01—Abstract
Summary
Summary of the 8-K filed April 30, 2024. Cited figures are marked; the original filing is the authoritative source.
CenterPoint Energy (CNP) reported first quarter 2024 results on April 30, 2024, with GAAP income available to common shareholders of $350 milliona, or $0.55 per diluted share, versus $0.49 in Q1 2023.
Non-GAAP EPS was also $0.55b, up 10% from $0.50 a year earlier. Growth and rate recovery contributed $0.09 per share, weather and usage added $0.02, and these gains were partly offset by $0.04 of higher financing costs and $0.02 of higher O&M expense. Management reiterated 2024 non-GAAP EPS guidance of $1.61-$1.63, representing about 8% growth over 2023 non-GAAP EPS of $1.50, and maintained a non-GAAP EPS growth target of the mid-to-high end of 6%-8% annually through 2030.
The most significant strategic news was the filing of Houston Electric's first Texas System Resiliency Plan, which management says could support up to $500 millionc of incremental capital investment. The plan covers roughly $2.2 billion to $2.7 billion of investments over 2025-2027, with about $2.2 billion already included in the 10-year capital plan. The 10-year capital plan through 2030 stands at $44.5 billion, with a potential increase of up to about $500 million.
The company also reported a 14.6% FFO/Debt ratio on a Moody's basis adjusted for one-time items, against a long-term target of 14%-15%, and it is moving to sell its Louisiana and Mississippi natural gas LDC businesses for a gross price of about $1.2 billiond, targeted to close by Q1 2025. Investors should weigh the solid quarter and reiterated guidance against several items. GAAP and non-GAAP EPS were equal this quarter only because ZENS-related mark-to-market effects offset each other.
Rising interest expense is a continuing headwind, and the Houston Electric rate case settlement and other pending regulatory outcomes will shape earnings timing. The company's ability to execute on its capital plan and regulatory recovery remains central to its growth thesis.
02—Key points
Key Highlights
- Q1 2024 GAAP EPS of $0.55 vs. $0.49 in Q1 2023; non-GAAP EPS of $0.55, up 10% year over year
- Reiterated 2024 non-GAAP EPS guidance of $1.61-$1.63, about 8% growth over 2023 non-GAAP EPS of $1.50
- Filed Houston Electric's first-of-its-kind Texas System Resiliency Plan with $2.2B-$2.7B of 2025-2027 investments and up to ~$500M of potential incremental capital
- 10-year capital plan through 2030 at $44.5B, with potential increase of up to ~$500M to ~$45B; targeting 10% rate base growth through 2030
- FFO/Debt of 14.6% (Moody's, adjusted for one-time items) vs. 14%-15% long-term target through 2030
- Pending sale of Louisiana and Mississippi natural gas LDCs at ~$1.2B gross price (~32x 2023 earnings), targeted to close by Q1 2025
- Q1 EPS drivers: growth and rate recovery +$0.09, weather/usage +$0.02, offset by financing costs -$0.04 and O&M -$0.02
03—Questions
Frequently Asked Questions
Why were GAAP and non-GAAP EPS identical in Q1 2024?
The ZENS-related mark-to-market adjustments largely offset each other in the quarter. Equity securities losses of $66 million (after tax) were offset by gains on indexed debt securities of $68 million (after tax), leaving net GAAP and non-GAAP income both at $350 million, or $0.55 per diluted share. Going forward, these mark-to-market swings can cause GAAP and non-GAAP results to diverge, so investors should focus on non-GAAP EPS for underlying performance.
What is the Texas System Resiliency Plan and why does it matter?
It is Houston Electric's first System Resiliency Plan in Texas, covering $2.2B-$2.7B of investment over 2025-2027 in areas such as electric system hardening, flood control, wildfire mitigation, physical security, and information technology. Management says it could add up to $500 million of incremental capital beyond the existing plan, which would support rate base growth. Recovery and approval through the regulatory process will determine the actual earnings impact.
Is the 2024 EPS guidance at risk?
Management reiterated guidance of $1.61-$1.63 and cited a strong first quarter that delivered over one-third of the midpoint. The guidance assumes normal weather, customer growth, timely capital recovery, and stable financing costs. Rising interest expense, which was a $0.04 headwind in Q1, and deviations from these assumptions could cause results to fall short, though the filing does not indicate that any such deviation has occurred.
How is the pending Louisiana and Mississippi LDC sale expected to affect the company?
The sale has a gross purchase price of about $1.2 billion and a net price of about $1.0 billion after roughly $200 million of taxes and transaction costs and about $400 million of operating company debt paydown. Management said the transaction would recycle capital at about 1.55x 2023 rate base and would support balance sheet optimization and the capital plan. The deal is subject to Louisiana and Mississippi commission approvals and is targeted to close by the end of Q1 2025.
What does the balance sheet look like, and what are the key debt maturities?
The company reported a 14.6% FFO/Debt ratio on a Moody's basis adjusted for one-time items, within its 14%-15% target range, although the unadjusted ratio was 13.5%. Upcoming maturities total about $850 million in 2024, $51 million in 2025, and $2.26 billion in 2026, with the company working to reduce its roughly $2.6 billion of floating-rate exposure. Management also plans to issue about $250 million of equity or equity-like capital annually through 2030, with about 75% of the 2024 ATM program issued to date.
04—Continue