CenterPoint (CNP) Q4 2025 Earnings Call Transcript

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Date

Thursday, Feb. 19, 2026 at 8 a.m. ET

Call participants

• Chair and Chief Executive Officer — Jason P. Wells
• Chief Financial Officer — Christopher A. Foster
• Vice President, Investor Relations — Ben Vallejo

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Takeaways

• Non-GAAP EPS -- $0.45 for the quarter and $1.76 for the year, reflecting 9% growth over 2024.
• GAAP EPS -- $0.40 for the quarter and $1.60 for the year; full-year figure includes $0.11 from Louisiana and Mississippi natural gas goodwill disposition and $0.07 depreciation from temporary generation units.
• Dividend growth -- 9% increase per share for the year, in line with EPS growth.
• 2026 non-GAAP EPS guidance -- Reaffirmed at $1.89 to $1.91, representing 8% midpoint growth over delivered 2025 results.
• Long-term EPS growth target -- Mid to high end of 7%-9% annual range through 2028, then 7%-9% per year through 2035.
• Houston Electric peak load forecast -- Anticipated 50% increase by 2029, two years earlier than previously planned, translating to an additional 10 gigawatts.
• Large load pipeline -- 2.5 gigawatts under construction and 5 gigawatts of firmly committed projects to be energized by 2028, plus 3 gigawatts of organic regional growth.
• Customer bill projection -- The company estimates that activating 5 gigawatts of hosting capacity could reduce residential delivery charges by over 2% based on 2025 average bill levels.
• Capital investment plan -- Ten-year plan raised by $500 million to exceed $65 billion, including a newly planned 765 kV import line.
• Capital expenditures -- $5.4 billion invested in 2025, exceeding the updated $5.3 billion annual plan.
• 2026 capital plan -- Affirmed at $6.8 billion for electric and gas infrastructure, resiliency, and modernization.
• Regulatory clarity -- 80% of rate base secured with final orders through 2029, limiting expected regulatory activity to under 20% of consolidated earnings power in the near term.
• Ohio gas LDC sale -- Final rate case order received; $53.1 million revenue requirement, 9.79% ROE, 52.9% equity ratio; closing anticipated in fourth quarter 2026.
• Capital recovery mechanisms -- 85% of capital investments expected to be recovered via capital trackers; TCOS and DCRF filings expected within one month.
• Securitization bonds -- Priced roughly $1.2 billion in bonds, with planned use of proceeds to retire a $500 million Houston Electric term loan and reduce commercial paper exposure.
• Ohio sale proceeds -- $800 million in post-tax cash expected in fourth quarter 2026 to support balance sheet flexibility.
• Credit metrics -- Moody's adjusted FFO to debt at 13.8% as of year-end; revised cash tax guidance expected to lift this metric by 60-70 basis points.
• Corporate alternative minimum tax impact -- New Treasury guidance allows utility repairs deduction; estimated annual federal income tax now expected to be near zero through 2035, freeing up financing capacity.
• Balance sheet and equity -- The company states, "could allow us to incorporate an incremental $1 billion of customer-driven capital investments into our now over $65 billion plan without the need for incremental equity."
• O&M initiatives -- $0.02 unfavorable to fourth quarter earnings due to acceleration of reliability/resiliency work, which management expects will drive further improvements in system reliability and O&M reductions.

Summary

CenterPoint Energy (NYSE:CNP) reported 9% growth in both non-GAAP EPS and dividends per share for the fiscal year, highlighting performance consistency and strong delivery on stakeholder expectations. The company accelerated its growth trajectory in Houston Electric, forecasting a 50% increase in peak load by 2029, driven primarily by advanced manufacturing and data center demand, which is expected two years ahead of previous plans. Management announced a $500 million increase to its ten-year capital investment plan, launching a third 765 kV import line, and indicated visibility into over $10 billion of further upside capital projects tied to ongoing regional growth. Revised U.S. Treasury guidance on the corporate alternative minimum tax has materially reduced projected cash tax payments through 2035, enhancing financing flexibility and supporting rate base growth without incremental equity issuances. Regulatory clarity was achieved for 80% of the company's rate base through 2029, further stabilizing the company's medium-term earnings and cash flows.

• Company leadership stated, "that if 5 gigawatts of existing hosting capacity were utilized, we estimate it could reduce average residential delivery charges by over 2% based on the 2025 average bill," supporting customer affordability alongside accelerated infrastructure investments.
• Management emphasized that the majority of large load interconnections can be accommodated using existing capacity and system upgrades, with additional transmission needs expected to materialize toward the end of the decade.
• Investment of $5.4 billion in 2025 surpassed the revised capital plan by $100 million, reflecting execution ahead of schedule and acceleration of system resiliency initiatives.
• Christopher A. Foster reported, "As of the end of the year, our adjusted FFO to debt ratio based on Moody's rating methodology was 13.8%, slightly below our targeted cushion of 100 to 150 basis."
• The upcoming sale of the Ohio gas LDC is projected to provide $800 million in cash proceeds and partially offset lost investment contributions, while regulatory mechanisms (TCOS and DCRF) remain on track to support ongoing capital recovery.
• Discussions with data center clients remain active outside Texas, but current demand and connection activity are predominantly concentrated in the Houston region due to available capacity and the company's ability to execute rapidly.

