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    CenterPoint Energy Inc (CNP)

    Board Change

    Business Description

    CenterPoint Energy, Inc. is an energy delivery company that operates in electric transmission and distribution, power generation, and natural gas distribution, serving over 7 million metered customers across Indiana, Louisiana, Minnesota, Mississippi, Ohio, and Texas . The company's business activities are divided into two main segments: Natural Gas and Electric . CenterPoint Energy provides electric generation, transmission, and distribution services, as well as natural gas distribution and transportation services .

    1. Electric Segment - Provides electric generation, transmission, and distribution services, primarily in southwestern Indiana, and includes power generating and wholesale power operations .
    2. Natural Gas Segment - Offers natural gas distribution and transportation services, primarily in southwestern Indiana .

    Q3 2024 Summary

    Initial Price$31.15July 1, 2024
    Final Price$29.89October 1, 2024
    Price Change$-1.26
    % Change-4.04%

    What went well

    • Strong 2025 Earnings Guidance: CenterPoint Energy has initiated its 2025 non-GAAP earnings guidance range of $1.74 to $1.76 per share, representing 8% growth from the midpoint of its 2024 guidance. This confidence is based on significant investments leading to a rate base CAGR of about 11% over the last two years, new base rates in three jurisdictions, and access to capital recovery mechanisms.
    • Robust Load Growth in Texas: The company expects load growth in its Texas service territory to be at least 30% through 2030, with potential for even higher growth due to additional speculative load activity. This strong growth outlook provides confidence in their long-term performance.
    • Strong Financial Position and Regulatory Support: CenterPoint Energy maintains strong credit metrics, with an adjusted metric of 13.8%, and expects further improvements from asset sale proceeds and securitization. Rating agencies are watching closely but are confident due to the supportive Texas regulatory construct and the company's effective navigation of regulatory processes.

    What went wrong

    • CenterPoint Energy's FFO-to-debt ratio is only 13.8%, barely above Moody's 13% downgrade threshold, raising concerns about potential credit rating downgrade and limited financial flexibility.
    • The company acknowledges the need to "continue to re-earn trust" with stakeholders, indicating ongoing reputational challenges that could impact operations and regulatory relations.
    • Reliance on securitization proceeds and asset sales (Louisiana and Mississippi Gas LDCs) to meet financial targets introduces uncertainty, as rating agencies are watching these transactions closely.

    Q&A Summary

    1. Confidence in 2025 Earnings Guidance
      Q: What's your confidence level in hitting 2025 earnings guidance?
      A: We have a high degree of confidence in our 2025 earnings guidance due to several factors. First, we've invested significantly over the last two years, achieving a rate base CAGR of about 11%, providing a solid foundation for our 8% earnings growth target . Second, we'll have new base rates in three jurisdictions in 2025—Texas Gas, Indiana Electric, and Minnesota Gas—which will smooth earnings and rate increases for customers . Lastly, we have access to all recovery mechanisms for our capital spend except in Ohio .

    2. Equity Raise Plans
      Q: Can you address the increased equity needs and potential prefunding?
      A: We've increased our equity needs by $1.25 billion to $2.5 billion through 2030 and plan to efficiently fund this without necessarily prefunding . We have a strong track record of raising equity and will consider optimal financing methods . With $3 billion of cash inflows expected over the next 12 to 18 months, we have significant flexibility .

    3. Credit Metrics and Securitization Timing
      Q: How will securitization proceeds affect credit metrics in 2024 and 2025?
      A: We expect securitization proceeds to bolster our credit metrics by Q1 2026 . We'll file two securitization requests: the first for May storm costs, with proceeds expected in Q3 2025, and the second for Hurricane Beryl costs, expected in late Q4 2025 or early Q1 2026 . We're focused on maintaining a cushion of 100 to 150 basis points above downgrade thresholds .

    4. Texas Load Growth and Transmission Opportunities
      Q: What's the outlook for Texas load growth and transmission investments?
      A: We're witnessing significant potential in Texas, with peak load growth expected to be at least 30% through 2030 . This figure may increase as speculative loads, like hydrogen projects, materialize . The recent surge in data center activity has increased our queue from 1 GW to over 8 GW . We're poised to invest in transmission, including potential 765 kV projects, which could add substantial upside to our $47 billion CapEx plan .

    5. Rating Agencies Update
      Q: What are rating agencies focusing on, and how are metrics trending?
      A: Rating agencies are monitoring both our financial metrics and regulatory developments . We're measuring against Moody's 13% downgrade threshold and reported an adjusted metric of 13.8% . Expected cash inflows from asset sales and securitizations will enhance our metrics .

