Q3 2024 Earnings Summary
- 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.
- 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.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -0.2% | The slight YoY decline reflects weather-driven usage softness and fluctuations in natural gas costs, partially offset by new customer rates and moderate customer growth. Milder temperatures in certain territories further reduced demand. |
SG&A | +20% | The notable increase is due to inflationary pressures on labor and overhead, along with higher corporate support expenses, as the company scales its operations. Forward-looking, continued cost management remains critical. |
D&A | -11% | The decrease is connected to timing of asset additions and retirements, reducing overall depreciation expense. This partially offsets previously higher D&A from capital expansions; additional investments may drive higher future D&A. |
Operating Income (EBIT) | -18% | Lower EBIT reflects softer revenues from milder weather and rising interest or pass-through costs, partially offset by cost management. Inflation and storm restoration costs also weighed on margins. |
Net Income | -32% | The sharp decline results from higher interest expense, milder weather impacts, and inflationary cost pressures exceeding revenue growth. Ongoing infrastructure investments may support future earnings recovery. |
EPS (Diluted) | -29% | EPS followed the drop in net income, with interest rate volatility and storm-related expenses notably affecting profitability. Looking ahead, the company may rely on rate recovery and cost discipline to stabilize per-share earnings. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Non-GAAP EPS | FY 2024 | $1.61 to $1.63 | $1.61 to $1.63 | no change |
Non-GAAP EPS | FY 2025 | no prior guidance | $1.74 to $1.76 | no prior guidance |
Long-term EPS Growth | FY 2030 | Mid- to high end of 6%-8% | Mid- to high end of 6%-8% | no change |
Dividend Growth | FY 2030 | Mid- to high end of 6%-8% | In line with EPS growth | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Texas Load Growth (Hydrogen & Data) | • Q2 2024: No mention. • Q1 2024: ~10 GW of hydrogen production noted; data centers described as low-margin. • Q4 2023: Hydrogen hub mentioned (30k–35k jobs), no specific data center reference. | Significant load growth in Texas, driven by ~3.5 GW of hydrogen projects in advanced phases. Data center interconnection queue rose from 1 GW to 8 GW, indicating a major driver of future load. | Recurring mention with expanded data center details. |
Rate Base Expansion & CapEx Strategies | • Q2 2024: Maintaining $3.7B CapEx target, consolidating TX gas jurisdictions. • Q1 2024: 10% rate base growth, $44.5B CapEx plan, resiliency projects $2.2–$2.7B. • Q4 2023: Increased plan to $44.5B, targeting 10% rate base CAGR. | Highlighted 11% rate base CAGR and $2.6B invested YTD, >70% of $3.7B 2024 CapEx target. Plans $4.9B in 2025, total $47B through 2030. Resiliency plan to add $2.5B extra CapEx. | Consistent growth focus; CapEx plan increased further. |
Credit Metrics & Rating Downgrades | • Q2 2024: Temporarily lower FFO-to-debt due to timing; expects improvement by Q4 2025. • Q1 2024: 14.6% FFO-to-debt for Moody’s, managing negative S&P outlook. • Q4 2023: Maintained ~14% FFO-to-debt, reducing floating-rate debt. | Adjusted FFO-to-debt at 13.8% (above 13% Moody’s threshold). Aiming for 100–150 bps cushion. Coordinating securitization proceeds to maintain credit health. | Ongoing focus on securitization timing to avoid downgrades. |
Equity Issuance & Shareholder Dilution | • Q2 2024: Pulled forward $250M equity from 2025 to 2024, total $1.75B equity through 2030. • Q1 2024: ~$250M ATM equity program nearly complete. • Q4 2023: ~$250M/yr equity through 2030 planned. | Plans additional $1.25B equity (total $2.5B) through 2030 for resiliency. No common equity issuance planned in 2025, leveraging $3B proceeds from asset sale and securitizations. | Recurring strategy, increased total equity plan to fund resiliency. |
Regulatory Approvals & Cost Recovery | • Q2 2024: Consolidated TX gas jurisdictions; multiple rate cases (MN, IN, Houston Elec) pending. • Q1 2024: Several rate cases in TX, MN, IN; ~6-month approval for resiliency. • Q4 2023: Rate cases in TX, MN, IN, Ohio; resiliency bill allows cost recovery. | Withdrew TX rate case (modest | Continues multiple rate filings, focusing on storm cost securitization. |
