Q3 2021 CenterPoint Energy Inc Earnings Call

Good morning, and welcome to Centerpoint Energy's third quarter 2021 earnings conference call with senior management.

During the Companys prepared remarks, all participants will be in a listen only mode. There will be a question and answer session. After managements remarks to ask a question press star one on your Touchtone keypad to withdraw your question press. The pound. Please limit your questions to one question and one follow up question I will now turn the call over to Phil holder Senior Vice.

Our strategic planning and Investor Relations.

Good morning, everyone welcome to Centerpoint to earnings Conference call.

<unk> was our our CEO, Jason Wells, our CFO, who will discuss the company's third quarter 2021 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 or uncertainties.

Actual results could differ materially based upon various factors as noted in our Form 10-Q under SEC filings and our earnings materials.

We undertake no obligation to revise or update publicly any forward looking statements. We will also discuss non-GAAP EPS referred to as utility EPS earnings guidance, and our utility earnings growth target and.

In providing us financial performance metrics and guidance will use a non-GAAP measure of adjusted diluted earnings per share.

For information on our guidance methodology and a reconciliation of non-GAAP measures used in providing guidance. Please refer to our earnings news release and presentation.

Both of which can be found under the investors section on our website.

As a reminder, we may 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 the discussion over to Dave.

Thank you Phil good morning, and thank you to everyone joining us for our third quarter 2021 earnings call.

Because we recently hosted our analyst day, we will keep our prepared remarks brief today.

As you know we laid out our first ever Tad near plan back at our Analyst day, we expressed bad and are reiterating today that we are a management team who can execute we believe we will continue to demonstrate that for you.

This marks my sixth quarter with Centerpoint and Jason Smith, I'd like to first start by laying out how we are building a consistent track record of delivery.

First if you recall the centerpoint value proposition, we laid out at our recent analyst day focused on our efforts to achieve sustainable earnings growth for our shareholders sustainable resilient and affordable rates for our customers.

And a sustainable positive impact on the environment for our communities I believe we are continuing down the path of achieving this value proposition.

Each quarter under the new Centerpoint leadership, we have met or exceeded quarterly utility E P S and dividend expectations.

We have increased our annual utility E. P. S guidance for both 'twenty 'twenty and 2021.

And as I will discuss shortly today, we are increasing our 2021 utility E. P. S guidance once again.

Our 2021 through 'twenty 'twenty four annual utility EPS growth rates of 8% our top decile among our peers and we also expect to achieve at the mid to high end of our 6% to 8% utility EPS guidance range each year from 'twenty 'twenty four.

Five to 2030.

I am confident in our team's ability to achieve that growth.

Last year, we had a 13 billion dollar five year capital plan, we increased that to $16 billion and our 'twenty 'twenty analyst day, and this year, we increased it yet again to $18 billion plus.

We introduced our first ever 10 year capital plan.

Centerpoint remains ripe with opportunities across our footprint to expand and harden our system to benefit customers and shareholders.

Our current 10 year plan contains no external equity issuances.

We will fund the equity portion of our capital needs through internally generated operating cash flows and our already announced strategic transactions.

We're also executing on our plan to become a pure play regulated utility as we approach the closing of the enable E. T merger expected by the end of this year.

And then our subsequent sell down of our midstream stake.

With the recent settlement agreement among the parties in Arkansas. We are also moving toward the completion of our L. D C asset sale.

The remaining steps include the Oklahoma approval, which is anticipated to be received in November.

And the all party settlement in Arkansas is expected to be approved by mid December.

And with our newest announcement around our industry, leading E. S. G targets, we are on the path to executing on our goals to be net zero on direct emissions by 2035.

We continue to believe that this is an achievable path delivering for customers regulators investors and the environment.

In the third quarter of Twenty-twenty, I said that I will not be satisfied until we are recognized as a premium utility.

And the theme of our analyst day was again, establishing a path toward a premium.

I believe we are making tremendous strides down that path.

Before I get into the headlines for this quarter I want to thank all of the crews for their hard work to restore power after hurricane Nicholas down here in the Texas Gulf Coast.

