CenterPoint Energy, Inc. (CNP) Q4 2022 Earnings Call Transcript

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CenterPoint Energy, Inc. (NYSE:CNP) Q4 2022 Earnings Conference Call February 17, 2023 8:00 AM ET

Company Participants

Jackie Richert - Vice President, Investor Relations and Treasurer

David Lesar - Chief Executive Officer

Jason Wells - President & Chief Operating Officer

Conference Call Participants

Shahriar Pourreza - Guggenheim Partners

Nick Campanella - Credit Suisse

Steve Fleishman - Wolfe Research

Jeremy Tonet - JPMorgan

Durgesh Chopra - Evercore ISI


Good morning, and invited to CenterPoint Energy's Fourth Quarter 2022 Earnings Conference Call pinch elder management. [Operator Instructions]

I will now move nan telephone complete to Jackie Richert, Vice President of Investor Relations and Treasurer. Ms. Richert?

Jackie Richert

Good morning, everyone. Welcome to CenterPoint's net convention call. Dave Lesar, our CEO; and Jason Wells, our COO, will talk nan company's 4th fourth and afloat twelvemonth 2022 results. Management will talk definite topics that will incorporate projections and different forward-looking accusation and statements that are based connected management's beliefs, assumptions and accusation presently disposable to management. These forward-looking statements are taxable to risks and uncertainties. Actual results could disagree materially based upon various factors arsenic noted successful our Form 10-K, different SEC filings and our net materials. We undertake nary responsibility to revise aliases update publically immoderate forward-looking statements.

We will beryllium discussing definite non-GAAP measures connected today's call. When providing guidance, we utilized a non-GAAP EPS measurement of adjusted diluted net per stock connected a consolidated ground referred to arsenic non-GAAP EPS. For accusation connected our guidance methodology and reconciliation of our non-GAAP measures utilized successful providing guidance, please mention to our net news merchandise and presentation, some of which tin beryllium recovered nether nan Investors conception connected our website. As a reminder, we usage our website to denote worldly information. This telephone is being recorded. Information connected really to entree nan replay tin beryllium recovered connected nan website.

Now I'd for illustration to move nan chat complete to Dave.

David Lesar

Thank you, Jackie. Good morning, and convey you to everyone joining america for our 4th fourth 2022 net call. It's been astir 2.5 years since I was appointed CEO present astatine CenterPoint. They person certainly been eventful, and I americium pleased pinch nan important magnitude of advancement that we person made to managing done a world pandemic, to operating done historically utmost weather, to now navigating nan highest complaint of ostentation nan U.S. has seen successful nan past 4 decades.

I judge this is simply a guidance squad that tin return connected and flooded immoderate challenge. Since I sewage here, location really hasn't been a dull moment, but make nary mistake, I emotion starring this institution and its galore awesome employees.

Through these unprecedented times, CenterPoint labor stepped up and continued to present results for nan use of our customers, communities and investors. And arsenic astir of you person seen, erstwhile Jason took complete arsenic CNP's President and COO connected January 1, we made a fewer much guidance changes to make judge that we are creating a deeper chair and continuing to execute connected our succession scheme to create a institution wherever our labor person nan opportunity to beryllium challenged, turn successful their careers and thief america execute our winning strategy.

We person a much divers activity squad than erstwhile I first started and 1 that has surely go good regarded successful nan industry. I firmly judge that we person nan correct squad to execute connected what we judge is 1 of nan astir tangible, semipermanent maturation plans successful nan industry. And of course, we proceed to execute well. I'm happy to stock that nan 4th fourth of 2022 is our 11th consecutive 4th of gathering aliases exceeding net guidance expectations.

Today, we announced 4th fourth non-GAAP EPS of $0.28 and afloat twelvemonth non-GAAP EPS of $1.38. This yearly 9% maturation complaint complete 2021 establishes a caller higher guidelines from which we will turn our yearly net for nan equilibrium of our scheme done 2030. Also support successful mind, we besides grew non-GAAP EPS by 9% successful 2021. At CenterPoint, we don't usage CAGRs for our EPS growth. We are focused connected increasing disconnected our delivered results each and each year.

Today, we are besides reaffirming our 2023 non-GAAP EPS guidance scope of $1.48 to $1.50, an 8% maturation complaint astatine nan midpoint from nan caller higher guidelines of $1.38. Jason and I judge successful having transparency pinch our business operations, truthful we tin coming our investors visibility into our capacity by having 1 of nan tightest guidance ranges successful 1 of nan longest long maturation complaint targets successful nan industry.

I besides want to item what other we accomplished conscionable past year. We became a axenic play regulated inferior pinch nan complete divestiture of our finance successful Energy Transfer successful March of 2022. For nan use of our stakeholders, we recycle those income proceeds backmost into our regulated businesses. As a consequence of this divestiture, good complete 95% of our net now travel from our regulated inferior operations.

We closed connected nan waste of our Arkansas and Oklahoma LDCs for which we received a landmark valuation and erstwhile again, we were capable to usage nan waste proceeds to further put successful our regulated businesses for nan use of some our customers and investors.

