Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CenterPoint Energy Inc (CNP, Financial) reported GAAP and non-GAAP EPS of $0.36 per share for the second quarter of 2024.
- The company reaffirmed its full-year 2024 non-GAAP EPS guidance range of $1.61 to $1.63, representing 8% growth at the midpoint from 2023.
- CenterPoint Energy Inc (CNP) expects to grow non-GAAP EPS and dividend per share growth at the mid-to-high end of its 6% to 8% range annually through 2030.
- The company has made significant progress in restoring power after Hurricane Beryl, including restoring power to over 1 million customers within 48 hours.
- CenterPoint Energy Inc (CNP) is investing heavily in vegetation management and system resiliency, including doubling its vegetation management resources and accelerating the adoption of advanced construction standards.
Negative Points
- Hurricane Beryl caused power outages for nearly 2.3 million customers, approximately 80% of the Houston electric customer base.
- The company faced significant challenges due to vegetation management issues, with 60% of the trees causing outages falling from outside of their rights-of-way.
- Increased interest expenses were a negative factor, driven by new debt issuances at a higher relative cost of debt.
- Weather and usage were unfavorable compared to the same quarter in 2023, primarily due to a milder spring in the Minnesota gas service territory.
- The company is pulling forward $250 million of equity planned for 2025 into 2024 to maintain credit metrics, indicating potential financial strain.
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?
A: Jason Wells, CEO: We can and will be better. The answer for getting better is continued investment in the resiliency of our system. This needs to be reflected in the ongoing settlement discussions to ensure we can make progress in mitigating the risk of outages and improving communication.
Q: How do recent events impact the resiliency spending bucketed as upside to the $44.5 billion CapEx plan?
A: Jason Wells, CEO: We were already investing in resiliency prior to the recent legislation. We plan to rapidly refile our system resiliency plan, and there's likely more support for incremental resiliency investments. For example, we proposed a 20-year pace for sectionalizing our system, but we may need to accelerate this.
Q: Can you provide more color on the likely type of financing for the upcoming refinancing?
A: Christopher Foster, CFO: We are looking at different versions of hybrids to pull in more equity content. Additionally, we plan to pull forward $250 million of equity planned for 2025 into this year, which does not change our long-term equity guidance.
Q: How are the rating agencies reacting to the event and spend in your updated plan?
A: Christopher Foster, CFO: We are having fluid conversations with rating agencies, sharing our plans for incremental resiliency work and the consistent history of Texas's securitization construct. We anticipate securitization proceeds by the end of next year.
Q: How do you feel about Houston Electric's ability to respond to the next storm?
A: Jason Wells, CEO: I feel confident. We have been working on scalable outage tracker platforms and overhauling our communications. We are also using predictive modeling to target enhanced vegetation management and resiliency investments, which will have a meaningful impact on minimizing outages.
Q: What can you do about the 60% of vegetation that caused outages coming from outside your right-of-ways?
A: Jason Wells, CEO: We are proactively working with property owners to address these hazard trees, but we currently lack authority to trim them without permission. We are looking to work with community leaders and regulators to address this vegetation that threatens our system.
Q: How does pulling forward equity from 2025 into 2024 impact your financial metrics?
A: Christopher Foster, CFO: Pulling forward $250 million of equity helps position the balance sheet until we receive securitization proceeds. This does not change our long-term equity guidance.
Q: Can you execute on the 1% to 2% O&M reduction forecast despite increased vegetation management costs?
A: Jason Wells, CEO: We continue to see opportunities to drive efficiency in our O&M practices. We increased vegetation management spend by over 30% last year and still achieved the 1% to 2% reduction. We will make necessary investments to improve service while finding efficiencies across the company's operations.
Q: What is the confidence level in the $1.6 billion to $1.8 billion storm cost estimate?
A: Christopher Foster, CFO: We have a good feel for the asset-based and labor costs associated with the storm. We are confident in the high end of the $1.8 billion estimate based on the costs incurred so far.
Q: Does undergrounding become more of a solution in your service territory?
A: Jason Wells, CEO: Undergrounding will play a more prominent role in our resiliency efforts. About 60% of our customers already receive service through underground lines, but we need to balance undergrounding with hardening overhead lines to minimize outages.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