The storm had winds of up to 90 miles an hour, leaving 470000 of our Houston electric customers without power within three days, we had 95% of the power restored for those customers and within five days the whole system was back online.

Now for this quarter's headlines.

Our year to date financial progress has been strong.

We are reporting a utility E. P. S beat and are raising our full year outlook this quarter.

For the third time this year, we are increasing our 2021 utility E. P. S guidance. This time to $1 26 to $1 28 for the full year.

And for the first nine months, we've already achieved nearly 80% of that full year goal.

More importantly, we are still targeting an 8% annual growth rate for 2022 to 'twenty 'twenty four so this raises our guidance for 2022 utility E. P. S to $1 36 to $1 38.

For the third quarter of 2021 we reported 25 sets of utility E. P. S, which compares to 29 cents in the third quarter of 'twenty 'twenty.

In the third quarter of this year, we had a one time impact to earnings of four cents per share related to our most recent board implemented governance changes, Jason will get into more detail on the variances shortly.

Capital investments as I mentioned earlier, we have increased our five year capital plans to 18 billion plus over the next five years and $40 billion plus over the next 10 years.

This is nearly a 40% increase in our five year capital investment plan since the third quarter of 'twenty 'twenty.

This includes new opportunities that stem from the latest legislative session in Texas.

One of those opportunities was the ability to lease and put into rate base mobile generation units.

We moved quickly on this opportunity and procured five five megawatt and 330 megawatt mobile generation units.

Some of which we were able to deploy during hurricane Nicholas as backup while crews worked to repair our system.

And recently during in ERCOT forecast at Texas wide load shedding of pad, the Texas PUC asked us to make sure our units were ready to support customers.

We were the first utility in the state to act Oddness legislative opportunity and had them in place to utilize them in the way the law intended.

We look forward to mobilize quickly on the other tools provided to us by the Texas legislature to improve the resiliency of the electric grid and help reduce the risk of prolonged outages.

We already have an outstanding RFP for additional mobile generation, which could bring our total up to 500 megawatts and hope to have this procured in the coming months.

We believe that with the deployment of these additional tools, we will be able to mitigate some of the impacts of future extreme weather events on our customers.

Due to recent weather events in both Louisiana, and Texas, we are running slightly behind on our capital spending plans on a year to date basis.

These weather events pulled away many of our contract crews so they could provide mutual assistance to our fellow utilities.

Especially in Louisiana.

Therefore, while deployed elsewhere they cannot work on our capital projects, but we have a catch up plan in place.

And anticipate making the short fall off.

In anticipation of continued labor shortages and as we ramp up our capital plans in the coming years, we have now moved to procure additional contractor resources from multiple suppliers.

We believe that this will help to support continuity and crews on a long term basis will reduce the impact of any labor disruptions.

In executing our $40 billion plus capital spend over the next 10 years.

O&M.

Turning to O&M, we remain committed to our continuous improvement cost management efforts and our target of 1% to 2% average annual reductions.

We've already realized the benefit of some of these improvements this year.

We stated in the second quarter that we could accelerate approximately $20 million of recurring O&M work.

Forward from 2022 into this year, if we had the available resources. So far we've achieved approximately 20% of this goal year to date and remain confident our router team's ability to continue to execute towards this goal for the balance of the year.

This allows us the luxury of reducing near term run rate O&M costs, which helps to mitigate rate pressures, while maintaining a continued focus on reliability and safety of our service for customers all while sustaining growth for our shareholders.

Organic growth.

In addition to O&M continuous improvement efforts, we are fortunate to operate in growing jurisdictions.

This combination plays a key role in keeping our growth plans affordable for our customers.

As we discussed during our analyst day, Houston is the fourth largest city in the U S and the only one of those four that's growing.

Houston's organic growth is bad multi decades long.

That organic growth rate continued for yet another quarter.

We are also seeing strong growth in many of our other jurisdictions as well.

On a year over year basis, we saw about 2% customer growth for electric and 1% for natural gas through September.

