoration in the Southeast, and CenterPoint contributing a significant portion of its workforce. The article acknowledges past mutual assistance during Hurricane Beryl in the Greater Houston area and thanks those involved in current efforts. It outlines the agenda for a call, covering third-quarter financial results, the Greater Houston Resiliency Initiative, regulatory updates, organic growth in the Houston Electric Service Territory, and the company's 2025 earnings guidance. CenterPoint reported a non-GAAP EPS of $0.31 for the quarter and reaffirmed its 2024 guidance, indicating 8% growth from 2023.

In the third phase of the GHRI, significant progress was made to enhance the grid’s resilience and communication with customers. Key actions included removing high-risk vegetation, replacing poles with wind-resistant ones, and installing automated reliability devices, all completed ahead of schedule. An updated outage tracker was launched to improve customer experience during disruptions. Additionally, senior leaders in emergency preparedness and communications were hired to strengthen the team. The proactive communication approach has positively impacted customer experience, with plans for further improvements in future GHRI phases.

The paragraph discusses upcoming phases of a project aimed at reducing power outages and their duration by enhancing the resilience of the electric grid. The emphasis is on continuing prior investments in strengthening the transmission system against severe weather, which has already proven effective during recent storms. The focus will now shift to improving the distribution system, with the intention of rapid advancements. Notably, a significant portion of the Houston Electric distribution system is underground, offering an advantage. Future efforts will concentrate on reinforcing above-ground infrastructure to benefit the majority of customers served by the underground network.

The feeder blitz is expected to reduce outage numbers and accelerate restoration by allowing resources to focus earlier on remaining circuits. Improvements are planned for the distribution system through increased circuit segmentation and automation, using devices like intelligent grid switches and trip savers to create a self-healing grid. Currently, about 30% of Houston Electric's circuits have at least one automation device, and in Phase 2 of GHRI, they plan to nearly double this by installing 4,500 trip savers and 350 intelligent grid devices before the next hurricane season. These investments could save customers over 125 million outage minutes annually. Additionally, a plan over the next five years includes more devices and AI-based optimization. The company will provide further details on future investments during the fourth quarter call following the filing of a revised system resiliency plan, which now includes approximately $5 billion in investments from 2026 to 2028, a $2.5 billion increase from the previous plan.

The paragraph discusses Houston Electric's strategic focus on maintaining customer delivery charges in line with inflation over the next decade, and provides updates on its regulatory actions. Houston Electric has withdrawn its current rate case filing to concentrate on immediate and long-term resilience planning, with plans to refile by June 2025. It will also seek recovery of capital investments, including recent transmission and distribution projects, through capital trackers in the fourth quarter. The company is focused on reducing regulatory lag, as its earned return on equity is below the allowed level. Additionally, it plans to begin recovery for $450 million in storm-related costs. The paragraph concludes with a brief mention of a rate case proposal filed for Indiana Electric.

The Indiana Utility Regulatory Commission is set to issue its final order by February 3, 2025, and stakeholders are acknowledged for their input. In the Minnesota Gas rate case, intervenor testimony has been filed, and settlement talks are ongoing ahead of the rebuttal deadline on November 12. If no settlement is reached, interim rates for 2025 may be considered. For Ohio Gas, a Notice of Intent for a general rate case application has been filed, and the application is to be submitted shortly. This seeks to align recovery rates with Ohio peers for better funding of pipeline modernization. Additionally, there is notable organic growth in Texas, particularly in the Greater Houston region, which has seen rapid expansion.

The paragraph discusses the anticipated growth in Houston's energy demand, predicting a 30% increase by 2030 due to factors like population growth, electrification, and data center activity. Houston's attractiveness for living and working is fueling this growth, with housing starts significantly outpacing the national average. The city's industrial load growth is driven by industrial electrification and energy exports, notably hydrogen, supported by Houston's extensive hydrogen infrastructure and proximity to a major port. Data center development has surged, contributing to increased energy demand. This growth supports the company's confidence in their 2025 non-GAAP earnings guidance of $1.74 to $1.76 per share.

The paragraph discusses the company's financial outlook and commitment to growth and system resilience. It highlights an 8% growth target for non-GAAP EPS from the 2024 guidance midpoint and aims for 6% to 8% annual growth through 2030. The company plans to align dividend growth with earnings growth and manage electric delivery charge increases in line with inflation. It emphasizes the importance of customer service and system improvements through GHRI and upcoming investments. Chris Foster acknowledges the efforts of CenterPoint employees and contractors in hurricane recovery and outlines his focus on third-quarter financial results and 2025 non-GAAP EPS guidance.

