CenterPoint Energy, Inc (Holding Co)

Good morning and welcome to CenterPoint Energy's second quarter 2026 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 remarks. To ask a question, please press star 1-1 on your touch-tone keypad. I will now turn the call over to Ben Vallejo, Vice President of Investor Relations and Corporate Planning. Please go ahead.

Good morning, and welcome to CenterPoint's Q2 2026 Earnings Conference Call. Jason Wells, our Chair and CEO, and Chris Foster, our CFO, will discuss the company's second quarter 2026 results. Management will discuss certain topics that will contain projections and other forward-looking information and statements that are based on management's beliefs, assumptions, and information currently available to management. These forward-looking statements are subject to risks and uncertainties. Actual results could differ materially based on various factors as noted in our Form 10Q, other SEC filings, and our earnings materials. We undertake no obligation to revise or update publicly any forward-looking statement other than as required under applicable securities laws. We reported 37 cents per diluted share for the second quarter of 2026 on a GAAP basis. Management will be discussing certain non-GAAP measures on today's call. When providing guidance, For information on our guidance methodology and reconciliation of the non-GAAP measures used in providing guidance, please refer to our earnings news release and presentation on our website. We use our website to announce material information. This call is being recorded. Information on how to access the replay can be found on our website. I'd like to turn it over to Jason.