Again this organic growth is a luxury most other utilities just do not have.

Now, let me shift gears and give a brief regulatory update.

A recent highlight in Indiana happened just this past week.

As part of our long term electric generation transition plan.

We received the C. P C N approval from the Indiana utility regulatory Commission for the first tranche of solar generation, 75% of which we expect to own and 25% through a P. P. A.

This approval shows the commission's alignment and support of our 'twenty 'twenty I R. P.

Which bridges, our coal generation into a mix of lower carbon and renewable sources.

We anticipate the C. P C N decisions for our gas C. T plant in the second or third quarter of 2022.

And the incremental solar P. P. A in the third quarter of 2022.

As outlined in our IR P. We are targeting to own approximately 50% of our total solar generation portfolio.

Our continued build out of renewables is a key driver in achieving our net zero direct emissions goal by 2035.

Shifting to gas cost recovery from the February winter storm.

We continue to make progress and as we previously mentioned we have mechanisms in place or began recovery in all jurisdictions. We are happy to report that just this past week, we reached a settlement on the prudence proceedings supporting securitization of 100%.

Of gas costs and taxes, including all related carrying costs.

We look forward to the commission approval of the agreement.

We anticipate a financing in order for the securitization bonds by the end of the year.

With this timeline, we anticipate receiving the proceeds some time mid next year.

In Minnesota, we started a recovery as of September and are working with stakeholders on ways to reduce the impact on our customers.

We filed a rate case earlier this week and also proposed an alternative rate stabilization plan to address the unique set of circumstances customers are experiencing.

The full rate case request $67.1 million per year, while the rate stabilization plan requests 39.7 million per year, and an extended recovery period for winter storm costs.

The proposed rate stabilization plan would resolve the rate case.

And limit the bill impact on customers and part by recovering the winter storm costs over a 63 month period.

We're asking the PUC to review and approve the stabilization plan by the end of this year.

Which would allow rates to take effect on January 1st.

To summarize we are working with stakeholders to align our focus on safety and related investments, while minimizing the burden to our customers.

Largely as a result of mechanisms in our Houston electric and Indiana, South gas jurisdictions.

We have recently received approval for $40 million of increased incremental annual revenue.

As discussed in our analyst day, we anticipate approximately 80% of our 10 year capital plans to be recovered through interim mechanisms, which demonstrates the constructive jurisdictions in which we operate.

In Texas, our PUC is now appointed a fourth commissioner, Jason and I have now had the opportunity to meet all four commissioners and are very encouraged by the dialogue and expertise that all of these commissioners bring to the PUC Wheeler.

We look forward to continued engagement with the commissions in all of our jurisdictions.

So those are the headlines for the quarter I remain excited about what's to come for Centerpoint.

We have a growing track record of execution and believe it more than demonstrates what we can do in the near future and the unique value proposition that centerpoint offers to you.

With that let me turn the call over to Jason.

Thank you, Dave and thank you to all of you for joining US. This morning for our third quarter earnings call. This marks my one year of earnings calls with Centerpoint and the story keeps getting better.

To reemphasize Daves message, we are focused on establishing a track record of consistent execution and I fully believe the best is yet to come here at Centerpoint I'll start this morning with the earnings from the third quarter of 2021 on a GAAP EPS basis, we reported 32 cents for the third quarter of 2021 compared to 13 cents for the third quarter of 'twenty 'twenty.

Looking at slide five we reported thirty-three sense of non-GAAP EPS for the third quarter of 2021 compared to 34 cents for the third quarter of 2020.

Our utility E. P. S was 25 cents for the third quarter of 2021 while midstream investments contributed another eight cents.

Favorable growth and rate recovery lower interest expense and reversal of the net impacts from Covid last year. Each contributed one penny of favorability.

These amounts were offset by four cents related to a onetime board implemented governance changes recorded this quarter and another three cents of unfavorable variance attributable to weather and usage.

For context, we experienced 73 fewer cooling degree days in Houston for the third quarter of 2021 compared to the third quarter of 2020.

