The paragraph introduces CenterPoint Energy's fourth quarter and full year 2024 earnings conference call. The call features senior management, including CEO Jason Wells and CFO Chris Foster, who will discuss the company's financial results. Jackie Richert, the Senior Vice President of Corporate Planning, Investor Relations, and Treasurer, provides an overview. The management's remarks include forward-looking statements that are subject to risks and uncertainties, and actual results may vary. The company reported earnings of $1.58 for the full year and $0.38 for the fourth quarter of 2024 on a GAAP basis. They also use a non-GAAP EPS measure for guidance, and more details can be found in their earnings release and website. The call is recorded, and replay access is available online.

The paragraph begins by expressing gratitude to the company's frontline personnel for their efforts during severe winter weather conditions across various service areas. It then outlines the key areas to be addressed in the call: fourth quarter and full year 2024 financial results, a regulatory update including a system resiliency plan for Houston Electric, a proposed transaction with ERCOT, and growth drivers in the Houston area. The company announced non-GAAP EPS of $0.40 for the fourth quarter and $1.62 for the full year, marking an 8% growth over 2023 and the fourth consecutive year of meeting or exceeding earnings guidance. It has adjusted long-term growth targets based on higher earnings and reaffirmed its 2025 guidance range. The company expects to achieve annual non-GAAP EPS growth of 6% to 8% through 2030.

The paragraph discusses a refiled system resiliency plan by Houston Electric, proposing $5.75 billion in expenditures from 2026 to 2028, primarily for capital improvements aimed at enhancing system resiliency. The plan includes 39 specific measures to strengthen the transmission and distribution system, marking the company's largest investment in grid resiliency. Objectives include eliminating wood structures from the transmission system and elevating substations above the 500-year floodplain. Since Hurricane Beryl, automation on circuits has more than doubled, and it will triple in three years, potentially saving customers over one billion outage minutes during extreme weather.

The paragraph discusses a series of investments aimed at enhancing the resilience of the electric grid in Houston, which are expected to lower storm-related costs by $50 million annually starting in 2029 and subsequently reduce electric delivery charges. These efforts are part of a broader initiative to create a resilient coastal grid. It also highlights a recent regulatory development where a settlement in a 2024 rate case, if approved, would decrease annual revenue requirements by $47 million and lower monthly electric delivery charges by about $1 for residential customers. The settlement also proposes increased return on equity and equity ratio, enhancing competitiveness in capital markets. Despite higher spending on vegetation management, the company has successfully managed operational and maintenance reductions to improve customer outcomes. The company expresses gratitude to stakeholders in submitting the settlement to the PUCT.

The paragraph discusses progress in various rate cases for the company's electric and gas divisions. It highlights the final approval of an $80 million annual revenue increase for Indiana Electric, with a 9.8% return on equity, achieved by moving away from older facilities and reducing operational costs. The text also details a settlement in a Minnesota Gas rate case, with a revenue increase of nearly $104 million for 2024 and 2025, representing over 75% of the initially proposed $136 million. Interim rates for 2024 and 2025 are already in effect, pending a final order from the Minnesota Public Utilities Commission by July 1.

The paragraph discusses the company's recent regulatory activities and future plans. They thanked stakeholders for achieving favorable outcomes and reported filing an Ohio gas rate case for a $99.5 million revenue increase, aimed at aligning with state peers and supporting pipeline modernization. Over 18 months, five rate cases have been filed, with two final orders received, awaiting settlements for Houston Electric and Minnesota Gas, covering 80% of the company's rate base. Successful settlements would improve the company's return on equity and earnings potential. Lastly, stakeholder feedback indicates no interest in investing in large temporary generation facilities to manage large load events.

The paragraph discusses a collaborative solution developed with stakeholders to benefit various parties, including Houston Electric customers, ERCOT customers, and CenterPoint investors. The proposal involves temporarily transferring the use of power units to a Texas utility to address summer peak reliability in San Antonio for up to two years. After that, the units will be marketed to third parties at expected higher rates, outweighing any lost revenues during the donation period. The plan is positioned as beneficial for stakeholders, with contributions to the ERCOT grid, compensation for Houston Electric customers, and future profits for shareholders. The paragraph concludes by noting strong organic growth in Texas service areas.