Thank you, Ben, and good morning, everyone. On today's call, I'd like to address four key areas of focus for the quarter. First, I'll briefly walk through our strong second quarter financial results as we remain on track to deliver our full year non-GAAP earnings guidance. Second, I will provide an update on the significant progress we have made through ERCOT's new batch zero process. including the submission of more than 17 gigawatts of large load projects. 14 gigawatts of these submissions are expected to be eligible for batch zero and would represent an increase of more than 65% from Houston Electric's current system peak of 21 gigawatts. Third, I will discuss today's announced $1.2 billion increase to our capital investment plan driven by both the anticipated modest system upgrades expected to connect large load customers in Texas and continued progress related to the Downtown Houston Revitalization Project. We expect to deploy this incremental capital over the next five years without the need for additional equity financing. And finally, I will provide an update to our continued progress with prospective large load customers in our Indiana Electric Service Territory, which would represent transformational growth for the region and support long-term customer affordability. I'll start with our strong second quarter financial results. This morning we reported non-GAAP EPS of $0.40 for the second quarter of 2026. We are reiterating our full-year 2026 non-GAAP EPS guidance range of $1.89 to $1.91, which at the midpoint represents 8% growth over actual 2025 delivered results, as we seek to deliver compounded growth for our investors each and every year. Over the long term, we continue to expect to grow non-GAAP EPS at the mid to high end of our 7% to 9% annual guidance range through 2028 and 7% to 9% annually thereafter through 2035. Now I'd like to provide an update on the progress we've made through ERCOT's new batch zero process. Before I go into the details of our submissions, I want to acknowledge the substantial interest from prospective large load customers in the greater Houston area and the incredible efforts they have made throughout this process to demonstrate and maintain eligibility for Batch Zero. The investment commitments made by these customers enabled 17 gigawatts of project submissions. This not only reflects the strength of electric demand growth in our region, but also gives us even greater confidence in the acceleration and durability of the growth we are already seeing over the longer term. We look forward to working closely with our customers as this process continues to do our part in bringing growth to the region for the benefit of our customers, communities, and shareholders for years to come. Now turning to the 14 gigawatts of projects that remain eligible for batch zero. Approximately 10 gigawatts of these projects have both required studies approved and are eligible for baseload designation. The remaining four gigawatts of submissions are positioned to qualify as studied load because they have one of the two required studies already approved by RCOT. The four gigawatts of studied load will further be evaluated by ERCOT and included in the load allocation process expected to conclude in April of next year. In the aggregate, the 14 gigawatts of projects eligible for Batch Zero would represent over a 65% increase in our system's peak demand and further reinforce our confidence in achieving the accelerated 50% load growth by year-end 2029. Based on projected load ramps sought by customers, We expect nearly all of these projects to be energized by the end of 2030, extending our industry-leading growth trajectory well into the next decade. We are confident the combined 14 gigawatts of base load and study load are well-positioned to move forward in the batch zero process, given the level of customer commitments already secured. Among other customer commitments, these projects are supported by a signed facility extension agreement with long-term end-user commitments, Approximately $900 million of customer cash, commitments, and security already received and clear line of sight to the materials, execution capability, and system capacity to serve. The remaining three gigawatts of batch zero emissions represent additional customer demand that is pending ERCOT approval of the required studies. We will continue working closely with our customers and ERCOT to advance these projects to support our customers' desired energization timelines. With that said, the next phase related to the 10 gigawatts of baseload eligible projects is already underway. We have already begun work on the targeted system upgrades required to serve these customers, and we expect to continue this work over the next four years. We will also continue to work with customers on projects that remain eligible for studied load to finalize the plans related to needed system upgrades. Investments for both these baseload and study load projects are reflected in today's announced capital investment plan increase, which I'll discuss in more detail in just a moment. Importantly, this growth also supports customer affordability. With this increased demand from large load customers, we are now estimating that collectively residential and commercial electric customers will save over $5 billion over the next decade through the addition of 14 gigawatts of eligible base load and studied load projects. Outside of the incredible transmission level demand from large load customers, our Houston electric distribution system continues to experience significant increases in localized demand. Consistent with the pace of growth we have seen this year, we are anticipating an additional two gigawatts of distribution level demand over the next several years, driven by reshoring of advanced manufacturing and continued population growth in the greater Houston area. This growth will have additional affordability benefits for our customers. Moving now to the $1.2 billion increase in our 10-year capital investment plan. Today, we are increasing our capital investment plan by $800 million to support targeted system upgrades associated with the 14 gigawatts of expected batch zero eligible project. As previously highlighted, our Houston Electric System's approximately 10 gigawatts of existing hosting capacity gives us a distinct advantage in connecting significant new load quickly and efficiently with modest incremental investment. This differentiated system profile enables us to connect these projects at less than $60 million per gigawatt, allowing us to deliver long-term growth in a disciplined and affordable manner. Beyond today's capital increase related to system upgrades for expected batch zero eligible projects, we continue to evaluate the broader transmission investments necessary to support future demand growth through our ongoing internal transmission planning process. We expect to provide an update on these opportunities later this year. In addition to the $800 million capital increase associated with system upgrades, we have also identified approximately $700 million of additional investment opportunities that would be required to serve demand of approximately 3 gigawatts that are not baseload or study load eligible. This incremental capital is outside of the planned transmission investments we are evaluating as part of our comprehensive transmission study. As those projects remain subject to future batch processes, we maintain our conservative approach to incorporating the incremental investments into our 10-year investment plan and are not folding them in at this time. In addition to the investments associated with large load customers, we have made significant progress related to our work on the downtown Houston revitalization project. With the input of various stakeholder groups, we have made final site selections for the two required substation relocations. With those plans now solidified, we have refined our initial investment estimates, and as a result, we are increasing our capital investment plan by another $400 million. With today's combined $1.2 billion capital investment increase, we now expect a Houston electric rate-based CAGR of over 18% over the next three years. Chris will cover this in his section, but importantly, today's announced capital investment increase does not result in any increased equity needs. and even after incorporating today's increase, we still maintain visibility to at least $10 billion of additional capital investment opportunities through 2035. Consistent with our disciplined approach, we will continue to add future investments to the plan as projects become more clearly defined and as we gain confidence in our ability to execute them for the benefit of our customers and communities. Lastly, I want to touch on the transformational potential large load customer opportunities in our Indian Electric Service Territory. We continue to make progress advancing large load opportunities in our Indian Electric Service Territory, one of which would represent the single largest load we serve in that region. As a result of commitments from the customer, we have already begun work to serve this load. Outside of the project identified, we are engaged with multiple counterparties for additional large load projects in that area. As a reminder, the related investments required to serve these large loads would be incremental and outside of our current base plan. As we continue to advance these projects, we are focused on supporting the growth of the community we are privileged to serve and improving affordability for our customers for years to come. In closing, we continue to believe that we have one of the most tangible and executable long-term growth plans in the industry. We remain confident in our ability to execute our updated $66.7 billion capital investment plan through 2035, while maintaining visibility to at least $10 billion of additional upside capital investment opportunities. We are also well positioned to enable continued growth across the jurisdictions we have the privilege to serve, Thanks Jason. This morning I will cover four areas of focus. First, I will walk through the details of our strong second quarter financial results and how they position us well for the rest of the year. Second,