The paragraph discusses the company's financial performance and strategic plans. It outlines an update on capital deployment and financing plans, including an increase in equity guidance to support a $5 billion system resiliency investment from 2026 to 2028. The financial results for the third quarter of 2024 are presented, with GAAP EPS at $0.30 and non-GAAP EPS at $0.31, compared to $0.40 in the third quarter of 2023. Reduced earnings are attributed to increased operational and maintenance (O&M) costs associated with Phase 1 of the GHRI, including vegetation management and preparations for potential adverse weather. Additionally, weather and usage contributed to earnings decline, partly due to outages from Hurricane Beryl and a milder summer. However, customer-driven investments provided some earnings favorability.

The paragraph discusses factors impacting the company's financial performance, including the recovery from interim mechanisms affecting customer rates and strong organic growth in the Houston area. This growth helps align future electric delivery charge increases with inflation forecasts. Lower interest expenses and financing costs contributed positively compared to the same quarter in 2023, owing to moderating interest rates and redeeming Series A preferred stock. Despite past challenges, the company reaffirms its 2024 non-GAAP EPS guidance of $1.61 to $1.63, driven by accelerated O&M work. It also introduces a 2025 EPS guidance range of $1.74 to $1.76, indicating 8% annual growth from the 2024 midpoint, supported by recent strategic investments.

The paragraph discusses the company's recent and upcoming financial activities and plans. They have accelerated investments in the Houston Electric service area and maintained a strong investment profile, resulting in a rate base CAGR of over 11% in the past two years. This foundation supports their 2025 non-GAAP earnings guidance. In Q3 2024, they invested $900 million, reaching over 70% of their $3.7 billion capital expenditure goal. Despite storm-related disruptions, they are on track to meet their investment targets. They also report storm costs for the May derecho and Hurricane Beryl at the low end of the estimated $1.6 billion range and plan future filings for cost determination. Looking ahead, they aim to invest $4.9 billion in 2025.

The paragraph discusses the company's revised 10-year capital investment plan, which now totals $47 billion, a $2.5 billion increase from the previous $44.5 billion plan. Of the $26 billion expected to be invested in the next five years, $21 billion will be in Texas, notably in the Houston Electric service area. Investments will be included in a system resiliency plan to be filed by January 2025 and are expected to improve customer experience while aligning customer bill increases with long-term inflation rates. The company maintains that delivery charges have remained unchanged since 2014 and attributes growth to efficiency, operational activities, and customer base expansion in Houston. They aim to fund the increased investments without sacrificing balance sheet integrity, maintaining a calculated FFO to debt ratio of 13.8%, even with additional storm costs.

The company plans to accelerate $250 million in common equity and issue equity credit from hybrid debt securities to maintain financial health and fund investments. They expect substantial cash inflows starting in 2025, including $3 billion from divesting certain assets and securitization issuances. The company aims to strengthen its financial position through these activities and plans to raise an additional $1.25 billion in equity for $2.5 billion in resiliency investments by 2030, primarily towards the latter part of their five-year plan.

The company expects approximately $3 billion in cash inflows, which should provide financial flexibility and reduce the need for common equity issuances through 2025. They plan to opportunistically strengthen their balance sheet using credit-enhancing instruments rather than immediate common equity issuances. The focus remains on raising equity efficiently, possibly through methods like hybrids or recycling proceeds. They are confident in continuing their long-term plan aimed at improving customer outcomes, providing affordable service, and developing a resilient coastal grid. Following this, Jason Wells and Jackie Richert transition the discussion to a Q&A session, where Shar Pourreza from Guggenheim asks about the company's 2024 and 2025 guidance and potential impacts if certain regulatory requests are not approved.

Jason Wells discusses the company's confidence in its 2025 financial outlook. He highlights three main points: First, the company's significant investment over the past two years has created a strong foundation for projected 8% earnings growth. Second, new base rates in three jurisdictions (Texas Gas, Indiana Electric, and Minnesota Gas) in 2025 will provide a smoother revenue and earnings profile, particularly with the multiyear rate case in Minnesota that changes past patterns. Third, the company has access to most recovery mechanisms for capital expenditures, except in Ohio where a rate case is pending. Although the Texas rate case withdrawal involved a modest revenue proposal, it is not considered a driver for 2025 due to the other factors mentioned.

The paragraph details a discussion between analysts and company executives about the company's equity financing and growth expectations. The company has raised $1.25 billion in equity, with plans to raise a total of $2.5 billion by 2030. Jason Wells emphasizes the company's track record of efficient equity raising and mentions $3 billion in cash inflows expected over the next 12 to 18 months, providing flexibility for future financing. Discussion also covers Texas load growth, with expectations of a 30% increase in peak load by 2030. Wells notes this estimate includes a portion of speculative load, with further potential growth updates expected in collaboration with ERCOT.

