CenterPoint Energy Inc (CNP) Q3 2024 Earnings Call Highlights: Strong Growth Amid Operational ...

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Tue, Oct 29, 2024, 1:03 AM 4 min read

Non-GAAP EPS: $0.31 per share for Q3 2024.
Full Year 2024 Non-GAAP EPS Guidance: Reaffirmed at $1.61 to $1.63 per share.
2025 Non-GAAP EPS Guidance: Initiated at $1.74 to $1.76 per share.
GAAP EPS: $0.30 for Q3 2024.
O&M Expenses: $0.11 unfavorable impact due to increased and accelerated operations and maintenance.
Weather and Usage Impact: $0.06 unfavorable impact compared to Q3 2023.
Customer-Driven Investments: Contributed $0.09 favorability in Q3 2024.
Interest Expense and Financing Costs: $0.01 favorability compared to Q3 2023.
Capital Expenditures: $900 million invested in Q3 2024; $2.6 billion year-to-date.
Storm Costs: Estimated at $1.6 billion for major events and Hurricane Beryl.
10-Year Capital Investment Plan: Increased to $47 billion, with $21 billion in Texas.
Equity Guidance: Plan to raise $2.5 billion through 2030, with $1.25 billion in incremental equity.

Warning! GuruFocus has detected 5 Warning Signs with CNP.

Release Date: October 28, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

CenterPoint Energy Inc (NYSE:CNP) reported a non-GAAP EPS of $0.31 per share for the third quarter, reaffirming their full-year 2024 guidance range of $1.61 to $1.63 per share.
The company has made significant progress in its Greater Houston Resiliency Initiative (GHRI), including removing high-risk vegetation, replacing poles, and installing automated reliability devices ahead of schedule.
CenterPoint Energy Inc (NYSE:CNP) is experiencing strong organic growth, particularly in the Greater Houston region, with expectations of a 30% increase in peak load by 2030.
The company plans to invest approximately $47 billion in capital through 2030, with a focus on enhancing system resiliency and reliability.
CenterPoint Energy Inc (NYSE:CNP) has initiated its 2025 non-GAAP EPS guidance target range of $1.74 to $1.76 per share, representing 8% growth from the midpoint of their 2024 guidance range.

Negative Points

The company faced a $0.11 unfavorable impact on earnings due to increased and accelerated O&M expenses in the third quarter, primarily from vegetation management.
Weather and usage contributed an additional $0.06 of unfavorability quarter-over-quarter, partly due to outages from Hurricane Beryl and milder summer weather.
CenterPoint Energy Inc (NYSE:CNP) is experiencing regulatory lag, with a weather-normalized earned return on equity nearly 150 basis points lower than allowed in 2023.
The company anticipates the need to raise an incremental $1.25 billion in equity to fund additional resiliency investments, increasing total equity guidance to $2.5 billion through 2030.
There is uncertainty regarding the approval of the withdrawal of the Houston Electric rate case, which could impact future financial planning.

Q & A Highlights

Q: As we think about 2025 guidance, there are many moving pieces, including the GRC withdrawal requests and potential higher O&M. What is the level of confidence here, and what happens if the GRC withdrawal request isn't approved? A: We have a high degree of confidence in our 2025 guidance. We've invested significantly over the last two years, resulting in a solid foundation for 8% earnings growth. We will have new base rates in three jurisdictions in 2025, and we believe we have access to all recovery mechanisms for our capital spend, except in Ohio. The timing of the Houston Electric rate case is not a major driver for 2025.

Q: On equity, it's increased by another $1.25 billion to $2.5 billion through 2030. Can you prefund the needs, and are asset sales still an opportunity? A: We have a strong track record of efficiently raising equity. We will look at the most optimal way to finance these needs, but prefunding is not necessarily the approach. We have $3 billion of cash inflows over the next 12 to 18 months, providing flexibility in efficiently raising equity.

Q: Could you provide more detail on the Texas load growth and the 30% growth in peak through 2030? Does this include all updates for early next year? A: The 30% growth figure is a subset of speculative load where we have a higher degree of confidence. There is potential for incremental load growth in the update, especially in areas like hydrogen-related activity, which could be multiples of what's included in the current number.

Q: Can you update us on where things stand with the rating agencies and what they're focusing on? A: The rating agencies are focusing on both metrics and the regulatory environment. We are confident in maintaining a 13.8% FFO to debt ratio. The agencies are closely watching the securitization filings and the strong Texas regulatory construct, which has a history of approvals.

Q: Could you give an update on the proposal regarding temporary generation recovery? A: The focus is on large units, with less than $100 million of profit not yet recognized. We proposed to forgo $110 million of profit. Stakeholders saw this as a positive step, and we are working with the state to find a solution that balances customer protection and cost optimization.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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