Q2 2024 CenterPoint Energy Inc Earnings Call

Unknown Executive: Good morning, and welcome to CenterPoint Energy's second quarter 2024 earnings conference call with senior managers. During the company's prepared remarks, all participants will be in a listen-only mode.

Unknown Executive: There will be a question and answer session after management's remarks. To ask a question, please press star 11 on your touch-tone keypad. I will now turn the call over to Jackie Richert, Senior Vice President of Corporate Planning, Investor Relations, and Treasurer.

Speaker Change: Good morning and welcome to CenterPoint Energy second quarter 2024 earnings conference call with senior management. During the company's prepared remarks, all participants will be in a listen only mode.

Jacqueline M. Richert: There will be a question and answer session after management's remarks. To ask a question, please press star 11 on your touchtone keypad. I will now turn the call over to Jackie Richert, Senior Vice President of Corporate Planning, Investor Relations, and Treasurer. Ms. Richert.

Jacqueline M. Richert: Good morning, and welcome to CenterPoint Energy's second quarter 2024 earnings conference call. Jason Wells, our CEO, and Chris Foster, our CFO, will discuss the company's second quarter 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 upon various factors, as noted in our Form 10-Q, other SEC filings, and our earnings materials.

Speaker Change: Good morning and welcome to CenterPoint Energy's second quarter 2024 earnings conference call. Jason Wells, our CEO , and Chris Foster, our CFO , will discuss the company's second quarter results.

Speaker Change: 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.

Speaker Change: Actual results could differ materially, based upon 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 statements.

Jacqueline M. Richert: We undertake no obligation to revise or update publicly any forward-looking statements. We will be discussing certain non-GAAP measures on today's call. For example, 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.

Speaker Change: We 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.

Jacqueline M. Richert: For information on our guidance methodology and reconciliation of the non-GET measures discussed on this call, please refer to today's news release and presentation on our website. We use our website to announce material information. This call is being recorded.

Speaker Change: For information on our guidance methodology and reconciliation of the non-GET measures discussed on this call, please refer to today's news release and presentation on our website.

Jacqueline M. Richert: Information on how to access the replay can be found on our website. Now, I'd like to turn the call over to Jason. Thank you, Jackie, and good morning, everyone. Before spending most of my time discussing the impacts of and our response to Hurricane Barrel, I will very briefly touch on our results for the second quarter. I'll then turn it over to Chris for a regulatory update and a more detailed recap of our financial results. For the second quarter, we reported gap and non-gap EPS of 36 cents per share.

Speaker Change: 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 the call over to Jason.

Jason: Thank you, Jackie, and good morning, everyone. Before spending most of my time discussing the impacts of and our response to Hurricane Beryl, I will very briefly touch on our results for the second quarter. I'll then turn it over to Chris for a regulatory update and a more detailed recap of our financial results.

Speaker Change: For the second quarter, we reported gap and non-gap EPS of 36 cents per share.

Speaker Change: In addition, we are reaffirming our full year 2024 non-GAAP EPS guidance range of $1.61 to $1.63.

Speaker Change: Beyond 2024, we are also reaffirming our long-term guidance, where we expect to grow non-gap UPS and dividend-per-share growth at the mid-to-high end of our 6% to 8% range annually through 2030.

Jason P. Wells: In addition, we are reaffirming our full-year 2024 non-GAP EPS guidance range of $1.61 to $1.63. Beyond 2024, we are also reaffirming our long-term guidance, where we expect to grow non-GAP UPS and dividend per share growth at the mid to high end of our 6% to 8% range annually through 2030. Now to turn to our primary area of focus. Earlier this month, Hurricane Beryl impacted our entire 5,000-square-mile service territory in the greater Houston area, causing power outages for nearly 2.3 million of our customers, or approximately 80 percent of our Houston electric customer base.

Speaker Change: Now, to turn to our primary area of focus.

Speaker Change: Earlier this month, Hurricane Beryl impacted our entire 5,000-square-mile service territory in the greater Houston area, causing power outages for nearly 2.3 million of our customers, or approximately 80% of our Houston electric customer base.

Jason P. Wells: We began tracking Hurricane Beryl and preparing for a possible impact nine days before Beryl made landfall. However, initial forecasts showed that our service area in Greater Houston would be spared a direct impact by the worst of the hurricane.

Speaker Change: We began tracking Hurricane Beryl and preparing for a possible impact nine days before Beryl made landfall. Initial forecasts showed that our service area in Greater Houston would be spared a direct impact by the worst of the hurricane. Nonetheless, we remain vigilant and plan for impact.

Jason P. Wells: Nonetheless, we remain vigilant and plan for impact. We initially secured 3,000 mutual assistance crew members from locations safely outside of the projected path of the storm. We also coordinated with utilities across Texas and the region to ensure resource availability. As the forecast trajectory changed, we quickly called on additional mutual assistance resources, ultimately activating and deploying over 15,000 CenterPoint mutual assistance crew members. Early in the morning on Monday, July 8th, Hurricane Beryl made landfall as a powerful Category 1 hurricane with heavy rains, flooding, and up to 97 mile-hour winds that reached further inland than any storm experienced in Houston since 1983.

Speaker Change: We initially secured 3,000 mutual assistance crew members from locations safely outside of the projected path of the storm. We also coordinated with utilities across Texas and the region to ensure resource availability.

Speaker Change: As the forecast trajectory changed, we quickly called on additional mutual assistance resources, ultimately activating and deploying over 15,000 CenterPoint mutual assistance crew members.

Jason P. Wells: As part of our response, we restored power to over 1 million customers within 48 hours, replaced over 3,000 distribution poles in our system, walked over 8,500 circuit miles to repair damage, and deployed mobile generators at 28 sites across the greater Houston area to various critical facilities. Impacts to our distribution lines and facilities from vegetation such as uprooted trees and related debris carried by the very high winds were the primary cause of customer outages. In recent years, trees in the Houston area have been weakened due to a combination of high rainfall, prior drought conditions, as well as winter freezes.

Speaker Change: Early in the morning on Monday, July 8th, Hurricane Beryl made landfall as a powerful Category 1 hurricane with heavy rains, flooding, and up to 97 mile-hour winds that reached further inland than any storm experienced in Houston since 1983.

Speaker Change: As part of our response, we restored power to over 1 million customers within 48 hours.

Speaker Change: replaced over 3,000 distribution poles on our system, walked over 8,500 circuit miles to repair damage, and deployed mobile generators at 28 sites across the greater Houston area to various critical facilities.

Jason P. Wells: We trimmed or removed approximately 35,000 trees during our restoration process. Through discussion with one of our largest vegetation management companies, 60% of the vegetation it removed were trees that had fallen from outside of our rights-of-way. Over the last 18 months, we proactively worked to address the challenges these conditions present to our distribution system through increased vegetation management. In fact, in 2023, our Houston electric business increased its vegetation management spend by over 30% from the prior year.

Speaker Change: Impacts to our distribution lines and facilities from vegetation, such as uprooted trees and related debris carried by the very high winds, were the primary cause of customer outages.

Speaker Change: In recent years, trees in the Houston area have been weakened due to a combination of high rainfall, prior drought conditions, as well as winter freezes.

Speaker Change: We trimmed or removed approximately 35,000 trees during our restoration process.

Speaker Change: Through discussion with one of our largest vegetation management companies, 60% of the vegetation it removed were trees that had fallen from outside of our right-of-way.

Speaker Change: Over the last 18 months, we proactively worked to address the challenges these conditions present to our distribution system through increased vegetation management. In fact, in 2023, our Houston Electric business increased its vegetation management spend by over 30% from the prior year.

Jason P. Wells: We continue to operate and invest at a similar, higher level of vegetation management as we recognize the impacts of the challenging growing seasons experienced in the Houston area over the last three years and the resulting threat they could have on our lines and infrastructure. In addition, Hurricane Beryl's destructive winds, in combination with already weakened trees, highlighted not only the urgency with which we need to execute on our vegetation management plan but also its scope.

Speaker Change: We continue to execute and invest at a similar higher level of vegetation management as we recognize the impacts of the challenging growing seasons experienced in the Houston area over the last three years and the resulting threat they could have on our lines and infrastructure.

Speaker Change: In addition, Hurricane Beryl's destructive winds in combination with already weakened trees highlighted not only the urgency with which we need to execute on our vegetation management plan, but also the scope.

Jason P. Wells: As a result, we have doubled our vegetation management resources and are aggressively tackling the riskier line miles with trees nearby. We will trim or remove trees related to an incremental 2,000 miles of our system by December 31st of this year.

Speaker Change: As a result, we have doubled our vegetation management resources and are aggressively tackling the riskier line miles with trees nearby.

Speaker Change: We will trim or remove trees related to an incremental 2,000 miles of our system by December 31st of this year. This represents a nearly 50% increase compared to our planned work for 2024.

Jason P. Wells: This represents a nearly 50% increase compared to our planned work for 2024. The vegetation work we have begun is only a part of a more comprehensive plan to improve customer outcomes and directly address the customer concerns and frustrations voiced with respect to critical aspects of our emergency response. This plan will also help us better prepare our response in key areas to future storms or hurricanes. I will walk through the three pillars of our comprehensive action plan to address our customers' concerns.

Speaker Change: The vegetation work we have begun is only a part of a more comprehensive plan to improve customer outcomes and directly address the customer concerns and frustrations voiced with respect to critical aspects of our emergency response.

Speaker Change: This plan will also help us better prepare our response in key areas to future storms or hurricanes.

Speaker Change: I will walk through the three pillars of our comprehensive action plan to address our customers' concerns.

Jason P. Wells: Our first pillar relates to our resiliency investment. By accelerating the adoption of advanced construction standards, retrofitting existing assets on an accelerated basis, and using predictive modeling and AI, as well as other advanced technologies, we will harden our distribution system to help withstand more extreme weather and improve the speed of restoration.

Speaker Change: Our first pillar relates to our resiliency investments.

Speaker Change: By accelerating the adoption of advanced construction standards, retrofitting existing assets on an accelerated basis.

Speaker Change: And using predictive modeling and AI, as well as other advanced technologies, we will harden our distribution system to help withstand more extreme weather and improve the speed of restoration.

Jason P. Wells: This is in addition to proactive steps we took nearly two years ago when we moved to constructing at the new national standard for high wind and extreme ice loading. Second, we will build a best-in-class customer communications program. Since the derecho that impacted Houston in May, our outage tracker has not been available for our customers. The tracker we previously used was hosted on a physical server that was not able to accommodate the demand of millions of users at one time.

Speaker Change: This is in addition to proactive steps we took nearly two years ago when we moved to constructing at the new national standard for high wind and extreme ice loading.

Speaker Change: Second, we will build a best-in-class customer communications program.

Speaker Change: Since the derecho that impacted Houston in May, our outage tracker has not been available for our customers.

Speaker Change: The tracker we previously used was hosted on a physical server that was not able to accommodate the demand of millions of users at one time.

Jason P. Wells: To keep our communities informed, we provided daily restoration updates, but we understand that for many, this was insufficient. As one component of our Customer Communication Action Plan, we are launching a new, more customer-oriented audit tracker later this week. Our new Outage Tracker will help provide our customers with more of the information they need in a timely fashion. It will also be comparable to what our Texas Peer Utility customers experience. The new tracker is cloud-based, which will also allow us to scale to high levels of demand. Third, we will strengthen our partnerships with government and community leaders. Effective emergency preparedness and response requires close coordination with government officials.

Speaker Change: To keep our communities informed, we provided daily restoration updates, but we understand that for many, this was insufficient.

Speaker Change: As one component of our Customer Communication Action Plan, we are launching a new, more customer-oriented outage tracker later this week.

Speaker Change: Our new outage tracker will help provide our customers more of the information they need in a timely fashion.

Speaker Change: It will also be comparable to what our Texas Peer Utility customers experience.

Speaker Change: The new tracker is cloud-based, which will also allow us to scale to high levels of demand.

Speaker Change: Third, we will strengthen our partnerships with government and community leaders.

Speaker Change: Effective emergency preparedness and response requires close coordination with government officials.

Jason P. Wells: We will hire a seasoned emergency response leader to help the company rapidly accelerate its planning capabilities and to develop close community partnerships to help ease the burden of storm events on our more vulnerable communities. We believe the work underlying these three pillars will support our efforts to build and operate a grid that meets the demands of one of the most dynamic economies in the United States here in Houston. The initial set of specific actions we are taking is laid out on slide three.

Speaker Change: We will hire a seasoned emergency response leader to help the company rapidly accelerate its planning capabilities and to develop close community partnerships to help ease the burden of storm events on our more vulnerable communities.

Speaker Change: We believe the work underlying these three pillars will support our efforts to build and operate a grid that meets the demands of one of the most dynamic economies in the United States here in Houston.

Speaker Change: The initial set of specific actions we are taking is laid out on slide 3.

Jason P. Wells: We will also be taking additional actions as we continue to learn from our internal reviews and external independent reviews, as well as through engagement with emergency response experts, our customers, elected officials, and community stakeholders. Our singular and overarching goal is to improve in every aspect of our emergency preparedness and response.

Speaker Change: We will also be taking additional actions as we continue to learn from our internal reviews and external independent review, as well as through engagement with emergency response experts, our customers, elected officials, and community stakeholders.

Speaker Change: Our singular and overarching goal is to improve in every area of our emergency preparedness and response.

Jason P. Wells: Whether it is before, during, or after any future storm, we will be better prepared to support, communicate with, and serve our customers in these times of emergency. As we begin to execute this initial plan, we will work to consistently provide updates on our progress. The men and women at CenterPoint go to work every day with an unrelenting focus on delivering safe, reliable, and resilient energy to our customers while also striving to improve their experience.

Speaker Change: Whether it is before, during, or after any future storm, we will be better prepared to support, communicate with, and serve our customers in these times of emergency.

Speaker Change: As we begin to execute this initial plan, we will work to consistently provide updates on our progress.

Speaker Change: The men and women at CenterPoint go to work every day with an unrelenting focus on delivering safe, reliable, and resilient energy to our customers, while also striving to improve their experience.

Jason P. Wells: We will continue to make customer-focused capital investments to achieve better outcomes for the nearly 3 million electric customers and over 4 million gas customers across our six-state footprint. And with that, I'll turn it over to Chris.

Speaker Change: We will continue to make customer focused capital investments to achieve better outcomes for the nearly 3 million electric customers and over 4 million gas customers across our six state footprint. And with that, I'll turn it over to Chris.

Christopher A. Foster: Thanks, Jason. Before I get into my updates, I want to echo Jason's gratitude to our customers and our communities. Our team is focused on improving our resilience and emergency response capabilities, and I will speak to our financial plan to support those efforts in my remarks today. Today, I'd like to cover three areas of focus.