We estimate that each cooling degree day above normal has approximately a 70000 dollar a day impact in our Houston electric business.

Turning to slide six for the first nine months, we've achieved nearly 80% of our full year 2021 utility EPS guidance, which we are now raising to $1 26 to $1 28.

And as Dave said, we are also raising our utility EPS guidance for 2022 to $1 36 to $1 38, which is an 8% increase from our new 2021 estimates.

Looking beyond that we are focused on delivering 8% annual utility EPS growth through 'twenty 'twenty four and at the mid to high end of our 6% to 8% annual utility E. P. S range over the remainder of our 10 year plan.

Strong growth each year and every year no caters for earnings.

The last thing I'll mention for this quarter is the share count our preferred series B shares converted into 36 million common shares as at September 1st further reducing the number of share classes outstanding.

We expect the conversion will have no impact on earnings as the increase in shares is effectively offset by the termination of our series B dividends.

Going forward I want to reiterate we have no external equity included in our current growth plans and only expect our share count to modestly increase from dividend reinvestment or incentive plans.

Now I want to offer some color on our capital plans supporting our rate base in utility EPS growth.

We spent approximately $2.3 billion year to date on capital investments.

As Dave mentioned, we had some slight delays due to recent weather events and are focused on making that up over the coming months.

We outlined on our analyst day, the three buckets that we are investing in safety reliability and growth and enabling clean investments that are included in our $40 billion plus 10 year capital investment plan.

This investment profile should benefit our shareholders, our customers and the environment.

We see those opportunities weighted nearly 60% towards investments in our electric business throughout the plan.

While we are slightly behind the capital plan on a year to date basis. We are in the midst of ramping up to a sustained increase in our capital investments and we are restructuring contract crews Sydney way that helps support our labor needs to execute this level of investment.

We are confident we will make up the shortfall by early 2022.

Moving to the financing updates our current liquidity remains strong at 1.8 billion, including available borrowings under our short term credit facilities and unrestricted cash.

Our long term F. A photo that objective remains between 14% and 15% aligning with Moody's methodology, and it's consistent with the expectations of the rating agencies as mentioned during the analyst day, it's our intention to stay within this range throughout the course of our long term plan.

Lastly, as we near the end of the calendar year, we are getting incrementally closer to the expected closing of the strategic transactions. We've announced we recently filed a settlement in Arkansas that represents an agreement amongst all parties, we anticipate that Arkansas Commission will issue. Its final approval by mid December in Oklahoma, a hearing was held on November 3rd and we expect a fine.

I'll order soon.

Finally, as energy transfer expressed on their earnings call earlier. This week, the enable and energy transfer mergers also expected to close before year end once that transaction closes we will remain absolutely focused on reducing and then eliminating our exposure to make sure Inc. Through a disciplined approach.

As said on our analyst day, we anticipate being fully exited from the midstream sector by the end of 2022.

We will then be nearly a pure play regulated utility.

As we continue to express we take our commitment to be good stewards of your investment very seriously and realized our obligation to optimize stakeholder value.

And with that we look forward to more of the shorter earnings calls in the future I'll turn the call back over to Dave.

Thank you Jason as you heard from us today and others from our full management team during the analyst day, the outlook for Centerpoint, just keeps getting better.

As I said, we now have six quarters of meeting or exceeding expectations, but we believe there is much more to come we.

We are demonstrating a pathway to premium and we hope that you will be on board with us as a shareholder when that happens.

Thank you, Dave we will now take a few questions being mindful of today's earnings schedule and the upcoming EI conference.

At this time, we will begin taking questions.

To ask a question. Please press star one on your Touchtone keypad to withdraw your question press pound the company requests that when asking a question colors pick up their telephone handsets.

Limit yourself to one question and one follow up question. Thank you.

Our first question is from Anthony crowd out.

Please proceed with your question.

Hey, good morning, good morning, Jason.

Good morning.

Hopefully I contribute to the a short earnings call, but just like.