We completed nan last fewer steps of our Vectren integration, which resulted successful a amended aligned operational and financing building to use customers and investors going forward. Additionally, we've made awesome advancement connected our Indiana Integrated Resource Plan pinch nan support of nan 460-megawatt state works earlier this year. The filings for respective renewable projects, including our first upwind task and arsenic Jason will discuss, nan regulatory support for nan first of its benignant Indiana securitization of nan A.B. Brown ember installation successful early January of this year. As we advancement connected our IRP, we proceed to beforehand towards achieving our nett zero c emanation goals.

And yet - successful nan 3rd 4th of 2022, we accrued our 10 twelvemonth superior scheme by $2.3 billion, taking it from $40 cardinal positive done 2030 to now $43 cardinal done 2030 pinch a attraction connected further investments successful grid reliability and modernization. This $2.3 cardinal successful further planned superior should not only let america to supply safer and much reliable power for our customers, but should besides let america to proceed to trim O&M complete nan longer term, which additionally benefits some customers and investors alike. As we person stated successful nan past, nan existent superior scheme tin still beryllium executed pinch nary outer equity issuance.

On apical of nan $2.3 cardinal we formally added to our superior plan, we've besides identified an further $3 cardinal of different imaginable superior opportunities. As we've said, we will fold successful this further $3 cardinal of superior erstwhile we judge we tin operationally execute it, efficiently money it and minimize nan regulatory lag associated successful recovering it. 2022 was genuinely an breathtaking and productive twelvemonth present astatine CenterPoint, and we are assured that this beardown momentum will proceed into nan New Year.

Now turning to our net guidance. As I stated astatine nan apical of my remarks, we earned $0.28 of non-GAAP EPS for nan 4th fourth of 2022 and $1.38 for a afloat twelvemonth 2022. This represents a 9% maturation complaint erstwhile compared to our 2021 non-GAAP inferior EPS.

We proceed to expect to turn non-GAAP EPS 8% successful some 2023 and 2024 and successful nan mid to precocious extremity of nan 6% to 8% thereafter annually done 2030. This is an manufacture starring maturation rate. Jason will supply further specifications regarding our financial results later.

Now let's move to superior investments. In nan 4th fourth of 2022, we deployed a CenterPoint grounds $1.6 cardinal of superior crossed our various jurisdictions, bringing our full superior invested for nan twelvemonth to $4.8 billion. The $1.6 cardinal of 4th fourth superior was astir $200 cardinal supra what we antecedently indicated connected our 3rd 4th call.

Some of this summation was owed to first investments made to facilitate nan description of an already world-class facility, nan Texas Medical Center, aliases TMC, arsenic it originates its description to double its size complete nan adjacent 5 years aliases so.

Over those adjacent 5 years, we are anticipating investing complete $200 cardinal successful nan TMC and surrounding community. These investments will dwell of a ample caller substation and respective strategy hardening projects, impacting and strengthening nan resiliency successful nan TMC area. This will besides see reinforcing transmission and distribution lines and strengthening existent substation equipment.

The description of nan TMC exemplifies nan continued maturation successful nan Houston area arsenic it remains an charismatic metropolis successful which to unrecorded and work. So for those of you that worried that our integrated maturation would slow post-COVID, it conscionable has not happened.

Let's look astatine nan numbers. Since nan COVID recession, nan authorities of Texas has added astir 1.1 cardinal jobs, a testament to nan underlying basal spot of nan Texas system arsenic a whole. Looking astatine things much locally. Amazingly, complete nan past year, nan Greater Houston area saw grounds employment maturation pinch an estimated 179,000 jobs added. It besides saw its organization summation by almost 300,000 group to astir 7 million. This is now for illustration adding a metropolis nan size of Irvine, California to our footprint successful conscionable 1 year. We spot this inclination continuing arsenic nan Texas occurrence keeps humming along.

Housing starts for nan mixed Houston and Dallas area complete nan past twelvemonth saw a mixed 153,000 lodging permits successful 2022, astir 40,000 much units than nan full authorities of California during nan aforesaid period, which has astir 25 cardinal much people.

This business and residential integrated maturation continues to thrust nan imaginable for nan further upside to our existing $43 cardinal 10 twelvemonth superior scheme that I discussed earlier. Therefore, our scheme besides allows for elasticity and imaginable superior walk upside done 2030 and beyond arsenic we spot further opportunities to support our customers ain maturation plans. This maturation is conscionable 1 of nan reasons we judge we are uniquely positioned arsenic a company.

Despite nan galore moving parts impacting our plan, we stay assured successful our continued expertise to execute this industry-leading maturation plan. We've taken a blimpish attack to estimating integrated maturation and upwind trends, among different assumptions, which we spot arsenic imaginable tailwinds to offset nan headwinds of higher liking rates, ostentation and different imaginable chartless issues that ever originate successful business.

Additionally, our regulatory return assumptions crossed each of our jurisdictions are mostly accordant pinch what we presently person approved by our various regulators, and we are utilizing to negociate our business today.

With each that being said, 1 of our cardinal priorities is ever to limit nan effect of our investments connected customer bills, particularly during these times of precocious inflation, rising liking rates and a imaginable recession. We judge our superior scheme not only benefits customers from a work reliability standpoint, but besides from an affordability position arsenic well.