Chris: Thanks, Jason. Before I get into my updates, I want to echo Jason's gratitude to our customers and our communities.

Chris: Our team is focused on improving our resilience and emergency response capabilities, and I will speak to our financial plan to support those efforts in my remarks today.

Christopher A. Foster: First, the details of our second quarter financial results and guidance. Second, I'll provide a brief update on the progress we're making on our regulatory calendar. Third, I'll touch on our capital deployment status for this quarter and forecasted storm costs. And finally, I'll provide an update on our financing plan. Again, as Jason noted, today we are reaffirming our full year 2024 non-GAP EPS guidance range of $1.61 to $1.63, which represents 8% growth at the midpoint from our 2023 actual results of $1.50.

Chris: Today I'd like to cover three areas of focus.

Chris: First, the details of our second quarter financial results and guidance.

Chris: Second, I'll provide a brief update of the progress we're making on our regulatory calendar.

Chris: Third, I'll touch on our capital deployment status this quarter and forecasted storm costs. And finally, I'll provide an update on our financing plans.

Chris: Again, as Jason noted, today we are reaffirming our full year 2024 non-GAAP EPS guidance range of $1.61 to $1.63, which represents 8% growth at the midpoint from our 2023 actual results of $1.50.

Christopher A. Foster: Beyond 2024, we are also reaffirming our guidance, where we expect to grow non-GAAP EPS at the mid to high end of the 6% to 8% range annually through 2030, as well as targeting dividend per share growth in line with earnings per share growth. Let's now move to the financial results shown on slide four. On a GAAP EPS basis, we reported $0.36 for the second quarter of 2024.

Chris: Beyond 2024, we are also reaffirming our guidance, where we expect to grow non-GAAP EPS at the mid-to-high end of the 6% to 8% range annually through 2030, as well as targeting dividend per share growth in line with earnings per share growth.

Chris: Let's now move to the financial results shown on slide 4.

Chris: On a GAAP EPS basis, we reported $0.36 for the second quarter of 2024.

Christopher A. Foster: On a non-GAAP basis, we also reported $0.36 for the second quarter of 2024, compared to $0.28 for the second quarter of 2023. Diving into more detail of the earnings drivers for the quarter, growth and rate recovery contributed $0.10, which was primarily driven by the ongoing recovery from various interim mechanisms for which customer rates were updated last year, as well as the interim rates in our Minnesota gas business that went into effect on January 1 of this year.

Chris: On a non-GAAP basis, we also reported $0.36 for the second quarter of 2024, compared to $0.28 in the second quarter of 2023.

Chris: Diving into more detail of the earnings drivers for the quarter, growth and rate recovery contributed 10 cents, which is primarily driven by the ongoing recovery from various interim mechanisms for which customer rates were updated last year.

Chris: as well as the interim rates in our Minnesota gas business that went into effect on January 1 of this year.

Christopher A. Foster: In addition, the Houston area continues to see strong organic growth, extending the long-term trend of 1-2% average annual customer growth. This sustained growth has been beneficial for our customers and investors alike. O&M was two cents favorable for the quarter.

Chris: In addition, the Houston area continues to see strong organic growth, extending the long-term trend of 1-2% average annual customer growth.

Chris: This sustained growth has been beneficial for our customers and investors alike.

Christopher A. Foster: This favorable variance was driven primarily by the fact that we incurred more of our expenses in the first quarter and had some of our scheduled activities diverted to attend to restoration efforts related to the major HO storm. Partially offsetting the favorable items from rate recovery in O&M were unfavorable weather and increased interest expense. Weather and usage were one cent unfavorable when compared to the comparable quarter of 2023, driven primarily by a milder spring in our Minnesota gas service territory. Interest expense was $0.06 unfavorable, primarily driven by the new debt issuances since the first quarter of last year to fund customer-driven work across our electric and gas territories at a higher relative cost of debt.

Chris: O&M was two cents favorable for the quarter. This favorable variance was driven primarily by the fact that we incurred more of our expenses in the first quarter and had some of our scheduled activities diverted to attend to restoration efforts related to the major HO storm.

Chris: Partially offsetting the favorable items from rate recovery and O&M were unfavorable weather and increased interest expense.

Chris: Weather and usage were one cent unfavorable when compared to the comparable quarter of 2023, driven primarily by a milder spring in our Minnesota gas service territory.

Chris: Interest expense was $0.06 unfavorable, primarily driven by the new debt issuances since first quarter of last year, to fund customer-driven work across our electric and gas territories at a higher relative cost of debt.

Christopher A. Foster: I now want to turn to an update on our broader regulatory calendar in progress, and I'll cover these sequentially from the dates file. Starting with Texas Gas, where last month we received Railroad Commission approval of our now final settlement. As a reminder, our four Texas gas jurisdictions will now be consolidated on a go-forward basis for our ongoing rate adjustments. This new consolidation should benefit many customers through a lower impact on their bills from certain investments and also a reduced administrative burden for other stakeholders. Moving next to the filed Minnesota gas rate case.

Chris: I now want to turn to an update on our broader regulatory calendar in progress, and I'll cover these sequentially from the dates filed.

Chris: Starting with Texas Gas, where last month we received Railroad Commission approval of our now final settlement.

Chris: As a reminder, our four Texas gas jurisdictions will now be consolidated on a go-forward basis for our ongoing rate adjustments.

Chris: This new consolidation should benefit many customers through a lower impact on their bills from certain investments and also a reduced administrative burden for other stakeholders.

Christopher A. Foster: And as a reminder, we filed our rate case on November 1st of last year. As discussed on the last call, the interim rates for 2024 were approved in mid-December and went into effect on January 1st. The Minnesota Commission will consider interim rates for 2025 toward the end of this year, depending on how far along we are in the case. Hearings are scheduled to occur in the middle of December of this year.

Chris: Moving next to the filed Minnesota gas rate case.

Chris: And as a reminder, we filed our rate case on November 1st of last year. As discussed on the last call, the interim rates for 2024 were approved in mid-December and went into effect on January 1st.

Chris: The Minnesota Commission will consider interim rates for 2025 toward the end of this year, depending on how far along we are in the case.

Christopher A. Foster: Ahead of those hearings, we intend to engage in settlement discussions with parties involved in the case. And, as you may recall, we have settled our previous three rate cases in our Minnesota gas jurisdiction. Now, turning to the Indiana electric grade case, we currently have a non-unanimous settlement pending approval. Hearings on this settlement will begin the first week of September with the new statutory deadline for a final order of February 3rd.

Chris: Hearings are scheduled to occur in the middle of December of this year.

Chris: Ahead of those hearings, we intend to engage in settlement discussions with parties involved in the case.

Chris: And as you may recall, we have settled our previous three raid cases in our Minnesota gas jurisdiction.

Chris: Now, turning to the Indiana electric rate case, we currently have a non-unanimous settlement pending approval.

Chris: Hearings on this settlement will begin the first week of September , with a new statutory deadline for a final order of February 3rd. We look forward to continuing to work with stakeholders to achieve what we believe to be a reasonable outcome for all parties.

Christopher A. Foster: We look forward to continuing to work with stakeholders to achieve what we believe to be a reasonable outcome for all parties. Now, I'll touch on our largest jurisdiction, Houston Electric. Over the last month, we have been engaged with many stakeholders as part of settlement discussions in our pending rate case. Those settlement discussions are ongoing, and we continue to provide regular updates to the ALJ in the case. In addition, as we execute on the actions we've laid out following Hurricane Beryl, we intend to work with stakeholders on how to amend our system resiliency plan with the PUCT.

Chris: I'll now touch on our largest jurisdiction, Houston Electric.

Chris: Over the last month, we have been engaged with many stakeholders as part of settlement discussions in our pending rate case.

Chris: Those discussions are ongoing, and we continue to provide regular updates to the ALJ in the case.

Chris: In addition, as we execute on the actions we've laid out following Hurricane Beryl, we intend to work with stakeholders on how to amend our system resiliency plan with the PUCT.

Christopher A. Foster: The process is fluid, but at this stage, we have abated the schedule on the underlying system resiliency plan, which all parties have agreed to. This allows us to take the coming months to reflect stakeholder input and additional potential system resiliency concepts that emerge from our After Action Review and the review at the PUCT. We currently anticipate filing a revised plan later in Q1 2025.

Chris: The process is fluid, but at this stage, we have abated the schedule on the underlying system resiliency plan, which all parties have agreed to.

Chris: This allows us to take the coming months to reflect stakeholder input and additional potential system resiliency concepts that emerge from our After Action Review and the review at the PUCT.

Chris: We currently anticipate filing a revised plan later in Q1 2025.

Christopher A. Foster: Lastly, I want to briefly mention that next month we will file a notice of intent for our upcoming rate case for our Ohio gas business, which is approximately $1.4 billion in rate base. Next, I'll touch on our capital investments thus far in 2024, as shown on slide six, including the anticipated impact of storm costs and their associated recovery. In the second quarter of 2024, we invested $800 million in base work for the benefit of our customers and communities. This excludes spending related to storm restoration.

Chris: Lastly, I want to briefly mention that next month we will file a notice of intent for our upcoming rate case for our Ohio gas business, which is approximately $1.4 billion in rate base.

Chris: Next, I'll touch on our capital investments thus far in 2024, as shown on slide 6, including the anticipated impact of storm costs and their associated recovery.

Chris: In the second quarter of 2024, we invested $800 million of base work for the benefit of our customers and communities.

Christopher A. Foster: We now have a little less than 60 percent of our original 2024 capital expenditure target of $3.7 billion to be invested over the remainder of the year, excluding storm costs. We remain on track to meet our capital investment target despite the interruptions of normal capital deployment from the storms we've experienced this year. Maintaining our target as we consider a revised version of the resilience work is a reflection of the conservatism with which we plan each and every year.

Chris: This excludes spending related to storm restoration.

Chris: We now have a little less than 60% of our original 2024 capital expenditure target of $3.7 billion to be invested over the remainder of the year, excluding storm costs.

Chris: We remain on track to meet our capital investment target, despite the interruptions of normal capital deployment from the storms we've experienced this year.

Chris: Maintaining our target as we consider a revised version of the resiliency work is a reflection of the conservatism with which we plan each and every year.

Christopher A. Foster: Although the cost invoicing is not final, total spending associated with the Maystorm events and Hurricane Beryl is currently estimated to be approximately $1.6 billion to $1.8 billion. We currently anticipate that we will securitize both the capital and non-capital portion of the $1.5 to $1.7 billion distribution costs to limit the impact on our customers on their bills, and we'll include approximately $100 million of transmission investments within the next PCOS recovery filing. Based on the current average residential electric bill, we estimate that these costs could result in an increase of a little more than 2%.

Chris: Although the cost invoicing is not final, total spending associated with the Maystorm events and Hurricane Beryl are currently estimated to be approximately $1.6 billion to $1.8 billion.

Chris: We currently anticipate that we will securitize both the capital and non-capital portion of the $1.5 to $1.7 billion distribution costs to limit the impact to our customers on their bills and will include approximately $100 million of transmission investments within the next T-Cost recovery filing.

Chris: Based on the Total Current Average Residential Electric Bill, we estimate that these costs could result in an increase of a little more than 2%.

Christopher A. Foster: As a reminder, the mechanism to recover storm costs in the state of Texas is very constructive and cost effective for customers. Texas TDUs are able to securitize non-T-cost storm-related costs in excess of approximately $100 million under existing statutory authority. As a result, we anticipate filing for securitization in the fourth quarter of this year, with securitization bond proceeds expected to be received towards the end of next year. Finally, I want to touch on our ballot sheet and how we're thinking about funding the storm costs I just discussed. As of the end of the second quarter, our calculated FFO to debt was 13.3% based on our calculation aligning with Moody's methodology, as shown on slide 7.

Chris: As a reminder, the mechanism to recover storm costs in the state of Texas is very constructive and cost-effective for customers.

Chris: Texas TDUs are able to securitize non-TCOS storm-related costs in excess of approximately $100 million under existing statutory authority.

Chris: As a result, we anticipate filing for securitization in the fourth quarter of this year, with securitization bond proceeds expected to be received towards the end of next year.

Chris: Finally, I want to touch on our ballot sheet and how we're thinking about funding the storm costs I just discussed.

Chris: As of the end of the second quarter, our calculated FFO to debt was 13.3 percent, based on our calculation aligning with Moody's methodology as shown on slide 7.

Christopher A. Foster: The second quarter tends to be our lightest quarter due to the timing of incremental financing relative to interim recovery mechanisms. This quarter also had a temporary cash flow item that we expect to normalize through the next quarter. Taking a step back, as we continue to see the need to fund the growth we are experiencing in Texas, we remain focused on the balance sheet. And with respect to our financing plans through the end of the year, we have evolved our approach, recognizing the storm impact.

Chris: The second quarter tends to be our lightest quarter due to the timing of incremental financing relative to interim recovery mechanisms.

Chris: This quarter also had a temporary cash flow item that we expect to normalize through the next quarter.

Chris: Taking a step back, as we continue to see the need to fund growth we are experiencing in Texas, we remain focused on the balance sheet.

Chris: And with respect to our financing plans through the end of the year, we have evolved our approach, recognizing the storm impacts.

Christopher A. Foster: As we remain committed to maintaining our current credit metrics in light of these incremental costs, we intend to pull forward $250 million of equity planned for 2025 into this year, which is in addition to the $250 million issued to date. This does not change our long-term equity guidance, rather it should only be considered as an acceleration.

Chris: As we remain committed to maintaining our current credit metrics in light of these incremental costs, we intend to pull forward $250 million of equity planned for 2025 into this year, which is in addition to the $250 million issued to date.

Chris: This does not change our long-term equity guidance, rather should only be considered as an acceleration.

Christopher A. Foster: We will also incorporate higher equity content into our upcoming debt issuances to enhance credit metrics until the anticipated securitization proceeds are received. We would also see this as pulling forward instruments we've been considering in our long-term plans, as mentioned in recent quarterly calls. We remain confident in the continuation of our long-term execution. The last thing I want to mention is we are making good progress related to the sale of our Louisiana and Mississippi gas LDCs.

Chris: We will also incorporate higher equity content into our upcoming debt issuances to enhance credit metrics until the anticipated securitization proceeds are received.

Chris: We would also see this as pulling forward instruments we've been considering in our long-term plans, as mentioned in recent quarterly calls.

Chris: We remain confident in the continuation of our long-term execution.

Chris: The last thing I want to mention is we are making good progress related to the sale of our Louisiana and Mississippi gas LDCs.