Industry glossary

• TCOS (Transmission Cost of Service): A regulatory mechanism in Texas that allows utilities to recover costs related to transmission investments outside of standard rate cases, helping to reduce regulatory lag.
• DCRF (Distribution Cost Recovery Factor): A tariff rider in Texas permitting recovery of specified distribution capital investments between rate cases.
• FFO to debt: Ratio of funds from operations to total debt, a key credit metric tracked by rating agencies.
• ERCOT (Electric Reliability Council of Texas): The grid operator for most of Texas, overseeing electric transmission and market operations.
• 765 kV line: Extra-high voltage transmission line (765 kilovolts), typically used for major power import/export across regions.
• Capital tracker: Regulatory mechanism enabling timely recovery of qualifying capital expenditures outside of general rate cases.
• LDC (Local Distribution Company): Utility that delivers natural gas or electricity to end users within a local territory.

Full Conference Call Transcript

Operator: Good morning, and welcome to CenterPoint Energy, Inc.'s fourth quarter and full year 2025 earnings conference call with senior management. During the company's prepared remarks, all participants will be in a listen-only mode. There will be a question and answer session after management's remarks. To ask a question, press 11 on your touch-tone keypad. I will now turn the call over to Ben Vallejo, Vice President of Investor Relations. Mr. Vallejo, good morning, and welcome to CenterPoint Energy, Inc.'s Q4 2025 earnings conference call.

Ben Vallejo: Jason Wells, our Chair and CEO, and Christopher A. Foster, our CFO, will discuss the company's fourth quarter and full year 2025 results. Management will discuss certain topics that will contain projections and other forward-looking information and statements that are based on management's beliefs, assumptions, and information currently available to management. These forward-looking statements are subject to risks and uncertainties. Actual results could differ materially based on various factors as noted in our Form 10-K, other SEC filings, and our earnings materials.

Operator: We undertake no obligation to revise or update publicly

Ben Vallejo: any forward-looking statement other than as required under applicable securities laws. We reported $1.60 per diluted share and $0.40 per diluted share for the full year and 2025, respectively, on a GAAP basis. Management will be discussing certain non-GAAP measures on today's call. When providing guidance, we use the non-GAAP EPS measure of diluted adjusted earnings per share on a consolidated basis referred to as non-GAAP EPS. Non-GAAP measures used in providing guidance. For information on our guidance methodology and reconciliation of these measures, please refer to our earnings news release and presentation on our website. We use our website to announce material information. This call is being recorded.

Information on how to access the replay can be found on our website. I would like to turn it over to Jason. Thank you, Ben, and good morning, everyone.

Jason P. Wells: I would like to begin by extending my sincere appreciation to all frontline team members who continue to work tirelessly to deliver better outcomes for our customers. Whether it is responding to severe weather like we experienced in January, or executing on the reliability and resiliency work that resulted in a reduction of more than $100,000,000 outage minutes across the Greater Houston region last year, our dedicated workforce executes for our customers and communities each and every day. On today's call, I would like to address three key areas of

Operator: focus.

Jason P. Wells: First, I will touch on the strong and consistent execution over the fourth quarter and throughout 2025. Our continued performance is reflected in our delivery of 9% EPS growth for the fourth time in the last five years. Second, I will discuss the increased acceleration of the significant growth in our Houston Electric business. We are now forecasting peak load demand to increase by 50%, or an additional 10 gigawatts, by 2029. This is two years earlier than previously planned. More importantly, this growth continues to be positive news for the region as it drives jobs, increases tax base, and helps keep our portion of the bills essentially flat, benefiting our customers and communities.

And lastly, separate and apart from this accelerated growth, we are adding $500,000,000 of incremental capital to our ten-year $65,000,000,000 capital investment plan to fund an additional 765 kV import line. We continue to see CapEx upside in excess of $10,000,000,000 to further support economic development throughout our region. Let's start with our fourth quarter and full year financial results. This morning, we announced non-GAAP EPS of $0.45 for the fourth quarter and $1.76 for the full year 2025. In addition to delivering this 9% EPS growth, we also delivered 9% dividend per share growth last year. I am proud of this track record of consistent execution for our stakeholders. Christopher A.

Foster will provide additional details around these strong results and consistent delivery of industry-leading performance in his section. As a reminder, we continue to rebase our long-term growth targets from our actual performance as we seek to deliver value for our investors each and every year. Consistent with this approach, today, we are reaffirming our 2026 non-GAAP earnings guidance of $1.89 to $1.91, an 8% increase at the midpoint from our 2025 delivered results. Over the long term, we continue to expect to grow non-GAAP EPS at the mid to high end of our 7% to 9% long-term annual guidance range through 2028, and 7% to 9% annually thereafter through 2035.

I would now like to touch on the increased acceleration of growth in our Houston Electric business, which is fueled by a diverse set of drivers. We are fortunate to have a proven track record of serving large loads and rapid growth across our region. Our diverse growth and the substantial increase in our interconnection queues continue to accelerate at an unprecedented pace, driven primarily by reshoring of advanced manufacturing facilities and new data center demand. As a reflection of that, we are now expecting peak load to grow by 50% two years earlier than originally planned.