The company maybe over the last year. It was maybe more of a transition story and we got I guess three increases in guidance throughout the year, including today I mean, how do we think about going forward are we more now on steady state and the guidance. You gave is probably more certainly looked to be in the middle of it or do we continue to get may be increasing.

Items.

One follow up.

Yeah, well look I hope you got a sense today of how confident we are in the business or the direction that the business is going at this point in time and I think that we're starting to hit on all cylinders I agree. We were we were in a transition, but I think in a transition to what we believe.

To be a premium utility so I think if you listen to what we said today and let me boil it down into pretty simple terms you know whatever we do this year, we'll do 8% more than next year, whatever we do next year will do 8% more of the year after that.

And et cetera, as we outlined during our analyst day, but we've got a lot of tailwind behind US right now and we really really like where we are.

Great and just one follow up Dave.

Dave at the Analyst Day, you gave us some great.

Great insight into I guess, just commodity prices maybe from a previous job beheld just thoughts on are you seeing any type of change in your view that you think maybe the commodity prices will end up coming down.

No I think.

I assume you're referring to natural gas prices, yeah, and I think that you know if you look at the strip Oh. It is starting to drift down, but I think more importantly is it it's really the focus you know if you look at gas prices on our business specifically.

We've got organic growth.

To sort of absorb issues, we've got our ability on O&M. So if your question really is do we see an impact on set of customer a rate certainly it's going to be out there, but I think we've got some offsets that may be other utilities don't have.

Jason anything you want to add to that.

Sure Dave Thanks for the question Anthony.

We outlined at Analyst day, we continue to work within.

Our defined gas procurement plans for each jurisdiction and as of today.

Looking across all of our jurisdictions, we're roughly 60% hedged now that we're going into.

The outcome of a winter season and for almost all of those jurisdictions, we've locked in kind of a weighted average cost of gas of somewhere between sort of the mid threes in high threes, a $3 per M to you.

And the majority of our jurisdictions and so feel well positioned for this upcoming winter season. Obviously, we continue to look at what we can do across the business to ease the burden stores and I think one example of that was.

You know the creative.

Coal transition.

Certainly helps that because of the capital that it is going to absorb and as we've said at our analyst day, and we've said in some of our prior calls.

We don't we don't need equity to execute this 10 year plan, but if other opportunities did come up we know the inherent value of the remaining gas LDC and you could look to them as a source of liquidity, but I think bottom line is we're biased towards electric and that is the way.

We will continue to drift I'm not going to put a prediction out there as to what that ratio will be over time, but directionally thats, where we're headed.

Got it and then just lastly.

Obviously, a little bit behind on the Capex as you highlighted in the prepared remarks, but still kind of targeting that 18 billion plus.

Just I guess what are some of the governing factors to increasing the upside or bringing that $1 billion into the base plan that we discussed during the analyst day.

Well I think it's a couple of things one is just getting sort of final resolution and clarity around the new tools in the toolbox with respect to the Texas Legislative process. We highlighted today the temporary generation for instance that we've moved very very quickly.

<unk>.

Those kinds of things would absorb some of that additional $1 billion and sort of contingent capital that we laid out on our analyst day and the other just the other issue is going to be just finding sufficient cruise and labor.

<unk> parts and inventory and those kinds of things out there to accelerate it. So I think the message. We tried to leave at analyst day is we have $18 billion plus to spend in the next five years $40 billion plus to spend in the next 10 years, and we will spend that capital as fast.

As we can reasonably do so as long as it's consistent with sort of rate pressures.

That we will have end to end to spend it efficiently. So again, we've got the wind at our back on many many things in our capital spend opportunities is certainly one of those.

Great. Thanks, Thank you for that I'll see you guys shouldn't appreciate it okay. Thanks.

Our next question is from in Soo Kim from Goldman Sachs. Please proceed with your question.

Good morning. Good morning, just first question going back to <unk> question on the Capex spend.

The potential or I guess the delays currently.

I understand the reasoning for the year to date.

Delay and how youre going to make that up just when you look out currently at the current environment to structurally are you seeing any concerns or challenges too.