Christopher A. Foster: We, along with the buyer, have now made all required regulatory filings, including filings with the Louisiana and Mississippi Public Service Commissions, and we look forward to working constructively with the commissions to facilitate the approval proceedings. We still anticipate closing the sale late in the first quarter of 2025, which is anticipated to result in after-cash tax proceeds of approximately $1 billion.

Chris: We, along with the buyer, have now made all required regulatory filings, including filings with the Louisiana and Mississippi Public Service Commissions, and we look forward to working constructively with the commissions to facilitate the approval proceedings.

Chris: We still anticipate closing the sale late in the first quarter of 2025 and is anticipated to result in after-cash tax proceeds of approximately 1 billion dollars.

Christopher A. Foster: As a reminder, a majority of these proceeds will be used to fund our capital investments at Houston Electric for the benefit of customers. And with that, I'll now turn the call back over to Jason. Thank you, Chris.

Chris: As a reminder, a majority of these proceeds will be used to fund our capital investments at Houston Electric for the benefit of customers.

Chris: And with that, I'll now turn the call back over to Jason.

Jason P. Wells: Regardless of the challenges we face, this management team remains firmly committed to delivering for all of our stakeholders, our customers, our communities, our regulators, our legislators, and our investors. Thank you, Jason. With that, Operator, we're now ready for Q&A. Thank you. At this time, we will begin taking questions. If you wish to ask a question, please press star 11 on your touchtone keypad.

Jason: Thank you, Chris. Regardless of the challenges we face, this management team remains firmly committed to delivering for all of our stakeholders, our customers, our communities, our regulators, our legislators, and our investors.

Speaker Change: Thank you, Jason. With that, Operator, we're now ready for Q&A.

Speaker Change: Thank you. At this time, we will begin taking questions. If you wish to ask a question, please press star 11 on your touchtone keypad. The company requests that when asking a question, callers pick up their telephone handsets. Thank you.

Unknown Executive: The company requests that callers pick up their telephone handsets. Thank you. One moment for the first question. The first question will come from Shahriar Pourreza with Guggenheim Partners. Your line is open. Hey guys, good morning. Morning, Shahriar.

Speaker Change: One moment for the first question.

Speaker Change: The first question will come from Shahriar Pourreza with Guggenheim Partners. Your line is open.

Shahriar Pourreza: Morning, Jason, maybe a little bit of a tough question to answer. But I guess, how do you see the commentary that, you know, that we've all been listening to from customers, legislators, and kind of stakeholders impacting the current settlement negotiations in the Houston electric rate? Yeah, thanks for the question, Shahriar. You know, clearly, as I've said in a number of different forums, we can and will be better.

Shahriar Pourreza: Hey guys, good morning.

Shahriar Pourreza: Morning, Shahriar. Morning. Jason, maybe a little bit of a tough question to answer, but I guess, how do you see the commentary that, you know, that we've all been listening to from customers, legislators, and kind of stakeholders?

Speaker Change: impacting the current settlement negotiations in the Houston Electric Rate Case?

Jason P. Wells: You know, these are important issues for the greater Houston region and for Texas. Ultimately, though, the answer for getting better is continued investment in the resiliency of our system. And I think that, you know, needs to or will be reflected, you know, in the continued negotiations that are occurring from a settlement standpoint. And so, you know, there's, again, clear demand that we need to communicate better, that we need to mitigate the risk of these outages moving forward. And I think ongoing settlement discussions are all just part of putting the company in a position to continue to be able to make that progress. Okay.

Jason: As I've said in a number of different forums, we can and will be better. These are important issues for the greater Houston region, for Texas.

Jason: Ultimately, though, the answer for getting better is continued investment in resiliency of our system.

Jason: And I think that, you know, needs to, or will be reflected, you know, in the continued negotiations that are occurring from a settlement standpoint. And so, you know, there's, again,

Jason: clear demand that we need to communicate better that we need to mitigate the risk of these outages moving forward

Jason: And I think ongoing settlement discussions are all just part of.

Jason P. Wells: And then just lastly, obviously, Hurricane Beryl certainly highlighted more work needs to be done, and you had a level of resiliency spending bucketed as upside to the 44 and a half billion capex plan. I guess how do the recent events impact that bucket even directionally, so how fast do you plan to ramp up in light of the increased urgency with the current regulatory construct that's out there? Yeah, I think it's definitely in a very important area of focus, you know.

Jason: putting the company in a position to continue to be able to make that progress.

Speaker Change: Okay, got it. And then just lastly, obviously, Hurricane Beryl, certainly.

Speaker Change: highlighted more work needs to be done and you had a level of resiliency spending bucketed as upside.

Speaker Change: to the $44.5 billion capex plan. I guess, how do the recent events impact that bucket even directionally? So how fast do you plan to ramp up in light of the increased urgency with the current regulatory construct that's out there? Thanks.

Speaker Change: Yeah, I think it's...

Jason P. Wells: We were investing in resiliency prior to that resiliency legislation. I think we heard loud and clear at the PECT meeting last week that we need to continue to move forward. We've made commitments to move forward. And so, ultimately, while we've pulled down the system resiliency plan and we are working with outside experts to get feedback, we'll obviously work with parties in the case. You know, we plan to rapidly refile it, and I think the short of it means there's probably more support for incremental resiliency investments. I'll give you one example.

Speaker Change: Definitely an area of focus, you know.

Speaker Change: We were investing in resiliency prior to that resiliency legislation. I think we heard loud and clear.

Speaker Change: At the PECT meeting last week that we need to continue to move forward. We've made commitments to move forward. And so ultimately, while we've pulled down the system resiliency plan, and we are working with outside experts taking feedback, we'll obviously work with parties in the case.

Speaker Change: You know, we plan to rapidly refile it, and I think the short of it means there's probably more support for incremental resiliency investments. I'll give you one example.

Jason P. Wells: You know, in the filing, we proposed continued sectionalization of our system, which is an important part of isolating outages, helping minimize the overall number. We proposed a pace of about 20 years in that program. I think that's a program that we need to revisit. I don't think the 20-year pace is... isn't anymore the kind of pace that folks expect of us, right?

Speaker Change: You know, in the filing, we proposed continued sectionalization of our system, which is an important part of isolating outages, helping minimize, you know, the overall number.

Jason P. Wells: And so, if anything, I think the bias will be towards accelerating incremental resiliency investment as opposed to delaying it. Got it. Okay, appreciate it. I'll pass it to someone else.

Speaker Change: is no longer kind of a pace that folks expect of us, right? And so, if anything, I think the bias will be towards accelerating incremental resiliency investment as opposed to delaying it.

Speaker Change: Got it. Okay, I appreciate it. I'll pass it to someone else. Thank you, guys.

Unknown Executive: Thank you guys. The next question comes from Steve Fleishman with Wolf Research. Your line is open. Yeah, hi, good morning. Morning, sir. Good morning. So just on the, I guess first a question on the financing plan, the comment on the equity content of the upcoming refinancing. Should we assume that's more like a junior subordinated, or could that be like a convertible?

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Steve Fleishman with Wolf Research. Your line is open.

Steven Isaac Fleishman: Yeah, hi. Good morning. Morning. So just

Steven Isaac Fleishman: Good morning. So just on the, I guess first a question on the financing plan, the comment on the equity content in the upcoming refinancing.

Speaker Change: Should we assume that's more like a junior subordinated or could that be like a convertible? Any more color on the likely type of financing there?

Steven Isaac Fleishman: And any more color on the likely type of financing there? Morning, Steve. It is fair to say that we're certainly looking at different versions of hybrids to pull in more equity content into the plan. And as I mentioned this morning, the other piece is just to pull forward $250 million. Again, to be clear, that doesn't change the overall guide from 2024 to 2030 of the $1.75 billion total. It's just a pull forward of that piece.

Speaker Change: Morning, Steve. It is fair to say that we're certainly looking at different versions of hybrids.

Speaker Change: to pull in more equity content into the plan. And as I mentioned this morning,

Christopher A. Foster: And you can imagine the point there is to just be able to have that in place to comfortably position the balance sheet until we get the anticipated securitization proceeds, currently thinking those are probably going to be end of year next year. Okay, and then maybe you could just give us some color on how the rating agencies are reacting to this event and spending and your updated plan and, kind of, you know, it's going to be a while, a little while before we know and see the securitization, so thoughts on, kind of, their, you know, willingness to be patient. Sure thing.

Speaker Change: The other piece is just to pull forward $250 million. Again, to be clear, that doesn't change the overall guide from 2024 to 2030 of the $1.75 billion total. It's just a pull forward of that piece. And you can imagine the point there is to just...

Speaker Change: be able to have that in place to comfortably position the balance sheet until we get the anticipated securitization proceeds. Currently thinking those are probably going to be end of year next year.

Speaker Change: Okay, and then maybe you could just give us some color on how the rating agencies are reacting to this event and spend and your updated plan and kind of, you know, it's going to be a little while before we know.

Speaker Change: and see the securitization, so just thoughts on kind of their, you know, willingness to be patient.

Christopher A. Foster: I think it's fair to say we're having a conversation, Steve, obviously, about both how we're thinking about the plan that Jason has referenced, where we're going to aggressively move forward here in 2024 to do some critical work in the immediate sense. Longer term, we're also talking about some initial thinking on moving forward, ideally in Q1 with a subsequent revised system resiliency plan filing. I think that in this case, Texas has had a consistent construct in the state for utilities to securitize costs above the $100 million point. Certainly, that's the case here.

Speaker Change: Sure thing. I think it's fair to say we're having a conversation, Steve, obviously, about both how we're thinking about the plan that Jason has referenced, where we're going to aggressively move forward here in 2024 to do some critical work in the immediate sense.

Speaker Change: Longer term, we're also talking about some initial thinking on moving forward, ideally in Q1 with a subsequent revised system resiliency plan filing.

Speaker Change: I think that in this case, Texas has had a consistent construct in the state for

Speaker Change: Utilities to Securitize Costs Above the 100 Million Dollar Point, certainly that's the case here, and so we're sharing certainly that history and consistent history of the state as well in terms of its overall construct.

Speaker Change: Fairly fluid conversations you can imagine just given how quickly we're moving on a few fronts, but certainly sharing all of our all of our different activities

Speaker Change: Okay, great. Thank you.

Christopher A. Foster: And so we're sharing that history and the consistent history of the state as well in terms of its overall construct. So fairly fluid conversations, you can imagine, just given how quickly we're moving on a few fronts, but certainly sharing all of our different activities. Okay, great. Thank you. Thank you. The next question comes from Jeremy Tonet with JP Morgan Securities. Your line is open. Hi, good morning.

Steven Isaac Fleishman: Thanks, Steve.

Speaker Change: Our next question comes from Jeremy Tonet with J.P. Morgan Securities. Your line is open.

Jeremy Bryan Tonet: Morning, Chairman. I wanted to pick up on the storm commentary. Thank you for the details today. Just pulling it all together, looking at your post-hurricane action plan in the items you laid out here, how do you feel about, I guess, how Houston Electric can respond to the next storm out there? Do you think you have the pieces in place now to see a better response, even if everything's not in place altogether? Just wondering how you guys think.

Jeremy Bryan Tonet: Hi, good morning.

Chairman: Good morning Chairman.

Jeremy Bryan Tonet: Wanted to pick up on the storm commentary. Thank you for the details today. Just, you know, pulling it all together, looking at your post-hurricane action plan in the items you laid out here.

Jeremy Bryan Tonet: How do you feel about, I guess, how Houston Electric can respond to the next storm out there? Do you think you have the pieces in place now to see a better response, even if everything's not in place altogether? Just wondering how you guys think you stand now.

Jason P. Wells: Yeah, no, thanks for the question. I, you know, I do feel confident. You know, as I mentioned yesterday in the Senate hearing, it offers no relief to the customers impacted by Beryl.

Speaker Change: Yeah, no, thanks for the question. I, you know, I do feel confident.

Speaker Change: You know, as I mentioned yesterday in the Senate hearing, it offers no relief to the customers impacted by barrel.

Jason P. Wells: You know, we were moving with pace and urgency after the DeRay show to move to a fully scalable outage tracker platform that would offer estimated times of restoration consistent with industry-leading practices, um, and had begun the work to overhaul our communications. That's why I feel confident that, you know, if a name storm threatens the Texas Gulf Coast region, we'll be in a much better position to communicate before, during, and after that storm.

Speaker Change: You know, we were moving with pace and urgency after the DeRay show to move to, you know, a fully scalable outage tracker platform.

Speaker Change: that would offer estimated times of restoration consistent with industry-leading practices and had begun the work to overhaul our communications.

Speaker Change: That's why I feel confident that, you know, if a name storm threatens the Texas Gulf Coast region, you know, we'll be in a much better position to

Jason P. Wells: I think giving our customers the information they unfortunately lack during Hurricane Beryl. But it's that work that we've been doing in advance that I think helps on the communication front, and then, equally, it offers no relief to the customers that experienced this pain during Beryl, but we have been working on bringing a lot of the innovative predictive modeling to target, Enhanced vegetation management, and resiliency investments for work, and that's why I'm confident that as we execute on the incremental resiliency commitments that we And so, you know, the last month has been tough on the city of Houston. We understand the role we play, but that's also why I have confidence looking ahead. I got it.

Speaker Change: Communitech

Speaker Change: before, during, and after that storm. I think giving our customers the information they unfortunately lacked during during Hurricane Beryl, but it's that work that we've been doing in advance that I think helps on the communication front and then

Speaker Change: Equally, it offers no relief to the customers that experience this pain during barrel, but we have been working on bringing a lot of the innovative predictive modeling to target

Speaker Change: Enhanced vegetation management and resiliency investments for work. And that's why I'm confident that as we execute on the incremental resiliency commitments that we've made to Governor Abbott and others.

Speaker Change: It will have a meaningful impact for our communities. And so, you know, the last month has been tough on the city of Houston. We understand the role we play, but that's also why I have confidence looking forward.

Jason P. Wells: Thank you for that. And then just to follow up here, you mentioned that 60% of the downfall came from outside of your right of way. What can you do about that going forward? And also, I guess, just the assets overall, how did the hardened assets perform during the hurricane? You know, just want to see what value you think has been delivered with kind of prior, you know, hardened Yeah, you know, it's, again, offers. No relief for customers, but we are seeing the value of resiliency investments. We saw very minimal structural damage on our transmission system substations.

Speaker Change: Got it. Thank you for that. And then just to follow up here, you mentioned that 60% of the downfall came from outside of your right-of-ways.

Speaker Change: What can you do about that going forward? And also, I guess, just the assets overall. How did the hardened assets perform during the hurricane? You know, just want to see what value you think has been delivered with with kind of prior, you know, hardening here.

Speaker Change: Yeah, you know, it's...

Speaker Change: again offers

Speaker Change: No relief to the customers, but we are seeing a value of resiliency investments.