Looking further ahead, this continued growth and significant acceleration gives us even greater confidence in our forecast that load demand will more than double by the middle of the next decade. However, it also suggests the continued reporting of an unconstrained interconnection queue does not offer meaningful insight into the level of expected growth, which will largely be driven by existing system capacity and ability to scale and execute quickly. Instead, we believe that the most meaningful measure of current growth is the pipeline of large load requests that are either already under construction or large projects that are firmly committed.

To provide context for the 50% increase in peak load, today, we have already 2.5 gigawatts of projects that are in the construction phase, with another 5 gigawatts of firmly committed projects that we expect will be energized by 2028. This is in addition to the 3 gigawatts of ordinary course growth that our region is already expected to experience. We are confident that we can execute on this near-term demand as it will be met with existing system capacity and manageable system upgrades. Outside of these projects, we will continue working on converting the remaining interconnection requests, which could further add to this projected growth.

The rapid acceleration of the pace of this large load growth combined with the ordinary population growth across the Greater Houston region will have positive impacts for our customers and communities and help keep our portion of the bills essentially flat. To illustrate the potential benefit of energizing data center customers, we believe that if 5 gigawatts of existing hosting capacity were utilized, we estimate it could reduce average residential delivery charges by over 2% based on the 2025 average bill. This continues a trend that has allowed us to keep customer charges nearly flat over the last decade.

To be ready for the incremental growth that we continue to see beyond the near term, we are updating our transmission planning study that will likely lead to incremental transmission projects to keep pace with our region's explosive growth. Outside of the potential for additional transmission projects from this accelerating growth, I want to briefly touch on some recent updates from ERCOT and the incremental capital investments we will be making to support our previously planned growth. In response to feedback from ERCOT indicating the need for additional infrastructure to support the continued growth of the Greater Houston region, we have filed for an additional 765 kV transmission line in January.

This will be the third 765 kV import line, providing enhanced resiliency and reliability to our region as it continues to grow. Today, we are incorporating this needed project into our outlook, and we are increasing our capital investment plan by approximately $500,000,000, bringing our ten-year total to more than $65,000,000,000. Beyond this increase announced today, we continue to see over $10,000,000,000 of incremental opportunities. We will fold these incremental opportunities into our ten-year investment plan when we are confident we can execute the work for the benefit of our customers. These additional investments would provide further upside to our over 11% rate base growth through 2030. Before I hand it over to Christopher A.

Foster, in delivering I want to thank our teams for continuing to execute for our customers and communities on our strong 2025. That commitment to consistent execution, and the rapid acceleration of firmly committed growth opportunities, we are well positioned to continue our track record of delivering for our stakeholders. With that, Christopher A. Foster will walk through the financials in more detail.

Operator: Thanks, Jason.

Christopher A. Foster: This morning, I will cover four areas of focus. First, the details of our fourth quarter and full year financial results. Second, I will provide a brief regulatory update. Third, I will touch on our capital deployment execution, including the $500,000,000 positive revision of our ten-year capital investment plan,

Jason P. Wells: And finally, I will provide an update on where we stand with respect to the balance sheet,

Christopher A. Foster: and our financing plan. Let's now move to the financial results beginning on slide five. On a GAAP EPS basis, we reported $0.40 for the fourth quarter and $1.60 for the full year 2025. The $1.60 includes $0.11 related to the disposition of goodwill allocated to Louisiana and Mississippi natural gas businesses, in addition to $0.07 of depreciation related to our large temporary generation units. As a reminder, we expect to start marketing those units for either a sublease or sale later this year in anticipation of getting those units back no later than spring of next year.

We continue to believe that the sublease revenue over the remaining years of our lease will equal at least the lost revenue from the period they were donated to San Antonio. On a non-GAAP basis, we reported $0.45 for the fourth quarter and $1.76 for the full year 2025. Our 2025 results reflect 9% growth compared to 2024 results. These strong results give us confidence in meeting our 2026 non-GAAP EPS guidance of $1.89 to $1.91. As a reminder, our 2025 year-over-year rate recovery reflected the delayed timing of several interim recovery mechanisms until the second half of the year.

As we move into 2026, we expect to return to a more typical and timely filing cadence, which should support stronger and more consistent recovery throughout the year. Now taking a closer look at the drivers of our fourth quarter earnings. Growth in rate recovery contributed $0.12 when compared to the same quarter last year, which was driven by the implementation of constructive rate case and interim filing mechanism outcomes throughout the year. Weather and usage were $0.01 favorable when compared to the comparable quarter last year, driven by higher customer usage as temperatures across our service territory were largely in line with historical norms.

O&M was $0.02 unfavorable for the fourth quarter, as we accelerated certain work, including reliability and resiliency work originally planned for 2026. Additionally, higher interest expense was $0.05 unfavorable from an incremental approximately $3,300,000,000 in debt issuances. I would now like to touch on our recent regulatory activity.

Jason P. Wells: During the quarter, we received a final order in our Ohio gas LDC rate case,

Christopher A. Foster: which continues our track record of constructive outcomes. The order made slight modifications to the settlement agreement, approving a modestly lower revenue requirement of $53,100,000 and ROE of 9.79%, with no change to the agreed upon 52.9% equity ratio. As a reminder, we anticipate closing on the sale of this business in the fourth quarter of this year. I want to highlight that we have limited regulatory activity over the next few years. We anticipate filing rate cases in the latter part of this year in Minnesota and Indiana which, in the aggregate, represent less than 20% of the earnings power in our consolidated base.