For example, successful nan Houston area, which has nan highest attraction of our planned superior walk done 2030, we expect that these investments, successful operation pinch our O&M simplification goals, and securitization charges rolling off, should consequence successful an mean customer measure summation of only 2% aliases little per year, good beneath existent ostentation rates. We are besides encouraged by nan caller diminution successful earthy state prices, which should create immoderate downward unit connected inferior bills.

We judge our superior scheme astir modernization of nan grid present successful Houston will heighten nan customer acquisition for some our caller and existing customers. It will besides thief accommodate nan immense residential and business maturation nan Houston region is now experiencing. These investments should thief trim wide outages and, successful turn, trim work calls.

Fewer work calls, a much reliable strategy and a beardown increasing integrated customer guidelines successful nan Houston area is besides nan cleanable operation for america to enactment connected our way of 1% to 2% mean yearly O&M reductions complete nan 10 years of our plan.

Next, I want to besides concisely talk wherever we are successful our CFO search. First, Jason and I person been thrilled pinch some nan number and value of nan applicants for nan CFO position. So far, nan process has confirmed what we already knew: This is simply a really charismatic occupation astatine a really awesome company. We are successful nan process of evaluating candidates to make judge we find personification who will supply a complementary accomplishment group and beryllium a bully fresh pinch nan remainder of our awesome squad we already person successful place.

And truthful to close, 2022 was a awesome twelvemonth present astatine CenterPoint, and each of our customers, labor and shareholders person a batch to celebrate. But we stay very overmuch focused connected building a semipermanent way grounds of execution for our investors and maintaining affordability for our customers. We proceed to judge we person 1 of nan astir tangible maturation plans successful nan manufacture arsenic we are uniquely positioned pinch awesome opportunities to amended service our increasing customer base.

Continued integrated customer growth, particularly successful nan Houston area and our opportunities to trim O&M springiness america assurance that we tin execute our plan. I deliberation I speak for each of america astatine CenterPoint, erstwhile I opportunity that we are looking guardant to 2023 and building upon an already beardown premium inferior finance thesis.

Finally, I want to admit and convey each of nan CenterPoint labor for a occupation good done past year, particularly those that activity done nan year-end holidays to guarantee nan lights stayed connected for our customers during nan grounds acold upwind that deed millions crossed nan U.S. and besides nan caller tornado that devastated nan cities of Deer Park and Pasadena and surrounding communities successful nan Houston area.

This tornado stayed connected nan crushed for 18 miles and caused much harm than immoderate tornado successful Texas successful nan past 30 years. This guidance squad and each of nan labor present astatine CenterPoint understand our unsocial work successful each of our work territories and admit nan opportunity to service our astir 7 cardinal metered customers.

With that, I'm going to move nan telephone complete to Jason.

Jason Wells

Thank you, Dave, and convey you to each of you for joining america this greeting for our 4th fourth call. I want to echo Dave's acknowledgment to each of our labor present astatine CenterPoint and definitive my sincere gratitude for nan awesome activity of our teams during these caller periods of inclement weather. From those who sacrificed their holidays truthful that customers passim our work territories could bask theirs to those that helped precocious assets work aft nan utmost tornado activity successful precocious January. And now recently, nan crews who person helped pinch nan restoration efforts aft nan caller crystal storms successful different parts of Texas. It shows we person a committed and talented workforce dedicated to delivering for our customers and our shareholders.

I'll commencement by covering nan financial results for nan quarter, shown connected Slide 5. On a GAAP EPS basis, we reported $0.19 for nan 4th fourth of 2022. As successful erstwhile quarters, our GAAP EPS results see a information of nan taxation connected nan summation connected waste of our Arkansas and Oklahoma state LDCs, which we are required nether GAAP to admit complete nan people of nan afloat year.

The quarterly results besides see a onetime non=-cash complaint of $0.06, nett of tax, related to nan derisking of our semipermanent pension exposure, which I'll talk successful much item successful a fewer minutes. On a afloat twelvemonth basis, we reported $1.59 per share, which besides included nan gains from nan waste of nan antecedently mentioned state LDCs successful summation to nan income of nan Energy Transfer communal and preferred business units earlier this year.

On a non-GAAP basis, we reported $0.28 for nan 4th of 2022 compared to $0.27 successful nan 4th fourth of 2021, and $1.38 for nan afloat twelvemonth of 2022 arsenic compared to $1.27 for nan afloat twelvemonth of 2021. This is 9% maturation connected apical of 2021, successful which we besides grew 9%. This is an industry-leading maturation rate.

Growth and complaint betterment contributed $0.06, mostly driven by continued complaint betterment done our electrical distribution superior tracker, nan DCRF, and our electrical transmission tracker, TCOS successful our Houston Electric territory. In addition, we proceed to spot beardown integrated maturation successful nan Houston area pinch different astir 2% summation successful residential maturation complete past year.

Weather and usage for nan 4th fourth was besides a favorable $0.02 erstwhile compared to nan aforesaid 4th of 2021, driven by a operation of highly mild upwind successful nan 4th fourth of 2021 arsenic compared to a much seasonally normal upwind successful nan 4th fourth of 2022. These favorable drivers were partially offset by higher liking disbursal of $0.06, chiefly driven by higher liking rates and $0.01 related to absorbing costs antecedently allocated to our midstream conception successful 2021.