Jason P. Wells: Strategically, it makes sense to put the first investments in the backbone of the system from a resiliency standpoint, some of the incremental sectionalization work and hardening of distribution circuits. And that work saved over 150,000 outages for the communities that we deployed it in. And so I think moving forward from a resiliency standpoint, it's the acceleration of that work on the distribution grid that will have the most meaningful impact on minimizing outages going forward.

Speaker Change: We saw very minimal structural damage on our transmission system substations, you know, and strategically, it makes sense to put the first investments in the backbone of the system from a resiliency standpoint. We've begun.

Speaker Change: Some of the incremental sectionalization work and hardening of distribution circuits and that work saved over 150,000 outages.

Speaker Change: and the communities that we deployed that. And so I think moving forward from a resiliency standpoint, it's the acceleration of that work on the distribution grid that we'll have.

Speaker Change: kind of the most meaningful impact to minimizing outages going forward. You know, the key issue, though, at the end of the day was...

Jason P. Wells: You know, the key issue, though, at the end of the day was that Candidly, there was little structural damage on the system, you know, it was less well, less than half a percent of our poles failed. But what really caused the outages were, as you pointed out, 60% of the trees impacting our lines were outside of our right-of-way. And candidly, we don't have any authority today to trim and manage those trees.

Speaker Change: Standardly, there was there was little structural damage on the system. You know, it was less, well less than even half a percent of our poles failed. But what really caused the outages were, as you pointed out,

Speaker Change: 60% of the trees impacting our lines were outside of our right-of-way and candidly we don't have any authority today to trim and manage those trees.

Jason P. Wells: We are doing the work to identify the trees that create those hazards. We are proactively trying to work with property owners to access that property and address those trees, which, you know, are a safety issue, obviously, for the... For the residential homeowner, as an example, a tree could easily, just as easily fall into their home as it could into the power line. But we don't have authority today unless it is granted by the homeowner.

Speaker Change: We are doing the work to identify the trees that create those hazards. We are proactively trying to work with property owners.

Speaker Change: to access that property and address those trees,

Speaker Change: For the residential homeowner, as an example, a tree could easily, just as easily, fall into their home as it could into the power line, but we don't have authority today, unless granted by the homeowner, and so looking to work with

Jason P. Wells: And so I'm looking to work with you know, community leaders, our regulators, elected officials to make sure that we can continue to work at pace to address this vegetation that threatens our system moving forward. Got it, thank you for that. And our next question comes from Nicholas Campanella with Barclays. Your line is open. Hey, good morning. Thanks for taking my questions this morning. I appreciate all the details.

Speaker Change: you know, community leaders, our regulators, elected officials, to make sure that we can continue to work at pace to address this vegetation that that threatens our system moving forward.

Speaker Change: Got it. Thank you for that.

Speaker Change: And our next question comes from Nicholas Campanella with Barclays. Your line is open.

Nicholas Joseph Campanella: Hey, good morning. Thanks for taking my questions this morning. I appreciate all the detail.

Nicholas Joseph Campanella: Morning. Just wanted to follow up, you know, as we kind of contemplate pulling forward some of this equity from 25 into 24. And then you also talked about doing this equity content financing as well. I know you talked about some kind of one-time issues in the trailing 12 month FFOTA debt, but where do you think you kind of end up at the base year, just based on the current plan today? Sure, good morning.

Nicholas Joseph Campanella: Morning. Just wanted to follow up, you know, as we kind of contemplate pulling forward some of this equity into from 25 into 24 and then you also talked about doing this equity content financing as well.

Speaker Change: I know you talked about some kind of one-time issues in the trailing 12-month FFOTA debt. Where do you think you kind of end at the base year just based on the current plan today?

Christopher A. Foster: I think if you saw this report this morning, as you can imagine, some of this is just the differing methodologies. But from this standpoint, in the S&P methodology, there's the assumption that the securitization proceeds do come through, right, which moves us up to well above the downgrade threshold, up to 12.9%. At Moody's, they treat it slightly differently.

Speaker Change: Sure, good morning. I think if you saw this report this morning, as you can imagine, some of this is just the differing methodologies.

Speaker Change: From this standpoint, in the S&P methodology, there's the assumption that the securitization proceeds do come through, right, which moves us up to well above the downgrade threshold, up to 12.9%.

Speaker Change: At Moody's, right, they treat it slightly differently, so it takes us from that roughly 14 to 13.3 where we are this morning.

Speaker Change: I do have to emphasize, though, Nick, keep in mind that last year this was the same situation. This is a bit of a trough that occurs in Q2.

Christopher A. Foster: So it takes us from that roughly 14 to 13.3, where we are this morning. I do have to emphasize, though, Nick, keep in mind that last year, this was the same situation. This is a bit of the trough that occurs in Q2 before we pick back up. And we've got a one-time item that we believe in Q3 that you'll be able to see come through further improving FFO to debt. Hard for me to be specific about year-end, but just you can imagine where we are at this point. It's really the transitory Impact here of the time period that will pass between now and the securitization proceeding. Okay, thanks for that.

Speaker Change: Before we pick back up and we've got a one-time item that we

Speaker Change: I believe in Q3 that you'll be able to see come through further improving FFO to debt. Hard for me to be specific about year-end, but just you can imagine where we are at this point. It's really a transitory impact here of the time period that will pass between now and the securitization proceeds.

Nicholas Joseph Campanella: And then I guess you spoke about kind of doubling some of the labor efforts around the tree trimming. Just can you remind us because you do have this one to 2%, I think it's an O&M reduction forecast in the long-term plan. Does that need to be kind of reassessed? Can you kind of execute on that even net of these veg management increases? And just how do we think about that?

Speaker Change: Okay, thanks for that. And then I guess just you spoke about kind of doubling some of the labor efforts around the tree trimming.

Speaker Change: Just can you remind us because you do have this one to two percent

Speaker Change: I think it's an O&M reduction forecast in the in the long-term plan. Does that need to be kind of reassessed? Can you kind of execute on that even net of these veg management increases and just how do we kind of think about that? Does that stuff get deferred? I'll leave it there. Thanks.

Christopher A. Foster: Does that stuff get deferred? I'll leave it there. Thanks. Thanks for the question, Nick. I think, you know, we continue to see opportunities to drive efficiency in our O&M practices to help support that overall one to two percent reduction in O&M. We continue to highlight, as we have in the past, a classic example of that is the benefit of deploying smart, you know, the next generation of smarter meters on the gas side.

Speaker Change: Thanks for the question, Nick. I think, you know, we continue to see opportunity.

Speaker Change: to drive efficiency in our O&M practices to help support that overall 1-2% reduction in O&M.

Speaker Change: You know, we continue to highlight, as we have in the past, a classic example of that is the benefit of deploying smart, you know, the next generation of smarter meters on the gas side.

Christopher A. Foster: So we see plenty of opportunity to continue to be efficient, which is, I think, obviously, and in our customer's interest, but also helps free up some opportunity to accelerate in other areas, you know, and as I highlighted, we proactively increased our vegetation management over 30% last year in 2023. And we still achieve that one to 2% reduction year over year in 23.

Speaker Change: We increased proactively our vegetation management over 30% last year in 2023, and we still achieve that 1-2% reduction year-over-year in 2023. We will always make the investment that's needed to...

Christopher A. Foster: You know, we will always make the investment that's needed to drive improvement and service. But I still feel like we've got a number of opportunities across, you know, the full scope of the company's operations to achieve on a consolidated basis that one to 2% O&M reduction. That's helpful. Thanks so much.

Speaker Change: drive an improvement in service, but I still feel like we've got a number of opportunities across the full scope of the company's operations to achieve on a consolidated basis that 1-2% O&M reduction.

Speaker Change: That's helpful. Thanks so much.

Durgesh Chopra: And our next question comes from Durgesh Chopra with Evercore. Your line is open. Hey, team. Good morning.

Speaker Change: And our next question comes from Durgesh Chopra with Evercore. Your line is open.

Durgesh Chopra: Thank you for giving me time. I just, I think, Chris, you mentioned 2% increase in distribution spending. I have two questions related to that. First, the confidence level of 1.6 to 1.8 billion. I guess where I'm getting at with that is, have you basically taken a deep dive into your costs? Are you still incurring costs? And the number could be significantly higher.

Durgesh Chopra: Hey team, good morning. Thank you for giving me time. I think, Chris, you mentioned 2% will increase from the securitization of the distribution spending. I have two questions related to that. First,

Christopher A. Foster: That's one. And second, what that 2% is over, you're assuming, I guess, cost recovery over a time frame, over multiple years. Maybe just if you could elaborate on that, please.

Speaker Change: The confidence level in 1.6 to 1.8 billion, I guess where I'm getting at with that is

Speaker Change: Have you basically taken a deep dive of your costs, are you still incurring costs and the number could be significantly higher?

Speaker Change: That's one. And second, what that 2% is over, you're assuming, I guess, cost recovery over a time frame, over multiple years. Maybe just, just if you could elaborate on that, please. Thank you.

Christopher A. Foster: Thank you. Sure thing, happy to. Good morning, Durgesh.

Speaker Change: Sure thing. Happy to. Good morning, Durgesh. I think there's really two pieces there.

Speaker Change: The first is, I'll hit the second one first in terms of time frame. At this stage, we would be compiling the costs. The thing to keep in mind is that the existing construct in the state does allow for the entity to combine events that occur, including multiple events over a calendar year.

Christopher A. Foster: I think there are really two pieces here. I think the first is, I'll hit the second one first, in terms of time frame. At this stage, we would be compiling the costs. The thing to keep in mind is that the existing construct in the state does allow for the entity to combine events that occur, including multiple events over a calendar year, into one securitization. So, again, we would seek to file that and ultimately assume, in this situation, a end of year 2025 time frame for recoveries there as it relates to the overall kind of profile itself.

Speaker Change: into one securitization. So again, we would seek to file that and ultimately assume at this case, in this situation, end of year 2025 timeframe for recoveries there.

Speaker Change: as it relates to the overall kind of

Christopher A. Foster: The thing to keep in mind here is that we do already have a good feel for the asset base costs associated with both the derecho and hurricane barrel. The primary driver beyond that is, most commonly, labor costs, right?

Speaker Change: profile itself, the thing to keep in mind here is that we do already have a good feel of the asset base costs associated with both the derecho and hurricane barrel.

Christopher A. Foster: The cost associated with nearly 15,000 individuals that were doing work on our system. And so we do have a pretty good feel for how those costs are forecasted at this stage, which informs the disclosure this morning at the high end of $1.8 billion. So again, it's going to be a somewhat similar profile, just given the crews and the associated contracts are very similar to what we saw in the situation with the derecho, and we're well over 75% of those costs already in. So it gives us confidence to inform the profile that you see today. Excellent. Thank you.

Speaker Change: The primary driver beyond that is most commonly the labor costs, right? The cost associated with nearly 15,000 individuals that were doing work on our system. And so, we do have a pretty good feel of how those are forecasted at this stage, which informs the disclosure this morning at the high end of $1.8 billion. So, again, it's going to be a somewhat similar.

Speaker Change: Profile, just given the crews and the associated contracts are very similar as to what we saw in the situation with the derecho and we're well over 75% of those costs already in. So it gives us confidence to inform the profile that you see today.

Christopher A. Foster: Just one quick clarification, Chris. The 2%, I think you mentioned the 2% impact on customer bills. I guess where I was going with the timeframe is that assumes that $1.8 billion is collected over how many years? Sure. Traditionally, the statutory requirement in Texas, it's 15 years.

Speaker Change: Excellent, thank you. Just one quick clarification, Chris. The 2%, I think you mentioned the 2% impact on customer bills. I guess where I was going with the time frame is that assumes that $1.8 billion is collected over how many years?

Speaker Change: Sure. Traditionally, in the statutory requirement in Texas, it's 15 years.

Christopher A. Foster: Thank you. I appreciate the time. Sure thing. Our next question comes from David Arcaro with Morgan Stanley. Your line is open. Good morning, David. Good morning. I'm wondering if you might be able to comment on the legislative outlook from here. I'm curious if there are... Just any ideas.

Speaker Change: Thank you. I appreciate the time.

Chris: Sure thing.

Speaker Change: Our next question comes from David Arcaro with Morgan Stanley . Your line is open.

David Keith Arcaro: Oh, hey, good morning. Thanks for taking my questions.

David Keith Arcaro: Good morning, David. Good morning. I'm wondering if you might be able to comment on the legislative outlook from here. I'm curious if there are legislative initiatives that you might pursue or support.

Speaker Change: Just any ideas that are maybe being explored by lawmakers in the state to help improve resiliency.

David Keith Arcaro: Yeah, I mean, a couple of the topics that came up early on or were consistent with the Foster Foundation and the L.A. Department of Health and the Department of Health and Human Services. So I'm going to go through the list of my previous discussion around vegetation management is there. I think the question is, you know, does the state of Texas need to do something different to be able to attack these hazardous trees that are outside of right-of-ways and do so in a manner that, you know, is obviously constructive with property owners? I think that's obviously a place to look.

David Keith Arcaro: Yeah, I mean, a couple of the...

Speaker Change: topics that have come up early on or

Speaker Change: sort of consistent with.

Speaker Change: my previous

Speaker Change: Discussion around vegetation management. I think the question is, you know, does the state of Texas, do we need to do something different to be able to attack these hazard trees that are outside of right-of-ways and do so in a manner that, you know, is obviously constructive with property owners? I think that's obviously a place to look. The other thing that's come up is

Jason P. Wells: The other thing that's come up is sort of the unique aspect of the market here in Texas, the fact that we have a service relationship with customers but not a commercial relationship. It's, at the end of the day, inexcusable that we don't have customer contact information at each address since we have that service-related responsibility. And there may be something around that as well.

Speaker Change: sort of the unique aspect of the market here in Texas, the fact that we have a service relationship with customers, but not a commercial relationship.

Speaker Change: You know, there it's.

Speaker Change: At the end of the day, inexcusable that we don't have customer contact information.

Speaker Change: at each address, since we have that service-related responsibility. And, you know, there may be something around that as well. Clearly, yesterday, there was a lot of feedback on mobile generation.

Jason P. Wells: Clearly, yesterday, there was a lot of feedback on, [inaudible] You know, right now, we want to be constructive with the policy objectives of the state. As I mentioned in the Senate hearing, we have an order by the PCT that we cannot allow a customer to go more than 12 hours without power in a load shed event. Those assets are necessary to comply with that order.

Speaker Change: Right now, we want to be constructive with the policy objectives of the state.

Speaker Change: As I mentioned in the Senate hearing, we have an order by the PECT that we cannot allow a customer to go more than 12 hours without power in a load shed event.