We will provide more color with respect to both cases the closer we get to their respective filing dates. Outside of those two rate cases, we will continue to file our interim capital trackers across our various service territories. And as a reminder, we anticipate recovering approximately 85% of our capital investments through our various capital trackers. We expect to file within the next month both our TCOS and DCRF mechanisms, which support recovery of ongoing investments and help reduce regulatory lag.

Jason P. Wells: Next, I will touch

Christopher A. Foster: on our capital investments execution for 2025, and our increased ten-year capital plan as shown on slide nine. Through the end of the fourth quarter, we invested $5,400,000,000 for the benefit of our customers and communities. This exceeded our already positively revised 2025 plan of $5,300,000,000, which incorporated a $500,000,000 increase over our initial capital investment profile as we accelerated certain investments related to our system resiliency plan.

Jason P. Wells: This increased level of investment

Christopher A. Foster: should allow us to partially offset the loss of Ohio investments upon the close of the sale later in the fourth quarter of this year. For 2026, we are reaffirming our capital plan outlined in our ten-year plan at $6,800,000,000 for the benefit of our customers, and we expect continued execution across electric and gas infrastructure, resiliency, and system modernization. As Jason highlighted earlier, increased visibility into incremental transmission needs supports a $500,000,000 increase to our long-term capital investment plan, bringing the total to over $65,000,000,000 through 2035. Knowing the timelines on these electric transmission projects, we anticipate the CapEx to be added toward the end of the decade.

This reflects opportunities that we now have greater confidence in moving forward, consistent with our disciplined approach of formally incorporating incremental capital as clarity and approvals are achieved. Finally, I want to touch on our credit metrics and balance sheet. As of the end of the year, our adjusted FFO to debt ratio based on Moody's rating methodology was 13.8%, slightly below our targeted cushion of 100 to 150 basis

Jason P. Wells: We believe we are well positioned to be within our target cushion. In particular,

Christopher A. Foster: given the updated rulemaking provided by the U.S. Treasury Department just yesterday, that I will provide more color on shortly. We see further improvement in our metrics through the remainder of the plan as well, as we have signaled previously. Given we anticipate significant cash proceeds from the issuance of securitization bonds related to Hurricane and the closing of our Ohio gas LDC sale later this year, our execution remains on track, as just yesterday, we priced roughly $1,200,000,000 in securitization bonds. With these proceeds, we will look to extinguish a $500,000,000 term loan at Houston Electric and reduce commercial paper.

Operator: In addition,

Christopher A. Foster: we expect to receive cash proceeds, net of tax, of $800,000,000 in the fourth quarter from the closing of the Ohio transaction, which will provide additional balance sheet support and further enhance our financial flexibility. I would now like to briefly touch on draft guidance issued by the U.S. Treasury Department with respect to computation of the corporate alternative minimum tax that will add additional financing flexibility to our existing plan. As some of you may have seen, yesterday, the U.S. Treasury issued guidance that modifies how this tax is computed and now clarifies that eligible utilities like CenterPoint Energy, Inc. should reduce their tax liabilities for the repairs deduction.

As a reminder, when the corporate alternative minimum tax was first enacted under the Inflation Reduction Act, we conservatively estimated our annual cash tax liability to be approximately $150,000,000.

Jason P. Wells: And while we are still analyzing the impacts of the notice,

Christopher A. Foster: we now believe that our

Jason P. Wells: annual federal income tax cash tax liability

Christopher A. Foster: should be near zero through 2035. With this new cash tax profile, we anticipate a 60 to 70 basis point improvement to our credit metrics in the near term. This is a great outcome for our customers, as the reduction in cash taxes should flow through to reduce customer charges. In addition, it could allow us to incorporate an incremental $1,000,000,000 of customer-driven capital investments into our now over $65,000,000,000 plan without the need for incremental equity. Lastly, we could potentially see guidance related to the use of the tax repairs deduction to reduce cash tax liability associated with the corporate alternative minimum tax.

Jason P. Wells: As a reminder,

Christopher A. Foster: we estimate approximately $150,000,000 of annual cash taxes from the corporate alternative minimum tax. The removal of this cash tax impact would result in a 60 to 70 basis point increase in our FFO to debt metrics over the next few years. In summary, we believe we are well positioned to execute in 2026 and beyond, given the derisked and conservative nature of our plan. We are also reiterating our 2026 non-GAAP earnings guidance targeting at least the midpoint of $1.89 to $1.91. At the midpoint, this would represent an 8% increase over 2025 delivered results. Looking ahead, we expect to grow non-GAAP EPS at the mid to high end of our 7% to 9% range from 2026 through 2028.

And over the long term, we expect to grow non-GAAP EPS at 7% to 9% annually through 2035. We remain committed to delivering continued improvements in customer experience, and look forward to executing our plan that delivers on the most diverse growth drivers in the country, propelling economic development for years to come. I will now turn the call over to Jason.

Jason P. Wells: Thank you, Chris. In closing, our executable growth is now coming at an even faster pace and more significant scale than before, helping to bring economic growth for our region and supporting customer affordability. As Chris covered, we are also fortunate to have achieved regulatory clarity through 2029 on approximately 80% of our rate base, supported by approved final orders. I continue to have full confidence that with our exceptional load growth fundamentals, constructive jurisdictions, and derisked financing plan, we continue to have one of the most tangible and executable growth plans in the industry.

