CenterPoint Energy, Inc. (CNP) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Reaffirmed Full Year 2024 Guidance: CenterPoint Energy reaffirmed its full-year 2024 non-GAAP EPS guidance range of $1.61 to $1.63 and its long-term guidance for non-GAAP EPS and dividend per share growth at the mid-to-high end of the 6% to 8% range annually through 2030.
• Strong Response to Hurricane Beryl: The company successfully restored power to over 1 million customers within 48 hours after Hurricane Beryl, replaced over 3,000 distribution poles, and significantly increased its vegetation management efforts.
• Investment in Resiliency and Customer Communication: Plans to accelerate adoption of advanced construction standards, retrofit existing assets, and launch a new, more customer-oriented outage tracker to improve communication and service reliability.
• Regulatory Progress and Capital Deployment: Received approval for Texas Gas consolidation and reaffirmed commitment to a $3.7 billion capital expenditure target for 2024, excluding storm costs, to support growth and system resilience.

Pessimistic Highlights

• Impact of Hurricane Beryl: The hurricane caused power outages for nearly 2.3 million customers, highlighting challenges in vegetation management and the need for increased system resiliency.
• Increased Interest Expense: The company reported an unfavorable variance due to increased interest expense, primarily driven by new debt issuances to fund customer-driven work.
• Storm Recovery Costs: Estimated storm recovery costs associated with Hurricane Beryl and previous events are between $1.6 billion to $1.8 billion, necessitating securitization to limit impact on customer bills.

Company Outlook

• Continued Focus on Resiliency and Efficiency: CenterPoint Energy is committed to improving its emergency preparedness and response capabilities, with a focus on accelerating resiliency investments and maintaining efficient operations to support long-term growth and customer satisfaction.

Q & A Highlights

• Q: How do you see the commentary from customers, legislators, and stakeholders impacting the current settlement negotiations in the Houston Electric rate case? (Shar Pourreza, Guggenheim Partners)

  A: The company acknowledges the need for improvement and sees continued investment in system resiliency as a key part of ongoing settlement discussions. There's a clear demand for better communication and mitigation of outage risks. (Jason Wells)

• Q: How do recent events impact the resiliency spending bucketed as upside to the CapEx plan? (Shar Pourreza, Guggenheim Partners)

  A: The bias is towards accelerating incremental resiliency investments, with a focus on sectionalization of the system and other measures to improve service reliability. (Jason Wells)

• Q: Could you clarify the financing plan, especially regarding the equity content in upcoming refinancing? (Steve Fleishman, Wolfe Research)

  A: The company is considering different versions of hybrids to pull in more equity content into the plan, in addition to pulling forward $250 million of equity planned for 2025 into this year. (Chris Foster)

• Q: How do you feel about Houston Electric's ability to respond to the next storm? (Jeremy Tonet, JPMorgan Securities)

  A: Confident in the company's improved position to communicate and respond to future storms, with ongoing investments in predictive modeling and vegetation management. (Jason Wells)

• Q: How does the company plan to address outages caused by trees outside of its right-of-ways? (Jeremy Tonet, JPMorgan Securities)

  A: The company is identifying hazardous trees and working proactively with property owners to address them, seeking support from community leaders and regulators to enhance vegetation management efforts. (Jason Wells)