Jason P. Wells: But if policymakers want to change that direction, obviously, we will work to support the policy direction of the state. So there's a lot of different things being discussed now, and I think that they will, the rest of the year, and they obviously at the start of the legislative session next year. Okay. That's helpful. Thanks.

Speaker Change: Those assets are necessary to comply with that order, but if policymakers want to change that direction, obviously, we will work to support the policy direction of the state. So there's a lot of different things being discussed now, and I think that they will

Speaker Change: come into, you know, greater focus as we approach the end of the year and they obviously the start of the legislative session next year.

David Keith Arcaro: And maybe, Chris, just wondering if you might be able to clarify, is there a target for when you would expect the effort to get back to the State of the Union? I mean, we've been talking about this for a while, but is there a target for when you would expect the effort to get back to the State of the Union?

Speaker Change: Okay, that's helpful. Thanks. And maybe, Chris, just wondering if you might be able to clarify, is there a target for when you would expect to get back, the FFO to debt level, you would expect to get back into the target range and get above 14%?

Christopher A. Foster: I'm not sure I can answer that. I think it's a little bit of a question of time. And I'm not sure if I'm answering that correctly, but I'm wondering if you could clarify. Sure thing. I think, Sure, David, I think what you'll see there naturally is that you'll have the adjustment upward from S&P that will take place, and then Moody's does so upon receipt of proceeds again. So you'd be looking at roughly Q4 of next year in this timeframe. And the next question comes from Julien Dumoulin-Smith with Jeffries. Your line is open.

Chris: for example at Moody's. Sure thing.

Speaker Change: Sure, David. I think what you'll see there naturally is that you'll have the adjustment upward from S&P that will take place, and then Moody's does so upon receipt of proceeds again, so you'd be looking at roughly Q4 of next year in this timeframe.

David Keith Arcaro: Okay, understood. Thanks so much.

Speaker Change: And the next question comes from Julien Dumoulin-Smith with Jeffries. Your line is open.

Julien Patrick Dumoulin: Hey, good morning, team. Thank you guys for your time. I hope you guys are hanging in there. Just maybe on the puts and takes, obviously, you talked about some of the accelerated equity here on 24. Just can we talk a little bit about your thoughts on the positive offsets here to the pressure points, whether it's additional OPEX in the form of these storms, you know, to the extent to which they're realized, the extent to which that there's any realized interest expense or ultimately just lost sales. How do you think about the good guys and the bad guys and the offsets there to maintain the outlook here in the very near term? Oh, sure thing, Julien.

Julien Patrick Dumoulin: Hey, good morning team. Thank you guys for the time. I hope you guys are hanging in there.

Julien Patrick Dumoulin: Just maybe on the puts and takes, obviously you talked about some of the accelerated equity here on 24. Just can we talk a little bit about your thoughts on the the positive offsets here to the pressure points, whether it's an additional OPEX?

Speaker Change: in the form of these storms, you know, to the extent to which realized, the extent to which that there's any realized interest expense or ultimately just lost sales. How do you think about the good guys and bad guys and the offset there to maintain the outlook here in the very near term?

Christopher A. Foster: In the very near term, as you can imagine, right, there was a usage impact associated with the storm itself. We also had a situation where we were, you know, having to adjust work temporarily as it related to the literal storm response and restoration, but ultimately, as we're looking through the remainder of the year, as you saw, and we reaffirmed this morning, gives us confidence that we've got both those two things going on. One, the ability of mutual aid and other crews who joined our colleagues to really effectively work to restore customers quickly.

Speaker Change: Oh, sure thing, Julien. In the very near term, as you can imagine, right, there was a usage impact associated with the storm itself.

Speaker Change: We also had a situation where we were, you know, having to adjust work temporarily as it related to the literal storm response and restoration. But ultimately, as we're looking through the remainder of the year, as you saw, we reaffirmed this morning, gives us confidence that we've got both two things going on. One, the ability for the mutual aid and other crews who joined our colleagues to really effectively work to restore customers quickly.

Christopher A. Foster: But also, as I mentioned, we have been able to retain confidence in achieving the base CapEx plan as well. So net of the different factors, including interest expense, we're confident that we're still able to reaffirm this morning. All right, fair enough. And then just coming back to the mobile gen, I mean, that's been getting a certain amount of attention here. And obviously, perhaps they were contemplated for a slightly different circumstance.

Speaker Change: but also, as I mentioned, we have been able to retain confidence in achieving the base CapEx plan as well. So, net of the different factors, including interest expense, we're confident that we're still able to reaffirm this morning.

Speaker Change: All right, fair enough. And then just coming back to the mobile gen, I mean, that's been getting a certain amount of attention here, and obviously, perhaps they were...

Jason P. Wells: How do you think about developing a more refined program here to target more of these localized distribution related outages with the vegetation management issues that you've encountered here? And ultimately, how does this work in, because of which you evaluate this or otherwise, into a revised timeline on the resiliency filing here? I know that there are various permutations there as well.

Speaker Change: Contemplated for a Slightly Different Circumstance, how do you think about developing a more refined program here to target

Speaker Change: more of these localized distribution-related outages with the vegetation management issues that you've encountered here. And ultimately, how does this work in, because of which you evaluate this or otherwise, into a revised timeline on the resiliency filing here? I know that there's various permutations there as well.

Jason P. Wells: Yeah, I mean, I strongly believe we have the most comprehensive mobile gen program consistent with what has been asked of us by the state and its policy objectives. You know, the legislation was passed in 2021, and there was a focus on load shed events. Those are sort of larger units tied to substations. And as I mentioned yesterday, there have been 115 instances since that legislation started to be discussed where there were tight system conditions on our cotton systems.

Speaker Change: Yeah, I mean I I strongly believe we have the most comprehensive mobile gen program.

Speaker Change: consistent with what has been asked.

Speaker Change: [inaudible]

Speaker Change: of us by the state and its policy objectives. You know, the legislation was passed in 2021 and there was a focus on load shed events. Those are sort of larger units tied to substations. And as I mentioned yesterday, there's been 115 instances since that legislation started to be discussed where...

Jason P. Wells: Those units may be utilized. We utilized one of the medium-sized units in 2021 for storm restoration and got a significant amount of pushback, and I think the legislature clarified that in 2023. And as soon as we got that clarification in the fall of 2023, we increased the number of small units. And so I'm proud that we were able to scale to 18 small units out of a total of 30, the other 12 we borrowed from our utility peers to be part of the storm response.

Speaker Change: There were tight system conditions on our cotton, those systems, those...

Speaker Change: For that clarification, in the fall of 2023, we increased the number of small units.

Speaker Change: And so I'm proud that we were able to scale to 18 small units.

Speaker Change: Out of a total of 30, the other 12 we borrowed from our utility peers.

Jason P. Wells: And so, as I said yesterday, we manage a number of different risks, whether those are load shed events or storm response. We've got a portfolio of assets to kind of meet those needs. Now, obviously, as I said, if the policy objectives of the state change, we will change with them. But I think, you know, today we are maintaining a diversified portfolio for the diversified set of risks that we're that we manage. Operator, I think we're gonna have time for one more question. Okay, and our last question will come from Anthony Crowdell with Mizuho. Your line is now open.

Speaker Change: to be part of the storm response. And so, as I said yesterday, we manage a number of different risks, whether those are load shed events or storm response, we've got a portfolio of assets to kind of meet those needs. Now, obviously, as I said, if the policy objectives of the state change, we will change with them. But

Speaker Change: I think today we are maintaining a diversified portfolio for the diversified set of risks that we manage.

Speaker Change: Operator, I think we're going to have time for one more question.

Speaker Change: Okay, and our last question will come from Anthony Crowdell with Mizuho. Your line is now open.

Anthony Christopher Crowdell: Hey, thanks for squeezing me in. I appreciate it. Just two quick ones.

Anthony Christopher Crowdell: Hey, thanks for squeezing me in. I appreciate it. Just two quick ones. I'm not sure if one was answered. If I look on slide three and the plan and everything else, if I remember correctly, your system resiliency plan...

Speaker Change: was between 2.2 and 2.7 billion, 2.2 was the base case, can what's on slide 3 be accomplished as a 2.7 billion dollar number, or that would be...

Anthony Christopher Crowdell: I'm not sure if one was answered. If I look at slide three and the plan and everything else, if I remember correctly, your system resiliency plan was between $2.2 and $2.7 billion. $2.2 was the base case. Can what's on slide three be accomplished as a $2.7 billion number? Or that would be, above the $2.7 billion number? Anthony, morning. I was thinking about it within the $2.7 billion number.

Christopher A. Foster: Keep in mind that we provide that higher end as an articulation of the ability to accelerate some work. And that's really what you're seeing here, a pretty aggressive acceleration here in 2024 to make sure we're doing more work on the system.

Speaker Change: above the $2.7 billion number.

Anthony Christopher Crowdell: Anthony Mourning, I would think about it within the 2.7. Keep in mind that we provide that higher end as an articulation of the ability to accelerate some work and that's really what you're seeing here is a pretty aggressive acceleration here in 2024 to make sure we're doing more work on the system.

Anthony Christopher Crowdell: And then follow up to an earlier question, you guys identified a lot of the outages occurred due to, I think, trees that are on your customer's property; you guys didn't really have any responsibility over them. I mean, does undergrounding become more of a solution in your service territory than maybe years past? Yeah, thanks, Anthony. It's a great question.

Speaker Change: Great, and then follow up to an earlier question, you guys identified a lot of the outages.

Speaker Change: on, you know, customer's property, you guys didn't really have any responsibility over it. I mean, does undergrounding become more of a solution in your service territory than maybe years past?

Jason P. Wells: I think one where there's certainly going to be a greater push for undergrounding, and it will probably play an even more prominent role in our resiliency efforts going forward. But, you know, what I think is important as well as to kind of balance it, about 60% of our customers today receive service through underground lines. You know, it's a pretty significant penetration of undergrounding already, and the system. But you know, the point of weakness is that those communities are often fed with overhead lines kind of at the feeder level. That's where we saw the tree damage.

Speaker Change: Yeah, thanks, Anthony. It's a great question, and I think one where there's certainly going to be a greater push for undergrounding, and it will play probably an even more prominent role in our resiliency efforts going forward. But, you know, what I think is important as well is to kind of balance it.

Speaker Change: About 60% of our customers today receive service through underground lines.

Speaker Change: You know, it's a pretty significant penetration of undergrounding already.

Speaker Change: in the system. But, you know, the point of weakness is those communities are often fed with overhead lines kind of at the feeder level. That's where we saw the tree damage. And so I think we have to find a balance.

Jason P. Wells: And so, I think we have to find a balance between undergrounding where it makes sense and where we have overhead lines, making sure that they are hardened and more resilient, so that they're not the single point of failure, so to speak, from an outage standpoint. So it's, it's, it's a little bit of all of the above, but I would imagine that undergrounding takes an even greater prominence within forward. Great. Thanks for taking my question. Thanks. I'm a great operator with that.

Speaker Change: between undergrounding where it makes sense and where we have overhead lines making sure that they are hardened and more resilient.

Speaker Change: So that they're not the single point of failure, so to speak, from an outage standpoint. So it's a little bit of an all of the above, but I would imagine that undergrounding takes an even greater prominence moving forward.

Speaker Change: Great. Thanks for taking my questions.

Unknown Executive: That will now conclude our Q&A for the day. Appreciate everyone dialing in. I think with that, we'll conclude the call. This concludes CenterPoint Energy second quarter 2024 earnings conference call. Thank you for your participation and have a good day. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] Good morning and welcome to CenterPoint Energy second quarter 2024 earnings conference call with senior managers. During the company's prepared remarks, all participants will be in a listen-only mode.

Speaker Change: Thanks, Jennifer. Great. Operator, with that, that will now conclude our Q&A for the day. Appreciate everyone dialing in. I think with that, we'll conclude the call.

Unknown Executive: There will be a question and answer session after management's remarks. To ask a question, please press star 11 on your touchtone keypad. I will now turn the call over to Jackie Richert, Senior Vice President of Corporate Planning, Investor Relations, and Treasurer.

Jacqueline M. Richert: Good morning, and welcome to CenterPoint Energy's second quarter 2024 earnings conference call. Jason Wells, our CEO, and Chris Foster, our CFO, will discuss the company's second quarter 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 upon various factors, as noted in our Form 10-Q, other SEC filings, and our earnings materials.

Speaker Change: This concludes CenterPoint Energy second quarter 2024 earnings conference call. Thank you for your participation and have a good day.

Speaker Change: www.centerpointenergy.com

Speaker Change: Thank you for watching.

Speaker Change: www.CenterPointEnergy.com www.CenterPointEnergy.com

Jacqueline M. Richert: We undertake no obligation to revise or update publicly any forward-looking statements. We will be discussing certain non-GAAP measures on today's call. For example, 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.

Speaker Change: Good morning and welcome to CenterPoint Energy second quarter 2024 earnings conference call with senior management. During the company's prepared remarks, all participants will be in a listen only mode.

Speaker Change: There will be a question and answer session after management's remarks. To ask a question, please press star 11 on your touchtone keypad.

Jacqueline M. Richert: For information on our guidance methodology and reconciliation of the non-GET measures discussed on this call, please refer to today's news release and presentation on our website. We use our website to announce material information. This call is being recorded.

Jacqueline M. Richert: I will now turn the call over to Jackie Richert, Senior Vice President of Corporate Planning, Investor Relations, and Treasurer. Ms. Richert?

Jacqueline M. Richert: Information on how to access the replay can be found on our website. Now, I'd like to turn the call over to Jason. Thank you, Jackie, and good morning, everyone. Before spending most of my time discussing the impacts of and our response to Hurricane Barrel, I will very briefly touch on our results for the second quarter. I'll then turn it over to Chris for a regulatory update and a more detailed recap of our financial results. For the second quarter, we reported gap and non-gap EPS of 36 cents per share.

Speaker Change #100: Good morning and welcome to CenterPoint Energy's second quarter 2024 earnings conference call. Jason Wells, our CEO , and Chris Foster, our CFO , will discuss the company's second quarter results.

Jason P. Wells: In addition, we are reaffirming our full-year 2024 non-GAP EPS guidance range of $1.61 to $1.63. Beyond 2024, we are also reaffirming our long-term guidance, where we expect to grow non-GAP UPS and dividend per share growth at the mid to high end of our 6% to 8% range annually through 2030. Now, to turn to our primary area of focus. Earlier this month, Hurricane Beryl impacted our entire 5,000-square-mile service territory in the Greater Houston area, causing power outages for nearly 2.3 million of our customers, or approximately 80% of our Houston electric customer base.

Speaker Change #101: 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.

Speaker Change #101: Actual results could differ materially, based upon 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 statements.

Speaker Change #101: We 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.