Get the current Capex plan executed over the next couple of years, whether it is the labor shortages or just from a maybe from a cost standpoint labor costs or other items that could potentially be a headwind.

And look I mean, just like pretty much every other company and management team in the U S. We're dealing with supply chain issues upward pressure on labor cost.

But I don't think that we have seen it to such an extent that we're going to say that we can't meet the capital plan. We have every intention and we have every confidence we're going to meet the capital plan, we tried to give a little color to it.

With respect to that on the call today, we have moved aggressively to tie up more construction crews.

We have expanded our vendor base in and around that area. One of the tools that we got in the new legislative processes, the ability to put long lead time items into inventory and into rate base. So we're looking at all of those.

The sort of small slip in capital spend this year really was unrelated to any of that it really was related to the storms that really pounded into Louisiana and as all utilities do we help each other when those sort of situations arise and we released a number of our crews that were.

We're focused on capital build for us to help the people in Louisiana to get back on their feet. Those crews are now coming back and as Jason said, we've got a short term plan in place to to catch up on that capital spend but our longer term view of tying up crews and making sure we have the long lead.

Time items ordered gave us a great deal of confidence that the.

The capital plan, we have is and that's going to be achievable.

Understood and just quickly.

Other question I had was as we think about the closing of the midstream.

Fans action remind me is there I know you've already priced contingent sale of a portion of it but is there a limit on how much you can sell in terms of the units at any given time.

I'll, let my very good CFO, Jason answer that question.

Andrew Thanks for the question no. There is no direct limit and we had talked about previously the need to register those units energy transfer has already undertaken that effort. So.

We are free to execute contingent forward up until the close as we have done once the deal is closed to the extent that we want to execute a.

Marketed offering we have to obviously coordinate with energy transfer we have full flexibility to do that after the close of the transaction and then similarly, we will have the ability to durable to share. So I think we're moving to a place of full control no limitation on.

On the number of units.

Got it thank you and see you soon.

Our next question is from Julien Dumoulin Smith with Bank of America. Please proceed with your question.

Hey, good morning team sorry about the shows there.

My condolences as well here.

I would tell you I didn't think this would turn into a burial of the Astros and I appreciate that.

Yes.

Remember that we know they're close to your heart there you go.

Yeah.

Indeed it was.

Just wondering what's driving the confidence still on the timeline for the <unk> deal here.

I know you mentioned it here again, you mentioned at the analyst day, but.

And maybe remind us where that process stands specifically with respect to FTC, obviously, they continue to put up their own headlines.

Hey, good morning, Julien, it's Jason here.

Look as we said at analyst day energy transfer enable obviously, taking the lead with this and the conversations with the FTC. We're clearly very interested party and everything that we've observed just gives us confidence that this deal will get closed here in.

In the fourth quarter so.

I don't think.

It's probably more of a direct question for energy transfer.

Those conversations are going by the day, but as I said as we observe the progress we continue to remain confident of a close here in Q4.

Got it Alright fair enough and then then on this alternate stabilization plan can you talk a little bit more about the mechanics.

Obviously, it's early here, but has there been any feedback so far on the proposal. Obviously these these are somewhat sensitive subject. So I'll, let you respond accordingly.

Yeah, Thanks, Julien, it's really unique.

Situation, obviously in Minnesota with the incremental gas costs from winter storm Yuri.

The fact that we've got a regular rate case schedule, there and so while we filed.

Typical rate case, we thought it was prudent to bring forward.

Deem them.

Great stabilization plan and I think.

What it tries to do is build off of what was just a recent settlement of the last rate case filed in Minnesota, So keeping similar terms on depreciation rates cost of capital.

Allows us to recover the capital that we will be spending over the next couple of years to improve the safety of our gas systems. It differs a little bit of the.

Amortization of some regulatory assets for things like Covid related costs and some of the incremental O&M that we had anticipated, but we think it puts us in a really good position to continue to.

Proved system safety with our capital investment plans, while recognizing.

The rate impact and trying to moderate that for our customers there in Minnesota and so early days in terms of the conversations with stakeholders, but we hope that it is seen as a constructive solution and the backdrop what is.