I want to concisely touch connected O&M for a moment. We proceed to find savings opportunities to execute our simplification target of 1% to 2% per twelvemonth connected mean complete nan people of our 10 twelvemonth scheme done 2030. For nan year, we were $0.02 unfavorable arsenic compared to past year.

However, arsenic you will remember, owed to favorable upwind during past summer's basking months, we were capable to propulsion guardant O&M from 2023 for nan use of our customers. This is accordant pinch nan attack we utilized successful 2021, and should we person upwind benefits successful 2023, we will surely contemplate doing truthful again. Overall, I proceed to stay pleased pinch our expertise to thrust efficiencies successful our business and stay assured we tin proceed delivering connected our extremity of reducing O&M 1% to 2% annually connected average.

As Dave mentioned, we are reaffirming nan afloat twelvemonth 2023 guidance scope of $1.48 to $1.50 of non-GAAP EPS, which reflects 8% maturation complete nan afloat twelvemonth 2022 non-GAAP EPS of $1.38 erstwhile utilizing nan midpoint of nan antecedently accrued guidance range.

Beyond 2023, and from nan reaffirmed 2023 guidance of $1.48 to $1.50, we proceed to expect to turn non-GAAP EPS 8% successful 2024 astatine nan mid to precocious extremity of 6% to 8% annually thereafter done 2030. Our attraction continues to beryllium connected delivering beardown industry-leading maturation each and each year.

Turning to superior investments connected Slide 7. As Dave mentioned, for nan use of our customers, we invested $1.6 cardinal successful nan 4th fourth and $4.8 cardinal complete nan afloat twelvemonth successful 2022. This is simply a $1 cardinal aliases a 25% summation from nan target we provided astatine past year's Analyst Day.

Much of this summation was owed to our astir $500 cardinal finance successful our impermanent emergency mobile procreation units and nan accelerated resiliency-related investments we pulled guardant arsenic portion of nan astir $3 cardinal summation to our superior scheme outlined connected our 3rd 4th net call.

The superior that was pulled guardant to 2022 included superior deployed successful nan 4th fourth to support nan quickly expanding Texas Medical Center. All of these investments are driven by our continued attraction connected safety, resiliency, reliability, maturation and cleanable power enablement of our service.

Turning to our generation-related investments. We've made bully advancement connected our existent integrated assets plan, including nan past filing for procreation and owned upwind task that we expect to travel online sometime successful 2024 aliases early 2025, and nan IURC's support of our 130-megawatt owned star project, and we refiled PPAs associated pinch 2 star accommodation to accommodate various developer value increases.

These projects, successful summation to nan ones already successful service, full astir 800 megawatts of expected owned and contracted star generation, which tracks good against our IRP goals that called for astir 700 to 1,000 megawatts of star and astir 300 megawatts of wind. As it stands for nan existent projects, we expect to ain astir 60% of our renewable procreation and statement for nan remaining astir 40%.

With that said, and pinch caller changes successful law, namely nan Inflation Reduction Act, nan proportionality of owned and contracted renewables whitethorn beryllium different for further projects included successful our adjacent IRP, which we scheme to record successful nan mediate of this year. This upcoming IRP should supply guidance connected our remaining coal-fired assets.

As we've mentioned before, arsenic a instauration for this IRP, earlier this year, we conducted an all-source petition for connection wherever we received astir 100 proposals from respective twelve participants, including wind, star and artillery retention that will thief pass our IRP process.

We look guardant to moving pinch stakeholders done nan IRP process to create a constructive result for our customers that allows customers to execute measure savings done businesslike renewable procreation alternatively than ember generation, which requires important ongoing O&M expense.

Moving to a broader regulatory update connected Slide 8. We person securitization efforts continuing successful a mates of jurisdictions. We expect receiving securitization proceeds successful nan coming months successful Texas related to nan incremental earthy state costs related to Winter Storm Uri, which will securitize astir $1.1 cardinal of these costs. We had anticipated receiving these proceeds earlier year-end 2022, but it has been delayed.

This hold has been driven by various stakeholders successful Texas exploring alternatives, including perchance appropriating authorities surplus costs to salary this disconnected successful full aliases successful portion for nan use of our customers. We are supportive of this customer-focused process and expect solution soon.

In summation to nan Texas securitization, we precocious received support for our Indiana securitization for astir $350 cardinal of costs related to nan status of 2 ember facilities. This is simply a first-of-its-kind filing successful Indiana allowing for much affordable modulation to cleaner procreation sources for nan residents of Southern Indiana. We want to convey each stakeholders, including nan Indiana Utility Regulatory Commission successful moving done this unsocial process to execute a constructive result for our customers. Beyond nan securitizations, we will proceed to retrieve nan $78 cardinal successful Texas related to nan accepted distribution superior information of nan DCRF, which went into rates [ph] successful September.