The paragraph discusses significant electric demand growth in Texas, particularly in the Greater Houston area, prompted by rapid economic development. The speaker highlights their partnership with customers and the submission of an electric load forecast to ERCOT. They mention receiving approximately 40 gigawatts in load interconnection requests, though they estimate a more realistic peak demand increase from 21 gigawatts to 31 gigawatts by 2031. This increase aligns with Greater Houston's demand growth over the last 25 years. The forecasted growth is diverse and not reliant on a single industry, reflecting the region's economic expansion beyond its energy sector reputation.

The paragraph highlights that energy comprises slightly over a third of Houston's economy, with logistics, healthcare, and energy exports driving future growth. Houston, a major U.S. logistics hub with a large port, is expected to see around 20% of a projected 10-gigawatt increase in electricity demand by 2031 due to port and fleet electrification. The expanding healthcare sector, including the world's largest medical complex, along with commercial activities like data centers, is anticipated to contribute 30% to this growth. As a key player in energy refining and exportation, Houston's role in the evolving global energy mix necessitates significant investments in electric infrastructure, particularly transmission systems. With Houston representing just over 2% of Texas's area but about a quarter of ERCOT's peak load, there's a need to import up to 60% of its electricity. The Texas Public Utility Commission's decision on transmission standards will influence capital investment plans, with further guidance expected by May.

The paragraph discusses CenterPoint's optimistic outlook due to the growth of the Houston area, which drives investment opportunities and provides sustainable benefits for customers. Chris Foster will address several key areas, including the company's fourth quarter and full-year financial results, capital deployment execution, a temporary generation proposal, and balance sheet updates. For the fourth quarter of 2024, CenterPoint reported earnings per share of $0.38 on a GAAP basis and $0.40 on a non-GAAP basis, compared to $0.32 in the same quarter of 2023.

In the fourth quarter, the company excluded impacts related to the sale of Louisiana and Mississippi Gas LDCs from its non-GAAP EPS results, which included an $8 million deferred tax remeasurement. The company saw growth from rate recovery, contributing $0.05, driven by updated customer rates and Minnesota Gas rate case interim rates. Operational and maintenance (O&M) expenses improved by $0.05, partly due to reduced work compared to the previous year. Weather and usage contributed an additional $0.02 favorability, but interest expenses were $0.03 unfavorable due to new debt issuances. Despite challenges, the company met its 2024 non-GAAP EPS target of $1.62. The company plans to continue reducing O&M by 2% annually and is transitioning to a three-year vegetation management cycle at Houston Electric to enhance efficiency and maintain proactive management.

The paragraph discusses the company's focus on reducing operating and maintenance costs by 1% to 2% and the anticipated annual savings of $50 million from storm-related costs starting in 2029 due to a system resiliency plan. The company reaffirms its 2025 non-GAAP EPS guidance of $1.74 to $1.76, projecting an 8% growth from the expected $1.62 in 2024. For 2024, they exceeded their capital expenditure target by investing $3.8 billion, despite challenges due to storm restoration efforts. The system resiliency plan involves a $5.5 billion capital investment, increasing their total capital investment target to $47.5 billion through 2030. This will be funded through a balanced mix of 50% equity and 50% debt. The company plans to continue recovering capital through existing mechanisms and is making progress on storm recoveries.

The paragraph discusses the company's progress in cost recovery and capital mechanisms in Texas. They have reached a settlement to recover 98% of storm-related costs and are planning a cost recovery filing for Hurricane Beryl in the second quarter. The company filed transmission and distribution trackers in Houston, with the transmission tracker resulting in a $63 million revenue increase. A distribution tracker was withdrawn to update figures for a revised filing by the first quarter's end. It also mentions the financial impacts of a temporary generation transaction, with a lease running through June 2029, designed to support customers during potential large load shed events.

The company plans to offset $475 million in regulatory recoveries for their customers through three main actions. First, they will offer 15 large temporary emergency generation units to support the San Antonio area and ERCOT's reliability needs, contributing approximately $180 million in value over up to two years. Second, the Houston Electric rate case settlement, once approved, is expected to save Houston Electric customers around $250 million over five years. Third, the company will not seek to recover $110 million in costs related to May storms and Hurricane Beryl recovery, resulting in lower cash flow as customer collections are reduced.

