CenterPoint Energy, Inc. — 2024 Q1

It's actually Constantine on for Shahriar. Appreciate the updates on the call today, especially with the resiliency filing, and I see that it was largely embedded in the 4Q update. But as we think about the $500 million upside, just how are you thinking about in terms of accretion versus the 10% rate base growth? And maybe any specific thresholds or incremental -- on the incremental updates on CapEx? And how are you kind of planning to announce any kind of financing optimization there?

Yes. Thanks, Constantine. Pretty comprehensive question there. Let me kind of start at the highest level. And I think there's 3 main points to this CapEx update. The first is we've got a great base plan, 10% rate base growth through the end of the decade. And the second point I'd make is we've been spending significantly on resiliency because it's the right thing to do for our customers and case in point. We've increased our CapEx plans over 10% since our 2021 Analyst Day. That was largely [indiscernible] increased resiliency efforts.

Sure. Happy to hit it, morning, Constantine. I think if you look at the larger incremental potential CapEx that Jason was just referencing, you should think about it as just the prior approach that we've referenced, which is continuing to incorporate that into our capital plan as we can execute it, finance it and recover it and the way in which we would do it would largely be to fund it in line with our enterprise cap structure.

I appreciate that. And maybe a quick follow-up on that. You kind of highlighted the path on credit metrics and how are you thinking about options of refinancing needs on both floating rate exposure and kind of near-term maturities? And is there any optimization opportunities there with convertibles, hybrids, any of these kind of federal loan programs to supplement?

Sure. Happy to touch on it. And I have to say, we're pleased with where we are today, reported 14.6% in terms of FFO to debt based on the Moody's calc and consistently are seeing as we go forward, a good trajectory, both on the Moody's and S&P calculation.

Okay. So everything is on the table. And just a quick one on Jason's comments around demand growth that you mentioned and cost shift has kind of become more of a prominent issue with the inflection and load that we are seeing. Do you see any issues in Texas or even Indiana, where you would need to adjust kind of cost allocation? And would those be addressed in the current rate case process or any kind of separate proceedings?

Constantine, I think it's a great question. Probably less kind of an issue directly in the service territories that we serve largely because the growth that we're seeing, both the potential for it up in Southwest Indiana as well as here in the Greater Houston area really driven by industrial load growth that comes with significant jobs.

Yes. Maybe a couple of quick points on that, Jim. So the 2.2%, the low end of the range is consistent with $44.5 billion, the upper end of the resiliency filing that incremental $500 million would put us to $45 billion overall through 2030. Look, I think that there is pretty strong alignment across the state here in Texas around investments to keep the great resilience and can help the economic growth that we're experiencing in Texas.

And sure, just to build on that, again, as we look at the base plan at the low end of the resiliency filing, that would just support the $44.5 billion with the ongoing very modest ATM program that we've got through 2030. And again, as we look beyond that for some of these incremental opportunities, it really would be funny in line with the existing cap structure.

Steve, thanks for the question. We pushed the start of the hearing by day as we continue to explore the potential here for settlement. It's hard to handicap kind of expectations. I think we're working hard with stakeholders to find what we believe would be a constructive path forward.

Steve, that's accurate. Really, what S&P was looking at was the past, right? As they evaluated and arrived at that outcome. Our general assumption, it is that roughly year-long period. And as we look at the plan going forward, as we look over the next few years, you'll see naturally that Uri impact roll off and we'll see ourselves really as we see just in 2024, looking at the year, you're going to see us at Moody's, continuing to target that 100 to 150 basis points cushion, that won't change. And additionally, you're going to see us grow into a greater cushion at S&P as we walk into the subsequent year. So comfortable with the base financial plan and what it informed for the years ahead.

I think -- Steve, if I could add to that. Obviously, as Chris said, we're comfortable. But I think it's important just to highlight the core difference in methodology here because it is transitory in nature. The way that issue I'd add is we've received securitization proceeds from [indiscernible] significant cash inflow. We have to pay taxes on that, cash outflow. S&P's methodology excludes that significant inflow but includes the associated cash outflow, right? That's sort of a transitory effect. And as Chris said, as we look forward, we feel comfortable about the trajectory that we're on. And so just a very sort of idiosycratic impact from their calculation.

Yes. Thanks, Steve. What I would say is, I don't think you can find a more dynamic setting anywhere in the country, particularly on electric sales growth and you can't hear. Residential load growth continues to be best-in-class, right? We continue to see the industrial load growth that I mentioned, transportation, electric load growth. And I think that's really reflective in our sales numbers for the first quarter. On a quarter-over-quarter basis, when we adjust for weather, sales are up 8% over the first quarter last year, driven by strong residential, commercial and large industrial growth. There's electrification at one of our nation's largest ports here in Houston. We continue to see incremental growth in the petrochem complex will becoming one of the dominant areas in the country for life sciences.

I think about it, is just to be clear, very small, right? We're really talking about component here, where we're looking at the federal program from the loan standpoint, as you mentioned, as well as the specificity that we provided around the GRIP program that's there, which has already been filed. We've also got some Texas Department of Energy -- excuse me, emergency management funds that we've also asked for on the state level. Those would be in the form of grants, again, just a situation where we can get better outcomes in total for customers.

Yes. Thanks, Chris. What we've consistently said, Nick, is that we'll come back after these rate cases next year and provide a new 10-year plan well into the mid-2030s to reflect in our continued confidence on long-term growth. What I want to highlight, though, are there's been a handful of things that we've been able to accomplish since we rolled out that guidance, the long-term EPS guidance, which is again, 8% growth here in 2024 and then the mid- to high end of the 6% to 8% range through 2030.

Sure thing, Nick. I'll just say, as we are building the plan heading into 2023. I don't know that any of us really could have appropriately predicted the impact there, but I think you saw the company execute well and overcome that pressure. As we look into 2024 walking into the year, we definitely plan conservatively there. And it's hard for me to be too specific, but just know that if you look across our plant, I hope that you've seen we're consistently bringing forward conservatism so that there are no surprises in the end.

Yes. Thanks for the comprehensive question. Look, from a wildfire standpoint, as you highlighted, $140 million is in a significant driver of the overall $2.2 billion to $2.7 billion plan. I think it's important to understand why 60% of our system is currently underground. Jeremy, as I know you know, we have high relative humidity here. So all things being equal, we have significantly lower cloud buyer risk than our peers. That being said, obviously, we haven't sat on our hands. We've been addressing this risk with changes in operations, shutting of automatic or closers, enhanced inspections during periods of higher wildfire rigs. But this plan basically addresses about 1% of overhead miles that are in higher fire risk areas. And so this is probably under the current set of conditions sufficient to mitigate our wildfire risk.

Operator, I think we have time for one more question, please.

Yes. Thanks, Durgesh, for the questions. On the first side, the time line for approval of the resiliency plan, I think the legislation call it for about a 6-month approval period. What I will say is this is first of its kind legislation. So we'll have to kind of get in the middle but I'm sure there will be a number of parties sort of intervening, but I would look towards the tail end of this year, calendar year, to get a final decision on the resiliency plan that we file.

Okay. Operator, with that, that concludes our call for the quarter. Thanks, everyone, for joining.