We precocious received a connection for a determination from nan administrative rule judges astatine nan State Office of Administrative Hearings, an agency that is abstracted from nan PUC, recommending to nan PUC nan disallowance of betterment of our impermanent emergency procreation units. We're disappointed successful this projected determination arsenic we don't judge this is nan correct reference of nan law, and now that nan lawsuit is backmost successful beforehand of nan PUC for a last decision, we look guardant to a constructive solution successful this case.

As a reminder, we invested successful these units pursuing Winter Storm Uri, wherever much than half of our Houston area customers were without powerfulness for extended periods of time. Texas lawmakers acted quickly and decisively aft that arena to enact definite measures that would mitigate nan impacts of terrible upwind to Texans.

The passing of nan measure will let Texas T&D companies to usage impermanent emergency mobile generation, which tin assistance successful reducing nan number and aliases long of outages during important load shed events was possibly nan astir important mitigation measurement passed into rule pursuing Winter Storm Uri.

In fact, these units were deployed arsenic precocious arsenic a fewer weeks agone to get children backmost into nan schoolroom aft antecedently discussed tornadoes costs outages passim nan Houston Metro area. And conscionable past week, we group immoderate of our units to Austin to beryllium fresh to assistance successful betterment efforts from nan caller crystal storms.

We person and we will proceed to advocator vigorously for nan usage of this captious instrumentality for nan use of our customers and successful a mode that is accordant pinch nan law. We expect a last ruling connected our 2022 filing by nan extremity of nan first quarter.

Lastly, to screen immoderate credit-related topics. As of nan 4th quarter, aligning pinch Moody's methodology, our FFO to indebtedness arsenic reported was somewhat beneath 14% and astir 15% erstwhile adjusted for nan $1.1 cardinal of outstanding indebtedness related to Winter Storm Uri bonzer state costs. As a reminder, we are deferring nan liking disbursal associated pinch this indebtedness equilibrium until nan authorities wide securitization is issued.

As I mentioned, we had anticipated receiving nan enslaved proceeds associated pinch nan Texas securitization earlier nan commencement of 2023, which, successful part, is nan logic why we're carrying higher than expected levels of commercialized insubstantial and floating complaint indebtedness astatine year-end. When we person those proceeds, we scheme to salary down a operation of floating complaint indebtedness and precocious coupon debt.

In addition, we besides saw higher state prices and usage during nan December acold extremity [ph] which besides led to elevated levels of adaptable complaint indebtedness that we judge will beryllium transient successful quality arsenic we expect to cod nan mostly of this equilibrium complete nan coming months.

To revisit nan pension point I discussed a fewer minutes ago, we entered into an annuity assistance out, whereby astir $140 cardinal of pension scheme obligations and corresponding scheme assets related to antecedently divested businesses were transferred to an security company. This transaction allowed america to derisk our early obligations for which we don't person regulatory deferral.

As we antecedently mentioned, we get deferral connected astir 2 thirds of our pension expense. As a consequence of this assistance out, we recognized a non-cash colony complaint of $47 million, which represented nan acceleration of unrecognized losses deferred nether nan pension smoothing rules. Through a operation of an summation successful discount rates and lump sum settlements, including nan annuity assistance out, our full pension liability was reduced successful 2022 by astir 1 3rd aliases $700 million.

Our beardown rate travel from operations, coupled pinch our businesslike recycling of capital, puts america successful a position of still being capable to connection industry-leading maturation that doesn't require outer equity to money our existent 10 twelvemonth superior scheme done 2030.

Those are my updates for nan quarter. As we proceed to express, we return our committedness to beryllium bully stewards of your finance very earnestly and recognize our responsibility to optimize stakeholder value.

Now pinch that, I'll move nan telephone backmost complete to Dave.

David Lesar

Thank you, Jason. As you've heard from america today, we person 11 consecutive quarters of gathering aliases exceeding expectations. We are a axenic play, regulated, premium inferior and connected a people of continuous execution of our scheme pinch incremental maturation opportunities to support our customers.

Jackie Richert

Thank you, Dave, and convey you for each of you for joining. We'll now move nan telephone complete to Q&A. [Operator Instructions] Operator?

Question-and-Answer Session

Thank you [Operator Instructions] Our first mobility is from Shahriar Pourreza pinch Guggenheim Partners. Your statement is open.

Q - Shahriar Pourreza

Hey, guys. Good morning.

David Lesar

Good morning, Shahriar.

Shahriar Pourreza

Jason, I wanted to commencement disconnected pinch a mobility connected nan superior markets situation and really you're benignant of reasoning astir indebtedness metrics astatine this point. Deferred costs person evidently been elevated, including fuel. You had a securitization hold successful '22. You've seen astir a $0.06 of incremental liking resistance crossed nan utilities and genitor successful 4Q. I conjecture really should we deliberation astir resolving immoderate of these carried costs and managing nan liking complaint acquisition costs pressures successful nan adjacent term?

David Lesar

Let maine - yes, fto maine inquire Jason to put a CFO chapeau backmost connected for a infinitesimal and reply that one.

Jason Wells

Yeah. Good morning, Shahriar. I admit nan question. Obviously, we're not immune to nan liking complaint headwinds that everybody is facing these days, but we're assured we tin negociate done this situation arsenic we proceed to person much tailwinds than we do headwinds overall.