The third phase involves marketing 15 large mobile power units to third parties at favorable market rates, expected to be twice the original lease rate. Once relocated to San Antonio, these units will no longer generate regulated returns, so their impact on non-GAAP earnings will be excluded. The earnings potential could match or surpass previous regulated investments, despite being unregulated. Although this earnings profile is inconsistent with the core regulated business, the transaction is seen as beneficial. The company will focus on funding its capital plan, noting that its adjusted FFO-to-debt ratio was slightly below target but expected to improve with forthcoming cash proceeds from the sale of Louisiana and Mississippi LDCs and additional securitization proceeds related to storm costs. The company remains committed to maintaining balance sheet health while investing for customer and community benefit.

The paragraph highlights the company's strong financial performance, meeting or exceeding expectations for four consecutive years, with a focus on a targeted non-GAAP EPS growth. Jason Wells expresses pride in the team's perseverance, especially through 2024, positioning the company in the top decile of its utility peer group. Looking ahead, the company has a solid foundation for future growth, including a $500 million incremental capital expenditure (CapEx) plan driving a 10% rate base growth through the decade. They have settled multiple rate cases, covering over 80% of the enterprise rate base, ensuring clear visibility for the next four years. The company is serving a rapidly growing region, with a projected 50% peak load increase in the Houston area by 2031, driven by various economic factors. This presents additional growth opportunities in CapEx. Finally, Jason Wells mentions that more detailed long-term investment information will be shared later in the year. The paragraph concludes with a transition to a Q&A session, with Steve Fleishman from Wolfe Research inquiring about growth forecasts compared to ERCOT's previous estimates.

In the paragraph, Jason Wells discusses the significant growth in electricity demand in the Houston area, reflecting a 10 gigawatt increase in interconnection demand for the first time. This growth is primarily associated with the company's increased participation in ERCOT submissions, focusing on substantiated rather than speculative loads. This heightened demand will lead to additional capital expenditures (CapEx) for electric transmission, potentially exceeding $3 billion, though the precise amount will depend on decisions regarding voltage standards. The discussion highlights both the challenges and opportunities associated with these developments.

The paragraph discusses factors affecting rating agency views regarding the company. Chris Foster highlights three key areas: the supportive Texas regulatory environment, including capital recovery mechanisms; the Houston Electric rate case settlement, which is awaiting action from the Public Utility Commission of Texas (PUCT); and the securitization of storm costs, where progress has been made ahead of schedule with a $500 million settlement for May storm impacts. Additionally, the prudency review related to Hurricane Beryl costs is noted as important, with a filing planned in the coming months. Steve Fleishman finds the update helpful, and the discussion transitions to Shahriar Pourreza from Guggenheim Partners.

Shahriar Pourreza asked Jason Wells about plans for an Analyst Day and whether the company's capital plan will include the anticipated 50% load growth in Houston. Jason Wells confirmed their commitment to updating their 10-year capital investment plan, factoring in Texas's voltage standard decision expected by May. They plan to provide a market update later in the year. Wells highlighted significant opportunities for electric and gas transmission projects, particularly in Texas and Indiana, as key drivers for capital expenditure growth. Pourreza also inquired about financing strategies, particularly regarding equity funding and asset optimization in Houston, to which Wells' response detailed their ongoing consideration of these options.

The paragraph features a discussion led by Chris Foster about the financial strategy for funding equity needs and managing growth capital expenditures. Foster indicates that the company has covered its equity needs for 2025 and will rely on an ATM program for future modest equity requirements. The funding strategy involves a 50% debt and 50% equity approach. He highlights their ability to explore various financing options, including base ATM, hybrid structures, and subordinated notes, along with potential transactions. Jason Wells adds that an update on these strategies will be shared later in the year, emphasizing efficient equity funding and maintaining a healthy balance sheet. The paragraph ends with Shahriar Pourreza commending the company's asset optimization efforts, followed by a question from James Thalacker of BMO Capital Markets.

The paragraph discusses a cost control program aimed at achieving a 1% to 2% annual reduction in operational and maintenance (O&M) expenses, despite increased spending on system resiliency and vegetation management. Chris Foster explains that this reduction will be achieved through investments in automated grid devices that reduce the need for physical interventions, and by standardizing legacy IT and network systems across various operational regions. These measures are expected to enhance efficiency and decrease costs over time.

The paragraph discusses a company's efforts to empower employees and improve processes for year-over-year enhancements, aiming for 1% to 2% improvements annually. James Thalacker praises these efforts, and Chris Foster expresses gratitude. The conversation shifts to Jeremy Tonet from JPMorgan Securities, who inquires about mobile generation and regulatory discussions. Jason Wells responds, detailing ongoing dialogues with stakeholders about the need for mobile generation in the San Antonio region to support the ERCOT market. The company plans to donate units at zero cost to aid the market, demonstrating their commitment to be a constructive partner. They've also worked to address the demands of making customers whole for past benefits from the equipment.