Unique situation there.

Got it and last one just super quickly I heard you guys comment on the backup Gen in.

In Texas, but any updates on the for instance, Texas transmission, obviously, the PCT will be moving fairly swiftly still here curious if theres anything we set on that front.

As a function of reforms.

I think maybe just to tease you a little bit yes, we're having some dialogue with them on additional transmission lines, but it's really too early to talk about any specifics on it.

Okay, Alright fair enough I suspected as much alright best of luck to speak soon.

Thanks.

Our next question is from <unk> Chopra with Evercore ISI. Please proceed with your question.

Good morning.

Hey, Good morning, just one for me just on the Indiana Solar program David in your commentary you mentioned 70, 525 mix 75 rate base 25, PPA is that sort of what you are targeting going forward.

And your plans and just curious as to how you got there.

In terms of the 70 525 mix.

Good morning, I'll, let Jason answer that good morning <unk>.

Overall as we look at this.

First sort of.

Part of our coal transition plan, we're targeting a 50 50 allocation that is 50% owned renewables, 50% contracted through Ppas for renewable portion for the first tranche of the coal transition. We had filed originally as you pointed out and as Dave mentioned in his prepared remarks, an initial tranche of solar.

That was 75% 125% PPA. We then subsequently filed in the third quarter this year for 100%.

PPA.

Ah.

Solar projects and so again as you look through kind of each of these individual filings, we're targeting a $50 51 contract target mix for renewables.

Got it thank you very much.

Our last question is from Stephen Byrd from Morgan Stanley. Please proceed with your question.

Hey, good morning, good morning.

Good morning.

Just had one kind of a broad question just on draft federal legislation and as you look at that I know, that's subject to change and who knows what the final version will look like but I was thinking in particular about I guess two elements one would be <unk>.

<unk> policy.

And impacts in terms of cash flow customer bills etcetera, and then the other was just broad support for clean energy, whether that might change or enhance.

Some of your resource plans and movement towards clean energy or accelerates some of your plans. So just curious what youre thinking there.

I mean I'll, let me take the first crack at it and I'll have Jason can talk about the potential tax impact, but you're absolutely right. It's definitely a moving target right now and haven't been through many of these.

Parts of efforts that wind their way through Washington, I learned a long time ago, you really you got to just sort of watched the process happen, but you don't want to do anything.

Set a concrete until it sat in La and then you can react to it I think directionally from if you look at sort of the renewables and the ESG aspects of it. It's certainly supportive of the direction that we're going but based on what we see right now I don't see it accelerating or decelerating.

Anything that we've got on plans, we have as you know instead of an industry, leading that goal out there of net direct emissions to zero by 2035.

I think that's a good plan, we're going to stick with it.

The direction, we're headed we get some incremental help with what comes out of D. C. We will take advantage of it but it isn't going to bump us off course from the direction. We're headed right now Jason do you want to talk about the tax aspect.

Yeah sure. Thanks for the question Stephen.

From a tax standpoint.

<unk> federal cash taxpayer right now as you kind of cut through sort of.

Power Financial's Theres, a lot of sort of one time items as we've.

Executed on this transition to a pure play regulated utility and we will continue to see that as you've kind of cut through that.

For us.

Our effective tax rate from a cash tax standpoint is somewhere between 8% to 10%.

So clearly a minimum tax of 15% would put a little bit of impact or headwind on the financing plan, we don't think its.

Certainly something that we can overcome we don't think its an impediment to the Capex plan that we outlined and still feel like we can continue to maintain a strong balance sheet as we outlined and deliver on our $40 million capital investment plan. So early days will follow.

Probably not as big an impact to us as maybe some of our peers just given the fact that we have been a federal cash taxpayer, but obviously something we'll continue to monitor.

That's great. Thank you very much.

Again, thank you everyone for joining us today and for your interest in Centerpoint, We look forward to seeing you all.

This concludes today's Centerpoint Energy's third quarter earnings conference call. Thank you for your participation you may now disconnect.

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