Christopher A. Foster: Thanks, Jason. Operator, I would like to turn it over for Q&A.

Operator: Thank you. At this time, we will begin taking questions. The company requests that when asking a question, callers pick up their telephone handset. Thank you. Our first question comes from David Arcaro with Morgan Stanley. Your line is open. Hey, thanks so much. Good morning.

Jason P. Wells: Good morning. How are you doing? Good. Good.

Operator: Hey, Jason, I think you mentioned updating the transmission planning

David Arcaro: study. Was that something that was already done and reflecting the 765 kV line that you added to the plan here, or is that yet to come? Wondering if you could give timing and just thoughts on what the upside potential would be if it is still ahead.

Jason P. Wells: Yes. No. Thanks, David, for the question. I would separate the $500,000,000 of additional capital we announced related to that 765 kV line this quarter. The incremental transmission work that will be needed as a result of the acceleration of the large loads that I mentioned. The third 765 kV line that we introduced this quarter had been in the works. It had been part of ERCOT's planning for a while. We had just gotten to the point, though, where we confirmed the need on our system and had filed for it at ERCOT, which is why we included it as an update to the ten-year CapEx guidance. Separate from that, as we are seeing this large load accelerate

David Arcaro: we

Jason P. Wells: have internally accelerated our annual transmission planning. I expect we will be able to provide an update in the second half of the year of incremental transmission projects that will be needed to accommodate this new load. What we are seeing with respect to these new large loads is, as I said, they are coming faster and, also, importantly, they are coming to different geographies, different areas within the Greater Houston region. So it will likely result in incremental import capacity for our Houston system as well as incremental intraregional transmission projects to make sure that we have capacity where we need it within the Houston region.

As I said, we will likely be able to provide an update on what that means from a CapEx standpoint in the second half of the

David Arcaro: Got it. Okay. That makes sense. That is helpful. And then, Chris, apologies if I missed it, but just as you reflect on the repairs adjustment now in the AMT, does that potentially formally reduce the equity needs in the plan versus what you have got baked in there? When

Operator: Afternoon. So I think ultimately, it is in line with where expectations were, and it will have a couple of benefits. First, remember that the general profile we talked about was about $150,000,000 per year. So what this will do is really two things as we think about it. First, definitely have near-term balance sheet benefit of 60 to 70 basis points. And we think about it as unlocking an incremental roughly $1,000,000,000 of CapEx that we could also add to the plan without adding any incremental equity. Perfect. Thanks so much. Thank you.

Christopher A. Foster: Our next question comes from Shahriar Pourreza, Wells Fargo Securities. Your line is open. Hey, guys. Good morning.

Operator: Morning, Shahriar. Morning. Morning. Jason, I just wanted to tease out a little bit of

Jason P. Wells: David's question that he had on the growth and such. I mean, just the two years ahead of schedule, that is just a massive amount of growth. It could be sizable, obviously, to the current guide. Can you just help us frame maybe a little bit with more specificity of what this means in terms of timing and scale of CapEx and maybe how we should think about your 7% to 9%, especially since you are already near the top end of that trajectory? I guess, how do we think about what this could mean to the ultimate trajectory? Thanks.

Operator: Ultimately, I just think this is another very strong tailwind for

Jason P. Wells: the company on an already great, industry-leading plan. But

Operator: let me try to provide a little bit more color. You know, we are able to accelerate these large load interconnections because we have existing capacity in our system. I think that is a unique asset for us. You know, many of these companies where their advanced manufacturing data centers are looking for power

David Arcaro: over the next two years, and we are uniquely positioned to connect them over that period of time. Those projects do not require significant incremental capital. It is effectively building a new substation off our existing transmission lines. What this will do, though, is it will create, as I mentioned to David, incremental need for more import capacity into Houston, as well as more intraregional transmission ties to make sure we are moving the power to where we need it here in Houston. So if you think about the timing of those projects, those are going to likely be projects that

Operator: well,

David Arcaro: impact the CapEx guidance, I would estimate at this point, towards the tail end of this decade

Operator: into next. I would not look at it as a near-term opportunity as much as, as I said, towards the tail end of the decade. But, again, this just provides an exceptionally strong tailwind to an already great plan.

Jason P. Wells: Got it. Okay. That is perfect. And then just lastly, on ERCOT's batching and study process changes, there is kind of a view out there that it can affect queue timing and certainly for new interconnections and upgrades. Do you expect any approval slowdowns or delays with in-service dates, especially with this accelerated load you are targeting, or is the impact managed? Thanks.

David Arcaro: I definitely think it is manageable. You know, we support the overall direction of batching. I think it will help provide relief to the overall ERCOT market. But, you know, as a quick reminder, pretty unique here in Houston. We have been very disciplined in what we put in the ERCOT queue, and our large load interconnection applications have been processed within 70 days. So we do not see the backlog that many regions have. And as ERCOT transitions to this batching process, you know, we are still operating under those current rules that exist today where we have been, as I said, achieving reviews and approvals within 70 days.

