CenterPoint Energy, Inc. 2026 Q3 Earnings Call

Good morning, and welcome to CenterPoint's Q3 2026 earnings conference call. Jason Wells, our Chair and CEO, and Chris Foster, our CFO, will discuss the company's third quarter 2026 results. Management will discuss certain topics that will contain projections and other forward-looking information and statements that are based on management's beliefs, assumptions, and information currently available to management. These forward-looking statements are subject to risks and uncertainties. Actual results could differ materially based on various factors as noted in our Form 10-Q, other SEC filings, and our earnings materials. We undertake no obligation to revise or update publicly any forward-looking statement other than as required under applicable securities laws. We reported $0.50 per diluted share for the third quarter of 2026 on a GAAP basis. Management will be discussing certain non-GAAP measures on today's call.

When providing guidance, we use the non-GAAP EPS measure of diluted adjusted earnings per share on a consolidated basis referred to as non-GAAP EPS. For information on our guidance methodology and reconciliation of the non-GAAP measures used in providing guidance, please refer to our earnings news release and presentation on our website. We use our website to announce material information. This call is being recorded. Information on how to access the replay can be found on our website. Now, I'd like to turn it over to Jason.

Thank you, Ben, and good morning, everyone. On today's call, I would like to address three key areas of focus for the quarter. First, I will briefly touch on our strong third quarter financial results and the increase to our 2026 non-GAAP EPS guidance range we announced this morning. Second, I will discuss how the accelerating and diverse customer-driven growth in our Houston Electric service territory is driving the $4 billion increase to our capital investment plan and the acceleration of another $1.5 billion into the first five years of our plan. With more growth expected, today's increase reflects only a portion of the opportunity in front of us as we continue to see at least $10 billion of additional investment opportunities through 2035.

And finally, I will discuss how the strength and visibility of our growth across our service territories gives us the confidence to extend our long-term earnings outlook. We now expect to deliver non-GAAP EPS growth at the mid to high end of our 7%-9% annual range for another two years through 2030. I will also cover our 2027 non-GAAP EPS guidance of $2.07-$2.09, representing 9% growth at the midpoint from our increased 2026 guidance. I will start with our strong third quarter financial results. This morning, we reported third quarter 2026 non-GAAP EPS of $0.53. Our continued strong execution brings us to nearly 80% of the midpoint of our original full year guidance range of $1.89-$1.91. Our outstanding year-to-date results gives us greater confidence and visibility to raise our 2026 non-GAAP EPS guidance range to $1.90-$1.92.

At the midpoint, this new and higher range would represent nearly 9% growth from our 2025 delivered results and would mark the fifth year of more than 8% growth since 2020. It also resets our earnings base higher from which we intend to compound future growth as we seek to create durable value for our investors year after year. I would now like to turn to the accelerating and diverse customer growth that is driving today's announced $4 billion increase to our capital investment plan and the acceleration of an additional $1.5 billion of investments. Greater Houston's growth continues to accelerate, demonstrated by approximately 14 gigawatts of customer demand we submitted as eligible load for ERCOT's Batch Zero process.

As we continue to work with stakeholders on our Batch Zero submissions, we remain highly confident in the 10 gigawatts of base load demand we outlined on our previous call, and we now expect approximately 2 gigawatts to remain as studied load. Combined with our smaller transmission and distribution customers' growth, we expect to energize at least 14 gigawatts by the end of 2030. This incredible demand is creating a powerful multiplier effect as large industrial expansions drive broader commercial growth across our service territory. Notably, industrial and commercial leasing activity in the Houston area is up more than 30% from last year. We are seeing that momentum firsthand with nearly 1 gigawatt of distribution level load request received in the last year.

Houston Electric's more than 10 gigawatts of existing system capacity help to attract this demand by enabling fast, efficient, and cost-effective interconnections, giving Greater Houston a compelling speed to market advantage over competing regions across the country. This growth strengthens the regional economy while also supporting customer affordability. Notably, the at least 14 gigawatts of demand anticipated through the end of the decade are expected to generate $5 billion in customer savings across Texas over the next 10 years. Serving this growth absorbs the capacity that helped attract it. To replenish that capacity and sustain the region's competitive advantage for the next wave of demand, earlier this year, we began an internal transmission study focused on increasing load-serving capacity in three key areas. First, import transmission capacity. Second, system stability, and third, interregional transmission capacity.