Storm Cost Securitization & Funding | • Q2 2024: ~$1.6B–$1.8B storm costs (May + Beryl), aiming to securitize to limit bill impact. • Q1 2024: Winter Storm Uri securitization proceeds impacted metrics. • Q4 2023: No mention. | Two securitization filings planned: May derecho (~Q3 2025 proceeds) & Hurricane Beryl (~Late Q4 2025/Q1 2026). Total storm costs at low end of $1.6B range. Emphasizes Texas’ strong securitization track record. | Ongoing filings for major storm costs, relieving financing pressures. |
Alternative Minimum Tax (AMT) | • Q2 2024: No mention. • Q1 2024: No mention. • Q4 2023: Projected ~$115M/yr in cash taxes due to AMT, effectively prepaying tax liabilities. | No mention in Q3 2024. | No recent discussion; last addressed Q4 2023. |
LA & MS LDCs Sale & Capital Recycling | • Q2 2024: ~$1B after-tax proceeds expected by late Q1 2025. • Q1 2024: ~$1B after-tax proceeds, closing Q1 2025, redeploying to higher-return jurisdictions. • Q4 2023: ~$1B after-tax, 32x multiple, closes Q1 2025; frees capital for Houston Electric. | Expects ~$3B gross proceeds (asset sale + securitizations) over 12–18 mos; will strengthen finances and fund new investments. | Continues to emphasize asset sale proceeds for growth investments. |
Large-Scale Transmission (765 kV) | • Q2 2024: No mention. • Q1 2024: No mention. • Q4 2023: No mention. | Potential tie-ins to 765 kV project; Texas right of first refusal. Could be upside to $47B plan, expecting ERCOT speculative load study in 2025. | New mention in Q3 2024; indicates future upside opportunity. |
Hydrogen Hubs & Industrial Electrification | • Q2 2024: No mention. • Q1 2024: ~10 GW hydrogen, major industrial electrification driver. • Q4 2023: Hydrogen hub in Houston with 30k–35k permanent jobs. | ~3.5 GW hydrogen in advanced phases; Houston ideal hub. Strong industrial electrification in Greater Houston. | Recurring topic, evolving with clearer project details. |
Data Center Expansion | • Q2 2024: No mention. • Q1 2024: Recognized as low-margin growth without many jobs. • Q4 2023: No mention. | Data center queue rose from 1 GW to 8 GW, major AI-driven shift; big tailwind. | Recurring but newly expanded emphasis in Q3 2024. |
Earnings Growth (8% through 2025) | • Q2 2024: Reaffirmed $1.61–$1.63 for 2024, 8% midpoint growth vs. 2023. • Q1 2024: 8% for 2024, mid- to high end of 6–8% post-2025. • Q4 2023: Targeting 8% in 2024, ~6–8% annual through 2030. | Initiated 2025 EPS $1.74–$1.76, ~8% growth from 2024 midpoint. Strong rate base CAGR and capital recovery support confidence. | Consistent guidance reaffirmed, remains a core focus. |
Potential Budget Overruns | • Q2 2024: Storm costs of $1.6–$1.8B; resiliency plan $2.2–$2.7B could accelerate. • Q1 2024: Conservative planning, $500M possible resiliency add. • Q4 2023: Raised 2023 CapEx to $4.3B but no explicit overruns beyond planned increases. | No direct mention of overruns in Q3, but the company is on track for 2024 base CapEx (~$3.7B). | No new details on overages; focus remains on execution within updated budgets. |
Increased Equity Needs Through 2030 | • Q2 2024: Accelerating $250M equity from 2025 to 2024, no change to total plan. • Q1 2024: Higher equity ratios in TX gas/Houston Electric, but no explicit 2030 target. • Q4 2023: ~$250M per year equity or equity-like through 2030. | Additional $1.25B equity (total $2.5B) for resiliency, balanced 50/50 with debt. No new equity in 2025 thanks to $3B gross proceeds from asset sale & securitizations. | Reinforced total equity plan; bigger resiliency funding drives higher issuance. |
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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 . -
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 . -
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 . -
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 . -
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 . -
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 . -
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 . -
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 . -
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 .