Many of these firm projects will follow that timeline and, again, I think whether they are approved under the current rules that are in effect or as part of wave zero, batch zero, we feel like we can bring these projects online really in the 2027 and 2028 timeline. So, again, supportive of the long-term direction, but I think given the fact that these are prospective rules, we have the opportunity to move quickly to accommodate the large load requests that are here today.

Jason P. Wells: Got it. Fantastic, guys. Thanks so much. Appreciate it.

Christopher A. Foster: Thank you. Our next question comes from Steven Fleishman with Wolfe Research. Your line is open.

Jason P. Wells: Yes. Excuse me. Good morning. Just following up on the

David Arcaro: load growth and transmission capacity.

Steven Isaac Fleishman: Jason, how would you think about how much excess you have left, if at all? Are you filling that up with these two buckets that you laid out

Christopher A. Foster: Yeah.

David Arcaro: Good morning, Steven. You know, we are certainly making a pretty big dent in the excess capacity I have today, but not fully exhausting it. You know, do you recall for the investor update this past fall when we rolled out the $65,000,000,000 ten-year CapEx plan, included in that plan were a little more than 200 transmission projects that were geared at keeping pace with the growth. What we are seeing here with an acceleration is it is here at a higher quantum sooner and in different geographies, which will likely lead to even more transmission projects. But that base plan that we had proposed allowed us to make sure that we stay in front of these capacity needs.

And so today, we are estimating we have roughly a little shy of 10 gigs of existing capacity, but we are already working on the transmission projects that will unlock more capacity as we bring these large loads on. And so I do not foresee at this point a challenge with not only accommodating these projects, but additional large loads that we are working with

Steven Isaac Fleishman: Okay. And then from the standpoint of pricing to your customers, I assume this growth helps with your customer bills long term? Or how should we think about that?

David Arcaro: That is it. You know, this is a phenomenal opportunity for our customers and communities, you know, because the existing capacity is there today. We are going to be spreading those fixed costs out over a wider base, driving down customer bills. You know, we have been connecting large loads since before it was cool for the industry. This is what has kept our rates flat over the last decade here in Houston, and this is just a continuation of that trend.

The more that we bring these large projects into our region, the more they not only help with the tax base in this region, but, back to the point that you are making, they help us keep our rates affordable. So we continue to project we will now keep rates flat through 2028 as a result of incremental load.

Steven Isaac Fleishman: Okay. And then two more quick ones. I guess, on the data center opportunity, you have mentioned in the past potentially looking at something in Indiana. Is there any update on that?

David Arcaro: We continue to have very active conversations up there. I remain very optimistic that we will be able to finalize those opportunities that we are pursuing. But right now, where we see the trend in the data center market is really looking at available capacity. Many of the hyperscalers have needs for power. Really, they are not trying to optimize over the next two years. Texas is one of the few areas of the country where we have capacity at scale and can move quickly, which is why we have seen such a fundamental shift to the Houston region.

Again, I remain optimistic about our ability to land and secure at least one large data center opportunity for Southwest Indiana, but what we are seeing today is really this pursuit of existing capacity in Texas.

Steven Isaac Fleishman: Okay. And then lastly, on the balance sheet with the benefit and then you mentioned Burrell and the LDC sale. So if you do not change your capital plan, where would FFO to debt be by, I do not know, 2026 or 2027?

Operator: I think you probably, sure, Steven. I think if you just kind of hold everything constant, we would probably be on the order of roughly 15%, directionally is the way to think about that. But it is definitely good in terms of the new regulation coming out.

Jason P. Wells: Okay.

Steven Isaac Fleishman: Great. Thank you. Thank you, Steven. Thank you.

Christopher A. Foster: Our next question comes from Julien Patrick Dumoulin-Smith. Your line is open.

Steven Isaac Fleishman: Team, thank you very much. Appreciate the time. Maybe just to come back to a couple subjects. First,

Jason P. Wells: a little bit of detail, but we have seen ONE Gas update their guidance here on the Texas legislation from last year.

David Arcaro: Can you comment a little bit about the deferrals and any opportunities there? How are you leveraging that versus your peers? We have seen Atmos also reflect it pretty meaningfully. Just would love to hear your latest updated thoughts on that and to what extent it is perhaps just within the range of guidance or

Steven Isaac Fleishman: is that something that is

Operator: perhaps not fully utilized thus far?

David Arcaro: Hey. Good morning, Julien. No.

Jason P. Wells: Thanks for the question. It is in the guidance that we have currently issued thus

Steven Isaac Fleishman: far. As you know, we were out in front of this issue. I really think it makes

David Arcaro: sense from the standpoint of helping reduce regulatory lag, which is both helpful for our customers and our shareholders. We pursued this because, again, we thought it was in the best interest of all of our stakeholders. As a result of pursuing it, we had line of sight to it, I think, earlier than a number of our peers and, as a result, reflected it in the guidance that exists.