Speaker Change #101: For information on our guidance methodology and reconciliation of the non-GET measures discussed on this call, please refer to today's news release and presentation on our website.

Speaker Change #101: 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 the call over to Jason.

Jason P. Wells: Thank you, Jackie, and good morning, everyone. Before spending most of my time discussing the impacts of and our response to Hurricane Vero, I will very briefly touch on our results for the second quarter. I'll then turn it over to Chris for a regulatory update and a more detailed recap of our financial results.

Speaker Change #103: For the second quarter, we reported gap and non-gap EPS of 36 cents per share.

Speaker Change #103: In addition, we are reaffirming our full year 2024 non-GAAP EPS guidance range of $1.61 to $1.63.

Speaker Change #103: Beyond 2024, we are also reaffirming our long-term guidance, where we expect to grow non-gap UPS and dividend-per-share growth at the mid-to-high end of our 6% to 8% range annually through 2030.

Speaker Change #104: Now, to turn to our primary area of focus. Earlier this month, Hurricane Beryl impacted our entire 5,000-square-mile service territory in the greater Houston area, causing power outages for nearly 2.3 million of our customers, or approximately 80% of our Houston electric customer base.

Jason P. Wells: We began tracking Hurricane Beryl and preparing for a possible impact nine days before Beryl made landfall. However, initial forecasts showed that our service area in Greater Houston would be spared a direct impact by the worst of the hurricane.

Speaker Change #104: We began tracking Hurricane Beryl and preparing for a possible impact nine days before Beryl made landfall. Initial forecasts showed that our service area in Greater Houston would be spared a direct impact by the worst of the hurricane. Nonetheless, we remained vigilant and planned for impact.

Jason P. Wells: Nonetheless, we remain vigilant and plan for impact. We initially secured 3,000 mutual assistance crew members from locations safely outside of the projected path of the storm. We also coordinated with utilities across Texas and the region to ensure resource availability. As the forecast trajectory changed, we quickly called on additional mutual assistance resources, ultimately activating and deploying over 15,000 CenterPoint mutual assistance crew members. Early in the morning on Monday, July 8th, Hurricane Beryl made landfall as a powerful Category 1 hurricane with heavy rains, flooding, and up to 97 mile-hour winds that reached further inland than any storm experienced in Houston since 1983.

Speaker Change #104: We initially secured 3,000 mutual assistance crew members from locations safely outside of the projected path of the storm. We also coordinated with utilities across Texas and the region to ensure resource availability.

Speaker Change #104: As the forecast trajectory changed, we quickly called on additional mutual assistance resources, ultimately activating and deploying over 15,000 CenterPoint mutual assistance crew members.

Speaker Change #104: Early in the morning on Monday, July 8th, Hurricane Beryl made landfall as a powerful Category 1 hurricane with heavy rains, flooding, and up to 97 mile-hour winds that reached further inland than any storm experienced in Houston since 1983.

Jason P. Wells: As part of our response, we restored power to over 1 million customers within 48 hours, replaced over 3,000 distribution poles on our system, walked over 8,500 circuit miles to repair damage, and deployed mobile generators at 28 sites across the greater Houston area to various critical facilities. Impacts to our distribution lines and facilities from vegetation, such as uprooted trees and related debris carried by the very high winds, were the primary cause of customer outages. In recent years, trees in the Houston area have been weakened due to a combination of high rainfall, prior drought conditions, as well as winter freezes.

Speaker Change #104: As part of our response, we restored power to over 1 million customers within 48 hours.

Speaker Change #105: replaced over 3,000 distribution poles on our system, walked over 8,500 circuit miles to repair damage, and deployed mobile generators at 28 sites across the greater Houston area to various critical facilities.

Speaker Change #105: Impacts to our distribution lines and facilities from vegetation, such as uprooted trees and related debris carried by the very high winds, were the primary cause of customer outages.

Speaker Change #104: In recent years, trees in the Houston area have been weakened due to a combination of high rainfall, prior drought conditions, as well as winter freezes.

Jason P. Wells: We trimmed or removed approximately 35,000 trees during our restoration process. Through discussion with one of our largest vegetation management companies, 60% of the vegetation it removed were trees that had fallen from outside of our rights-of-way. Over the last 18 months, we proactively worked to address the challenges these conditions present to our distribution system through increased vegetation management. In fact, in 2023, our Houston electric business increased its vegetation management spend by over 30% from the prior year.

Speaker Change #104: We trimmed or removed approximately 35,000 trees during our restoration process.

Speaker Change #106: Through discussion with one of our largest vegetation management companies, 60% of the vegetation it removed were trees that had fallen from outside of our rights-of-way.

Speaker Change #106: Over the last 18 months, we proactively worked to address the challenges these conditions present to our distribution system through increased vegetation management. In fact, in 2023, our Houston Electric business increased its vegetation management spend by over 30% from the prior year.

Jason P. Wells: We continue to operate and invest at a similar, higher level of vegetation management as we recognize the impacts of the challenging growing seasons experienced in the Houston area over the last three years and the resulting threat they could have on our lines and infrastructure. In addition, Hurricane Beryl's destructive winds, in combination with already weakened trees, highlighted not only the urgency with which we need to execute on our vegetation management plan but also its scope.

Speaker Change #106: We continue to execute and invest at a similar higher level of vegetation management as we recognize the impacts of the challenging growing seasons experienced in the Houston area over the last three years and the resulting threat they could have on our lines and infrastructure.

Speaker Change #106: In addition, Hurricane Beryl's destructive winds in combination with already weakened trees highlighted not only the urgency with which we need to execute on our vegetation management plan, but also the scope.

Jason P. Wells: As a result, we have doubled our vegetation management resources and are aggressively tackling the riskier line miles with trees nearby. We will trim or remove trees related to an incremental 2,000 miles of our system by December 31st of this year.

Speaker Change #106: As a result, we have doubled our vegetation management resources and are aggressively tackling the riskier line miles with trees nearby.

Speaker Change #106: We will trim or remove trees related to an incremental 2,000 miles of our system by December 31st of this year. This represents a nearly 50% increase compared to our planned work for 2024.

Jason P. Wells: This represents a nearly 50% increase compared to our planned work for 2024. The vegetation work we have begun is only a part of a more comprehensive plan to improve customer outcomes and directly address the customer concerns and frustrations voiced with respect to critical aspects of our emergency response. This plan will also help us better prepare our response in key areas to future storms or hurricanes. I will walk through the three pillars of our comprehensive action plan to address our customers' concerns.

Speaker Change #106: The vegetation work we have begun is only a part of a more comprehensive plan to improve customer outcomes and directly address the customer concerns and frustrations voiced with respect to critical aspects of our emergency response.

Speaker Change #106: This plan will also help us better prepare our response in key areas to future storms or hurricanes.

Speaker Change #106: I will walk through the three pillars of our comprehensive action plan to address our customers' concerns.

Jason P. Wells: Our first pillar relates to our resiliency investment. By accelerating the adoption of advanced construction standards, retrofitting existing assets on an accelerated basis, and using predictive modeling and AI, as well as other advanced technologies, we will harden our distribution system to help withstand more extreme weather and improve the speed of restoration.

Speaker Change #106: Our first pillar relates to our resiliency investments.

Speaker Change #106: By accelerating the adoption of advanced construction standards, retrofitting existing assets on an accelerated basis, and using predictive modeling and AI, as well as other advanced technologies, we will harden our distribution system to help withstand more extreme weather and improve the speed of restoration.

Jason P. Wells: This is in addition to proactive steps we took nearly two years ago when we moved to constructing at the new national standard for high wind and extreme ice loading. Second, we will build a best-in-class customer communications program. Since the derecho that impacted Houston in May, our outage tracker has not been available for our customers. The tracker we previously used was hosted on a physical server that was not able to accommodate the demand of millions of users at one time.

Speaker Change #106: This is in addition to proactive steps we took nearly two years ago when we moved to constructing at the new national standard for high wind and extreme ice loading.

Speaker Change #106: Second, we will build a best-in-class customer communications program.

Speaker Change #107: Since the derecho that impacted Houston in May, our outage tracker has not been available for our customers.

Speaker Change #107: The tracker we previously used was hosted on a physical server that was not able to accommodate the demand of millions of users at one time.

Jason P. Wells: To keep our communities informed, we provided daily restoration updates, but we understand that for many, this was insufficient. As one component of our Customer Communication Action Plan, we are launching a new, more customer-oriented outage tracker later this week. Our new outage tracker will help provide our customers with more of the information they need in a timely fashion. It will also be comparable to what our Texas Peer Utility customers experience. The new tracker is cloud-based, which will also allow us to scale to high levels of demand. Third, we will strengthen our partnerships with government and community leaders. Effective emergency preparedness and response requires close coordination with government officials.

Speaker Change #107: To keep our communities informed, we provided daily restoration updates, but we understand that for many, this was insufficient.

Speaker Change #107: As one component of our Customer Communication Action Plan, we are launching a new, more customer-oriented outage tracker later this week.

Speaker Change #107: Our new Outage Tracker will help provide our customers more of the information they need in a timely fashion.

Speaker Change #107: It will also be comparable to what our Texas Peer Utility customers experience.

Speaker Change #107: The new tracker is cloud-based, which will also allow us to scale to high levels of demand.

Speaker Change #107: Third, we will strengthen our partnerships with government and community leaders.

Speaker Change #107: Effective emergency preparedness and response requires close coordination with government officials.

Jason P. Wells: We will hire a seasoned emergency response leader to help the company rapidly accelerate its planning capabilities and to develop close community partnerships to help ease the burden of storm events on our more vulnerable community. We believe the work underlying these three pillars will support our efforts to build and operate a grid that meets the demands of one of the most dynamic economies in the United States here in Houston. The initial set of specific actions we are taking is laid out on slide three.

Speaker Change #107: We will hire a seasoned emergency response leader to help the company rapidly accelerate its planning capabilities and to develop close community partnerships to help ease the burden of storm events on our more vulnerable communities.

Speaker Change #107: We believe the work underlying these three pillars will support our efforts to build and operate a grid that meets the demands of one of the most dynamic economies in the United States here in Houston.

Speaker Change #107: The initial set of specific actions we are taking is laid out on slide 3.

Jason P. Wells: We will also be taking additional actions as we continue to learn from our internal reviews and external independent reviews, as well as through engagement with emergency response experts, our customers, elected officials, and community stakeholders. Our singular and overarching goal is to improve in every aspect of our emergency preparedness and response.

Speaker Change #107: We will also be taking additional actions as we continue to learn from our internal reviews and external independent review, as well as through engagement with emergency response experts, our customers, elected officials, and community stakeholders.

Speaker Change #107: Our singular and overarching goal is to improve in every area of our emergency preparedness and response.

Jason P. Wells: Whether it is before, during, or after any future storm, we will be better prepared to support, communicate with, and serve our customers in these times of emergency. As we begin to execute this initial plan, we will work to consistently provide updates on our progress. The men and women at CenterPoint go to work every day with an unrelenting focus on delivering safe, reliable, and resilient energy to our customers while also striving to improve their experience.

Speaker Change #107: Whether it is before, during, or after any future storm, we will be better prepared to support, communicate with, and serve our customers in these times of emergency.

Speaker Change #107: As we begin to execute this initial plan, we will work to consistently provide updates on our progress.

Speaker Change #107: The men and women at CenterPoint go to work every day with an unrelenting focus on delivering safe, reliable, and resilient energy to our customers, while also striving to improve their experience.

Jason P. Wells: We will continue to make customer-focused capital investments to achieve better outcomes for the nearly 3 million electric customers and over 4 million gas customers across our six-state footprint. And with that, I'll turn it over to Chris.

Speaker Change #107: We will continue to make customer-focused capital investments to achieve better outcomes for the nearly 3 million electric customers and over 4 million gas customers across our six-state footprint. And with that, I'll turn it over to Chris.

Christopher A. Foster: Thanks, Jason. Before I get into my updates, I want to echo Jason's gratitude to our customers and our communities. Our team is focused on improving our resilience and emergency response capabilities, and I will speak to our financial plan to support those efforts in my remarks today. Today, I'd like to cover three areas of focus.

Christopher A. Foster: Thanks, Jason. Before I get into my updates, I want to echo Jason's gratitude to our customers and our communities.

Christopher A. Foster: Our team is focused on improving our resilience and emergency response capabilities, and I will speak to our financial plan to support those efforts in my remarks today.

Christopher A. Foster: First, the details of our second quarter financial results and guidance. Second, I'll provide a brief update on the progress we're making on our regulatory calendar. Third, I'll touch on our capital deployment status for this quarter and forecasted storm costs. And finally, I'll provide an update on our financing plan. Again, as Jason noted, today we are reaffirming our full year 2024 non-GAP EPS guidance range of $1.61 to $1.63, which represents 8% growth at the midpoint from our 2023 actual results of $1.50.

Christopher A. Foster: Today I'd like to cover three areas of focus.

Christopher A. Foster: First, the details of our second quarter financial results and guidance.

Christopher A. Foster: Second, I'll provide a brief update of the progress we're making on our regulatory calendar.

Christopher A. Foster: Third, I'll touch on our capital deployment status this quarter and forecasted storm costs.

Christopher A. Foster: And finally, I'll provide an update on our financing plans.

Christopher A. Foster: Again, as Jason noted, today we are reaffirming our full year 2024 non-GAAP EPS guidance range of $1.61 to $1.63, which represents 8% growth at the midpoint from our 2023 actual results of $1.50.

Christopher A. Foster: Beyond 2024, we are also reaffirming our guidance where we expect to grow non-GAAP EPS at the mid to high end of the 6% to 8% range annually through 2030, as well as targeting dividend per share growth in line with earnings per share growth. Let's now move to the financial results shown on slide four. On a GAAP EPS basis, we reported $0.36 for the second quarter of 2024.

Christopher A. Foster: Beyond 2024, we are also reaffirming our guidance, where we expect to grow non-GAAP EPS at the mid-to-high end of the 6% to 8% range annually through 2030, as well as targeting dividend-per-share growth in line with earnings-per-share growth.

Speaker Change #109: Let's now move to the financial results shown on slide 4.

Speaker Change #109: On a GAAP EPS basis, we reported $0.36 for the second quarter of 2024.

Christopher A. Foster: On a non-GAAP basis, we also reported $0.36 for the second quarter of 2024, compared to $0.28 for the second quarter of 2023. Diving into more detail of the earnings drivers for the quarter, growth in rate recovery contributed 10 cents, which was primarily driven by the ongoing recovery from various interim mechanisms for which customer rates were updated last year, as well as the interim rates in our Minnesota gas business that went into effect on January 1 of this year.

Speaker Change #109: On a non-GAAP basis, we also reported $0.36 for the second quarter of 2024, compared to $0.28 in the second quarter of 2023.