The paragraph discusses the company's strategic approach to managing speculative load activity, particularly hydrogen-related projects, and their confidence in achieving at least 30% of projected goals by 2030. Steve Fleishman inquires about the company's standing with rating agencies. Chris Foster responds, indicating that the company is measuring its performance against Moody's downgrade threshold and has achieved a 13.8% adjusted number, above the 13% threshold. The company is focusing on completing securitization filings and pursuing traditional capital trackers, emphasizing the robust Texas regulatory framework. This is supported by a history of 11 previous securitizations and aims to bolster financial stability.

In the discussion, Durgesh Chopra asks Chris Foster for details on the timing of securitization proceeds in 2025 and their impact on credit metrics for 2024 and 2025. Chris explains that the company plans to file two securitization requests: one for the May storm or derecho-related costs, expected to resolve by Q3 2025, and another for Hurricane Beryl-related costs, targeted for filing in Q2 next year, with proceeds expected late in Q4 2025 or early Q1 2026. The cost estimate has been updated to $1.6 billion. Durgesh also inquires about the company's position in relation to a 14% to 15% target by the end of next year, considering capital expenditure and proceeds.

The paragraph is a discussion during a conference call involving Chris Foster, Durgesh Chopra, and others about financial and operational plans. Chris Foster mentions they expect to achieve a solid financial cushion by Q1 2026 after obtaining securitization proceeds. They've been focusing on strengthening their balance sheet, even bringing forward 2025 equity efforts. Jeremy Tonet from JPMorgan Securities follows with a question about stakeholder engagement in Texas post-GHRI Phase I work. Jason Wells responds that stakeholder conversations are improving, with emphasis on stakeholder desires for a resilient system and better communication, particularly highlighted during preparation for the storm Francine. He notes that ongoing investments in automation and segmentation as part of GHRI's second phase are expected to significantly reduce outage minutes for customers.

The paragraph involves a discussion on the company's strategy moving forward into 2024. It highlights the company's commitment to rebuilding trust and improving communication with stakeholders, including elected officials and communities, to achieve a more resilient and reliable grid. In relation to financial guidance, Chris Foster explains how despite a $0.11 operating and maintenance (O&M) cost drag this quarter, they remain confident in reaffirming the 2024 guidance due to consistent benefits from certain financial trackers. Additionally, incremental system work in Q3, including critical vegetation management, is noted to contribute positively to Q4 performance, with some work from 2024 having been pulled forward into 2023, providing further benefits.

The paragraph discusses a proposal related to temporary generation recovery and its financial implications. Jason Wells explains that the main focus is on large generation units, with around $100 million of unrecognized profit involved. The company proposed in August to forego $110 million in profit as a compromise, which stakeholders viewed positively. There is ongoing discussion about the use of these units, as they are crucial for power rotation during load shed events, particularly in serving critical facilities like the Texas Medical Center. The company is willing to collaborate with the state if there are changes to the current requirements, but no specific timeline has been set for these discussions.

The paragraph discusses potential investment opportunities in Texas involving 765 kV transmission lines, particularly around substations the company operates. The right of first refusal in Texas presents significant investment opportunities outside the company's current $47 billion CapEx plan. While the Permian Basin offers less direct potential, the company anticipates increased transmission needs due to speculative load growth in the Greater Houston region. With 60% of electricity imported daily to serve customers, continued growth could necessitate new transmission lines and substations, becoming a long-term benefit for the CapEx plan. Greater clarity on these opportunities is expected around 2025, following ERCOT's updated speculative load study.

In the paragraph, Julien Dumoulin-Smith from Jefferies asks about the strategic options available if the state mandates a divestment in mobile generation. Jason Wells responds by explaining the state's challenges with dispatchable generation, noting that while there has been significant growth in intermittent renewables, there has been little new dispatchable generation. He emphasizes the importance of finding solutions for the winter peak when energy shortages could last days and highlights that while battery storage has helped with summer peaks, it is less effective during winter peaks.

The paragraph discusses potential strategies to keep equipment within the state, such as subleasing, while working with elected officials for solutions to optimize costs and protect customers during load shedding. Julien Dumoulin-Smith asks about ERCOT's recent load forecast and its implications. Jason Wells responds by confirming an increase in both demand and transmission planning. He notes a shift in data center activity, with demand increasing from 1 gigawatt to over 8 gigawatts, reflecting a move towards AI-driven data centers where latency is less of a concern. An update on this demand is expected by early 2025, specifically in the Greater Houston region.

The paragraph discusses the attractiveness of Texas for building new transmission lines and power generation, highlighting its favorable interconnection timelines and quick infrastructure development capabilities. This has led to significant changes in the region, particularly impacting ERCOT's forecasts. It mentions that 60% of electricity is imported daily in the Greater Houston area, indicating a need for more transmission infrastructure. Julien Dumoulin-Smith and Jason Wells discuss these changes and the upward trend in developments despite ERCOT's recent updates. The paragraph concludes with Jackie Richert ending the Q&A session of CenterPoint Energy's third-quarter 2024 earnings conference call.

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