Julien Patrick Dumoulin-Smith: Got it. Yeah. I know you did it last year. I just want to make sure that it was

David Arcaro: more fully utilized. And then separately, if I can come back to that batch process conversation, I know it has gotten a lot of attention here. Can you comment a little bit about

Operator: just when it kicks back off here later this in June or whenever they ultimately move? Is there any risk that you perceive on timing here ultimately, or is

David Arcaro: the intent by moving it to June or later here to really sidestep some of the delays that you could conceivably or at least or perceive to be feared to be pushed out? Thanks again for the question. I mean, I think we are all waiting for the revised timing. But backing up from what has been signaled as a summer adoption, what we are advising our customers on is that they complete their load studies as quickly as possible so that we can finalize our work and submit them to ERCOT here this spring. The large load numbers that we put in the firmly committed column

Julien Patrick Dumoulin-Smith: are

David Arcaro: those customers that we have been working with that have already fully completed their large load requests, inclusive of the timing of the ramps. So I do not see any challenge with getting those requests into the ERCOT queue and getting them moving, again, either under the existing rules as part of batch zero, which is consistent with the timing that we have outlined here. So we have been working constructively to continue to connect large loads. We have not had the issue of the backlog that many of the other regions in ERCOT have experienced. We will continue to do that, and then we will work with ERCOT as they transition this summer to the batch process.

Julien Patrick Dumoulin-Smith: Awesome. And then the last little nuance here. This is, as you say, I think the third 765 project thus far. Can you comment a little bit about whether we should expect incremental cadence in coming quarters again, or would it rather be at some point having a bigger 765 update just based on the ERCOT process in identifying transmission needs? Or is it going to continue to be one-off and two-off?

David Arcaro: Yeah. We think it makes sense to be conservative. We have identified a number of 765 kV opportunities that are included in the $10,000,000,000 plus of CapEx upside. We think it makes sense, though, to identify it as upside and then work with ERCOT and others to ensure that these lines are needed and best support the growth of the Greater Houston region. And that is what occurred here. ERCOT proposed this third line. We needed to assess it. We agreed with the assessment. We filed for it, and that is why we are incorporating it.

So I would expect a track record similar to this where there is just a serial set of updates as we get more comfortable with each individual project, as opposed to one comprehensive 765 update

Julien Patrick Dumoulin-Smith: Totally understood. Thank you, guys. Appreciate it.

Christopher A. Foster: Thank you. Our next question comes from Nicholas Joseph Campanella with Barclays. Your line is open.

Steven Isaac Fleishman: Hey. Good morning. Good morning.

Nicholas Joseph Campanella: I like the tagline “connecting large loads before it was cool.” Appreciate that.

Steven Isaac Fleishman: So, hey, just one for me. A lot of good questions have been answered, but just

Nicholas Joseph Campanella: you have a track record for consistently raising CapEx every quarter here, it seems, and it is great to see the $500,000,000 increase to the ten-year plan. When you think about executability, supply chain, labor constraints, what is the ability to bring more into the five-year plan, or is that fully baked at this point? I know you have a bunch of items listed on the slides that are incremental, and it does seem like some of these transmission connections are in the 2027, 2028 and beyond timeframe, but just maybe frame how much capital you can actually facilitate bringing into the next five years versus the ten years?

David Arcaro: Yeah. Given the fact that some of these large loads are in new regions in the Greater Houston area. So, historically, we have connected a lot of these large loads near the ship channel, the petrochem complex. We are now seeing different areas within Houston really target accommodating these large load requests. We are going to need more intraregional transmission capacity. That is work that will need to be done in the first five years of the plan. Import lines generally take a little longer. I would expect those to really be hitting towards the end of the decade, early part of next. But we undoubtedly will need more transmission in the Greater Houston area in the first five years.

We have capacity to accommodate that. Again, since we have been connecting large loads for such a long time, we have had

Julien Patrick Dumoulin-Smith: you know,

David Arcaro: purchasing spots in all of the critical equipment: voltage breakers and transformers. We have had relationships with third parties. We can move quickly at the pace of our customers to connect these loads. So I do not see materials being a constraint. I do not see labor being a constraint. Really, what we need to do is continue to finalize the details of our power flow study, propose these projects, and begin working on them. I think some of that is going to come in the first five years, and some of it will be a tailwind into the next decade.

Nicholas Joseph Campanella: Thanks for the thoughts. Appreciate it.

Steven Isaac Fleishman: Thank you.

Christopher A. Foster: Our next question comes from Jeremy Bryan Tonet with JPMorgan Securities.

Steven Isaac Fleishman: Hi. Good morning. Good morning.

Julien Patrick Dumoulin-Smith: Thanks for all the color today. I just wanted to dive in a little bit more on smart meters and undergrounding in Houston, if I could. Just wondering if you might be able to provide a little bit more detail on what the timeline could look like there and what the

Nicholas Joseph Campanella: size of the opportunity is as you see it now.

Steven Isaac Fleishman: Sure, Jeremy. The short of it is, I think there are opportunities here, maybe bridging to the last question too, maybe even in the five-year plan as well. So the short of it is on the new smart meter program, we are probably going to be looking to file in Q4 at the PUCT. That is a natural time we will be able to give you insight there for the more potential CapEx upside to the plan. I think the other one to touch on, which makes sense, is a really important project again for the City of Houston. It is this downtown revitalization effort, as we have talked about.

Here, we are going to be in a position to update probably second half of this year, due to the fact that at that stage, we are spending the time now to work with the city to talk about what locations make the most sense to relocate and site our new substations. So those will be meaningful decisions, and that will certainly drive the cost profile and potential upside to plan there as well. Finally, on the system resiliency plan, there we are starting some of the strategic undergrounding work as early as this year. The natural timing of filing the next resiliency plan is probably going to be 2028.