The paragraph discusses the current state of discussions around ERCOT's plans to have new units operational before the summer and mentions an upcoming special meeting on February 25. Jeremy Tonet asks about Texas legislative proposals, specifically SB 6, and their potential impact on CenterPoint. Jason Wells responds by explaining that the Texas legislature is starting to ramp up its activities, and CenterPoint will support constructive legislation focused on system resiliency and economic growth. Regarding SB 6, Wells emphasizes the importance of fair cost allocation for large loads, which includes many of their largest customers in Houston. He mentions collaborating with legislators, regulators, and customers for a fair outcome.

In the paragraph, Jason Wells discusses the potential impact of adopting a 765 kV standard on the transmission system, which would increase capacity but also result in higher costs, potentially exceeding $3 billion compared to a 345 kV standard. Jeremy Tonet seeks clarification on the incremental capital expenditure (CapEx). Durgesh Chopra from Evercore ISI asks Chris Foster about guidance for 2025, specifically regarding the inclusion of temporary generation in their models. Chris Foster explains that previous recoveries included temporary emergency electric facilities, which were filed for recovery. Going forward, once units are provided to San Antonio, the remaining amount will be removed from the rate base.

The paragraph discusses a company's financial strategy concerning certain temporary generation equipment. They plan to exclude associated future benefits and interim losses from non-GAAP earnings, particularly during a two-year period in San Antonio starting in 2025. Jason Wells explains that due to rapid amortization, equity earnings from the equipment are decreasing and that the equipment's market value has doubled, negating any need for a write-down. The company plans to temporarily allocate the equipment to an unregulated subsidiary, excluding related losses and eventual gains from ongoing earnings evaluations. Despite no revenue during this period, the company will cover the lease expense and eventually recover and profit from the investment by selling the equipment. Overall, the strategy will not affect the assets' value.

In the discussion, Jason Wells explains the transition from regulated to unregulated earnings, noting that regulated earnings have become manageable due to rapid amortization, and will be excluded from non-GAAP earnings for not reflecting the business's true earnings power. In terms of load growth, Wells acknowledges a significant potential pipeline of 61 gigawatts through 2031, although most projects are in early stages with low probability. He realistically estimates that 10 gigawatts are likely to materialize by 2031.

The paragraph discusses the increasing demand for power in Texas, particularly from data center activity, which has grown to over 11 gigawatts in the greater Houston area. This demand is part of a broader trend, with significant interest in connecting to the grid, projecting a realistic outlook of adding about 10 gigawatts annually. Jason Wells notes that not all 11 gigawatts of data center demand will materialize, but the activity is intensifying. Additionally, there is notable data center interest in Indiana, a key market for hyperscalers, where the company has infrastructure capable of expanding power capacity.

In the article paragraph, several business topics are discussed. There is ongoing demand for data centers, with potential significant opportunities in the hyperscale sector that are currently under negotiation. David Arcaro thanks the speaker for providing insights, and Jackie Richert notes that time is running short, prompting the operator to take one final question from Julien Dumoulin-Smith of Jefferies. Julien inquires about mobile generation and its financial implications, specifically regarding the cash and market depth concerning a forthcoming ERCOT special meeting. Jason Wells responds, indicating that the company's cash flow is expected to benefit over time due to high market rates for equipment and prepaid leases. He views this as a cash flow tailwind for the company and mentions the potential outcomes of the special meeting.

In the paragraph, one of the speakers addresses a situation involving ERCOT's need for equipment in the San Antonio market. They offer to supply this equipment at no cost, viewing it as an excellent solution. However, if ERCOT chooses a different path, they'll market the equipment to third parties, which could be favorable due to limited manufacturers and capacity in the market. Additionally, there's a discussion about filing for recoveries related to Hurricane Beryl, with expectations of a filing in Q2 for around $1.1 billion. The costs are primarily driven by labor and materials used during power restoration efforts and are expected to proceed as planned.

The paragraph is a closing segment of CenterPoint Energy's earnings conference call. Julien Dumoulin-Smith congratulates the participants and the speakers, Jason Wells, Chris Foster, and Jackie Richert, express their gratitude. Jackie also thanks the operator and concludes the call, while the operator officially ends the session, inviting participants to disconnect.

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