    6. Mobile Generation—Possible Divestment
      Q: Are there strategic options for your mobile generation assets?
      A: Given the state's need for dispatchable generation, we're exploring solutions that could involve subleasing our equipment so it remains in Texas . We aim to find a cost-effective approach that ensures reliability during load shed events .

    7. Temporary Generation Proposal
      Q: What's the status of your temporary generation recovery proposal?
      A: We've proposed to forgo approximately $110 million in profit from our large temporary generation units . Stakeholders view this positively, but discussions continue regarding the use of these units . We're working with the state to find a mutually beneficial resolution .

    8. 2024 Guidance and Q4 Offsets
      Q: How are you offsetting the $0.11 O&M drag to maintain 2024 guidance?
      A: Offsets include consistent benefits from our trackers, contributing $0.09 to $0.10 quarter-over-quarter . We've accelerated some work from Q4 into Q3, resulting in a $0.01 benefit to Q4 . Pulling forward work from 2024 to 2023 last year adds another $0.03 benefit . Overall, we're confident in meeting our 2024 guidance .

    9. Stakeholder Conversations Post-Storm in Texas
      Q: How are stakeholder relations in Texas after recent storms?
      A: Relations are improving as we've engaged extensively with stakeholders . There's a collective desire for a more resilient system and better communications . Our Phase 2 GHRI plan focuses on segmentation and automation, aiming to save customers about 125 million outage minutes annually . We're committed to rebuilding trust and meeting stakeholders' expectations .

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Electric Transmission & Distribution--------
    - Revenue from Contracts-------1,065
    - Derivatives Income--------
    - Other-------(7)
    Natural Gas Distribution--------
    Energy Services--------
    Other Operations--------
    Corporate and Other-------2
    Electric Segment-------1,243
    Natural Gas Segment-------611
    Houston Electric-------1,058
    CERC-------600
    - Utility Revenues-------589
    - Non-utility Revenues-------11
    Eliminations--------
    Total Revenue-------1,856
    KPIs - MetricFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    **Metered Customers - Electric**2,871,6672,887,4922,906,3072,916,028-2,932,7022,950,5932,959,281
    **Metered Customers - Natural Gas**4,276,0884,264,3314,266,9954,313,954-4,329,0474,323,7534,332,007

    Executive Team

    NamePositionStart DateShort Bio
    Jason P. WellsPresident and Chief Executive OfficerJanuary 5, 2024Jason P. Wells is the President and CEO of CenterPoint Energy, effective January 5, 2024. He previously served as President and COO from 2023 to 2024, and EVP and CFO from 2020 to 2022 .
    Christopher A. FosterExecutive Vice President and Chief Financial OfficerMay 5, 2023Christopher A. Foster was appointed as EVP and CFO of CenterPoint Energy, effective May 5, 2023. He received a buy-out equity award from CenterPoint Energy valued at $3.9 million .
    Monica KaruturiExecutive Vice President and General CounselN/AMonica Karuturi serves as EVP and General Counsel at CenterPoint Energy. She is a key legal advisor and was listed as a named executive officer in the company's 2023 executive compensation program .
    Lynne Harkel-RumfordExecutive Vice President and Chief Human Resources OfficerN/ALynne Harkel-Rumford serves as EVP and Chief Human Resources Officer at CenterPoint Energy. Specific details about her start date are not provided.
    Jason M. RyanExecutive Vice President, Regulatory Services & Government AffairsN/AJason M. Ryan serves as EVP, Regulatory Services & Government Affairs at CenterPoint Energy. His base salary for 2023 was $510,000 .
    David J. LesarChief Executive Officer (retiring January 5, 2024)July 2020David J. Lesar served as CEO of CenterPoint Energy from July 2020 until his retirement on January 5, 2024. He was previously Chairman and CEO at Halliburton Company .
    Lynnae K. WilsonSenior Vice President of the Electric BusinessN/ALynnae K. Wilson is an officer at CenterPoint Energy, serving as SVP of the Electric Business. She owns 24,766 shares of common stock directly as of January 5, 2024 .
    Scott E. DoyleExecutive Vice President, Utility OperationsN/AScott E. Doyle served as EVP, Utility Operations at CenterPoint Energy. He was separated from the company on January 3, 2023, due to the elimination of his position .

    Questions to Ask Management

    1. Regarding the GHRI, you are planning to invest an additional $2.5 billion, increasing resiliency investments to approximately $5 billion from 2026 through 2028. How do you plan to achieve these significant investments while keeping Houston Electric's customer delivery charge increases roughly in line with the long-term rate of inflation over the next 10 years?