So, really, it is about feeding the back half of the plan, really 2029, 2030, and 2031 for potential upside there as well.

Jeremy Bryan Tonet: Got it. That is helpful. Thanks. And just one more if I could. You talked about keeping bills flat through 2028, and I think O&M reduction has been a meaningful part of the story over time. It looks like it

Nicholas Joseph Campanella: continues to be. Just wondering how deep you see that well at this point, given how much has been accomplished?

David Arcaro: I think we are still in early innings. I am really proud of the progress the team has made driving efficiency. When we continue to look at the system, I think we have further opportunity. Just as a case in point, I highlighted in my prepared remarks the fact that we saved $100,000,000 average minutes last year through our Greater Houston Resiliency Initiative. We are just getting started on that work. As we continue to have another year of investment under our belt, we are going to drive down outage levels in a way that will be a significant tailwind for O&M.

Just to put this in context, we achieved reliability numbers that we have not seen here in Houston since 2014. And since 2014, we have added north of a million metered homes and businesses. And so, as I said, we are just getting started. As we continue to drive down outages and improve and increase the automation of our system, we are going to reduce the amount of trouble work. And it is just an example of another tailwind with respect to O&M for the company.

Jeremy Bryan Tonet: Got it. That is helpful. Thank you.

Steven Isaac Fleishman: Thank you.

Christopher A. Foster: Our next question comes from Anthony Christopher Crowdell, Mizuho. Your line is open.

Jason P. Wells: Just one quick question. I think earlier, Chris, you talked about the additional balance sheet capacity you had with changing the recent decision and other items. I think you talked about maybe 15% FFO to debt. You have also been pretty opportunistic on selling some gas assets over the last couple of years to help fund a lot of the growth you have. Does this additional balance sheet capacity maybe delay future divestitures of the gas business, given you also have this substantial growth still in front of

Operator: Hey, Anthony. Good morning. We are going to constantly look at what makes the most sense. The capital recycling we have done has been highly efficient in feeding growth that has primarily been occurring here in the Greater Houston area. Ultimately, we are going to stay very open-minded to what makes sense. What Jason was getting at earlier is, certainly, there is balance sheet help here in the next few years from really multiple things. The Ohio gas LDC sale we have referenced was $100,000,000 better than planned. The outcome here on the corporate alternative minimum tax certainly provides additional cushion.

At the same time, Jason, I think you can hear us saying at the back end of the decade we could have substantial CapEx opportunities, which would require us to again look at the most efficient way to finance that growth. We are always going to stay open-minded on that front.

Jason P. Wells: Great. That is all I had. Thanks again.

Operator: Thank you.

Christopher A. Foster: Thank you. Our last question comes from Andrew Marc Weisel with Scotiabank.

Steven Isaac Fleishman: Hey, good morning, everyone. Thanks for squeezing me in.

Julien Patrick Dumoulin-Smith: Two quick ones, please.

David Arcaro: First, on the fourth-quarter electric volumes, I noticed that the total throughput was down modestly. Residential was up 4%, and we have seen positive C&I trends the last few quarters.

Andrew Marc Weisel: Just wondering if there is any noise in the data or anything to call out. Obviously, you are bullish on the long-term trends. Just wondering what is going on in the near term.

Operator: Sure, Andrew. I think the takeaway there is we continue to see more of a weighting towards the commercial and industrial growth among our overall base. I think I will put it that way. If you just look across all of 2025, we are talking about roughly 7% industrial growth. It is pretty dramatic. I think what you are also hearing us allude to is we are highly confident in the long-term growth potential, including because these opportunities we have talked about from a customer standpoint are going to create material new jobs to our communities. Two examples being maybe most recently, the over $15,000,000,000 investment that Eli Lilly has referenced to the Greater Houston area is pretty incredible.

That will represent thousands of jobs to come with it, as well as the loads that we are talking about actually include the ecosystem associated with data centers, which is the advanced manufacturing category that we talk about. The benefit there is that it is really about production and manufacturing of the components that go in the data centers. That means the same situation there. It comes with a large number of permanent jobs as well. So it gives us a lot of confidence for years to come on both that excellent dynamic we have had in both residential growth as well as accelerating industrial growth.

Andrew Marc Weisel: Okay. So not to worry about the Q4 number then, in other words? No, sir. Okay. Very good. And then lastly, in terms of the CapEx update, you are increasing the overall plan thanks to the 765 kV line. It looks like, if I am getting the numbers right, that was an increase of $800,000,000, and then you lowered the gas spending by about $300,000,000 or so, I believe. Can you walk us through what drove that? Was that about preserving the balance sheet? Or were there specific projects on the gas side that you chose to remove for fundamental reasons? You have got the puts and takes.

David Arcaro: There, right? I mean, largely, the increase is driven by the 765 kV line, as you mentioned. We are always constantly looking at the execution of our integrity management work. We were able to pull forward some of that into 2025, which gave us a little bit of an opportunity to be flexible on the gas side in the outer years. We will always tune the portfolio based on executability and where we are seeing demands. I would not look at that as a signal of a long-term trend.

Andrew Marc Weisel: Okay. Very good. Thanks so much.

Christopher A. Foster: Thank you. This concludes CenterPoint Energy, Inc.'s fourth quarter 2025 earnings conference call. Thank you for your participation.

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