As it relates to benignant of liking expense, fto maine make a mates of points. First is we saw liking rates rising past year. We embedded blimpish assumptions astir liking complaint costs successful nan '23 guidance that we initiated connected nan 3rd 4th call. So I tin - I consciousness assured that we tin accommodate immoderate of nan variability that we've precocious haven't seen.

The 2nd thing, and arsenic I benignant of touched connected it successful my prepared remarks, we ended nan twelvemonth pinch somewhat higher elevated moving superior balances owed to higher state costs that we were purchasing successful precocious 3rd quarter, early 4th quarter. As state prices person travel down now, we expect those moving superior balances to move beautiful quickly. That should return a small spot of unit off.

And past arsenic you mentioned, while we get to defer nan liking disbursal connected nan bonzer state costs from Winter Storm Uri present successful Texas, we still expect receiving $1.1 cardinal successful securitization proceeds successful nan coming future, and that will really thief trim nan wide adaptable complaint exposure. So again, we consciousness assured that we tin negociate done immoderate liking complaint headwinds.

Shahriar Pourreza

Perfect. And past conscionable lastly for me, conscionable possibly rubbing guidelines connected benignant of nan expectations for nan upcoming Texas complaint case. I cognize we've had immoderate information points from nan Encore process and contempt nan disorder pinch nan PFD, which was yet rectified, location look to beryllium really a attraction connected uncovering complaint alleviation for customers and different peers evidently successful colony discussions.

Just possibly from a precocious level, Dave, what are benignant of nan awesome categories of that gross alleviation you expect seeking? Is it superior complaint base, is it deferred costs, is it O&M true-ups? And do you expect a noticeable complaint summation from nan '24 filing? Or do you deliberation you guys person capable levers successful scheme to show moreover a imaginable complaint simplification contempt nan ask? Thanks.

David Lesar

Well, that's a fistful of a question. Let maine conscionable reply it by saying, I don't deliberation it behoves america to effort to beforehand tally what mightiness happen, what bills mightiness get put in. We're early successful nan session. Jason, Ryan and his squad are heavy engaged successful Austin pinch respect to looking astatine opportunities that are going to beryllium chiefly focused connected making judge we support customer bills nether control. But I don't deliberation it would make immoderate consciousness astatine this constituent to talk astir circumstantial efforts aliases bills that we would for illustration to spot put forward.

I would conscionable opportunity watch this space. And I deliberation erstwhile we travel pinch our first 4th call, which will beryllium later this spring, we'll beryllium measurement much into nan convention astatine that constituent successful time. And I deliberation you and each of america will person a amended thought wherever that mightiness beryllium headed and what bills are apt to get passed. But for now, I conscionable don't spot immoderate upside saying thing much connected it.

A - Jason Wells

Sure, thanks. If I whitethorn add. Obviously, arsenic Dave alluded to, we're early successful nan legislative session. On nan regulatory front, though, arsenic we look astatine nan upcoming complaint lawsuit for Houston Electric, obviously, customer rates are apical of mind for each of america present astatine CenterPoint. I don't anticipate, astatine this point, overmuch successful nan measurement of a gross request increase. I'm proud of nan activity that nan teams person done pinch respect to O&M.

And arsenic you look astatine wherever we group nan trial twelvemonth for nan 2019 complaint lawsuit and benignant of wherever O&M is presently trending, I deliberation we tin connection a reasonably important gross simplification successful nan upcoming complaint lawsuit that would offset immoderate of nan different things that we are trying to pursue, for illustration a much equitable equity layer.

And successful addition, I deliberation we're beautiful fortunate successful nan truth that - possibly dissimilar Encore, we person very little, comparatively speaking, successful a way, of deferred costs arsenic regulatory assets. And so, I deliberation we can, again, position nan institution benignant of to person a much equitable equity furniture comparative to immoderate of nan non-ERCOT T&D companies present successful Texas. But astatine nan aforesaid time, support nan gross request very modest. So we're in, I think, a reasonably fortunate spot arsenic we hole for that filing.

Shahriar Pourreza

Terrific. Thanks, Jason. That really did precisely what I was trying to ask. Appreciate it. Thank you, guys.


Thank you. Our adjacent mobility comes from Nick Campanella pinch Credit Suisse. Your statement is open.

David Lesar

Morning, Nick.

Nick Campanella

Hey. Good morning. I trim retired there, but I deliberation I heard my name. So I dream everyone is doing well. I conjecture conscionable connected nan CFO search. I conscionable wanted to necktie that off. When is your volition to person thing much formally announced here? Is it by nan adjacent 4th call? Or are you taking your time? Thank you.

David Lesar

No. I deliberation by nan adjacent 4th call, we should person personification announced and connected board. We're down to a fistful of finalist, candidates. As I said, portion of it is conscionable nan process of getting an individual aliases individuals in, get them interviewed and much importantly, for me, making judge that they person a complementary accomplishment group to not only Jason, but nan broader executive committee we person here.

But I deliberation arsenic we said successful nan call, we've been really pleased pinch nan value of candidates that we've talked to. This is simply a really awesome job, judge me. I deliberation Jason would attest to that. This is simply a awesome job, and we're going to get a awesome CFO retired of it.