    2. You mentioned that your data center interconnection queue now exceeds 8 gigawatts, but you acknowledge that not all of this will be developed. Given that, how are you factoring this speculative load into your capital expenditure plans, and what risks do you foresee if this expected growth does not materialize as anticipated?

    3. You plan to raise an incremental $1.25 billion of equity in addition to the $1.25 billion previously guided, totaling approximately $2.5 billion through the remainder of the decade. How will these significant equity issuances impact your balance sheet and earnings per share growth targets, and what strategies do you have in place to mitigate potential dilution for shareholders?

    4. With the withdrawal of your Houston Electric rate case filing due to focus on plan execution and resiliency development, and given the regulatory lag resulting in a 150 basis point lower earned ROE than allowed, how do you plan to address this regulatory lag before refiling in 2025, and what are your expectations for the new rate case?

    5. Concerning the temporary generation units, you proposed to forgo approximately $110 million of profit to address stakeholder concerns. Can you elaborate on how this proposal satisfies stakeholders, and what impact it might have on your financial performance and obligations to customers during load shed events?

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024 and FY 2025
    • Guidance:
      1. Non-GAAP EPS Guidance for 2024: $1.61 to $1.63 per share, representing 8% growth at the midpoint from 2023 results .
      2. Non-GAAP EPS Guidance for 2025: $1.74 to $1.76 per share, with an 8% growth from the midpoint of 2024 guidance .
      3. Long-term EPS Growth: Mid- to high end of 6% to 8% range annually through 2030 .
      4. Dividend Growth: In line with EPS growth through 2030 .
      5. Capital Investment Plan: $4.9 billion for 2025, with a total of $47 billion through 2030 .
      6. System Resiliency Investments: Approximately $5 billion from 2026 through 2028 .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Non-GAAP EPS Guidance for 2024: $1.61 to $1.63, representing 8% growth at the midpoint from 2023 results .
      2. Long-term Non-GAAP EPS Growth: Mid- to high end of 6% to 8% range annually through 2030 .
      3. Dividend Per Share Growth: In line with EPS growth .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Non-GAAP EPS Guidance: $1.61 to $1.63, 8% growth at the midpoint from 2023 results .
      2. Long-term EPS Growth: Mid- to high end of 6% to 8% range annually through 2030 .
      3. Dividend Growth: In line with EPS growth .
      4. Capital Expenditure: $3.7 billion for 2024 .
      5. Capital Investment Plan: $44.5 billion through 2030 .
      6. Rate Base Growth: Nearly 10% CAGR through 2030 .
      7. O&M Reduction: 1% to 2% per year on average through 2030 .
      8. FFO to Debt: 100 to 150 basis points cushion .
      9. Resiliency Investment: $2.2 billion to $2.7 billion from 2025 to 2027 .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Non-GAAP EPS Guidance for 2024: $1.61 to $1.63, 8% growth at the midpoint from 2023 .
      2. Long-term Non-GAAP EPS Growth: Mid- to high end of 6% to 8% range annually through 2030 .
      3. Dividend Growth: In line with EPS growth .
      4. Capital Investment Plan: $44.5 billion through 2030 .
      5. Equity or Equity-like Funding: $250 million annually .
      6. FFO to Debt Target: 100 to 150 basis points cushion to 13% downgrade threshold .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Large energy companies: Competitors in Enable's areas of operation with greater financial resources and access to supplies of natural gas, NGLs, and crude oil .
    • Producers of natural gas or crude oil: Enable's customers who may develop their own gathering, processing, transportation, and storage systems .

    Latest news

    Recent developments and announcements about CNP.

    Corporate Leadership

      Leadership Change

      ·
      Dec 16, 2024, 12:30 PM

      Lynne Harkel-Rumford, Executive Vice President and Chief Human Resources Officer at CNP, is retiring on February 3, 2025. Her departure is not due to any disagreements with the company . Dean Seavers has been appointed to the Board of Directors, effective December 31, 2024, filling the vacancy left by Barry T. Smitherman's resignation. Seavers brings extensive experience in the utility, safety, and security industries .

      Board Change

      ·
      Dec 16, 2024, 12:30 PM

      Dean Seavers has been appointed as a new member of the Board of Directors at CenterPoint Energy, effective December 31, 2024. He will fill the vacancy created by the resignation of Barry T. Smitherman and is expected to stand for election at the company's annual meeting in 2025. Seavers brings extensive experience in the utility, safety, and security industries .

      Board Change

      ·
      Dec 3, 2024, 10:44 PM

      Barry T. Smitherman, a director on the Board of Directors of CenterPoint Energy, Inc., has notified the company of his intent to resign from the Board effective December 31, 2024. His resignation is not due to any disagreement with the company on its operations, policies, or practices .