Speaker Change #109: Diving into more detail of the earnings drivers for the quarter, growth and rate recovery contributed $0.10, which was primarily driven by the ongoing recovery from various interim mechanisms for which customer rates were updated last year, as well as the interim rates in our Minnesota gas business that went into effect on January 1 of this year.

Christopher A. Foster: In addition, the Houston area continues to see strong organic growth, extending the long-term trend of 1-2% average annual customer growth. This sustained growth has been beneficial for our customers and investors alike. O&M was two cents favorable for the quarter.

Speaker Change #109: In addition, the Houston area continues to see strong organic growth, extending the long-term trend of 1-2% average annual customer growth.

Speaker Change #109: This sustained growth has been beneficial for our customers and investors alike.

Christopher A. Foster: This favorable variance was driven primarily by the fact that we incurred more of our expenses in the first quarter and had some of our scheduled activities diverted to attend to restoration efforts related to the major HO storm. Partially offsetting the favorable items from rate recovery in O&M were unfavorable weather and increased interest expense. Weather and usage were one cent unfavorable when compared to the comparable quarter of 2023, driven primarily by a milder spring in our Minnesota gas service territory. Interest expense was six cents unfavorable, primarily driven by the new debt issuances since the first quarter of last year to fund customer-driven work across our electric and gas territories at a higher relative cost of debt.

Speaker Change #109: O&M was two cents favorable for the quarter. This favorable variance was driven primarily by the fact that we incurred more of our expenses in the first quarter and had some of our scheduled activities diverted to attend to restoration efforts related to the major HO storm.

Speaker Change #109: Partially offsetting the favorable items from rate recovery and O&M were unfavorable weather and increased interest expense.

Speaker Change #109: Weather and usage were one cent unfavorable when compared to the comparable quarter of 2023, driven primarily by a milder spring in our Minnesota gas service territory.

Speaker Change #109: Interest expense was six cents unfavorable primarily driven by the new debt issuances since first quarter of last year to fund customer driven work across our electric and gas territories at a higher relative cost of debt.

Christopher A. Foster: I now want to turn to an update on our broader regulatory calendar in progress, and I'll cover these sequentially from the dates file. Starting with Texas Gas, where last month we received Railroad Commission approval of our now final settlement. As a reminder, our four Texas gas jurisdictions will now be consolidated on a go-forward basis for our ongoing rate adjustments. This new consolidation should benefit many customers through a lower impact on their bills from certain investments and also a reduced administrative burden for other stakeholders. Moving next to the filed Minnesota gas rate case.

Speaker Change #109: I now want to turn to an update on our broader regulatory calendar in progress, and I'll cover these sequentially from the dates filed.

Speaker Change #109: Starting with Texas Gas, where last month we received Railroad Commission approval of our now final settlement.

Speaker Change #109: As a reminder, our four Texas gas jurisdictions will now be consolidated on a go-forward basis for our ongoing rate adjustments.

Speaker Change #109: This new consolidation should benefit many customers through a lower impact on their bills from certain investments and also a reduced administrative burden for other stakeholders.

Christopher A. Foster: And as a reminder, we filed our rate case on November 1st of last year. As discussed on the last call, the interim rates for 2024 were approved in mid-December and went into effect on January 1st. The Minnesota Commission will consider interim rates for 2025 toward the end of this year, depending on how far along we are in the case. Hearings are scheduled to occur in the middle of December of this year. Ahead of those hearings, we intend to engage in settlement discussions with parties involved in the case. And, as you may recall, we have settled our previous three raid cases in our Minnesota gas jurisdiction.

Speaker Change #109: Moving next to the filed Minnesota gas rate case.

Speaker Change #109: And as a reminder, we filed our rate case on November 1st of last year. As discussed on the last call, the interim rates for 2024 were approved in mid-December and went into effect on January 1st.

Speaker Change #109: The Minnesota Commission will consider interim rates for 2025 toward the end of this year, depending on how far along we are in the case.

Speaker Change #109: Hearings are scheduled to occur in the middle of December of this year.

Speaker Change #109: Ahead of those hearings, we intend to engage in settlement discussions with parties involved in the case.

Speaker Change #109: And as you may recall, we have settled our previous three rate cases in our Minnesota gas jurisdiction.

Christopher A. Foster: Now, turning to the Indiana electric rate case, we currently have a non-unanimous settlement pending approval. Hearings on this settlement will begin the first week of September, with the new statutory deadline for a final order of February 3rd. We look forward to continuing to work with stakeholders to achieve what we believe to be a reasonable outcome for all parties. Now, I'll touch on our largest jurisdiction, Houston Electric. Over the last month, we have been engaged with many stakeholders as part of settlement discussions in our pending rate case.

Speaker Change #109: Now, turning to the Indiana electric rate case, we currently have a non-unanimous settlement pending approval.

Speaker Change #109: Hearings on this settlement will begin the first week of September , with a new statutory deadline for a final order of February 3rd. We look forward to continuing to work with stakeholders to achieve what we believe to be a reasonable outcome for all parties.

Speaker Change #109: I'll now touch on our largest jurisdiction, Houston Electric.

Speaker Change #109: Over the last month, we have been engaged with many stakeholders as part of settlement discussions in our pending rate case.

Christopher A. Foster: Those discussions are ongoing, and we continue to provide regular updates to the ALJ in the case. In addition, as we execute on the actions we've laid out following Hurricane Beryl, we intend to work with stakeholders on how to amend our system resiliency plan with the PUCT. The process is fluid, but at this stage, we have abated the schedule on the underlying system resiliency plan, which all parties have agreed to. This allows us to take the coming months to reflect stakeholder input and additional potential system resiliency concepts that emerge from our After Action Review and the review at the PUCT. We currently anticipate filing a revised plan later in Q1 2025.

Speaker Change #109: Those discussions are ongoing, and we continue to provide regular updates to the ALJ in the case.

Speaker Change #109: In addition, as we execute on the actions we've laid out following Hurricane Beryl, we intend to work with stakeholders on how to amend our system resiliency plan with the PUCT.

Speaker Change #109: The process is fluid, but at this stage, we have abated the schedule on the underlying system resiliency plan, which all parties have agreed to.

Speaker Change #109: This allows us to take the coming months to reflect stakeholder input and additional potential system resiliency concepts that emerge from our AFTER Action Review and the review of the PUCT.

Speaker Change #109: We currently anticipate following a revised plan later in Q1 2025.

Christopher A. Foster: Lastly, I want to briefly mention that next month we will file a notice of intent for our upcoming rate case for our Ohio gas business, which is approximately $1.4 billion in rate base. Next, I'll touch on our capital investments thus far in 2024, as shown on slide six, including the anticipated impact of storm costs and their associated recovery. In the second quarter of 2024, we invested $800 million in base work for the benefit of our customers and communities. This excludes spending related to storm restoration.

Speaker Change #110: Lastly, I want to briefly mention that next month we will file a Notice of Intent for our upcoming rate case for our Ohio gas business, which is approximately $1.4 billion in rate base.

Speaker Change #110: Next, I'll touch on our capital investments thus far in 2024, as shown on slide 6, including the anticipated impact of storm costs and their associated recovery.

Christopher A. Foster: We now have a little less than 60% of our original 2024 capital expenditure target of $3.7 billion to be invested over the remainder of the year, excluding storm costs. We remain on track to meet our capital investment target despite the interruptions of normal capital deployment from the storms we've experienced this year. Maintaining our target as we consider a revised version of the resilience work is a reflection of the conservatism with which we plan each and every year. Although the cost invoicing is not final, total spending associated with the Maystorm events and Hurricane Beryl is currently estimated to be approximately $1.6 billion to $1.8 billion.

Speaker Change #110: We now have a little less than 60% of our original 2024 capital expenditure target of $3.7 billion to be invested over the remainder of the year, excluding storm costs.

Speaker Change #110: We remain on track to meet our capital investment target, despite the interruptions of normal capital deployment from the storms we've experienced this year.

Speaker Change #110: Maintaining our target as we consider a revised version of the resiliency work is a reflection of the conservatism with which we plan each and every year.

Christopher A. Foster: We currently anticipate that we will securitize both the capital and non-capital portion of the $1.5 to $1.7 billion distribution costs to limit the impact on our customers on their bills. And we'll include approximately $100 million of transmission investments within the next PCOS recovery filing. Based on the Total Current Average Residential Electric Bill, we estimate that these costs could result in an increase of a little more than 2%.

Speaker Change #110: We currently anticipate that we will securitize both the capital and non-capital portion of the $1.5 to $1.7 billion distribution costs to limit the impact to our customers on their bills and will include approximately $100 million of transmission investments within the next TCOSS recovery filing.

Speaker Change #110: Based on the Total Current Average Residential Electric Bill, we estimate that these costs could result in an increase of a little more than 2%.

Christopher A. Foster: As a reminder, the mechanism to recover storm costs in the state of Texas is very constructive and cost effective for customers. Texas TDUs are able to securitize non-T-cost storm-related costs in excess of approximately $100 million under existing statutory authority. As a result, we anticipate filing for securitization in the fourth quarter of this year, with securitization bond proceeds expected to be received towards the end of next year. Finally, I want to touch on our balance sheet and how we're thinking about funding the storm costs I just discussed. As of the end of the second quarter, our calculated FFO to debt was 13.3% based on our calculation aligning with Moody's methodology, as shown on slide 7.

Speaker Change #110: Texas TDUs are able to securitize non-T-cost storm-related costs in excess of approximately $100 million under existing statutory authority.

Speaker Change #110: As a result, we anticipate filing for securitization in the fourth quarter of this year, with securitization bond proceeds expected to be received towards the end of next year.

Speaker Change #110: Finally, I want to touch on our ballot sheet and how we're thinking about funding the storm costs I just discussed.

Speaker Change #110: As of the end of the second quarter, our calculated FFO-to-debt was 13.3%, based on our calculation aligning with Moody's methodology as shown on slide 7.

Christopher A. Foster: The second quarter tends to be our lightest quarter due to the timing of incremental financing relative to interim recovery mechanisms. This quarter also had a temporary cash flow item that we expect to normalize through the next quarter. Taking a step back, as we continue to see the need to fund the growth we are experiencing in Texas, we remain focused on the balance sheet. And with respect to our financing plans through the end of the year, we have evolved our approach, recognizing the storm impact.

Speaker Change #110: The second quarter tends to be our lightest quarter due to the timing of incremental financing relative to interim recovery mechanisms.

Speaker Change #110: This quarter also had a temporary cash flow item that we expect to normalize through the next quarter.

Speaker Change #110: Taking a step back, as we continue to see the need to fund growth we are experiencing in Texas, we remain focused on the balance sheet.

Speaker Change #110: And with respect to our financing plans through the end of the year, we have evolved our approach, recognizing the storm impacts.

Christopher A. Foster: As we remain committed to maintaining our current credit metrics in light of these incremental costs, we intend to pull forward $250 million of equity planned for 2025 into this year, which is in addition to the $250 million issued to date. This does not change our long-term equity guidance, rather it should only be considered as an acceleration. We will also incorporate higher equity content into our upcoming debt issuances to enhance credit metrics until the anticipated securitization proceeds are received.

Speaker Change #110: As we remain committed to maintaining our current credit metrics in light of these incremental costs, we intend to pull forward $250 million of equity planned for 2025 into this year, which is in addition to the $250 million issued to date.

Speaker Change #110: This does not change our long-term equity guidance, rather should only be considered as an acceleration.

Speaker Change #110: We will also incorporate higher equity content into our upcoming debt issuances to enhance credit metrics until the anticipated securitization proceeds are received.

Christopher A. Foster: We would also see this as pulling forward instruments we've been considering in our long-term plans, as mentioned in recent quarterly calls. We remain confident in the continuation of our long-term execution. The last thing I want to mention is we are making good progress related to the sale of our Louisiana and Mississippi gas LDCs. We, along with the buyer, have now made all required regulatory filings, including filings with the Louisiana and Mississippi Public Service Commissions, and we look forward to working constructively with the commissions to facilitate the approval proceedings. We still anticipate closing the sale late in the first quarter of 2025, and it is anticipated to result in after-cash tax proceeds of approximately $1 billion.

Speaker Change #110: We would also see this as pulling forward instruments we've been considering in our long-term plans, as mentioned in recent quarterly calls.

Speaker Change #110: We remain confident in the continuation of our long-term execution.

Speaker Change #110: The last thing I want to mention is we are making good progress related to the sale of our Louisiana and Mississippi gas LDCs.

Speaker Change #110: We, along with the buyer, have now made all required regulatory filings, including filings with the Louisiana and Mississippi Public Service Commissions, and we look forward to working constructively with the commissions to facilitate the approval proceedings.

Speaker Change #110: We still anticipate closing the sale late in the first quarter of 2025, and it is anticipated to result in after-cash tax proceeds of approximately $1 billion.

Christopher A. Foster: As a reminder, a majority of these proceeds will be used to fund our capital investments at Houston Electric for the benefit of customers. And with that, I'll now turn the call back over to Jason. Thank you, Chris.

Speaker Change #110: As a reminder, a majority of these proceeds will be used to fund our capital investments at Houston Electric for the benefit of customers.

Speaker Change #110: And with that, I'll now turn the call back over to Jason.

Jason P. Wells: Regardless of the challenges we face, this management team remains firmly committed to delivering for all of our stakeholders, our customers, our communities, our regulators, our legislators, and our investors. Thank you, Jason. With that, Operator, we're now ready for Q&A. Thank you. At this time, we will begin taking questions. If you wish to ask a question, please press star 11 on your touchtone keypad.

Jason P. Wells: Thank you, Chris. Regardless of the challenges we face, this management team remains firmly committed to delivering for all of our stakeholders, our customers, our communities, our regulators, our legislators, and our investors.

Unknown Executive: The company requests that callers pick up their telephone handsets. Thank you. One moment for the first question. The first question will come from Shahriar Pourreza with Guggenheim Partners. Your line is open. Hey guys, good morning. Morning, Shahriar.

Jason P. Wells: One moment for the first question.

Speaker Change #111: The first question will come from Shahriar Pourreza with Guggenheim Partners. Your line is open.

Shahriar Pourreza: Morning, Jason, maybe a little bit of a tough question to answer. But I guess, how do you see the commentary that, you know, that we've all been listening to from customers, legislators, and kind of stakeholders? impacting the current settlement negotiations in the Houston electric great Yeah, thanks for the question, Shahriar. You know, clearly, As I've said in a number of different forums, we can and will be better. You know, these are important issues for the greater Houston region of Texas.

Shahriar Pourreza: Hey guys, good morning.