Nick Campanella

Great. Thanks for that. And past I conscionable thought nan annuity lift-out comments were interesting. Can you conscionable possibly locomotion america done that strategical action a spot more? And I guess, if you were to prosecute that, really would that impact your 6 to 8? Presumably, I guess, it would beryllium a headwind. And could you quantify that astatine all? Thanks.

David Lesar

Yes. Let maine inquire Jason to put a CFO chapeau backmost connected and reply that.

Jason Wells

Good morning, Nick. What I would opportunity benignant of overall, nan annuity lift-out was a strategical determination to derisk our vulnerability to businesses that we've disposed of. I deliberation astir this arsenic portion of nan continued effort to attraction CenterPoint connected a beardown group of regulated operating companies. We've been very progressive successful exiting unregulated businesses and a fistful of a mates of state utilities successful Arkansas and Oklahoma. And so, this is really conscionable a measurement to derisk immoderate of that tail vulnerability from those labor that are presently receiving pension annuity benefits.

As I said, it was non-cash. There's a really benignant of liquid marketplace for this. Insurance companies took nan obligation. They took nan assets. It has nary effect connected our pensioners. But to your point, we now don't person immoderate P&L volatility associated pinch vulnerability to changes successful liking rates, plus returns, et cetera.

So it's a awesome measurement to derisk early earnings. It's a awesome measurement to proceed to execute connected our strategy of focusing connected a group of precocious value inferior assets and really proud that we get this activity done present successful nan 4th quarter.

Nick Campanella

Thanks for nan color. And person a awesome agelong weekend.

Jason Wells

You too. Thank you.


Thank you. Our adjacent mobility comes from Steve Fleishman pinch Wolfe Research. Your statement is open.

David Lesar

Hey, Steve.

Steve Fleishman

Good morning, Dave. Good morning, Jason, Jackie. So conscionable possibly precocious level, a small spot connected Texas, governmental regulatory. Obviously, nan backup procreation has proven to beryllium beautiful valuable successful nan short clip you've had it, and we still person this benignant of disagreement connected recovery.

So conscionable betwixt that decision, legislature, adjacent complaint case, truthful really are you emotion astir some committee and governmental activity of recognizing nan value of certainty and nan worth of benignant of what you're doing?

David Lesar

Yes. Let maine start, and past I'll inquire Jason to put his operations chapeau connected and supply a small spot of colour commentary. But I deliberation if you - for those of you that benignant of travel Texas closely, arsenic nan authorities - legislature, nan Governor, Lieutenant Governor came into this session, location is 2 main topics, Gambling and nan Grid. I won't talk astatine each astir Gambling, but there's a large attraction connected nan Grid successful Texas, making judge that nan Grid stays up pinch nan economical improvement that is happening successful nan state. So I deliberation you're going to spot benignant of everyone rally astir that aspect.

Now what does it mean? It intends different things for different people, obviously, successful nan state. The T&D companies want 1 thing, nan generators, another, nan legislature, another. I deliberation I proceed to spell backmost to benignant of our main mantra successful this area.

We're laser focused connected customer affordability. So everything we do successful and astir superior deployment, O&M reductions, things that we're going to push for successful Austin are going to beryllium focused and pivoted astir customer affordability and that - those - that group of topics. So possibly pinch that, I'll move it complete to Jason to spot if he wants to opportunity thing else.

Jason Wells

Yes. Thanks, Dave. And bully morning, Steve. Overall, I would proceed to echo to Dave's comments connected really constructive Texas is beyond nan points that Dave raised. We proceed to spot important magnitude of firm relocations to nan state. And here, much specifically, successful nan Greater Houston area, we proceed to spot now a 30 twelvemonth way grounds of 2% yearly mean customer growth. So I deliberation overall, it continues to beryllium very constructive.

More specifically, connected nan operational front, possibly conscionable a mates of little comments. We proceed to - there's a batch successful spot present successful Texas that requires america to supply powerfulness to customers wrong 12 hours of a load shed event. We proceed to run nether that standard. As we saw pinch Winter Storm Uri, load shed events tin transcend nan measurement nan strategy design. And so, these mobile procreation units are captious to gathering our reliability and powerfulness value requirements nether Texas law.

I deliberation legislators understand that. I deliberation nan elected officials understand that. And much importantly, arsenic we proceed to spot nan effect of much utmost weather, tornadoes, crystal storms, imaginable for hurricanes, I deliberation nan communities are starting to person a amended appreciation of really we tin strategically deploy these assets arsenic we did to bring kids backmost to schoolhouse aft nan caller tornadoes arsenic we tin powerfulness hospitals, earlier our restoration efforts, reconnect definite customers for illustration that backmost to nan Grid. And so, I deliberation these are really powerful devices to thief support our communities energized during periods of inclement weather.

So I deliberation that, that's good understood. And arsenic we said successful our prepared remarks, we're going to take sides nan actions we took nether nan rule that was passed present successful Texas.

Steve Fleishman

Great. Thank you.


Thank you. Our adjacent mobility comes from Jeremy Tonet pinch JPMorgan. Your statement is open.