To date, that work has identified more than a dozen projects across these three areas required to add incremental load-serving capacity. This capacity is needed in the near term, as we already have requests for significant additional demand that we anticipate submitting in Batch 1 next year. Together, these projects represent approximately $5.5 billion of investments in two categories. First, $4 billion for newly identified projects not previously included in our 10-year plan, and $1.5 billion of projects accelerated from the back half of the plan into the first five years through 2030. We will efficiently fund this growth with a modest $1.6 billion increase to our equity financing guide, below our 47% rule of thumb for financing incremental investments. Chris will cover the timing of our capital investment and equity financing needs, including opportunities to reduce the amount of equity financing in his section.

Combined with a sufficient financing, the increased and accelerated investments will strengthen the earnings power of the company and are expected to drive an enterprise rate base CAGR of more than 14% through the end of the decade. We will continue to advance our transmission study to identify the additional infrastructure needed to meet the region's accelerating growth, which will likely inform additional incremental investments. Beyond today's $4 billion increase, we continue to see at least $10 billion of additional investment opportunities through 2035, driven by three categories. First, additional transmission infrastructure to support Greater Houston's accelerating customer demand. As we continue to advance our transmission study process, that will likely inform incremental investments needed to enable the next phase of growth in Greater Houston. We expect to be in a position to share our next update in this process in the first half of next year.

Second, along these growth investments, we will advance additional resiliency initiatives that build on Houston Electric's nearly 40% improvement in reliability over the past several years. We expect greater visibility into these incremental investments in the second half of next year and are targeting filing our next System Resiliency Plan by the end of 2027. Third, we continue to see large load opportunities in Indiana, where we anticipate signing a deal with a large load customer by the end of the year. These incremental opportunities, combined with the investments announced today, reinforce our confidence in delivering sustained double-digit rate base growth over the course of our 10-year plan while supporting long-term reliability, resiliency, and economic competitiveness across our service territories. In closing, we continue to believe that we have one of the most customer-driven and durable long-term growth plans in the industry.

The scale and pace of the customer-driven growth in Greater Houston is already driving today's announced $4 billion increase in our capital investment plan and reinforcing the long-term earnings power of our company. These needed investments provide the visibility to extend our expectation for non-GAAP EPS growth at the mid to high end of our 7%-9% annual guidance range through 2030. The opportunity extends well beyond today's plan update. We continue to see at least $10 billion of additional capital investment opportunities through 2035, supporting economic growth, customer affordability, and safe and reliable service in the communities we serve. With that, I'll now turn it over to Chris to cover the financials in more detail.

Thanks, Jason. This morning, I will cover four areas of focus. First, I will walk through our strong third quarter results, which bring us to nearly 80% of our full-year guidance and support raising our 2026 non-GAAP EPS guidance range from $1.89-$1.91 to $1.90-$1.92, as well as our extended outlook to grow at the mid to high end of our 7%-9% range through 2030. Second, I will detail the customer-driven $4 billion increase to our 10-year capital plan from $66.7 billion to $70.7 billion through 2035, and the $1.5 billion of accelerated investment that together drive an enterprise rate base CAGR of more than 14% through 2030.

Third, I will discuss our updated financing plan, including a modest $1.6 billion increase in equity financing to fund 40% of the $4 billion capital plan increase to support strong credit metrics, a healthy balance sheet, and a pathway to higher long-term growth. Finally, I will provide a brief regulatory update, including progress on timely recovery of our investments through our interim capital trackers. Starting with our third quarter results on Slide 4. On a GAAP EPS basis, we reported $0.50 for the third quarter of 2026. On a non-GAAP EPS basis, we reported $0.53 for the quarter. Our non-GAAP results exclude the impacts of our temporary generation units, which are no longer part of our regulated utility business. We are actively marketing these units for sublease or sale, and any resulting gain will also be excluded from our non-GAAP results.