Shahriar Pourreza: Morning, Shahriar. Morning. Jason, maybe a little bit of a tough question to answer, but I guess, how do you see the commentary that, you know, that we've all been listening to from customers, legislators, and kind of stakeholders impacting the current settlement negotiations in the Houston Electric rate case?

Jason P. Wells: As I've said in a number of different forums, we can and will be better. These are important issues for the greater Houston region, for Texas.

Jason P. Wells: Ultimately, though, the answer for getting better is continued investment in the resiliency of our system. And I think that, you know, needs to or will be reflected, you know, in the continued negotiations that are occurring from a settlement standpoint. And so, you know, there's again.

Jason P. Wells: Ultimately, though, the answer for getting better is continued investment in resiliency of our system.

Jason P. Wells: And I think that, you know, needs to, or will be reflected, you know, in the continued negotiations that are occurring from a settlement standpoint. And so, you know, there's, again,

Jason P. Wells: Clear demand that we need to communicate better, that we need to mitigate the risk of these outages moving forward. And I think ongoing settlement discussions are all just part of putting the company in a position to continue to be able to make that progress. Okay, got it. And then, obviously, Hurricane Beryl certainly highlighted more work needs to be done, and you had a level of resiliency spending bucketed as upside to the $44.5 billion CapEx plan. I guess, how do the recent events impact that bucket even directionally? So how fast?

Jason P. Wells: clear demand that we need to communicate better that we need to mitigate the risk of these outages moving forward

Jason P. Wells: and I think ongoing settlement discussions are all just part of

Jason P. Wells: putting the company in a position to continue to be able to make that progress.

Speaker Change #112: Okay, got it. And then just lastly, obviously, Hurricane Beryl, certainly.

Speaker Change #113: highlighted more work needs to be done and you had a level of resiliency spending bucketed as upside to the 44.5 billion CapEx plan. I guess, how do the recent events impact that bucket even directionally? So how fast

Jason P. Wells: plan to ramp up in light of the increased urgency with the current regulatory construct that's out there. Yeah, I think it's definitely in a very important area of focus, you know. We were investing in resiliency prior to that resiliency legislation. I think we heard loud and clear at the PUC team meeting last week that we need to continue to move forward. We've made commitments to move forward. And so, ultimately, while we've pulled down the system resiliency plan and we are working with outside experts to get feedback, we'll obviously work with parties in the case. You know, we plan to rapidly refile it, and I think the short of it means there's probably more support for incremental resiliency investments. I'll give you one example.

Speaker Change #114: Do you plan to ramp up in light of the increased urgency with the current regulatory construct that's out there?

Speaker Change #115: Yeah, I think it's...

Speaker Change #116: Definitely an area of focus, you know.

Speaker Change #117: We were investing in resiliency prior to that resiliency legislation. I think we heard loud and clear.

Speaker Change #117: You know, we plan to rapidly refile it, and I think the short of it means there's probably more support for incremental resiliency investments, I'll give you one example.

Jason P. Wells: You know, in the filing, we proposed continued sectionalization of our system, which is an important part of isolating outages, helping minimize the overall number. We proposed a pace of about 20 years in that program. I think that's a program that we need to revisit. I don't think the 20-year pace is..

Speaker Change #117: In the filing, we proposed continued sectionalization of our system, which is an important part of isolating outages, helping minimize the overall number.

Speaker Change #117: is no longer kind of a pace that that folks expect of us, right? And so, if anything, I think the bias will be towards accelerating incremental resiliency investment as opposed to delaying it.

Unknown Executive: Okay, appreciate it. I'll pass it to someone else. Thank you guys. The next question comes from Steve Fleishman with Wolf Research. Your line is open. Good morning. So just on the, should we assume that it's more like a junior subordinated, or could that be like a convertible?

Speaker Change #118: Got it. Okay, appreciate it. I'll pass it to someone else. Thank you guys.

Speaker Change #119: One moment for the next question.

Speaker Change #120: The next question comes from Steve Fleishman with Wolf Research. Your line is open.

Steven Isaac Fleishman: Yeah, hi. Good morning. Morning.

Steven Isaac Fleishman: Good morning. So, just on the...

Steven Isaac Fleishman: I guess first a question on the financing plan, the comment on the equity content in the upcoming refinancing.

Speaker Change #121: Should we assume that's more like a junior subordinated or could that be like a convertible? Any more color on the likely type of financing there?

Steven Isaac Fleishman: Morning, Steve. It is fair to say that we're certainly looking at different versions of hybrids to pull in more equity content into the plan. And, as I mentioned this morning, the other piece is just to pull forward $250 million. Again, to be clear, that doesn't change the overall guide from 2024 to 2030 of the $1.75 billion total. It's just a forward of that piece.

Speaker Change #122: Morning, Steve. It is fair to say that we're certainly looking at different versions of hybrids.

Speaker Change #122: to pull in more equity content into the plan. And as I mentioned this morning,

Christopher A. Foster: And you can imagine the point there is to just be able to have that in place to comfortably position the balance sheet until we get the anticipated securitization proceeds, currently thinking those are probably going to be end of year next year. Okay, and then maybe you could just give us some color on how the rating agencies are reacting to this event and spending and your updated plan and, kind of, it's going to be a while, a little while before we know their, you know, willingness to be patient. Okay, great. Thank you. Thanks, Steve. Our next question comes from Jeremy Tonet with JP Morgan Securities. Your line is open.

Speaker Change #126: The other piece is just to pull forward $250 million. Again, to be clear, that doesn't change the overall guide from 2024 to 2030 of the $1.75 billion total. It's just a pull forward of that piece. And you can imagine the point there is to just...

Speaker Change #122: be able to have that in place to comfortably position the balance sheet until we get the anticipated securitization proceeds. Currently thinking those are probably going to be end of year next year.

Speaker Change #123: Okay, and then maybe you could just give us some color on how the rating agencies are reacting to this event and spend and your updated plan and...

Speaker Change #124: It's going to be a little while before we know.

Speaker Change #125: and see the securitization, so just thoughts on kind of their, you know, willingness to be patient.

Speaker Change #127: Sure thing. I think it's fair to say we're having a conversation, Steve, obviously, about both how we're thinking about the plan that Jason has referenced, where we're going to aggressively move forward here in 2024 to do some critical work in the immediate sense.

Speaker Change #127: Longer term, we're also talking about some initial thinking on moving forward, ideally in Q1 with a subsequent revised system resiliency plan filing.

Speaker Change #129: I think that in this case, Texas has had a consistent construct in the state for

Speaker Change #127: Utilities to Securitize Costs Above the $100 Million Point, certainly that's the case here, and so we're sharing certainly that history and consistent history of the state as well in terms of its overall construct.

Speaker Change #127: Fairly fluid conversations you can imagine just given how quickly we're moving on a few fronts, but certainly sharing all of our all of our different activities

Speaker Change #128: Okay, great. Thank you.

Steven Isaac Fleishman: Thanks, Steve.

Speaker Change #130: Our next question comes from Jeremy Tonet with J.P. Morgan Securities. Your line is open.

Jeremy Bryan Tonet: Hi, good morning.

Chairman: Morning Chairman.

Jeremy Bryan Tonet: Wanted to pick up on the storm commentary. Thank you for the details today. Just, you know, pulling it all together, looking at your post-hurricane action plan in the items you laid out here.

Jeremy Bryan Tonet: How do you feel about, I guess, how Houston Electric can respond to the next storm out there? Do you think you have the pieces in place now to see a better response, even if everything's not in place altogether? Just wondering how you guys think you stand now.

Jeremy Bryan Tonet: Hi, good morning. Yeah, no. Thanks for the question. I, you know, I do feel confident. We were moving with pace and urgency after the DeRay show to move to a fully scalable outage tracker platform that would offer estimated times of restoration consistent with industry-leading practices, um, and had begun the work to overhaul our communications. That's why I feel confident that, you know, if a name storm threatens the Texas Gulf Coast region, we'll be in a much better position to put enhanced vegetation management and resiliency investments to work. And that's why I'm confident that as we execute on the incremental resiliency commitments that we've made to Governor Abbott and others, it will have a meaningful impact on our communities. And so, you know, We understand the role we play, but that's also why I have confidence looking ahead.

Speaker Change #131: Yeah, no, thanks for the question. I, you know, I do feel confident.

Jeremy Bryan Tonet: You know, we were moving with pace and urgency after the DeRay show to move to, you know, a fully scalable outage tracker platform.

Jeremy Bryan Tonet: that would offer estimated times of restoration consistent with industry-leading practices and had begun the work to overhaul our communications.

Jeremy Bryan Tonet: That's why I feel confident that, you know, if a name storm threatens the Texas Gulf Coast region, you know, we'll be in a much better position to

Jeremy Bryan Tonet: Communicate

Jeremy Bryan Tonet: before, during, and after that storm. I think giving our customers the information they unfortunately lacked during during Hurricane Beryl, but it's that work that we've been doing in advance that I think helps on the communication front and then

Jeremy Bryan Tonet: Equally, it offers no relief to the customers that experience this pain during barrel, but we had been working on bringing a lot of the innovative predictive modeling to target.

Jeremy Bryan Tonet: Enhanced Vegetation Management and Resiliency Investments for Work. And that's why I'm confident that as we execute on the incremental resiliency commitments that we've made to Governor Abbott and others,

Jeremy Bryan Tonet: It will have a meaningful impact for our communities. And so, you know, the last month has been tough on the city of Houston. We understand the role we play, but that's also why I have confidence looking forward.

Jason P. Wells: Thank you for that. And then just to follow up here, you mentioned that 60% of the downfall came from outside of your right of way, again offering some of the incremental sectionalization work and hardening of distribution circuits. And that work saved over 150,000 outages, and the communities that we deployed it in. And so I think moving forward from a resiliency standpoint, it's the acceleration of that work on the distribution grid that we'll have.

Speaker Change #132: Got it. Thank you for that. And then just to follow up here, you mentioned that 60% of the downfall came from outside of your right-of-ways.

Speaker Change #133: What can you do about that going forward? And also, I guess, just the assets overall. How did the hardened assets perform during the hurricane? You know, just want to see what value you think has been delivered with with kind of prior, you know, hardening here.

Speaker Change #134: Yeah, you know, it's.

Speaker Change #134: again offers

Speaker Change #135: No relief to the customers. But, you know, we are seeing a value of of resiliency investments. We saw

Speaker Change #136: Very minimal structural damage on our transmission system substations, you know, and strategically It makes sense to put the first investments in the backbone in the system from a resiliency standpoint. We've begun

Speaker Change #136: Some of the incremental sectionalization work and hardening of distribution circuits and that work saved over 150,000 outages.

Speaker Change #136: and the communities that we deployed that. And so I think moving forward from a resiliency standpoint, it's the acceleration of that work on the distribution grid that will have kind of the most meaningful impact to minimizing outages going forward. You know, the key issue, though, at the end of the day was

Speaker Change #137: Candidly, there was there was little structural damage on the system. You know, it was less, well less than even half a percent of our poles failed. But what really caused the outages were, as you pointed out,

Jason P. Wells: 60% of the trees impacting our lines were outside of our right-of-way, and candidly, we don't have any authority today to trim and manage those trees. However, we are doing the work to identify the trees that create those hazards. We are proactively trying to work with property owners to access that property and address those trees, which are, you know, are a safety issue, obviously for the residential homeowner. For the residential homeowner, as an example, a tree could easily, just as easily fall into their home as it could into the power line. But we don't have authority today unless it is granted by the homeowner.

Speaker Change #137: 60% of the trees impacting our lines were outside of our right-of-way and candidly we don't have any authority today to trim and manage those trees.

Speaker Change #137: We are doing the work to identify the trees that create those hazards. We are proactively trying to work with property owners.

Speaker Change #137: to access that property and address those trees,

Speaker Change #137: For the residential homeowner, as an example, a tree could easily, just as easily, fall into their home as it could into the power line, but we don't have authority today, unless granted by the homeowner, and so looking to work with

Jason P. Wells: And so I'm looking to work with you know, community leaders, our regulators, elected officials to make sure that we can continue to work at a pace to address this vegetation that threatens our system moving forward. Got it. Thank you for that. Hey, good morning. Thanks for taking my questions this morning. I appreciate all the details.

Speaker Change #137: you know, community leaders, our regulators, elected officials, to make sure that we can continue to work at pace to address this vegetation that that threatens our system moving forward.

Speaker Change #138: Got it. Thank you for that.

Speaker Change #139: And our next question comes from Nicholas Campanella with Barclays. Your line is open.

Nicholas Joseph Campanella: Hey, good morning. Thanks for taking my questions this morning. I appreciate all the details.

Nicholas Joseph Campanella: Morning. Just wanted to follow up, you know, as we kind of contemplate pulling forward some of this equity into from 25 into 24, and then you also talked about doing this equity content financing as well.

Speaker Change #140: I know you talked about some kind of one-time issues in the trailing 12-month epiphoda debt. Where do you think you kind of end at the base year just based on the current plan today?

I think if you saw this report this morning, as you can imagine, some of this is just the differing methodologies. But from this standpoint, in the S&P methodology, there's the assumption that the securitization proceeds do come through, right, which moves us up to well above the downgrade threshold, up to 12.9%. At Moody's, right, they treat it slightly differently. So it takes us from that roughly 14 to 13.3, where we are this morning.

Speaker Change #141: Sure, good morning. I think if you saw this report this morning, as you can imagine, some of this is just the differing methodologies, but.

Speaker Change #142: From this standpoint, in the S&P methodology, there's the assumption that these securitization proceeds do come through, which moves us up to well above the downgrade threshold, up to 12.9%.

Speaker Change #142: At Moody's, right, they treat it slightly differently, so it takes us from that roughly 14 to 13.3 where we are this morning.

Speaker Change #142: I do have to emphasize, though, Nick, keep in mind that last year this was the same situation. This is a bit of a trough that occurs in Q2.

I do have to emphasize, though, Nick, keep in mind that last year this was the same situation. This is a bit of a trough that occurs in Q2 before we pick back up. And we've got a one-time item that we believe in Q3 that you'll be able to see come through further improving FFO to debt. Hard for me to be specific about year-end, but just you can imagine where we are at this point. It's really a transitory impact here of the time period that will pass between now and the securitization proceeds.

Speaker Change #142: before we pick back up, and we've got a one-time item that we...

Speaker Change #142: I believe in Q3 that you'll be able to see come through further improving FFO to debt. Hard for me to be specific about year-end, but just you can imagine where we are at this point is it's really a transitory impact here of the time period that will pass between now and the securitization proceeds.

Speaker Change #143: Okay, thanks for that. And then I guess just you spoke about kind of doubling some of the labor efforts around the tree trimming.

Speaker Change #144: Just can you remind us because you do have this one to two percent