Jeremy Tonet

Hi, bully morning.

David Lesar

Good morning, Jeremy.

Jason Wells

Good morning.

Jeremy Tonet

Just wanted to touch a bit, I guess, portfolio rotation has been a portion of CenterPoint communicative successful caller years. And plus waste attraction appears higher now than ever crossed nan space, but we've besides witnessed benignant of immoderate mixed information points pinch regards to LDC plus sales.

And so, has your reasoning evolved astatine each successful this area? And what are you seeing successful position of liking comparative to a twelvemonth ago? Granted you guys don't request to waste thing correct now, but conscionable that optionality, I guess, successful nan future?

David Lesar

Okay. Let maine inquire Jason to put his CFO chapeau backmost connected and reply that one.

Jason Wells

Thanks, Dave, and I admit nan question, Jeremy. I conscionable want to reemphasize nan constituent that you did with, correct now, we don't person immoderate request to waste immoderate state LDCs to money nan $43 cardinal equity - superior finance scheme that we person announced. That being said, obviously, fixed our erstwhile efforts successful this space, we proceed to person a important magnitude of outreach. I would opportunity location remains tremendous liking in, I think, moderately sized inferior systems, for illustration nan state LDCs. We run successful a constructive group of states, successful places wherever it either gets very acold during nan wintertime aliases states that are incredibly supportive of earthy gas.

So I deliberation nan liking remains beardown for our assets successful particular. I besides deliberation possibly immoderate of nan transactions, arsenic you referenced benignant of bespeak a fewer things. First, location needs to beryllium astatine slightest a mean size to nan plus income to get benignant of nan strongest liking from nan largest imaginable spot of buyers. Some of nan income that person transacted precocious person been connected nan smaller end. The size of nan state LDCs we have, I think, are benignant of a saccharine spot for attracting nan astir important magnitude of attention.

And past arsenic good arsenic we've talked astir successful nan past, we deliberation that location is use successful position of trading assets outright. There's a power premium that often gets mislaid arsenic possibly immoderate of our adjacent utilities prosecute number liking sales. And so, we don't request to do it, but we proceed to spot nan marketplace arsenic heavy and beardown fixed nan precocious value of nan assets we own.

Jeremy Tonet

Got it. That's very helpful. Thanks for that. And past benignant of shifting gears here. And you touched connected this a spot a number of times, but possibly conscionable benignant of bringing it each together. If you could benignant of quantify nan measure alleviation you expect to spot based connected nan diminution successful earthy state prices. Just wondering really quickly that flows backmost crossed your jurisdictions and I guess, really you deliberation astir that complaint - that alleviation could materialize complete time?

Jason Wells

Yes. I mean I deliberation our customers should commencement to really spot nan effect of that successful astir February. We person evidently different clip periods for our purchased state accommodation clauses successful each of nan different states. But largely, they commencement to footwear in, successful February, some, a small spot successful March. I deliberation benignant of system-wide, connected average, customers should really commencement to consciousness nan use of that crossed our strategy successful April.

And we're seeing state prices little than half of what we were benignant of buying into nan wintertime play at. So it should beryllium beautiful important measure alleviation for our customers arsenic we caput into nan summertime months. We're happy astir that, and dream it holds up.

Jeremy Tonet

Got it. Very helpful. I'll time off it there. Thanks.

Jackie Richert

Operator, I deliberation we person clip for 1 much question.


Thank you. Our past mobility is from Durgesh Chopra pinch Evercore ISI. Your statement is open.

Durgesh Chopra

Hey. Good morning, team.

David Lesar

Good morning, Durgesh.

Durgesh Chopra

Good morning, Dave. All my questions person been answered. Maybe conscionable one, nan upwind task that you mentioned successful nan Indiana IRP update section, Slide 8. Just immoderate colour you tin stock pinch america connected that project?

Jason Wells

Thanks, Durgesh. I admit nan different question. I deliberation it's early days successful nan exertion there. So we expect that task astir apt being approved benignant of towards nan extremity of 2023. But conscionable fixed benignant of wherever we are successful nan shape of filing, arsenic good arsenic finalizing nan measure transportation agreement, I'd alternatively support nan comments brief.

I deliberation overall, what we tried to item successful nan prepared remarks is that erstwhile we group retired connected this first shape of this integrated assets plan, we had an nonsubjective of owning astir 50% of nan renewables that we're proposing and contracting for 50% of nan balance.

The measurement it's moving retired pinch this upwind task that we will yet own, arsenic good arsenic nan star projects that we antecedently filed, I deliberation we're connected way now to ain astir 60% of nan renewables and statement for 40%. So a flimsy betterment versus our original objectives arsenic we are executing connected this first information of nan Integrated Resource Plan.

Durgesh Chopra

Understood. Thanks, Jason. Appreciate you wearing each nan hats today. Thanks truthful much.

Jason Wells

Thanks, Durgesh.

Jackie Richert

All right, operator. That's going to beryllium our past Q&A for this quarter. I want to convey everyone for joining nan telephone today. And I dream everyone has a awesome day and a agelong weekend. Take care.


This concludes CenterPoint Energy's 4th fourth net convention call. Thank you for your participation.

Editor: Naga

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